Communications Bill

Public Bill Committee, 9 January 2003.

Standing Committee E

Communications Bill

Roger Gale (Conservative, North Thanet)

Before we start, I have a housekeeping—literally, in this case—announcement to make about accommodation. The powers that be have decided that the Hunting Bill is of such great importance that it takes precedence over the future of the nation's entire communications industry. On that basis, we are compelled to remain in this Room for the duration or our Committee, because the Hunting Bill will be discussed in Committee Room 14 for longer than we shall be in here.

That being so, we have examined other possibilities. The genius who designed Portcullis House has apparently configured all the major Committee rooms there in a manner that is entirely suited to Select Committees, but not remotely suited to the convenient operation of a Standing Committee, so we cannot use Portcullis House.

I shall therefore reiterate what I said the other day. I do not think that at this time on a Thursday we are likely to have a crowded Gallery, but if the situation becomes difficult, I propose to allow Hansard staff awaiting the collection of notes to use the Press Gallery. There is a precedent for that: Thomas Hansard was the first reporter allowed into the House of Commons. I have informed the Officers of the House of my proposal.

I am also willing—if it becomes necessary—to rope off that bit of the Room that allows people direct access from the Door without having to come through the Committee. I shall make that space available only to House of Commons pass holders working specifically for members of the Committee. That means that if hon. Members' secretaries, advisers or other persons need access without having to wait for a place in the Public Gallery, four places will be available for them. That is the best that we can do, but I shall raise the entire issue at the next meeting of the Chairmen's Panel.

Andrew Lansley (Conservative, South Cambridgeshire)

On a point of order, Mr. Gale. According to our programme resolution, we are due to discuss clause 193, which deals with the BBC and Ofcom, on Tuesday morning. The Government have stated repeatedly, and in their response to the Joint Committee, that they will make available a draft of the new agreement with the BBC for consideration alongside the relevant provisions of the Bill. I might have missed something, but I have not seen such a draft. Have you received any intimation from the Government that it will be available? We should receive it today if it is to have an impact on the tabling of amendments for Tuesday.

Roger Gale (Conservative, North Thanet)

The Chair always takes the view that it is desirable that hon. Members are given as much

information as possible, to facilitate deliberations. Having said that, I have been given no notice of any such paper being available now. The provision of Government papers is a matter for the Government, not for me, but having heard that point of order, I am sure that the Minister has taken note of what the hon. Gentleman said.

Michael Fabricant (Conservative, Lichfield)

Further to that point of order, Mr. Gale. If the information is not made available, will you consider deferring discussion of the relevant clauses until we have received sufficient information to table amendments?

Roger Gale (Conservative, North Thanet)

No. The order of business has been determined and I propose to adhere to it. The Minister has heard what the hon. Gentlemen have said. If he can, I am sure that he will respond positively.Clause 147 General functions of OFCOM in relation to radio spectrum

Clause 147 - General functions of OFCOM in relation to radio spectrum

John Whittingdale (Conservative, Maldon and East Chelmsford)

Given that this is the first clause in the part of the Bill that deals with spectrum use, it might be appropriate to say a few words about the main issue that we will address. Clause 147 is obviously the prime underlying clause that will determine all Ofcom's activities when it comes to exercise its responsibilities for the management of spectrum.

I cannot resist the temptation to quote from the report of the Joint Committee on the Bill, which, on examining these provisions, said:

''We have found these some of the most difficult provisions to examine for several reasons. First, the provisions seek to give effect not only to policy proposals in the White Paper and requirements of the EC Directives but also to some proposals in the independent review of radio spectrum management issued by Professor Martin Cave . . . but we have had to conduct our inquiry in ignorance of the Government's response to that review.''

Of course, since the Joint Committee conducted its inquiry, the Government have published a response to Professor Martin Cave. However, the Vote Office denies the existence of that response, and although the Library accepts that it exists, I was told that the cupboard that contained it was locked, and when the cupboard was at last opened, it was discovered that the relevant document had been removed. I am therefore not much better off than the Joint Committee when it comes to taking account of the Government's response, although I think that the Bill itself constitutes a response.

The Joint Committee report went on:

''Second, the provisions on spectrum use and management are an exemplar of the wider problem of a Bill that proceeds by amending earlier Acts, requiring those seeking to understand the provisions to navigate through a thicket of previous enactments.''

Thirdly, and finally on that subject, it says that

''spectrum management depends for its success on a number of technical considerations relating, for example, to interference management on which we do not purport to have any expertise.''

I probably speak for a number of Opposition Members when I say amen to that. The Joint

Committee is essentially saying that the provisions that we are discussing are very complicated. None the less, we will do our best, because they are terribly important.

In many ways, everything that Ofcom will do results from the fact that there are limits on the amount of spectrum available. That is justification for intervention and regulation by Government, for television companies being subject to restrictions on ownership and content, and for the management of telecommunications. Almost everything that the Bill covers flows from the fact that that spectrum is limited and that there is, therefore, a need for the state to intervene and control how it is used.

I cannot resist telling the Committee that it was in Chelmsford, which I have the great pleasure to represent, that the first radio broadcast was made by Guglielmo Marconi in 1920. The Marconi name is important in Chelmsford, although it has had its ups and downs in recent times. Nevertheless, we are proud of the fact that Chelmsford is the birthplace of British broadcasting. That first radio broadcast was made on 15 June 1920, and was of a concert by Dame Nellie Melba.

In those days, the issue of spectrum scarcity did not arise. There was a huge amount of spectrum that nobody was doing anything with until Nellie Melba was broadcast across the airwaves—there was no shortage of the stuff. However, in the past 80 or so years, ever more uses have been found for spectrum. That has led to steadily growing congestion and to debate on the best use of spectrum and the allocation of frequencies for different purposes.

Michael Fabricant (Conservative, Lichfield)

I always hesitate to correct the Front-Bench spokesman—that is probably why I remain on the Back Benches—but my hon. Friend is wrong to say that there was a considerable amount of spare spectrum available in 1920. He should read the excellent history of broadcasting by Asa Briggs, who was the vice-chancellor of Sussex university, where I took my masters degree.

Andrew Robathan (Conservative, Blaby)

He was provost of Worcester college, Oxford, as well.

Michael Fabricant (Conservative, Lichfield)

Indeed he was. In that book, Briggs wrote about the criticism made in the past by Morse code users about the amount of bandwidth used for voice broadcasts. Much of the spectrum that is now available—in the gigahertz region, as well as in the megahertz region—was not available at that time.

Roger Gale (Conservative, North Thanet)

Order. At the end of the sitting of this Committee, I intend to make a small award for the longest intervention, and the hon. Gentleman is in danger of breaking his own record.

I do not want to intervene in the debate, but as I am on my feet, I will say that I think that the first radio broadcast was from Brownsea island in Poole harbour to the Isle of Wight.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am grateful to my hon. Friend the Member for Lichfield (Michael Fabricant) for his remarks which, although lengthy, were informative.

What he said proves that the debate has been going on for longer than I had thought. I had the pleasure of sitting next to Lord Briggs at the Booker prize dinner not so long ago, and I would not dare to question anything that he has written, as he has great authority. However, I do not think that what has been said reduces the importance of my point, which is that the matters with which we are dealing with in this section of the Bill, and to which the clause primarily relates, have become steadily more complicated to administer over the past few decades.

I am sure that the Minister will be happy to join me in paying tribute to the Radiocommunications Agency. Of the five bodies that are being brought together to form Ofcom, the Radiocommunications Agency is in many ways the one that gets the least attention. Yet it is also the one that employs the most people: its staff comprise the majority of the staff that are going to Ofcom. In general the agency has succeeded in carrying out its functions extremely efficiently. Britain is regarded as a leader in the development of radio spectrum management techniques. The Bill will introduce several new aspects to that endeavour, and they will be examined with considerable interest overseas.

