Considered in Grand Committee
My Lords, digital infrastructure is central to the future of the UK economy. People now rely on being connected through calls and online services more than ever, whether at home or on the move, while communications networks underpin critical areas of the economy. This dependence will only grow with the deployment of new technologies such as 5G and full fibre, which will support innovative new services across manufacturing, logistics, agriculture and healthcare.
The current regulatory framework has created the right conditions for the improvement of connectivity in the UK. It has brought about regulatory certainty and long-term stability for the sector, creating a balance between robust competition, protection for consumers and innovation. However, that framework derives from an EU regulatory framework consisting principally of a number of directives which have been implemented in domestic law.
The UK’s withdrawal from the EU gives rise to deficiencies in that legislation if we leave the EU without an agreement in place. These regulations address those deficiencies and so provide clarity and certainty for communications providers and for the regulator, Ofcom. That is why this statutory instrument is before the Committee today.
I should make it clear at the outset that this SI is concerned with the core of the regulatory framework, in particular the Communications Act 2003. Other matters of relevance to the sector, such as legislation on cross-border data flows, mobile roaming and spectrum decisions, are addressed by separate instruments.
It is also important to observe that the EU framework has already been implemented in domestic law. We are not concerned here with incorporating swathes of EU legislation into UK law, but with making corrections to ensure that the law continues to function appropriately. Furthermore, the scale of those corrections is limited. While the EU framework aims to establish a harmonised telecoms market, that market is policed by national regulatory authorities in each member state, with the European Commission having only a supervisory role.
This SI is intended to ensure that Ofcom can continue to carry out its existing functions effectively. It does not transfer a plethora of new functions to Ofcom or the Secretary of State.
The Government published a technical notice on 13 September 2018 which set out that,
“irrespective of the outcome of the negotiations between the UK and the EU, we do not expect there to be significant impacts on how businesses operate under the telecoms regulatory framework and how consumers of telecoms services are protected”.
This SI is an important part of ensuring that continuity and certainty.
The domestic telecoms framework establishes key regulatory principles such as: the promotion of competition between operators; the protection of consumers of telecoms services; the efficient use of radio spectrum, and the independence of the regulator and its functions. As I have said, these rules derive from a set of EU directives and regulations which have already been implemented in UK law, predominantly in the Communications Act 2003 and in the Wireless Telegraphy Act 2006.
I have said that this instrument makes mainly minor and technical amendments to ensure the continuation of the regulatory framework. An example of such an amendment is the removal of a duty on Ofcom to ensure that its activities contribute to the development of the European internal market, set out in the Communications Act 2003.
May I continue, if the noble Lord does not mind? My speech is a tightly woven whole, and it might answer some of the questions he is coming to. Later, I will of course answer as many questions as I can.
I will concentrate in the remainder of this speech on those corrections which I expect to be of the most interest to noble Lords. I turn first to the existing requirements on Ofcom to notify, consult or provide information to the European Commission and to other EU bodies.
Ofcom is required to consult with the Commission, the Body of European Regulators for Electronic Communications—BEREC—and the national regulatory authorities of other member states before imposing certain types of regulatory measures. In the case of certain proposed remedies, if the Commission expresses reservations, there is a “standstill” period during which Ofcom must co-operate with the Commission and BEREC. In certain other cases, the Commission can veto the proposed measures.
The Commission’s role is to ensure compliance with the EU regulatory framework and a harmonisation of the approach taken by EU regulators, in order to develop the single market. After EU exit, a power for the Commission and BEREC to scrutinise Ofcom’s decisions in this way will no longer be appropriate, and so this instrument removes these requirements.
Ofcom will continue to need to comply with procedural statutory requirements, including consultation, before it takes regulatory decisions. Once taken, those decisions remain subject to the same scrutiny as today—in particular, the right for affected parties to appeal to the Competition Appeal Tribunal.
EU law also requires Ofcom to provide information to EU bodies. Again, the information requested by EU bodies is generally provided to enable the European Commission to monitor compliance with the European framework or to ensure the harmonisation of measures across the EU. This will not be required when the UK is no longer part of the EU. However, sharing information with the Commission, EU bodies or other regulators in the EU may remain beneficial to the UK after exit—it can help foster co-operation on regulatory matters. That is why this instrument makes amendments which clarify that Ofcom may notify or share information where it considers it appropriate—for example, regarding network security breaches.
Other amendments have been made to ensure the retention of protections for consumers and to enable the regulatory framework to develop in a way that will bring about consistency for industry. In relation to consumer protection, Ofcom has put in place various rules to protect consumers of telecoms services, some of which implement specific requirements of EU law. This instrument makes provision to ensure that Ofcom is able to maintain consumer protection measures which are currently required under the relevant EU directive.
Turning now to corrections that will bring about consistency for industry, Ofcom has existing powers to regulate communications providers with “significant market power”, or SMP. SMP regulation is based on competition law principles, as set out in EU competition law, and enables Ofcom to impose regulatory remedies on providers with SMP to address competition issues in a particular market. This instrument amends the Communications Act 2003 to ensure that, after exit, references to dominance in a market are to be construed consistently with the concept of market dominance in the Competition Act 1998 rather than EU competition law.
This approach ensures that there is a single concept of market dominance across UK competition law post exit. It ensures consistency with the amendments to the Competition Act 1998 which this House approved on 4 December. In other respects, Ofcom’s powers to identify dominant players in the market and to make remedies will remain the same as pre-exit.
Telecoms legislation also includes certain directly applicable EU regulations, which require correction. This instrument revokes the regulations that provide for financial assistance from the EU’s Connecting Europe Facility to support telecoms, including funding to install wi-fi equipment in public spaces. This recognises that this legislation concerns EU funding mechanisms that cannot be retained simply by converting them into domestic law.
In the event of a no-deal exit, UK organisations will no longer be eligible for such funding. However, even if the EU stops making payments to UK organisations delivering CEF-funded projects after exit, the government guarantee will support UK organisations to meet their obligations—including continued project delivery—until completion. The HMG guarantee will also cover successful applications submitted to the EU before exit day but where the award was made after exit.
