Digital Economy Bill — House of Lords, 2017-01-31
Topic: Technology
Thomas Ashton (Conservative, Centre-right): I am grateful to all noble Lords who have contributed. Amendment 12 would introduce a new clause to require that the rollout of the broadband USO be delivered on a fair and competitive basis. Under the EU universal service directive, the USO is delivered by one or more designated universal service providers. Designation of the provider or providers is a matter for Ofcom under Section 66 of the Communications Act 2003. The Act enables Ofcom to set out the procedure for designation in regulations, and Section 66(7) requires that this procedure must be efficient, objective and transparent, and not involve or give rise to undue discrimination against any person. Existing legislation therefore already provides for a fair and open process for the designation of a universal service provider, which meets the concerns of this amendment As noble Lords may be aware, in April last year Ofcom published a call for inputs, seeking views from industry and consumers on the design of the broadband USO. The majority of respondents shared Ofcom’s preference for a transparent and competitive designation process for the universal service provider. At the same time, however, few industry stakeholders expressed a desire to be designated as the provider of the broadband USO. In light of this, Ofcom’s USO technical advice, published on 16 December, explained that it considered that a more restricted process, whereby all providers are considered and an appropriate provider chosen, subject to a consultation process, was more likely than a competitive process which was unlikely to bring forward any interested providers. It also indicated that the most efficient outcome may be for BT and KCOM to be designated as universal service providers. This will be a matter for Ofcom to consider fully, once decisions are made on the detailed design of the broadband USO. I should, however, stress that the universal service provider is only able to recover from a USO fund in respect of an unfair net cost burden, as calculated by Ofcom, so the method of designation has no bearing on whether the designated provider is incentivised to deliver the USO in the most efficient way Amendment 13 would require the designated universal service providers to roll out in rural areas before deploying their networks in urban ones. I do not think this would be appropriate. There are, I know, more rural consumers struggling with slow broadband speeds, but I do not think that the needs of urban consumers are any different from those of rural ones in the same position. As such, they should be treated the same. The USO is being introduced specifically to target those areas where commercial providers have not provided, and are unlikely to provide, connectivity, be they rural or urban areas, and to confront social exclusion wherever it is located The noble Lord, Lord Mendelsohn, talked about the role of smaller suppliers in the BDUK superfast programme. Of course, smaller suppliers can successfully deliver infrastructure into communities in the hardest-to-reach parts of the UK. There are now 11 smaller suppliers contracted to deliver superfast broadband projects through BDUK’s programme. The noble Lord also asked why we do not introduce an outside-in rollout, like Germany. We agree that has been very successful but unfortunately it is not comparable to what is proposed under the USO. In Germany there is no USO, but a publicly funded rollout programme. It worked by giving the commercial sector the opportunity to roll out in more commercially viable urban areas. The USO is intended to target areas that are not commercially viable Amendment 20—I pay tribute to the noble Lord, Lord Mendelsohn, for his measured remarks about BT, which is a bit of a whipping boy here—would give the Secretary of State a power to direct Ofcom to begin the process of legally separating the Openreach division of BT. We do not think this power is necessary, since on 29 November last year Ofcom announced its intention to do that very thing, as the noble Lord, Lord Fox, mentioned. In answer to the question from my noble friend Lord Arbuthnot, I am afraid I do not know the details about the way it has been operating. I will check that and get back to him in writing. According to Ofcom, the only thing that can stop the process is if BT agrees a voluntary arrangement that meets all of the regulator’s requirements Furthermore, through its comprehensive digital communications review, which reported in February 2016, Ofcom examined closely the whole of the UK telecommunications market. It concluded that changes to the governance of Openreach could benefit competition and consumers, and consulted last summer on the form that these changes should take. Last November it announced its decision that legal separation was the way to go. Therefore, Ofcom has already carried out most of the actions set out in paragraph (2) of this amendment. If the Secretary of State were to use the power granted by this amendment to direct Ofcom in the manner described, the result would be repetition and delay due to the requirements of the clause Because Ofcom is an independent regulator—I can say to my noble friend Lady Byford that it is Ofcom that holds it to account—the Government do not wish to take a power to direct how it should carry out its duties. However, I can assure noble Lords that the Government are listening to Ofcom in case there is anything we can legitimately do to ensure that the changes the regulator has proposed can be carried out expeditiously. I will leave that there for the time being Amendment 21 would require local authorities to take steps to ensure that alternative suppliers are in place to meet the requirements of the broadband USO where they identify areas which do not receive this. It would also give local authorities the option of publishing data on broadband speeds in their area and the extent to which the broadband USO is being met If I have understood the intention, the first part of this new clause seems unnecessary, as the process for designating the universal service provider is intended to ensure that no operator would be excluded from being designated. It would be for operators themselves, either on a national or regional basis, to put themselves forward to be considered for designation by Ofcom. This is not something that local authorities would have a role in. If, on the other hand, the intention of the new clause is that local authorities should take a role in procuring alternative suppliers to deliver broadband to the same standard required by the USO, this would fall outside the USO measures in the Bill. Local authorities can, of course, carry out procurements to provide areas with superfast broadband through the UK’s national broadband scheme, and areas covered in this way will not need intervention under the USO The second part of the new clause is also unnecessary as local authorities already have the option to publish data about broadband speeds in their area without the need for this legislative provision. They would, in any case, rely on Ofcom data. Ofcom has extensive data-gathering powers and reports to the Government on the availability, take-up and use of broadband in its annual Connected Nations reports. The reports include data at local authority level. In future, once the USO has been introduced, the Connected Nations report will also provide a means of reporting on the broadband USO and whether it is effectively meeting the needs of consumers and businesses. Given those explanations, I hope the noble Lord will withdraw his amendment.