Every time a new technology develops—they seem to arrive with ever-increasing speed—new pressure will be put on existing users of radio spectrum, and new and more difficult issues will be raised for those who manage it. That is of huge importance, not only because modern life depends to an increasing extent on telecommunications and broadcasting, but because some users of spectrum are vital to national security, such as the Ministry of Defence, which is one of the biggest users of spectrum.

The emergency services are completely dependant on reliable communications that are not subject to interference. Interference is a vital aspect of the work of the Radiocommunications Agency, which is soon to be transferred to Ofcom, but we will talk about that later. Furthermore, as hon. Members of all parties know, the House of Commons would now be almost impossible to operate if our pager systems did not work efficiently. In some respects, it could be argued that the House of Commons would operate rather better without them, but they have become an indispensable part of the modern politician's life.

John Greenway (Conservative, Ryedale)

An example of the point that my hon. Friend just made appeared on my pager at 1.34 this morning. The message just said, ''J U.'' If he has any idea what that means, perhaps he would let me know.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I shall resist the temptation to speculate. My hon. Friend might need to resolve that with the Whips Office. There are a variety of possible explanations, which I shall not explore any further.

Each of the developing technologies is welcome. Mobile telephony is regarded by the younger population as essential to modern life, and internet access has the potential to become more important, particularly if we succeed in rolling out broadband any further through ADSL. Those technologies relate to existing users, but others technologies are beginning to

come down the pipeline and, in time, those will offer enormous potential. Two such technologies—software-based radio and ultra-wide broadband—appear in Professor Cave's report. I will not try to explain them in detail, because, to be quite honest, that would defeat me. However, I am told that they are very promising technological developments.

Professor Cave has said that it is impossible for us to predict the likely demands on the radio spectrum in future. Ours is a relatively small island, not only in geographical terms, and because of that the potential for interference and congestion that could result from the spectrum usage is greater. That makes it all the more important that we get spectrum management right. Initially, the Government took the view that the right approach to the problem was to conduct a kind of beauty parade, with people saying, ''This is a good idea. We think that it will provide the necessary benefits. Please can we have a chunk of the spectrum in which to do it?'' Essentially, the Government were to look at the merits of what was suggested and then decide whether to grant a licence.

The Wireless Telegraphy Act 1998 introduced incentive pricing, which sought to attach a value to a part of the spectrum, rather than charge the user for the administrative cost of licensing it. That development was useful and it began to introduce a market function into the determination of the allocation of spectrum. The type of centralised planning that was originally used to allocate spectrum is probably impossible now—it would defeat a genius to consider all the various possible uses, both now and in the future, and to achieve an efficient allocation. I have never been a great fan of central planning at any time, and that is a classic example of a situation in which even if the biggest supercomputer were available, central planning would be inferior to a market mechanism. I think, therefore, that the proposals contained in Professor Cave's review should be implemented under the clause.

The professor's recommendations are, in the main, sensible. The first of two main developments is the introduction of the ability to trade spectrum, which will clearly introduce a market mechanism for those who have existing licences for chunks of spectrum, and will, we hope, provide an incentive to spectrum holders to increase the efficiency with which the spectrum is used. Spectrum holders might release for sale a part of the spectrum that they use, because it will have a monetary value once trading is established. That will facilitate the drive towards the introduction of technology, which may lead to efficiency improvements in spectrum usage, as well as stop the hoarding of spectrum on the off chance that it might prove useful one day.

Brian White (Labour, North East Milton Keynes)

One of the key issues is that much spectrum use is determined by international agreement. How does the hon. Gentleman envisage spectrum trading within international agreements?

John Whittingdale (Conservative, Maldon and East Chelmsford)

That is an interesting question. I hope that in due course such trading might be possible, but that would require another level of international agreement. At the moment, we are concentrating on

trading spectrum within the bands that have been allocated by international agreement for each particular purpose.

Michael Fabricant (Conservative, Lichfield)

Will my hon. Friend allow me to intervene on that point?

Roger Gale (Conservative, North Thanet)

Order. I will allow the hon. Gentleman to intervene if the Front-Bench spokesman wishes, but as clause 163 relates to the wider issues, it may be that it is more appropriate for the Committee to debate the matter then. I accept that all these matters are inter-related, but clause 147 relates very specifically to the powers of Ofcom, which I have scarcely heard mentioned so far.

Michael Fabricant (Conservative, Lichfield)

Thank you Mr. Gale. Does my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) believe that Ofcom should have the power to intervene with the World Administrative Radio Conference to ensure that the frequency spectrum allocated by WARC can be traded between one nation and another?

John Whittingdale (Conservative, Maldon and East Chelmsford)

It would be rather difficult for us to give Ofcom that power. Other members of the conference would not necessarily recognise our all-powerful ability to tell them what to do. That too is an interesting point.

Mr. Gale, you are right that clause 163 deals specifically with the issue of trading. I want to explore further some of the problems that have been identified with, or might arise from the issue of spectrum trading. It is a desirable objective, but there is no doubt that is raises potential difficulties that the Committee should rightly address. The same will apply to auctions, of which we have had some experience. We will need to examine that when we reach the relevant clause of the Bill.

Returning to Professor Cave's report, it is the function of Ofcom, under clause 147, to implement Professor Cave's recommendations. He makes a persuasive case for the general move that will result from this part of the Bill, towards a more market-based approach to the allocation of radio spectrum.

One huge issue will have an enormous effect on the activities of Ofcom in the allocation of radio spectrum and will clearly be a major consideration in almost everything Ofcom does in this respect. Professor Cave concludes his report with the following paragraph:

''The switchover from analogue to digital broadcasting offers the UK the biggest potential efficiency gain in spectrum use in the next decade. The review's proposals would make it easier to achieve digital switchover.''

That is the underlying agenda throughout the part of the Bill that we are considering now. Clearly, the possibility of analogue switch-off will have a traumatic effect on spectrum use; it would certainly free up a large chunk of spectrum, allowing it to be used for other activities. It is probably common ground throughout the Committee that, in principle, analogue switch-off is a desirable objective.

Surely it is of economic benefit to the nation to have digital broadcasting. It enables many more services to be provided: it enables interactivity, better quality of

transmission and, at the same time, it allows us to free up a huge amount of spectrum for alternative uses.

Inevitably, another factor is the beady gaze of the Treasury. My hon. Friend the Member for South Cambridgeshire (Mr. Lansley) will remember that in the previous Parliament, when all parties were seeking extra resources to devote to good purposes such as the health service and education, the prize of achieving analogue switch-off and the potential revenue from the sale of that spectrum was very tempting. Recent events have demonstrated that perhaps it is not quite as big a prize as some had originally hoped. Figures of £20 billion, which were bandied around at one time, seem to have shrunk dramatically. I heard £500 million quoted recently. I would be interested to know the Minister's view. Clearly, everything that we are debating in relation to Ofcom's management of the spectrum will be affected by our progress towards analogue switch-off. I hope that the Minister will say a word about the Government's view of progress towards that objective. Analogue switch-off is one of the biggest issues; it affects everything that we are debating in the Bill. It is almost impossible to consider this part of the Bill without taking into account the consequences of analogue switch-off for spectrum management.

It is certainly true that analogue switch-off will be much more difficult to achieve than some first thought. The hon. Member for Ceredigion (Mr. Thomas), who is not in the Room, will be particularly aware of the difficulty in rural areas. There is also a need to ensure that there is 95 per cent. digital take-up before we consider turning off the analogue signal, or at least a need to put in place mechanisms to achieve that kind of take-up.

There are huge complications relating to that simple technical exercise. It is easy to say that 80 or 90 per cent. of the population now have access to digital broadcasting; I have access to it through the television in my living room, but not through the one in my kitchen. Almost the majority of the population are becoming two—or even three or four—television homes, so it is not sufficient to say that because people have a digital receiver, we can happily turn off their analogue signal as they do not use it any more. Such issues create real difficulties that we need to address before we reach a decision on analogue switch-off.