This instrument also makes corrections to the eCall legislation so that it continues to operate effectively after exit. eCall is an initiative established by the European Commission as part of the intelligent transport system project. It enables a mobile transmission to be sent to emergency services by a vehicle when it is involved in an accident. The eCall legislation refers in parts to technical standards. This instrument confers a legislative power on the Secretary of State to make provision to replace the standards listed. This will enable the standards to be updated, should this be necessary, to ensure continued public safety and effective operation of the eCall technology.
Finally, this statutory instrument revokes the 2009 EU regulation establishing BEREC, the body of national regulators from EU member states. Ofcom is currently a member. The main purpose of BEREC is to ensure the consistent implementation of the EU regulatory framework. BEREC’s membership is therefore limited to the regulators of EU member states. Ofcom will not be a member after exit, but as the UK will no longer be part of the EU regulatory framework, this will not have significant effects on regulation in the UK.
However, the Government and Ofcom agree that it may well be beneficial to have a continued exchange of regulatory best practice with other regulators and an exchange of information about telecoms matters more generally. The new BEREC regulation provides that BEREC participation should be open to third countries where appropriate agreements are in place. Ofcom intends to seek observer status after the UK has exited the EU, in the way that other regulators of states in the European Economic Area and EU candidate countries currently participate.
We are committed to ensuring that the regulation of telecoms markets continues to function appropriately after exit, providing regulatory certainty and the right conditions for continued investment and development. I commend these regulations to the House.
Before the Minister sits down, he said that he would come to my points later but he did not—although I accept that his speech was carefully woven and made a coherent case for the regulations. However, for the purposes of the Grand Committee, by far the most important issues in the Explanatory Memorandum are raised in paragraphs 10.2 and 10.3. These show that there were quite significant differences between the Government and some consultees on the shaping of the regulations and, in particular, whether there should be continuing obligations for consultation and reference in respect of decisions made by Ofcom as regulator, replicating the current powers and role of the European Commission. These look to be significant issues and the Minister did not mention them at all in his remarks. It seems to me to be important for the Grand Committee to understand what the consultation was, why the Government decided not to go with the view that there should be a regime that replicates that of the European Commission and why the Minister believes that we should go with the Government’s view rather than that of the consultees, who, I should say, are not named in paragraphs 10.2 and 10.3 so it is very hard for us to know who they are. Is this a matter on which we should seek further information and debate before we agree this regulation?
I am very happy to answer that; it is a reasonable question. The Government undertook extensive consultation with the telecoms industry, the regulator and other interested groups such as consumer associations. I shall start with the telecoms industry and come to why we should accept what was said.
The Broadband Stakeholder Group assisted us in organising our consultation, which has continued from summer 2017 until now, so it was over a long period, and it counts all the major providers of telecoms and broadband services in its membership: Arqiva, BT, Cisco, CityFibre, EE, Ericsson, Gigaclear, Openreach, Sky, TalkTalk, 3, Virgin Media, Vodafone and Wireless Infrastructure Group, and also from the sector were included Tech UK, INCA, which is the body representing UK alternative smaller telecoms infrastructure providers, consultancies, law firms, the BBC, Avanti, a satellite company, and the Federation of Communication Services. They were all consulted, and, as the noble Lord said, the main area of interest concerned EU consultation. This was discussed from summer 2017 until October 2018.
The main difference is that the function of EU supervision is really to promote the harmonisation of the EU single market. Obviously, that is not appropriate if indeed we leave the EU. The appeals process to the decision that Ofcom will make continues, so the appeals tribunal will still exist and operate in exactly the same way, and so will the administrative court, which enables the telecoms industry to go to judicial review.
In fact, the European Commission has never once vetoed an Ofcom decision, so we do not think it is of huge significance but, as I said, the main reason for not replicating that is that it affects European harmonisation rather than the national regulatory system.
I am very grateful to the Minister, but will he confirm that many members of the stakeholder group disagreed with the line that the Government are taking, which is not to have a continued consultation role with the European Commission? That is an important issue which is not properly brought out in these papers. The reason they did, which I take to be implicit in paragraph 10.2, is that they do not think that Ofcom should have unfettered power to act without consulting appropriate parallel competition regulatory authorities. Specifically mentioned in paragraph 10.2 is the Competition and Markets Authority, but I take it that the European Commission is seen to be a parallel body from that point of view. Will he expand further?
Yes, the body they would appeal to is part of the Competition and Markets Authority; it obviously has a completely different dynamic to the European Commission, which is there to harmonise the single market. It is true that they expressed those views, and it is probably fair to say that the sector would like as many avenues for appeal as possible—it is regarded as a reasonably litigious sector—but it was felt that because that was for harmonisation, it was not appropriate.
I can say that the industry, including that part of the stakeholder group referred to, is keen that the SI should be taken forward, because it wants clarity and a consistent regulatory framework. To that extent, it is happening.
The noble Baroness cannot make an observation unless I give way to her and I am not giving way to her, if she will forgive me.
Will the Minister agree to publish the minutes of the stakeholder group that he has referred to? It seems to me important in our proceedings that we understand what the consultation responses in fact were, as they were clearly at variance with what the Government have done. Will the Government do that before this matter comes before the whole House?
My Lords, following that interesting exchange, I pick up where the noble Lord, Lord Adonis, began, by pointing to what he described as the Minster’s “carefully woven” speech. I confess that I do not quite agree with that definition, as the speech appeared to be a cut-and-paste version of the speech that was given by the Minister in the other place, Margot James, on 7 January. Having gone through that speech, I noticed that odd words were missed out in the noble Lord’s version. In the other place, the Minister thought that there may well be a case for Ofcom remaining involved in BEREC—the word “well” was missing in the noble Lord’s version.
More important, we should recognise that over the last 30 years the industry that we are dealing with, including within it the telecoms industry, has developed from a monopoly situation to a highly competitive market, with annual revenues now in excess of £40 billion. It therefore forms an important part of our economy. Because of the way in which the industry is intrinsically linked to the European Union, there is no doubt in my mind that Brexit will have a significant impact on it, not least because a number of UK providers operate in other member states but have headquarters in the UK. I also believe that Brexit will have a significant impact on the regulatory regime under which those providers operate.
The Minister said, as indeed did Margot James in the other place, that the draft regulations will provide “clarity and certainty” both for the operators and for the regulator. I am somewhat inclined to disagree with that view. Indeed, the technical notice to which the Minister referred, which was issued way back on 13 September last year, explained that, irrespective of the outcome of the negotiations between the UK and the EU, the regulations would not have a significant impact on how businesses operate under the telecoms regulatory framework or on how consumers of telecoms services are protected within the UK. That claim is highly questionable.