The same applies to video recorders. Hon. Members will recall the exercise in relation to adjusting the tuning of video recorders that had to be conducted before Channel Five could start transmission. That was a minor exercise in comparison with what will be necessary for analogue switch-off. There have been real doubts about the cost that will be incurred before we can achieve that.

There may be mechanisms that Ofcom can use to make faster progress towards analogue switch-off. I suspect that one of Ofcom's prime objectives will be to encourage take-up of digital broadcasting so that we can get to the switch-off point faster. In particular, I would be interested to hear whether the Government

stand by their existing target for switchover. It is inevitably a fairly wide target, but there have been suggestions recently that even that wide target is slipping, and that the Government may be having second thoughts about its achievability.

It will be difficult to debate this part of the Bill and what Ofcom will do in relation to spectrum management unless we have a firm idea of exactly when the Government believe that it will be possible to achieve analogue switch-off and release a huge extra amount of spectrum. That release will allow Ofcom to debate the best use of that extra spectrum and to allocate it for other uses. There are many questions to which we shall want to return in detail when we consider the clauses individually, but this question is so enormous, and so looms over everything that we will consider today, that I hope that the Minister will say a word about it, so that we will be better informed for the rest of our debate.

Several hon. Members rose—

Roger Gale (Conservative, North Thanet)

Order. We are in danger of embarking on a Second Reading debate on chapter 2. I appreciate that a lot of interrelated and complex issues arise in this very technical debate, and I am reasonably willing to accommodate them on the clear understanding that we do not cover the same ground later. I shall pass on that information to Mr. Hood and Mr. Atkinson.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I wish to draw attention to the general functions of spectrum use. The hon. Member for Maldon and East Chelmsford helpfully set the matter into context, particularly when he referred to our being positive when referring to digital switchover, but being a little more critical when referring to analogue switch-off, which will probably be of most public interest when discussing spectrum, given that it is otherwise a dry, technical subject.

As for giving advice on the use of wireless telegraphy, I turn to the extent to which Ofcom, when giving advice on the use of wireless telegraphy, must or must not pay attention to the value of the spectrum. Great furore surrounded the auction of the 3G mobile licences. It was seen as a helpful revenue-raising exercise for the Government, with significant amounts of money coming in. Some time ago, I asked about the digital switchover and the valuation that the Government had put on the additional spectrum that would be made available at the time of the switchover because, clearly, they can achieve revenue from the additional spectrum. I was told that the Department for Culture, Media and Sport had made no estimate of the potential value of the spectrum.

People will want to know whether decisions about the use of spectrum are made purely in the public interest and the services that they receive over the spectrum or whether the Government's ability to raise revenue from the spectrum will be a factor. When considering how Ofcom will operate, it will be interesting to know whether the Minister's expectations are that Ofcom will be advising the Government from a public service viewpoint. What basket of services will be the most appropriate that can

be achieved over a limited spectrum? Will Ofcom be expected to have a sense of the cash value of the spectrum when it is auctioned by the Government for specific purposes?

We shall discuss spectrum access under later clauses. Will it be carried out primarily for a cash-raising exercise or is it about gaining efficient use of the spectrum? There is tension between the Government's desire to raise cash and the public interest in respect of who should have access to the spectrum and whether the costs should be passed on. We sympathise more or less with the 3G companies, but the fact remains that the costs of the 3G exercise will be passed on to the consumer. The 3G companies paid for that spectrum; it was their choice but, as representatives of the consumers, we worry about the extent to which costs are fair, given what the consumers will eventually pay.

I come now to grants under subsections (5) and (6). It is interesting that Ofcom will have the power to make grants to promote

''the efficient use in the United Kingdom of the electro-magnetic spectrum . . . the efficient management of that use''.

That raises the matter of digital switchover and the problem in regard to the last analogue television sets that will exercise the Government, when digital terrestrial penetration reaches a certain level. A number of analogue television sets will still be out there, perhaps in poorer households where individuals are unable or unwilling to switch? How will the Government deal with that problem? One solution would be for the costs of the switchover to be met by the Government rather than by the individual. Ofcom has power under the clause to make grants. Will it have the ability to fund the last 5 per cent. of switchovers, when they are of public importance? That may be defensible. It may be a sensible approach. Does the Minister envisage that happening in relation to grants or will matters be on a much smaller scale? What does he mean? Will grants cover digital switchover in digital or terrestrial television?

Brian White (Labour, North East Milton Keynes)

Just to show you how sad I am, Mr. Gale, I spent Christmas rereading the Cave report and I am not sure that I am any wiser than when I first read it. That was the third time that I had read it and, even though I had seen it before, as it was drawn to the attention of the pre-legislative scrutiny Committee, I still do not understand it. The Government's proposals on implementing Cave are correct in principle, but there will be problems with the detail. I am sure that we will come to that presently.

I have two questions about Ofcom's function under the clause. First, the hon. Member for Sheffield, Hallam (Mr. Allan) spoke about grants, but one constraint in the clause is that Ofcom must go to the Treasury every time it wants to make a grant, so there is a question about broadband and how that sector is to develop quickly. Ofcom might want to facilitate some innovations, but the procedures—going through Treasury committees and so on—prevent that from happening. As a consequence, something that might have been useful at the time would no longer be

appropriate. I ask the Minister to consider how that will work and to tell us about the relationship between Ofcom's ability to act in the national interest and in the interest of improving spectrum according to the terms of the Bill, and about its relationship to the Treasury. I fear that there might be a blockage that the Government do not intend to create, but which might be a consequence of the measures.

Secondly, an issue that emerged from evidence given to the pre-legislative scrutiny Committee was Ofcom's role in dealing with and across Departments. The hon. Member for Maldon and East Chelmsford mentioned the Ministry of Defence—to which I am sure we will return. How do the functions of Ofcom relate to that ability, which is currently exercised by committee across Government? How would that work, and what would the relationship be, given the functions that are described in clause 147?

John Greenway (Conservative, Ryedale)

Following from the points that were made by the hon. Member for Milton Keynes, North-East (Brian White), it would be helpful if the Minister were to give some examples of the sort of grant that it is envisaged that Ofcom would make under subsection (6). Like the hon. Gentleman, I am at a loss to know whether Treasury approval for granting public money is a valuable safeguard, or an unnecessary interference with Ofcom's flexibility.

The notes on clauses are excellent, but the notes on clause 147 leave us none the wiser about what the grants are for, to whom they would be made, what their specific purpose is, and what would be the measurement of outcome. One presumes that public money would be involved, but equally one presumes that the clause contains that facility because the Government envisage Ofcom having a valuable role in ensuring that we get the maximum use from the available spectrum.

The hon. Gentleman anticipated my train of thought. If grant enables a speedier roll-out of digital delivery, it would be to the good, particularly if it were in respect of radio. As my hon. Friend the Member for Maldon and East Chelmsford said, there is concern that the timetable for analogue switch-off and the roll-out of digital television may be slipping. I think that an increasing number of people are getting enjoyment from radio—I certainly do, so it is a great sadness that progress towards a digital era in radio has barely started. If the making of grants were to encourage and facilitate a speedier roll-out of digital radio, that would be valuable.

Given that grants can be made to any person, including

''a person holding a wireless telegraphy licence'',

I presume that they could be made to the BBC. If that is the case, the Minister should tell us. He should also try to give us some idea of what the Treasury's role will be, not only in deciding whether the grant can be made, but—in the words of subsection (7)(b)—in the setting of

''the terms and conditions on which such a grant is made.''

That is particularly relevant because, as subsection (6)(b) makes clear, there is potential for the

requirement for the grant to be repaid ''in specified circumstances.'' Those terms are extremely vague, but they are also quite powerful, and we ought to be given some sort of explanation.