Before I turn to those impacts, I want to seek clarification on consultation, the issue that has occupied a few minutes between the noble Lord, Lord Adonis, and the Minister. In the other place, the Minister for Digital and the Creative Industries, Margot James, said:
“All the changes that the draft regulations will make have been considered on a case-by-case basis and discussed with the regulator and stakeholders where possible”.—[Official Report, Commons, First Delegated Legislation Committee, 7/1/19; cols. 3-4.]
One has to assume that she believes that, as the noble Lord said only a few minutes ago, extensive consultation has taken place. The noble Lord told us about consultation with the Broadband Stakeholder Group and listed its membership. Interestingly, he did not mention the other part of the equation, which relates to the telecoms industry. There is a major body—the UK Competitive Telecommunications Association, or UKCTA—which represents very many of the key stakeholders in that field: Virgin Media, Vodafone, AT&T, the Post Office, Sky, TalkTalk; I could go on. If extensive consultation has taken place, one would assume that that key body, UKCTA, has been involved in the discussions. Yet I have received a note from UKCTA—I would be grateful if the Minister could explain whether this is correct—which says:
“UKCTA has not had any advance notice of, or discussions about, the SI despite regular meetings with DCMS, the most recent being on Monday 14th January”.
Can the Minister explain whether what I am told is incorrect, and if it is correct, can he explain why, despite the Government having claimed that there has been extensive consultation, this important body in the industry and the sector has not been consulted? On the impacts of these draft regulations, which the Government say they do not expect to be significantly—
The noble Lord has just raised an extremely important point about consultation. As he knows, in the discussions which the Grand Committee has been having on these no-deal regulations, the issue of inadequate consultation has been a running theme. As we probe beneath the regulations, significant issues of substance come to the fore when the Government tell us that the changes that are being made are technical. In fact, the actual change brought about by this regulation is substantial, because it entirely removes the European Commission from the whole process of deciding on competition issues.
The noble Lord is much closer to this sector than I am, and he has clearly had contact with the UK Competitive Telecommunications Association—I have to confess that I was not even aware of the existence of that body until he mentioned it, which is a huge lacuna in my understanding of public affairs. The noble Lord told us that it had not been consulted but that he has been speaking to it. Can he tell the Grand Committee what its view is of these regulations? Clearly, that is a material point, but it will also be a material point when the House itself comes to consider these regulations, also in the light of the further consultation responses which the Minister has kindly agreed to publish after the meeting of the Grand Committee.
I am grateful to the noble Lord for his intervention. I assure him that I am more than happy to help to resolve the lacuna he has, and I will go even further and share with him a few thoughts that that association has about the draft regulations before us. I will take one particular one, which is its reaction, and the reactions of many other people, to the Government’s claim that the changes envisaged in these draft regulations will not significantly change the protections that are currently enjoyed by consumers of UK telecoms services. That claim is disputed, and I am keen to hear the Minister’s reaction to that, particularly in relation to the fundamental question of who will now supervise the regulator.
The UK regulator is Ofcom, which is probably the most highly regarded regulator throughout the whole of the European Union. It is a regulator in which most of us have great confidence, but from time to time it can make questionable decisions. Within the EU arrangements there are processes which provide for oversight of decisions of all national regulatory authorities, including Ofcom. These processes are covered under Regulation 7, particularly 7(1). As the Minister knows, they ensure oversight of a regulator’s decision by the Commission, and peer review by other EU regulators—in this case by members of BEREC, which the Minister has already referred to: the Body of European Regulators for Electronic Communications.
Post Brexit, the EU checks and balances against bad regulatory decisions will clearly fall away, yet safeguards to ensure regulatory certainty, and safeguards against bad regulatory decisions, are critical to ensuring that businesses in this sector can have the confidence to make major investments. Can the Minister provide a clear explanation of how, under these draft regulations, Ofcom will be held to account post Brexit? Can he confirm that, for instance, the Digital Economy Act, which went through your Lordships’ House some while ago, has weakened the telecoms appeal regime and that all that appears to be left for those who believe that an Ofcom decision is wrong is the judicial review process? As the Minister said, in certain cases there might also be the opportunity to go to the Competition Appeal Tribunal, but in the majority of cases it would appear that we are left with only judicial review, which, as noble Lords know, has undergone some quite significant and worrying changes in recent times. Therefore, does the Minister agree that this is a significant diminution of the protections against bad decisions by the regulator, however infrequently they are likely to occur?
I have already mentioned BEREC, the Body for European Regulators for Electronic Communications, of which Ofcom is currently a highly regarded member. Clearly, at the point when these draft regulations come into force, Ofcom’s position in relation to BEREC will change significantly, and I argue that it will change in a way that will be of considerable detriment to us all.
It would be very helpful to your Lordships if the Minister were to set out his understanding of the likely situation and the relationship that it will be possible for Ofcom to have with BEREC in the future. The benefits of full membership of BEREC are numerous, not least in our having a powerful voice in decisions relating to the EU’s soft-law instruments and, much more importantly, legally binding legislation. In the future, BEREC will be hugely influential in changes to, for instance, the European Electronic Communications Code, the new guidelines on international roaming, net neutrality and very much more. As Ofcom said in a letter to me:
“Even if the UK is not bound to follow EU law, the approach taken at EU level on these issues will continue to be relevant to the UK and to many of the companies we regulate, many of whom also have operations in other EU countries or are subsidiaries of international telecoms groups that have substantial operations in other countries”.
It gives the examples of Telefonica, Three, Virgin Media and Vodafone. Ofcom goes on to say:
“There are also more general benefits from participation in EU networks since they provide a forum in which we can cultivate and sustain bilateral relationships with our EU peers, at both senior and working levels, to exchange experiences and share best practices”.
My Lords, the noble Lord is making a very powerful argument about the weakness of consultation and the problems that will be caused by these regulations. Is he suggesting that Ofcom itself said to him that it was not content with these regulations in their current form and that it is worried about the regime that will apply after a no-deal Brexit? That would be a very serious state of affairs if that were the case.
That would be taking the interpretation of the conversations and correspondence I have had with Ofcom a step too far. I do not think that Ofcom feels that it is its place to comment on the rightness or otherwise of the regulations. However, it is pointing out very clearly that when these regulations come into force, its ability to do the work to the level that it wishes will undoubtedly be diminished because of its inability to influence future EU legislation which will have a significant bearing on companies that operate in this country. Equally—I shall come on to this in a second—its ability to engage in discussion and debate with fellow regulators in this field across the 27 EU countries will depend on what happens now.
I hope that the Minister will agree to extend his remit just a little in this discussion. It would be enormously helpful to hear from him what he understands the situation will be not only in relation to a no-deal Brexit but, if the Prime Minister is successful in achieving her deal, what it will be during the implementation period and then after it. So there are three possible scenarios in which it would be helpful to learn from the Minister how he thinks the arrangements will operate.
It might help him if I shared with him my own understanding of what the situation is likely to be and possibly made his response much briefer, because he could then say that I have got it right. In the debate on 7 January in the other place, Margot James acknowledged that,
“the Government recognise that Ofcom would benefit from the continued exchange of best practice with other regulators, and from the exchange of information about telecoms matters more generally”.
She went on to say:
“Ofcom intends to seek observer status after the UK has exited the EU”.—[Official Report, Commons, Delegated Legislation Committee, 7/1/19; col. 6.]
Can the Minister confirm that this is a huge oversimplification of the process that now applies in the event of a no-deal Brexit? In the past, it would have been a relatively simple matter for Ofcom to seek observer status. Under the rules that applied until December 2018, just a month ago, BEREC could simply have invited Ofcom to have observer status and that would have been fine, but the BEREC regulations have changed and are now very different. I am sure that the Minister will confirm that, under those regulations, the only possibility of Ofcom having even observer status on BEREC is if the European Union has agreed to it. That would require the UK Government specifically to negotiate such an arrangement with the EU. I would be grateful if the Minister could confirm that that is the case, because it is very different from saying that Ofcom will seek observer status. The Government will have to engage positively in negotiations with the European Union to bring that about.
Can the Minister also confirm his understanding of the position of Switzerland? It is a very good example, because its regulator was an observer member of BEREC. With the change in rules in December 2018, it no longer has observer status and the Swiss Government are currently in extensive negotiations with the European Union to see whether agreement can be reached for that to happen—there is no certainty that it will, any more than there will be certainty, for reasons that I shall come on to in a few minutes, about an agreement on this matter being reached between the UK Government and the European Union.
I accept that the Minister is slightly stretching the issue, but I hope that he will confirm that under transitional arrangements of the withdrawal agreement—if the Prime Minister is successful in getting her deal through—the key provision is Article 128 along, in part, with Article 8, which states clearly the UK has no right to participate in decision-making or governance of any EU bodies and no right to attend meetings. During the transition period, there will no opportunity for Ofcom to be involved—with, however, one caveat.
The caveat comes in two parts. It says that there are exceptions: Ofcom may be allowed to pop along for the odd meeting and to participate in discussions but not have a vote, but only in the very limited case where BEREC is discussing a specific case that relates to the United Kingdom or if, by having Ofcom present, it would be beneficial to the EU as a whole. That is a decision for it to make. I would be grateful if the Minister could clarify the point. My understanding is that if the Prime Minister is successful in getting a deal, during the transition phase, the position of Ofcom will be even worse than it would be if it had observer status. That, I believe, would be significantly detrimental to the UK. Post Brexit, if the Prime Minister is successful with her deal, clearly the situation will be somewhat uncertain because it will depend on the interpretation of and success of the negotiations. However, the draft political declaration covers the issue in paragraphs 33 to 35 and 40 to 42. It would be helpful to hear the Minister’s views on how he thinks that this will work out.
My final point is simply this. All of this is dependent on an agreement. Whether we are in the situation of a no-deal Brexit as regards the regulations before us or even if the Prime Minister achieves her deal and we have a transition period with an exit being subject to whatever arrangements have been made, it will all depend on whether the UK has achieved a data adequacy agreement with the European Union. Nothing can happen unless we have one because it is absolutely crucial. I could read out to noble Lords many learned articles about whether it would be possible for the UK to get a data adequacy agreement easily or even to get one at all. For instance, criticisms are already raging about the impact of the investigatory powers legislation, the GDPR regulations, the e-commerce and e-privacy regulations and so on. Whether those will enable us to get a data adequacy regulation or prevent us doing so is very unclear indeed.
I have raised some important points and I look forward to the Minister’s response. Above all, however, he must give us a clear understanding of the Government’s view about the likelihood of us getting a data adequacy agreement. The Minister in the other place made it absolutely clear that if the Prime Minister gets her deal and we have a transition period of almost two years, it will take the whole of those two years to get agreement on data adequacy. She went on to say that if we have a no-deal Brexit, the chances are that getting such an agreement will take even longer. Does that not mean that all of the claims that there will be no significant impact as regards these regulations on people in the UK, both service providers and the regulator, really do not stack up?
The noble Lord has referred to the data adequacy agreement, which is clearly an important issue. What is his understanding of what the impact would be on the United Kingdom if we did not secure such an agreement in the event of a no-deal Brexit? Presumably it will be quite a tall order to get such an agreement in the next eight weeks.
Let me give the noble Lord one example. I said earlier that for Ofcom to become a member of BEREC, it is no longer a case of it going to BEREC and saying, “Please can we have observer status?” It will require a negotiated agreement between the UK and the EU. In my view and those I have spoken to about this, the agreement will not be reached unless we have an adequacy agreement. If the adequacy agreement is going to take at least two years and may not be achieved anyway, then during the whole of that period there is no way of Ofcom performing any role whatever within BEREC, for example.
The noble Lord asked a lot of questions. Underlying it all is the fact that this SI is there in the event of no deal. Of course, it is not surprising that references to and some of the effects of being in the EU are going to change. The essential point of the SI is that telecoms regulation is performed by national regulatory authorities with EU supervision. The issue is whether the supervision element is significant. The whole point of the SI is to make the regulatory system the same after we leave. The noble Lord made a lot of mileage out of whether we would remain a member of BEREC—
Yes, absolutely. I will come on to that because nobody regulates the regulator today.