Turning to another interesting feature of the clause, subsections (8) and (9) give Ofcom charging powers separate and additional to the general powers in clause 25. It would be helpful to the Committee, and to those whose livelihoods depend on the outcome of our deliberations, if the Minister were to give us some idea of how high those charges might be and in what circumstances they might be levied. Perhaps he might also, in general terms, give us some examples.

This clause raises many issues and the Minister might be able to respond only to some of them today. If any of my more detailed questions are more appropriately answered at a later date, I am happy to accept that. The Committee has a responsibility to ask questions. Where the Bill has anything to do with money, we should pause and reflect on what that means and what the consequences are both for the public purse and the wider interests of consumers and the communications and broadcasting industry.

Michael Fabricant (Conservative, Lichfield)

I do not intend to repeat the issues raised by my hon. Friend the Member for Maldon and East Chelmsford, whose speech was a tour de force—

Chris Bryant (Labour, Rhondda)

A tour d'horizon.

Michael Fabricant (Conservative, Lichfield)

A tour d'horizon aussi. My hon. Friend pointed out very well the problems with the application of frequency spectrum, not only now, but in the past. As several of the issues that are relevant to clause 147 are also of relevance to future clauses, I intend to raise many of them later on. However, I wish to make two points now. The first is about analogue switch-off. I am about to say something that I think will confine me to the Back Benches permanently: I congratulate the Department for Culture, Media and Sport on making the right decision when it recently gave the digital terrestrial television licence to Freeview, which is a consortium of the BBC, BSkyB and Crown Castle.

I see that your face has adopted a studied expression, Mr. Gale. You might be wondering whether the whole area that I am about to explore—and which was explored in some detail by my hon. Friend the Member for Maldon and East Chelmsford—is relevant to clause 147. It is relevant because analogue switch-off would make available frequencies that are not currently available for other use, such as telephony, telecommunications, and further forms of broadcasting other than television.

It is important to explain that digital terrestrial television and other digital forms of broadcasting not only have the advantages outlined by my hon. Friend—such as improved picture in many, but not all, cases—but allow far more television channels to be squeezed into the same amount of frequency spectrum, thanks to digital compression techniques. Many of those techniques were developed by the old Independent Broadcasting Authority's engineering

division at its headquarters at Crawley Court near Winchester, with which you might be familiar, Mr. Gale.

I congratulate the Department for Culture, Media and Sport; it was right to identify the fact the Freeview bid, under which Freeview said that digital terrestrial television should be made available free of charge, or free to air, was the only way to provide an incentive for people to gain access to the additional channels other than by using cable or satellite. Freeview cannot have the same number of channels as cable or satellite, because the frequencies are not available, but even having—if memory serves—24 digital television channels and six or seven audio channels is a major improvement on the five available on the analogue system.

I should be interested to hear whether the Minister thinks that the target date for analogue switch-off—if one has been set—is reachable. It seems to have altered: 2005 at one point, it is now 2010. My hon. Friend the Member for Maldon and East Chelmsford pointed out the difficulties of a switchover when he talked about the introduction of Channel Five, but my memory—and yours, I suspect, Mr. Gale—[Interruption.]

Roger Gale (Conservative, North Thanet)

Order. It is the duty of the hon. Member on his feet to seek to hold the attention of the Committee, but I must ask hon. Members to refrain from private conversation.

Michael Fabricant (Conservative, Lichfield)

Thank you, Mr. Gale. I am sure that you remember the problems of switching over from VHF to UHF television transmission. You may even have possessed a dual-standard television set, which consisted of a very clunky control that switched over not only from VHF to UHF, but from 405-line transmission on bands 1 and 3 of VHF, to 625-line transmission on UHF.

John Whittingdale (Conservative, Maldon and East Chelmsford)

My hon. Friend makes an interesting analogy. He might be interested to know that the Independent Television Commission compared the task of switchover from 405-line to 625-line with the task of achieving analogue switch-off, and warned that analogue switch-off would be likely to take at least as long, if not longer. It said that, as a result, 2018 was the earliest date imaginable.

Michael Fabricant (Conservative, Lichfield)

That is substantially different from the date that I have heard the Secretary of State for Culture, Media and Sport talk about. I should be interested to hear the views of the Minister for E-Commerce and Competitiveness on when we will be capable of analogue switch-off, although I recognise that he is a Minister at the Department of Trade and Industry, not the Department for Culture, Media and Sport.

I recall that people hung on to their old black-and-white 405-line sets for years and that it took some 15 years before the old VHF television transmissions could be switched off, during which period there was simulcasting on UHF for BBC 1 and ITV. If that trend continues, 2018 might well be a realistic target. That would be very unfortunate, if only for the Treasury, which, I suspect, thinks that it will raise considerable amounts of money from the sale of frequencies—

Roger Gale (Conservative, North Thanet)

Order. I appreciate that the future availability of spectrum is related directly to analogue and digital adjustments, but I remind the hon. Gentleman that the clause deals specifically with spectrum and Ofcom's functions in relation to it. He should either bring his remarks to a conclusion, or come back to the point.

Michael Fabricant (Conservative, Lichfield)

I was just about to move on to the next subject of concern with which I hope the Minister will deal. It arises from subsection (5), which deals with

''the efficient use in the United Kingdom of the electro-magnetic spectrum for wireless telegraphy''.

The Minister will be aware that several companies, such as Orange, O?2? and Vodafone, hold mobile telephony licences. Will it be Ofcom's duty to ensure that geographical elements of those licences cannot be sold to competing companies? As a satisfied Vodafone user, I shall use that company as an example of my argument, although I hasten to add that I have no reason to believe that the company intends to act in the way that I shall describe.

Vodafone would claim that its network covers a certain percentage—say, 90 per cent.—of the United Kingdom. Will Ofcom be in a position to stop Vodafone selling off frequencies in some rural areas in future to another company, such as O?2?? Apart from its tariff structure, I and other customers chose that particular company because of its coverage. If it could sell off its frequencies, I would be unable to use my mobile in certain areas of the country where, previously, I had been able to use it, unless the roaming position were changed, whereby I could use other telephone companies, but that would cost more. Will Ofcom have a locus, under the Bill, to stop the selling of some frequencies? Moreover, the Minister will be aware that the 07 band of telephony applies not only to mobile telephony, but pager use. Is there anything to stop inter-trading between pager companies and mobile telephone companies?

Roger Gale (Conservative, North Thanet)

Order. I am listening carefully to the hon. Gentleman and I am trying to be as generous as I can in my interpretation of the clause, but he is now talking about trading and that is covered under later clauses.

Michael Fabricant (Conservative, Lichfield)

In that case, I shall sit down. I will raise the matter and those to which my hon. Friend the Member for Maldon and East Chelmsford referred when we discuss future clauses.

Andrew Robathan (Conservative, Blaby)

I will not detain the Committee, but I wish to reinforce the argument of my hon. Friend the Member for Maldon and East Chelmsford. Nowhere in this leviathan of a Bill is there mention of analogue switch-off, but that will have a direct impact on the lives of a vast number of our constituents who probably are not concentrating on each word that has been said in this marathon of a Committee. Naturally, mobile telephony, broadcasting law and so on will also have an impact, but people will not notice it so directly as the impact of the switch-off of analogue television.

The switch-off will be enormously important to many people, particularly the elderly who probably do not have digital television. How it comes into effect will change their lives. As we know, many elderly people sit at home watching television and they will want to know the impact that the matters that we are discussing in Committee will have on their lives. The change is inevitable; as you will recall, Mr. Gale, it was debated at length during discussions on the Broadcasting Act 1996. I accept that the matter is a DCMS responsibility, but I hope that the Minister for E-Commerce and Competitiveness can explain to us and to our constituents what impact the change will have and how the Government envisage such an enormously important measure being introduced.