The noble Lord asked me to go beyond no deal to what happens to our membership of BEREC if we have a negotiated deal with an implementation period. During that period, the UK will no longer be a member state of the EU but, as is set out in the terms of the withdrawal agreement, common rules will remain in place. That is why we expect Ofcom to continue to participate in BEREC in line with the terms of the agreement, in the way that the noble Lord, Lord Foster, mentioned.
I point out to noble Lords that there is every reason to suppose that the EU would want that, because Ofcom is one of the leading telecoms regulators in Europe—if not the leading one. The interchange between Ofcom and other European regulators has been extremely beneficial, not only for them but for this country. There is every reason to think that they would wish to continue that—
I am sorry. The noble Lord is entitled to assert whatever he likes, but I specifically read out a section from the withdrawal agreement, which says, and I repeat, that the UK has no right to participate in decision-making or governance in any EU body of any type and no right to attend meetings. I have given the two caveats: the first relates to any discussion that,
“concerns individual acts addressed to the UK”,
or persons residing or established in the UK; and the second is that the presence of the United Kingdom is,
“necessary and in the interests of the Union”.
It is all very well for the Minister to say that he hopes that it will be perfectly all right and that the EU will have us for other things, but a specific clause in the withdrawal agreement says the opposite.
I was going to read out that exact clause to make my point. If it is,
“in the interests of the Union”,
or where the discussion concerns acts addressed to the UK and its citizens, it provides that the UK will continue to participate in EU agencies and bodies. I think that those two things apply and, as I was saying, the reason why I think that is the mutual benefit Ofcom has. It is a world-leading, well-respected regulator. However, I accept that it does not have the right to do these things. That is not surprising, because we are leaving the EU. Why should it have the right? I think that we have come to stalemate on that point.
The noble Lord mentioned the fact that BEREC rules have changed and that it is not just a question of having been invited to be an observer. He is absolutely right: either there has to be an agreement with the EU as part of a future economic partnership or a bilateral agreement can facilitate it. Under that facility, which the EU has deliberately put in the new BEREC regulations, Ofcom can—under a bilateral agreement—be a member of the board of regulators, the working groups and the management board.
I will move on to data adequacy later. The important issue that both noble Lords mentioned is, crudely put, whether the regulator will still be regulated. The European Commission does not regulate Ofcom. It has a supervisory power, which is principally designed to ensure the consistency of regulatory practices across the EU, in order to contribute to the development of the single market. It is quite understandable that the EU should want to harmonise national regulators to facilitate the single market. Of course, if we leave the EU, that will no longer apply. The role of the European Commission in telecoms regulation is unique and should not be compared to EU scrutiny powers over other UK economic regulators. There is sufficient accountability in the domestic system, because Ofcom decisions can be challenged in the courts—of course, the primary area in which they are challenged is in the statutory appeal before the Competition Appeal Tribunal.
In fact, the withdrawal Act is not a vehicle for policy changes, as I am sure the noble Lord, Lord Adonis, will remind us. We think that, under the terms of the Act, recreating a domestic equivalent for the oversight of Ofcom’s decisions will be considered going beyond what is appropriate to correct the deficiency.
I am grateful to the Minister, but does he not accept that this could be argued both ways? It is clear from reading the materials available to me that one could say that replicating the status quo means having some consultation and appeal role for a competition body above Ofcom, which is the role currently played by the European Commission, or one could take the Government’s view that there should not be such a role. It appears to me that the reason why this has happened is twofold: first, because the whole government mindset is to have as little Europe as possible—as a matter of prejudice the Government do not want any continued consultation role for the European Commission, even if that might be in the best interests of Ofcom and the robustness of our regime, given how intertwined our companies and industries are—and, secondly, because Ofcom would obviously prefer not to have any oversight. Any regulator in Ofcom’s position would much rather not have somebody else marking its homework. It appears that the Government have been unduly swayed by Ofcom in drawing up these regulations, particularly in the light of the observations from the noble Lord, Lord Foster, that key industry groups have not even been consulted.
I do not think that you can argue it both ways. Of course we will not be involved in the EU supervision, given that the whole point of the supervision is to affect the European single market, of which we will not be a part. To set up a completely new supervisory authority, with a completely different function from what it had before, would, I think, be beyond the powers of the withdrawal Act—it will obviously be different if we are not talking about EU supervision to maintain regulatory harmony.
I come to both noble Lords’ points about the consultation, because I do not believe that they are true. The noble Lord, Lord Foster, made a reference to the UKCTA—its members, by the way, are also members of the BSG—and read out the names of a number of companies that are part of the group which facilitated the round tables. There may be a disagreement with us, as my information is that it was asked to at least one of the round tables. It has met DCMS and has had the opportunity to raise concerns about the SI—as he said, it met DCMS only very recently—and of course our technical notice explains some of the problems and issues about telecoms regulation when we leave the EU, so it is not as though it did not mention it. Therefore, some of that body’s members have sat round the table with DCMS; they have been asked. There is no requirement to send the draft SI to industry, but it had every opportunity to contact DCMS and every opportunity to raise it at the meetings that the noble Lord referred to. We have ongoing and good relations with all parts of the sector, so there is absolutely no reason why, if there is a problem, it could not be raised with DCMS. I do not accept that in this case the consultation has been insufficient. We have had regular and continued consultation with the industry, not only with the telecoms sector but also with consumers and Ofcom itself.
I do not think that it is necessary to pursue this; I am merely making a simple request. Given that this body says that it has not been consulted—I entirely accept the Minister’s point that the draft regulations have been published and so it could have read them and perhaps could have come forward and said, “Can we discuss this?”—can the Minister just give the Grand Committee an assurance that it will now be invited to come and have a discussion about its concerns on these draft regulations? Then we can move on.
It is of course a bit late to consult it on the regulations, but we will definitely do so in future. I will try to find out where we have a disagreement on fact—whether it was able to be consulted—and will let the noble Lord know about that. I appreciate his allowing me to move on.
There is an important issue about data adequacy, which the noble Lord, Lord Adonis, mentioned. He asked whether it would happen in the next eight weeks. Of course, what he does not realise is that it cannot happen in the next eight weeks, because you cannot have data adequacy until you are a third country. You will never get data adequacy until exit day; when that will be is another matter. Data adequacy is an important issue. We have said that there will be no restriction on personal data flowing from the UK to the EU; the issue is entirely about personal data flowing from the EU to the UK. What are we doing about it? We have spent a lot of time talking to member states, explaining our mutual interest in having data adequacy. We should not forget that we start from the exact same position, because we have implemented the GDPR. We are therefore in a good position.
The EU has indicated—it has not said it formally—that it will be ready to discuss data adequacy as soon as exit day comes. We are ready to do that, but in the meantime there is a possibility that there will be a gap between when we leave the EU and whenever we get data adequacy. To cope with that gap there are mitigations and ways round it—standard contractual conditions for contracts, for example. We are ramping up the speed of publication and are making industry aware of this. There will be a significant amount of progress on that over the next few weeks. It is always frustrating when you spend time talking to trade bodies—we are talking to about 50 companies a week at the moment, and we will double that—and, despite all that work, people still say that they were not aware of it. We saw that with the GDPR. However, we have a publicity campaign; work is going on to try to make people aware and, for example, to encourage them visit the ICO website, which gives examples of ways to mitigate in case of a gap.
This could also affect government departments and, importantly, public services. There are issues around, for example, data localisation and data that is held in the cloud. If your data is stored on a European database or cloud data server somewhere and that service stops, that could potentially be very serious. There is no indication from the EU that it will take a hard regulatory approach. It could take the same proportionate approach that the ICO took for the GDPR, but that is not guaranteed. We are making preparations to deal with this; for example, we are making sure that all government departments are aware of where their data is and are doing something about it. Even if we do not move it back to the UK, it can be moved to other areas, such as America—we have had good decisions about third countries that have data adequacy arrangements with the EU. This is where we are: we know that there is a problem and we are addressing it, but it is potentially serious if people do not do anything about it before exit time.
On retaining the same level of consumer protection, the consumer protection part of the legislation is established by the general conditions set by Ofcom, which apply to communications providers. This does not alter Ofcom’s powers to set general conditions to protect end users. There is no reason to suppose that it would change consumer protection after exit. I hope that that answers most of points raised by noble Lords.
My Lords, the Minister has done a conscientious job of explaining the regulations and dealing with the concerns raised by the noble Lord, Lord Foster. However, I did not greatly care for the intervention at the beginning by the noble Baroness, Lady Goldie, which sought to prevent me from posing questions to the Minister. I hugely respect the noble Baroness, but it is important to understand what is going on in this Grand Committee. We are making significant changes to the law. It is true that we are doing so in an emergency situation because we have to agree things in the next eight weeks in case the United Kingdom crashes out of the EU without a deal, but we should not minimise the fact that we are making significant changes to the law. Because of the emergency nature of events, we are doing this by means of statutory instruments, but the fact that these are called statutory instruments does not make the changes to the law less substantial.
The changes to the law involved in this one statutory instrument would, in the normal course of events, require primary legislation, with Second Reading, Committee, Report and Third Reading. We would have ample opportunity to engage with the Minister, move amendments and probe issues around consultation and appeal mechanisms and so on, which we have been debating across the Floor. Because of the constraints of the statutory instrument process, all this is being done by means of one statutory instrument, with one debate in Grand Committee and potentially another in the Chamber.
When we went to the Chamber on the venture capital regulations yesterday, I had expected that the Minister, the noble Lord, Lord Bates, would present the regulations to the House in the light of the debate that had taken place in Grand Committee and to reply to that debate. I thought that he would do the same on the interchange regulations; the noble Baroness, Lady Bowles, who is in her place, had raised a lot of significant policy issues on those regulations. But things did not happen at all as I had expected. What happened was that the noble Lord, Lord Bates—
The noble Lord is kind to let me in. I think he is in danger of making a generic speech here. In this SI, we are retaining the status quo in telecoms legislation. We are trying to maintain EU law, which has been implemented in UK law. I accept that there are changes—for example, the European Commission is mentioned in relation to supervision—but obviously those changes will result from our coming out of the EU. I do not accept that, in this case, we are making substantive changes. I suppose that one area that one could argue we are changing is giving the Secretary of State powers to amend regulations so that the eCall system works. That is clearly to everyone’s benefit who drives or travels in a car. That is one area where we are possibly giving the Secretary of State more powers, but I do not accept that there is a whole swathe of legislation that normally would have required to be made through primary legislation.
I am grateful to the Minister for that intervention, but I note that the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum indicate that significant players in the industry do not accept the statements that he has just made. They do not accept that this is the best way of transposing the status quo into a new regime following a no-deal Brexit. On the contrary, as I will explain in a moment, they think that the Competition and Markets Authority should have replicated the existing role of the European Commission, but the Government decided not to do that. I accept that the Minister has said what he said in good faith, but what he said is not the view of a large number of players in the sector.
My Lords, the problem with this situation is that we do not know what happened in the consultation, because nothing has been published. Let me read out what paragraph 10.1 says, so that it goes on the record. Under the heading “Consultation outcome”, it says:
“Informal consultation has been undertaken with Ofcom, whose views have been taken into consideration in development of the instrument”.
In the case of informal consultation, nothing is published. Indeed, I am anxious to read the letter that Ofcom sent to the noble Lord, Lord Foster, because it will be the only thing that has come out in public saying what Ofcom actually thinks. For the process of making the law, the right course to pursue would have been to have had a formal consultation, with Ofcom’s formal view, but the Government did not do that. At the moment, we are legislating in the dark.
Ofcom has been consulted all along. It worked with DCMS in drafting the SI. It is keen to retain its independent status. It will not come out and say, “This is a joint DCMS/Ofcom SI”, but it has been consulted all the way along. It was instrumental in the drafting of the SI.
I do not for a moment expect that Ofcom should be required to agree. On the contrary, it is the job of the Government and Parliament to decide what the law and the regulations will be. However, it is our responsibility as parliamentarians to be fully informed about what the stakeholders think. Nothing has been published. The consultation with Ofcom has been informal. We have no details of the consultations referred to in paragraph 10.2. The noble Lord, Lord Foster, told us that the UK Competitive Telecommunications Association, which some of us had never heard of before, was not consulted. The Minister says that it was consulted. This issue of what in fact happened is still not resolved across the Grand Committee. The whole situation is unsatisfactory.
To complete the broader point that I was making in respect of the noble Baroness, Lady Goldie, I do not think it reasonable to curb the rights of noble Lords to question Ministers on fundamental changes to the law of the kind that are being proposed simply because it is inconvenient to the Government, but that is what the noble Baroness and other Ministers have sought to do.