Andrew Lansley (Conservative, South Cambridgeshire)

I am sure that there are many matters that we can discuss under clause 147, but I shall touch on only one. I was prompted to intervene by what the hon. Member for Milton Keynes, North-East and my hon. Friend the Member for Ryedale (Mr. Greenway) said about the grant-making powers of Ofcom. I understand why they exist, but it may be useful to take into account the structure. Ofcom has a number of functions that have been transferred to it from the pre-commencement regulators. In order to meet their costs, the regulators, with the exception of the Radiocommunications Agency, have pre-existing arrangements to secure charges upon people whom they currently license or will regulate in future. The Office of Communications Act 2002 includes a provision that Ofcom would make an account and, at the end of the year, if there is excess, the Secretary of State can direct those funds to be paid into the Consolidated Fund or used for some other purpose.

The Radiocommunications Agency operates differently. Sums received by the Radiocommunications Agency were paid to the Secretary of State and so were automatically paid into the Consolidated Fund. Clause 386 sets out the basis upon which money paid to Ofcom, in respect of wireless telegraphy licences and grants of recognised spectrum access is automatically paid into the Consolidated Fund. For this purpose, it would also apply to auctions, so we are potentially dealing with very large sums of money. Money that Ofcom spends in relation to its functions under the Wireless Telegraphy Act will be the subject of a grant to Ofcom by the Secretary of State, with the consent of the Treasury. That will include amounts required by Ofcom to undertake purposes of this kind that are grants from Ofcom to other persons, in relation to wireless telegraphy functions.

Given where we are in the Bill, this may be the point at which to ask: ''Am I right about that? Does that mean that there will, in effect, be an accounting separation between Ofcom's wireless telegraphy functions and its other functions?'' Many people, in particular those who are involved in broadcasting, and the telecommunications industry, may realise that Ofcom will have functions ranging from telecommunications regulation to spectrum. They may be concerned that money payable for licences and recognised spectrum access and auctions—in relation to wireless telegraphy licences—does not get

siphoned off to the Treasury via the Consolidated Fund, and consequently an inadequate grant is made to Ofcom to carry out its functions in relation to wireless telegraphy, effectively cross-subsidised by charges made upon telecommunications providers or broadcast licence holders. I seek an assurance that the accounting separation, given the different flows and the way in which money received by Ofcom is treated, will relate not only to Ofcom, but also of Ofcom's wireless telegraphy functions. We must see that money paid to the Treasury is then paid back to Ofcom, sufficient to meet all its expenses relating to those functions.

Stephen Timms (Labour, East Ham)

Let me begin by referring to the point of order at the beginning of our sitting and inform the Committee that we will provide the paper that was requested in time for the debate on clause 193.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am delighted to hear that from the hon. Gentleman, but could he elaborate on what he means by ''in time''?

Stephen Timms (Labour, East Ham)

I mean before the debate on clause 193.

Michael Fabricant (Conservative, Lichfield)

On a point of order, Mr. Gale. Will you clarify whether that is a satisfactory answer? Does it prevent us from tabling amendments, or will you allow amendments the night before the meeting begins, when we receive the document?

Roger Gale (Conservative, North Thanet)

I made it abundantly plain at the start of this sitting that the provision of documents supporting, but not directly related to the Bill, are entirely a matter for the Minister. The delivery of those papers is a matter for the Department; it is not a matter for the Chair. On the hon. Gentleman's question concerning the tabling of manuscript amendments, that policy is abundantly plain and the answer is no.

Stephen Timms (Labour, East Ham)

We will make the paper available as soon as possible.

Radio spectrum is a key raw material for the communications sector. Wireless networks are indispensable for mobile communications. Wireless links can be rolled out quickly and cost effectively to provide new fixed infrastructure, and the great majority of television and sound-radio broadcasting, which allows us all to listen to Dame Nellie Melba and others, depends on the allocation of the finite resource to which the hon. Member for Maldon and East Chelmsford referred.

Making spectrum available for new innovations is crucial for the economy, and managing the radio spectrum is a principal function of Ofcom as an integrated communications regulator. I was grateful to the hon. Gentleman for the well-deserved tribute that he paid to the Radiocommunications Agency for the effective way that it carries out it vital, but often unsung, tasks. Over the past seven months or so, I have become aware that it commands enormous respect from its international counterparts and from those who are on the receiving end of its work in the United Kingdom.

Clause 2 and schedule 1 will transfer the core functions of licensing and enforcement to Ofcom. This clause completes the picture by conferring on it additional related functions such as providing services, maintaining records and giving advice, all of which are integral parts of the remit of the spectrum manager. They all reflect functions that are currently exercised by the Secretary of State, so there is nothing new in this list; what is new is that the functions have been vested in the new integrated regulator—Ofcom.

Spectrum management involves a wide range of activities, from tackling interference to domestic TV reception to taking part in international negotiations with WARC and others. Ofcom's functions must be broad enough to allow it to undertake the full range of activities that it needs to.

I agree with what the hon. Member for Maldon and East Chelmsford said about the attractions of market mechanisms helping to make spectrum allocation decisions. Those arguments have been set out well in the report by Professor Cave that my hon. Friend the Member for Milton Keynes, North-East has read three times—greatly to his profit, no doubt. I am sorry that the hon. Member for Maldon and East Chelmsford has been unable to get hold of a copy of the Government's response to that report; I will ensure that one is sent to him forthwith.

In a few minutes' time we shall debate amendments that would constrain the way in which those market mechanisms can be used. I will resist them on the basis of the benefits—which the hon. Gentleman described—of being able to use market mechanisms in spectrum allocation decisions.

Michael Fabricant (Conservative, Lichfield)

Does the Minister not take on board the point that was made very well by the hon. Member for Sheffield, Hallam that there is a tension here between services that need to be universally available and market forces? Has new Labour become so capitalist that it has gone off the scale, or does he think that there must be some control of market forces with regard to frequency allocation?

Stephen Timms (Labour, East Ham)

Of course I do. Those constraints are set out in the Bill, and we will debate how they will work.

Several hon. Members asked me about the progress that is being made towards achieving digital switchover. Those who have followed the fortunes of digital television over the past 12 months or so have been on something of a rollercoaster ride. I freely acknowledge that at one stage last year things looked rather bleak after ITV Digital went into receivership last year. However, in a remarkably short space of time the Independent Television Commission was able to reallocate the licences that had been held by ITV Digital to the Freeview consortium, which the hon. Member for Lichfield (Michael Fabricant) mentioned. That has been successful and those who expressed much scepticism earlier last year about the timetable for the digital switchover should have been encouraged by the progress of digital broadcasting in the past months.

The position set out by the then Secretary of State, the right hon. Member for Islington, South and

Finsbury (Mr. Smith) was that we could look forward to digital switchover at some point during the period 2006–10. There is no reason to believe that that cannot be achieved.

Michael Fabricant (Conservative, Lichfield)

As the Minister implicitly corrected me by saying that it was the ITC—not the Secretary of State—that awarded the licence, can I withdraw my praise to the Department for Culture, Media and Sport and transfer it to the ITC?

Stephen Timms (Labour, East Ham)

All those who were involved should be congratulated for the success of that exercise.

Andrew Lansley (Conservative, South Cambridgeshire)

Regarding the date for digital switchover, Committee members will be aware of a number of Government amendments, which we will discuss later, that are designed to allow the expiry date of licences to be shifted from 2014 to some other unspecified date. That is because the Government are not 100 per cent. confident that digital switchover will happen between 2006 and 2010 and they do not even appear to be sufficiently confident to insert some other time parameters in order to establish those in the Bill. Why does the Minister suddenly shift to such uncertainty?

Stephen Timms (Labour, East Ham)

I look forward to the debate on those amendments when we reach them.

There is no reason to depart from the view that we set out some years ago, which was that we could look forward to switchover during the period 2006 to 2010. I have had discussions with Ministers from other countries and it is striking that they are considering much the same period for switchover. That is already happening in Berlin. We can be optimistic about the timetable being met.

Chris Bryant (Labour, Rhondda)

The Minister has already referred to the great success of Freeview since its launch, but there are still problems relating to the signal and the use of the spectrum in many areas of the country. Only 75 per cent. of England and 60 per cent. of Wales is covered by Freeview. Does the Minister think that Ofcom's powers in relation to spectrum management and its slightly interventionist approach will give it a more active and proactive role in ensuring that Freeview and digital terrestrial television, and does he think that issues relating to the signal can be resolved?

Stephen Timms (Labour, East Ham)

We have set out a changeover plan—available on the web—that addresses all the issues that must be resolved in order to achieve a successful switchover. The hon. Member for Maldon and East Chelmsford referred to second sets and video recorders—those must be addressed. We must also address the points that my hon. Friend the Member for Rhondda (Mr. Bryant) made about availability. One of the criteria set out by my right hon. Friend the Member for Islington, South and Finsbury in 1999 was that everybody who can currently get the main public service broadcasting channels in analogue form must be able to receive those on digital systems. It is essential that questions about access are resolved successfully by all those who are working on the switchover, including the industry, the regulator and the Government. I am confident that we will be able to do that successfully.

The hon. Member for Sheffield, Hallam asked me to comment on the valuation of the spectrum. Undoubtedly, the figure assigned by the market would be lower now than it would have been some years ago, but I do not want to give a figure at the moment. The valuation will continue to vary. However, the issue is significant for making decisions on how digital spectrum will be allocated across the country in order to enable the switchover to take place.

There are some quite difficult questions and cost-benefit issues relating to how digital spectrum will be allocated to facilitate digital television. There are more expensive options that would free up more spectrum, and less expensive options that would free up less spectrum. A cost-benefit view will need to be taken on the valuation of the freed-up spectrum, so that a decision can be taken on how much investment is warranted if that spectrum is to be released. Those issues are being considered.

We are not driven by revenue-raising ambitions; I give hon. Members that reassurance. At no point in the Bill have we introduced measures simply because we think that there is an opportunity to raise extra money. That is not the concern driving the clause, or any other part of the Bill. My hon. Friend the Member for Milton Keynes, North-East wondered whether the arrangements set out for the relationship with the Treasury will be a problem. I do not think so; the arrangement included under subsection (7) is entirely conventional, and I do not think that Ofcom will have difficulty working successfully under it.

My hon. Friend and others asked about the grant-making powers under the clause. Those mirror existing powers under section 5 of the Wireless Telegraphy Act 1998. It takes time to move assignments by regulation because of the need to consult and give due notice, and grants can accelerate that process by smoothing the way for incumbents in part of the spectrum to move voluntarily. Such grants are subject to value-for-money and additionality tests. Also, they require Treasury consent under section 5, and must comply with state aid rules, so there are constraints on what can be done.

Those are the reasons why the powers exist. They have existed since 1998, but no grants have yet been paid, although some cases are under consideration. The Radiocommunications Agency announced at the end of November that the Treasury had approved £2.5 million for grants to support research into improving radio spectrum efficiency in the coming financial year. The possibility of grant-making is also under consideration in the context of accelerating the reformatting of the spectrum for fixed wireless access, although the agency has not yet make a commitment to that.

Finally, I shall respond to the points raised by the hon. Member for South Cambridgeshire. I shall say more on spectrum and the accounting arrangements that he asked about when we reach clause 386, but I give the hon. Gentleman and the Committee the assurance that an arrangement will be put in place that broadly translates the existing arrangements, which he rightly identifies as being different in respect of the

Secretary of State and Ofcom. The Treasury and Ofcom are currently discussing the precise handling of those arrangements, but I can assure the hon. Gentleman that spectrum management functions will be adequately funded—as they are now.

Question put and agreed to.

Clause 147 ordered to stand part of the Bill.

Clause 148 - United Kingdom plan for frequency authorisation

Michael Fabricant (Conservative, Lichfield)

I have a series of questions on this. The clause appears to be straightforward: it basically says that Ofcom will publish,

''from time to time as they think fit . . . ''the United Kingdom Plan for Frequency Authorisation'' ''.

My first question is obvious: how often does the Minister think that it will be published? Will it be on an annual basis, or only when Ofcom thinks that the frequency plan might be changed?

My next question is, will the provision apply to all frequency usage in the UK? I assume that the answer to that is yes, but will it include the use of frequencies by the BBC? If that is the case, clause 149(1)(c) becomes relevant, as it talks about the demand that is likely to arise for use of spectrum for wireless telegraphy. Will the United Kingdom plan for frequency authorisation set out not only the matters that are addressed in subsections (2)(a) and (b) but the future possible plans that are outlined in the following clause?

It seems to me that there is a little tension between clauses 148 and 149 because clause 148 does not have a comparable provision to clause 149(1)(c). I did not bother to table an amendment as I hope that the Minister will be able to assure me that the plan will also include the future frequencies that Ofcom think might need to be made available.

Will the plan also address the problem of co-channel interference from transmissions from outside the UK? I remember visiting the television transmitter site at Rowridge on the Isle of Wight: the people there told me that they experienced considerable co-channel interference from the television transmissions of ORTF—Office de Radio-Téléfusion Fran¢aise—not just because of changes in the atmosphere, when local television transmissions can then go further because of the heavy side skip, but because the television transmission from France was not as stable as that from the UK and it was going off frequency. The French were not using a stable television transmission system; the transmitter was made by Thompson, and it was not as stable as it should have been, so there was co-channel interference. Will that sort of issue also be addressed?

The Minister talked about WARC—the World Administrative Radio Conference. Will the issues that it addresses be dealt with as well? Finally, the whole

issue of frequency spectrum applies not only to power and the frequency used, but to the range that the frequency is planning to achieve. The Radio Authority is to be applauded for the introduction of very low-power and small-scale temporary radio licences. Will that issue also be addressed?

I have a picture in my mind that the minimum requirement for clause 148 would be simply a spectrum chart. Can the Minister assure me that it will be far more than that, and that there will be a thorough discussion of the issues that I have just raised?

Stephen Timms (Labour, East Ham)

The production of the plan is a new requirement following from article 5 of the authorisation directive. In the UK, Ofcom will have a duty to provide this plan. The clause requires that the plan to be published and updated regularly, as the hon. Member for Lichfield said. I would not want to constrain those who are responsible in Ofcom by what I say about frequency. The Radiocommunications Agency publishes its spectrum strategy approximately every two years. That is broadly what I expect will happen with the plan. The agency coordinates that publication with the world radio conferences.

The plan will give details of which parts of the spectrum are available for assignment. I will list all the authorisations made by license exemption regulations, with references to the frequencies and the conditions of the regulations. That information will help to make sure that spectrum management is transparent. It will be very useful for those wanting to use the radio spectrum for whatever purpose. They will be able to see at a glance if they need a license in order to use a particular frequency, which frequency is available for assignment and for which applications. This information is published, in a different form, in the spectrum strategy I referred to.

I would not want the hon. Member for Lichfield to expect much detail in the plan when it is published. The plan, for example, will not show which individuals have been awarded licenses although, under clause 165 on the wireless telegraphy register, that will complement the plan by enabling Ofcom to publish information about assignments, subject to suitable safeguards for security and commercial confidentiality.

Will it set out what will happen in future? No. What the plan will contain is clearly set out in subsection (2). Ofcom will want to make available whatever information it can about envisaged changes, in order to assist those who need to plan operations in response. The constraints set out in subsection (2) are a necessary requirement of the plan. Ofcom, if possible, will provide further information, not necessarily in this plan, but elsewhere.