I thank the noble Lord for allowing me to intervene. I am interested in his surmise, because he gave me no opportunity to say why I wanted to intervene. In fact, there was a procedural issue to be addressed by the Chairman. I say to the noble Lord that there are rules, practices and courtesies in this House, which are listed in the Standing Orders and detailed in the Companion, whose purpose is to ensure that opportunities exist for full debates on important issues such as this. I would merely have observed earlier that the noble Lord should be careful not to stray into repetition, which Standing Orders do not permit, and be careful not to be accused of speaking on multiple occasions. I think I am not alone in being unclear about whether he is currently making a speech or another intervention. I merely ask him to observe the courtesies which everyone else in the House tries to observe for the mutual benefit of the House and all Members.
I am very grateful for the noble Baroness’s explanation but I do not believe that I was in any way infringing the courtesies of the House in seeking to question the Minister. The job of a Grand Committee is to elicit from Ministers information which is relevant to our consideration of these matters. However, we do not have the equivalent of a Committee stage in which we can propose amendments and hear explanations from the Government, which can then be questioned, so the only mechanism that we have in Grand Committee is to ask direct questions before the Minister sits down. Therefore, I do not accept for a moment that I was infringing the courtesies, the Standing Orders or the reasonable procedures of the House.
Unfortunately, it has become a pattern in Grand Committee for Whips to seek to curb proper debate and discussion. They are trying to railroad through these significant changes to the law with the minimum debate and the minimum questioning possible. I absolve the Minister from any intent to refrain from giving information, because he has been very forthcoming.
My Lords, I would be delighted to write to the noble Lord when his next lot of SIs are due to come before the Grand Committee and ask him for more information, but until I have heard the explanation and his account, it is often difficult to know what questions one wants to ask. I should observe that at the moment we are having these statutory instruments at the rate of about 20 to 30 a week, so, although I take my duties as a Member of the House very seriously, it would not be possible for me to correspond with Ministers in advance of each of them in a way that would be productive, given that we are going to debate them in any event.
I am not sure whether the noble Lord meant that as a serious contribution to the debate. I cannot think of anything that I would find more felicitous than engaging in correspondence with the Minister, so I would be happy to do that hereafter.
I sense that we will return to the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum when the regulations go to the Chamber. The Minister has already undertaken to publish the relevant minutes of the Broadband Stakeholder Group and it is important that we have an opportunity to take account of those before these regulations go to the House. If the Minister does not mind my saying so, we will need to have resolved what consultations have taken place with the UK competitor telecoms authority and its members, and having that information before the House would be useful too. That is important to enable the House to make a judgment on the issues raised in paragraphs 10.2 and 10.3. Perhaps I may read to the Grand Committee what is said there:
“Some stakeholders expressed concerns that removal of the requirement for EU consultation on certain Ofcom proposed regulatory measures (and in particular the Commission’s ability to require Ofcom to withdraw its proposed measure in some circumstances) … amounted to loss of a valuable check on Ofcom’s decision-making. Those stakeholders proposed that an equivalent function be recreated domestically (for example, requiring the Competition and Markets Authority to approve certain of Ofcom’s proposed measures”.
The Minister has just said that doing that would involve a change in the status quo. However, the contention of stakeholders in the sector is that, far from constituting a change in the status quo, it would transpose an equivalent function to the one currently performed by the European Commission once we leave the European Union. To me, the issue set out in paragraph 10.2 is significant, and the noble Lord, Lord Foster, who is much more knowledgeable about the sector than I am, made the concern of the sector a significant part of his remarks.
I entirely agree with the Minister that the Government should not be expected to give a veto to telecoms companies and other stakeholders which is in any way unreasonable. I accept that; as a former telecoms correspondent for the Financial Times, I am only too aware of the market power of those bodies, and it is important to have strong regulators. I am not saying that those telecoms companies and interest groups are necessarily right—the Government might be right not to give further supervisory powers to the Competition and Markets Authority that would lead to further appeals, litigation and huge expense to the public—but my concern, which goes to the whole procedure of dealing with these no-deal regulations, is that this is an important issue. I think that the Minister would accept that it is a pretty significant issue in terms of the construction of the regulatory regime. This decision has been taken on the basis of no formal consultation, and the views of stakeholders have become apparent to your Lordships only during this debate and were brought up particularly by the noble Lord, Lord Foster.
That is not right. That is why the Explanatory Memorandum specifically mentioned their views. It is not that the noble Lord has found them at the last minute, because he was citing the very Explanatory Memorandum that told him that there were opposite views, which we disregarded for reasons with which I think he agrees.
Let me correct myself. The Minister is quite right that the Explanatory Memorandum mentions that at paragraph 10.2. However, all it says is “some stakeholders”, so there is no explanation of who those stakeholders were. The noble Lord, Lord Foster, brought out who they were and why they hold those views. For our next consideration of this measure, we need to know more about which stakeholders expressed the views in paragraph 10.2 and why they did so, so that we can form a view as to whether the Government’s judgment, which is that there should be no role for the Competition and Markets Authority, is correct or whether the right approach would have been to have given some supervisory role to the CMA, as is envisaged by the stakeholders in paragraph 10.2.
This may help the noble Lord and cut down on the time. I have been told that we will continue to consult the industry on the scrutiny of Ofcom’s draft regulatory decisions, but we do not believe that this SI is the vehicle for such policy changes—because that is what they are. I committed to the noble Lord, Lord Foster, that I would outline the people whom we had consulted. I take his point about a formal consultation; we decided not to do that, but that is not to say that there has not been extensive consultation, which I have agreed to make clear. I hope that the noble Lord will accept that we will continue to consult on that, but will not do it through this SI.
I fully accept what the Minister said. He has been very forthcoming in making further information available to noble Lords. It would be very useful to us to have that further information before these regulations go to the House. We need that further information so that we can form a judgment on whether the Government’s decision as to how they will frame the regulatory regime after 29 March, if we crash out of the EU, is correct or whether it would have been appropriate to have in domestic arrangements some function equivalent to that performed by the European Commission; for example, by requiring the CMA to approve certain of Ofcom’s proposed regulatory measures. I hope that the Minister will be able to make that information available to the House so that we can form a judgment when this regulation comes to the House.
My Lords, I suspect that all present will be delighted to hear that I do not intend to detain your Lordships for very long. This has been a clash of the Titans, and a lot of material has come out from the noble Lords, Lord Foster and Lord Adonis, and the Minister’s responses. Having read diligently the papers that I had and highlighted the questions which concerned me, I find, alarmingly, that they have all been dealt with. For that reason, and hearing the question about repetition, I shall not go over the ground again.
However, I would make one or two observations, perhaps from a different angle. For example, I note at the beginning of the Explanatory Memorandum the number of Acts of Parliament and other measures that have had to be gone through with a tooth comb to produce 10 pages of minutiae—which in their totality are more than minutiae—affecting legislation in the way that the noble Lord, Lord Adonis, says. I would like to know as a point of information how many hours have been spent on teasing out these details in order to produce this one statutory instrument. On page 2, it deals with minor affairs and states that it must not be confused with other statutory instruments which will soon come through. It beggars belief that all this lies ahead. I read The Pilgrim’s Progress when I was a young man. The slough of despond and the swamp of despair are lurking and waiting for us before we will get to the celestial city.
We will have to have a consultation about that in order to find out who forms which view about Dante’s Inferno.
There are two focal points to my remarks. I wanted to ask about the data adequacy agreement but the Minister has answered that. I also wanted to ask: who regulates the regulator? I was very interested indeed to read about Ofcom. While I in no way have the level of expertise of other noble Lords who have spoken, just reading the text—I know how to do that—what hit me between the eyes begged questions: is this regulation or supervision? Are we talking about harmonisation? I have sat in on several debates to try to gauge what is happening in consideration of these statutory instruments and I am beginning to form the view that between where we are now and where we expect to be if all goes according to plan, in several instances there will be a lessening of the oversight and direction that we have currently through our membership of the European Union.
For example, I listened to the debate on nuclear safeguarding yesterday. I was not convinced by either the debate or the material I read that the concerns being expressed would be adequately met. It was a similar case as regards non-native invasive species. Again, I was left with questions which may be answerable: I am not an expert in these fields. However, simply because we are under pressure to agree to these statutory instruments, we must not go on driving them through in such a way that in the end the accumulation of feeling about what we are achieving is that we are making too much haste and should have a bit less speed. I know that there are just 70-something days and the pressures that we are under, but in the end we will have to live with what we decide now.
All of those Acts of Parliament were carefully gone through. I have just one brief observation to make about Ofcom because the others have been made. Most of my consideration was on paragraph 10, but I will not cover that at all. However, in paragraph 7, I find that again and again what Ofcom is required to do while we are a member of the European Union “may” turn into something later. The indicative mood turns into—what? Is it the optative or is it the subjunctive? The word “may” allows itself to be interpreted either way. The optative reflects the mood of wishful thinking while the subjunctive reflects the mood of doubtful assertion. I am truly interested in knowing whether Ofcom’s different field of endeavour and focal points amount to it having the same quality and weight of oversight that it currently enjoys and whether the subjective element which is being introduced by the verbs I have described allow for a different way for it to operate or a different mood to be generated. I do not know, because the words do not allow me to make a deduction and I have certainly not heard this mentioned or dealt with in our discussion thus far.
I said that I would not detain noble Lords for long and I shall not. I am normally an optimistic person and I end my short interventions by saying that I look forward to the next one. However, I sit down on this occasion in a more desultory manner, not sure that I do.
I am sorry that the noble Lord is not looking forward to my reply—he would not be the only one. Let me answer some of his points.
He asked how many hours have been put into the production of the SI. I cannot tell him exactly, but we have been working on it for about 18 months to allow for the engagement of stakeholders and other government departments and the appropriate legal checks. The consultation might not be to everyone’s liking in the sense that it was not formal, but it was real and I shall share some more information with the Committee about who turned up. It was real and, for the reasons that the noble Lord, Lord Adonis, gave, we may be vindicated in our decision not to include another regulator on top of Ofcom. I think I have covered that.
When the noble Lord, Lord Griffiths, talks about whether it is regulation or supervision and a lessening in oversight, the point to bear in mind is that telecoms have always been regulated by national regulators. The EU Commission has a very particular role in this connected with EU matters—namely, the single market. It is obvious that if we are no longer in the EU and the single market, not only will that supervisory function not be performed by the EU because we will not be in it but there will not be a harmonisation problem.
I said that I would not intervene but I am intervening. The Minister is well aware that the financial consequences of telecoms companies, for example, in the UK, which do not abide by regulations imposed by the European Union will be significant. Even following Brexit, there will be huge impacts, one upon another. Therefore, to suggest that Ofcom does not have to have regard to that is just wrong.
I may have missed the noble Lord’s point. The regulatory framework set up through EU directives and regulations has been implemented in UK law and is administered and regulated by the UK. It will change, so in certain cases we have provided that Ofcom, the regulator, will bear in mind the current status of EU directives but in future will have the liberty to move away from them, which is only to be expected because we will not be in the EU. Therefore, we have taken account of EU law as we are trying to maintain the existing regulatory framework, although I accept that in future we might move away from it. The noble Lord, Lord Foster, says that it is changing. It is, and the basis of this SI is that we are leaving the EU, so there is change.
The noble Lord, Lord Griffiths, asked about paragraph 7 of the Explanatory Memorandum: why Ofcom may exchange information with the EU Commission or BEREC. The reason is that it will be given the option to do so if it is in the best interests of this country. It would be perverse to deny it the option to do that, so we are giving it that power. Both noble Lords rightly made the point that it will not, ex officio, be a member of BEREC. We expect it to be either an observer or a member of the various groups that I mentioned, and we hope that it will be. Whether it is or is not, we think it would often be in the regulatory interests of this country to exchange information. I think it is extremely likely that it would do so and I am sure that regulatory information will flow the other way. It is the subjunctive, I feel, in answer to the noble Lord’s question.
I am grateful for the consideration of the instrument and expect a very brief further discussion—consultation, possibly—later; I have made commitments on that. We think that the amendments contained in the SI are essential to ensure legal clarity, to reduce litigation risk and to protect consumers. Beyond that, we have agreed on the necessity for the regime to exist to correct deficiencies in retained EU law. On that basis, I hope that noble Lords will be able to approve the consideration of the regulation.
The Question is that the Motion be agreed to. As many as are of that opinion will say “Content”; to the contrary “Not-content”.