Michael Fabricant (Conservative, Lichfield)

The Minister has reassured me to some extent. He said there would be a need to provide some indication of how frequencies might be allocated in the future. He said it would not be contained in the plan. Regarding frequency allocation, does he envisage that future planning might be expanded in the annual report of Ofcom?

Stephen Timms (Labour, East Ham)

I can certainly tell him that Ofcom, as is currently the case with the Radiocommunications Agency, will endeavour to give as much information as possible to its customers in every way it can. It is the case, as the hon. Member for Maldon and East Chelmsford said earlier in our proceedings, that the agency is seen as a helpful organisation in this and other respects. I am quite confident that Ofcom will be too.

Question put and agreed to.

Clause 148 ordered to stand part of the Bill.

Clause 149 - Duties of OFCOM when carrying out spectrum functions

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No.15, in

clause 149, page 136, line 32, leave out subsection (3).

Clause 149 sets out the range of matters that must be taken into account by Ofcom when managing spectrum. I hope that the Committee will forgive me, but I shall have to take a tour back through history. The purpose of section 2 of the Wireless Telegraphy Act 1998 was to set out the matters to be taken into account by the Secretary of State or the Radiocommunications Agency, on his behalf, when exercising the power to prescribe fees payable in respect of wireless telegraphy licences. In effect, that was the introduction of administrative incentive pricing for wireless telegraphy licences. The matters that must be taken into account are reflected directly under clause 149.

Let us consider clause 149(1)(a), (b) and (c). Such measures cover the supply, demand and prospective demand for spectrum and are translated from section 2 of the Wireless Telegraphy Act 1998. Subsection (2) of clause 149 sets out further factors that are not concerned with supply and demand for spectrum, but wider matters that relate to the economic management for spectrum for the delivery of benefits to society as a whole, such as efficient management, economic and other benefits, development of innovative services and competition. Such matters have been separated under the clause. It may be asked why were they not set out in a group in the same way as they were set out under section 2 of the Wireless Telegraphy Act.

I refer to the debates on the Wireless Telegraphy Act 1998 in Standing Committee A on 13 November 1997.

Brian White (Labour, North East Milton Keynes)

I remember it well.

Andrew Lansley (Conservative, South Cambridgeshire)

Yes. I was there. The hon. Member for Milton Keynes, North-East was there, as was the Minister. If the hon. Member for Broxtowe (Dr. Palmer) were with us, he might recall it. My purpose in that debate was to establish that the matters to be taken into account under section 2 of the Wireless Telegraphy Act should be taken into account in relation not only to administrative incentive pricing on wireless telegraphy licences, but spectrum auctions. The then Minister, the hon. Member for Leeds, West (Mr. Battle) said about spectrum auctions that

''clause 2 matters may be taken into account in assessing bids''.—[Official Report, Standing Committee A, 13 November 1997; c. 151.]

The hon. Gentleman was resisting the point that not only might such matters be taken into account, but that they should be taken into account. The legislation did not require the Secretary of State to take them into account because the structure of the Wireless Telegraphy Act meant that they were related specifically to wireless telegraphy licences and administrative incentive pricing, and were expressly excluded from applying to spectrum auctions. It meant that the Secretary of State could then prescribe in regulations those matters that he or she wanted to take into account in a spectrum auction. The Secretary of State went on to do so, for example, in the 3G auction and in relation to a range of issues, such as the efficient use of the spectrum, the promotion of competition, optimum efficiency in spectrum use, the promotion of effective and sustainable competition and the delivery of full economic value.

Words and interpretations differ. It could be said that delivering full economic value comprises many of those other factors, but it is interesting that the development of innovative services, which was one of the matters to be taken into account under section 2 of the Wireless Telegraphy Act was not specified in relation to the 3G auction. I shall not go into a long rigmarole about the auction, but I contend that the Secretary of State was not required to apply those matters when considering an auction and chose not to do so. Whether she was right is secondary: it ought to have been a requirement. That is the history and what the Conservatives argued back in 1997.

The Government have changed the structure with clause 149 and done something different. Instead of disapplying the further factors in subsection (3) so that they applied only to administrative incentive pricing, in respect of grants of recognised spectrum access or in relation to spectrum trading, they have constructed things differently so that those factors apply to everything—to the whole of spectrum use. That is what the clause sets out.

However, as I understand it, subsection (3) disapplies those matters in relation to anything other than the prescribing of fees for wireless telegraphy licences for administrative incentive pricing purposes. It refers back to section 2 of the Wireless Telegraphy Act 1998 which, as we will discover when we debate schedule 17, will be amended to relate to the grant of wireless telegraphy licences or recognised spectrum access under section 1 of that Act. Subsection (3) means that the additional matters to be taken into account in subsection (2):

''efficient management and use of the . . . spectrum . . . economic and other benefits . . . development of innovative services . . . and competition'',

which I contend should be taken into account in spectrum auctions and in the administration of spectrum trading, may be disapplied. They would then apply only to administrative incentive pricing and recognised spectrum access.

Those matters should be taken into account throughout the activity of spectrum management. Therefore, amendment No. 15 would remove

subsection (3), which has the effect of disapplying those factors in relation to matters other than those relating to section 1 of the Wireless and Telegraphy Act.

Chris Bryant (Labour, Rhondda)

Unlike others, I shall be very brief. I could not find a better place to raise this issue Mr. Gale, and I hope that you will be lenient with me because it is not directly related to the amendment. However, it is relevant to the clause and I presume that there will not be a stand part debate later.

Michael Fabricant (Conservative, Lichfield)

I hope that there will be.

Chris Bryant (Labour, Rhondda)

Oh well. I will proceed.

As other hon. Members have already mentioned, because the spectrum function issues relating to Ofcom are drafted in a convoluted, not to say terpsichorean way, it is difficult to perceive exactly how in five or 10 years time Ofcom will understand its relationship in terms of charging public service broadcasters—Channel 4, S4C, BBC, ITV and others—for spectrum. Will the Minister clarify whether, by virtue of including subsection (3) or this clause, Ofcom will have a new power to decide to charge those television stations for spectrum use, not least by virtue of the requirement that it should examine the efficient use and management of part of the electromagnetic spectrum and the economic and other benefits arising from the use of wireless telegraphy?

Roger Gale (Conservative, North Thanet)

In order to facilitate the debate and as we have already started to go down this road, I am prepared to call the hon. Gentleman. The Minister will then, no doubt, deal with all the issues at once, on the understanding that there will be no stand part debate.

Michael Fabricant (Conservative, Lichfield)

I specifically wanted to ask about the BBC and its use of spectrum. Last year, I mentioned in Committee that the BBC had in the past sat on frequencies to the detriment—in my opinion—of independent broadcasting in the United Kingdom. I gave the example of a frequency in Essex that is used for BBC local radio. Despite the Radio Authority's attempts to get the BBC to swap frequencies, it refused to do. A fourth independent national radio network was prevented from being established because that frequency was not made available.

Under clause 149, which is about the duties and powers of Ofcom, will Ofcom have the power—quite clearly lacking at present in relation to the Radio Authority or the Independent Television Commission—to instruct the BBC to surrender frequencies to commercial radio stations? Under clause 149(1)(c), Ofcom is to have regard to

''demand that is likely to arise in future''

and to the most efficient use of available spectrum. Indeed, it has power to instruct commercial broadcasters to surrender frequencies to the BBC if necessary. This is an important issue. It seems that there is no such power at present. Will the Bill give Ofcom the power to make such changes, either under clause 149 or elsewhere?

John Whittingdale (Conservative, Maldon and East Chelmsford)

I did not intend to speak on the clause, but the hon. Member for Rhondda has drawn me out. Like him, I was puzzling when we could raise the interesting question of broadcasters being charged. I thought that we might be able to do so under clause 158, but I agree that that clause would not be a very satisfactory vehicle, so it might be better to raise the matter now.

It is particularly interesting that the report of the Select Committee on Trade and Industry says that incentive pricing provoked quite a response from broadcasters. That is not entirely surprising, as they are likely face additional charges. One can understand why they might view the measure with a degree of concern. The report says that the response from broadcasters has been mixed. ITV accepted the rationale for some kind of spectrum pricing, but said that it already paid a licence fee and that the fee should go towards the payment, adding that, on that basis, it should not have to pay any more. That is perfectly understandable. However, the measure raises interesting questions for other broadcasters, all of which are in different circumstances.

As the hon. Member for Rhondda pointed out, S4C is directly financed by the Government, so in a sense, if S4C were to make a payment, it would simply be giving the Government their money back. It would, no doubt, ask the Government to give it more money so that it could give it back to them. Similarly, I have no doubt that if charging were to be introduced, the BBC would say that the licence fee must be increased—the BBC uses every opportunity to say that, and I am sure that it would not let that one pass. In the BBC's view, the licence fee is far too low and delivers value for money, and most people would applaud an opportunity to pay more. The case of Channel 4 is interesting. It does not receive public money, but is subject to a full public service remit. It has had financial difficulties recently, especially as a result of the advertising downturn.

It appears that the Government intend to proceed with requiring broadcasters to pay for spectrum usage, but such charges will have a different effect on each broadcaster. In some cases, it seems that there will simply be a transfer of money from the Government to the broadcaster and then back again from the broadcaster to the Government. As Professor Cave originally pointed out, that is a logical part of a market mechanism. Furthermore, as my hon. Friend the Member for Lichfield has said, the system will at least provide an incentive for the BBC to make available frequencies that it does not use, by enabling it to benefit from doing so. Although there is a clear market advantage in having it, the system will be complicated to administer and there are potential problems, as was highlighted in the Select Committee report. Now that the hon. Member for Rhondda has raised the matter, it would be helpful if the Minister were to take the opportunity to respond.

Roger Gale (Conservative, North Thanet)

I apologise if my well-intentioned ruling has allowed the waters to be muddied slightly. We are discussing an amendment. I invite the Minister

to address that first and to deal with other issues as he sees fit.

Stephen Timms (Labour, East Ham)

Thank you, Mr. Gale. I acknowledge both the desire of the hon. Member for South Cambridgeshire to ensure that Ofcom's spectrum management duties are harmonised and consistent, and his consistency and tenacity in pursuing the matter since 13 November 1997. I imagine that he worked through the pre-legislative scrutiny Committee as well, because the point was mentioned in its conclusions. We have added clause 149 to the Bill in response to Joint Committee recommendation 67. It imports those considerations in section 2 of the Wireless Telegraphy Act 1998 that are specifically about charging, and applies them to Ofcom's spectrum management functions as a whole, in the way that the hon. Gentleman described.

Spectrum management involves a wide range of activities from international allocations to domestic television interference. Clause 3 imposes on Ofcom a general spectrum duty to achieve optimal use of the radio spectrum, and the factors listed in the clause underpin that high aim. However, not all of the functions listed in subsections (1) and (2) are relevant to all of Ofcom's spectrum management functions.

The original purpose of the section 2 factors included in the Wireless Telegraphy Act 1998 was to provide a safeguard against the use of incentive pricing to raise revenue. They were intended to encapsulate the specific considerations that were to be taken into account in setting licence fees, but not all of them will necessarily be relevant to designing an auction, for example. Some are likely to be, some are not. The objectives of an auction might include other matters such as quality of service, speed of roll-out and geographical coverage. In an auction, fees paid will be determined not by the regulator, but by the bidders, so there is no need to specify factors to be taken into account in setting fees. Nor is it easy to relate the section 2 factors to Ofcom's function of investigating and assisting with interference.

Subsection (3) makes it explicit that if the factors in subsections (1) and (2), and in the Wireless and Telegraphy Act 1998, related to spectrum pricing are not relevant, they can be disregarded. The aim of that is to avoid confusion about the things that Ofcom should take into account in carrying out any part of its work. However, Ofcom may not disregard a factor that it is required to consider by another provision, nor may it choose not to take into account any of the listed factors relating to the specific function of setting fees, both for licences and for recognised spectrum access. We do not want to weaken the safeguards that prevent spectrum fees from being used as a revenue-raising device. Clause 149 is intended to introduce the elements of consistency and coherence that the Joint Committee recommended, while retaining the necessary flexibility for Ofcom in exercising its various spectrum management functions.

Subsection (3) makes it explicit in the Bill that Ofcom may exercise a sensible measure of discretion to set to one side factors that simply do not apply. However, I can tell the hon. Member for South Cambridgeshire that if the items listed in subsections

(1) and (2) were relevant—in a number of cases involving auctions, they certainly would be relevant—they would apply as the clause is drafted. Subsection (2) is difficult to follow, but the way in which the clause is constructed is more helpful to the hon. Gentleman's long-held aspirations than some of his remarks implied. I hope, therefore, that the amendment will not be pressed to a Division.

My hon. Friend the Member for Rhondda asked about Channel 4. We have made it clear that we envisage all spectrum users, including broadcasters, being embraced by the new regime. We want pricing to support the efficient use of the analogue broadcasting spectrum as well. For all broadcasters, spectrum pricing will not be introduced before 2006, and it will be introduced in such a way as to provide an added incentive to achieving full digital switchover—that refers back to our discussion of the previous clause. It will take into account the effect of the pricing proposals on what the broadcasters can do to achieve the conditions for early switchover, the ability to meet their public service obligations and the need for the incentives to be workable in practice. There will be a great deal of consultation and discussion about the arrangements before the charges are introduced. The answer to the question, ''Do we envisage charges being introduced specifically for Channel 4?'' is yes.

John Whittingdale (Conservative, Maldon and East Chelmsford)

On a point of information, once the process of consultation has been completed and Ofcom is in a position to proceed, will there be another opportunity for the House to consider the issues, or will everything be done by regulation?

Stephen Timms (Labour, East Ham)

I imagine that the answer is that it can be done by regulation, without further debate by the House, but if I am mistaken, I will, no doubt, be informed of the fact. There will be wide discussion of the matter and those who are affected will have every opportunity to comment and to make suggestions. There is every prospect that we can take the proposals forward in a consensual way, given the wide recognition of the benefits for everybody of spectrum charging. I hope that that will be the case.

Chris Bryant (Labour, Rhondda)

I am grateful for the Minister's comments, although slightly surprised by them. Will he comment on S4C, which exists under a different regime? Its financing and its relationships as a public service broadcaster are rather different from those of others. Does he expect that S4C will also face charging?

Stephen Timms (Labour, East Ham)

The regime set out in the Bill will apply to all spectrum users. We will not make exceptions for individual broadcasters. As I said, I am confident that we will be able to develop arrangements that meet the obvious concerns that arise when people face the prospect of new charges. However, I do not envisage S4C being left out of the arrangements.

The hon. Member for Lichfield asked whether the BBC might be forced to give up spectrum. That would not happen as a result of the impact of anything in clause 149, but the hon. Gentleman returns to the topic from time to time.

Ofcom will have the same powers as the Radiocommunications Agency has now to manage

spectrum, including unused spectrum, efficiently. We are not providing draconian new powers that are not available elsewhere, much though the hon. Gentleman might wish that we were. However, the charging arrangements will provide significant new incentives for spectrum users to relinquish spectrum that they do not use. That will be one of the major benefits of the new arrangements, and a number of people who are occupying spectrum now will find it to their advantage to give it up.

Michael Fabricant (Conservative, Lichfield)

The example I gave was not of unused frequency. What I had in mind happens, sadly, with some regularity. If the frequency used for a local radio transmission such as BBC Radio Essex—I do not know whether that was the one—had been surrendered and swapped for another VHF frequency, a national radio network could have been established, but that did not happen, with the result that there are now three, not four, national radio networks operating under the auspices of the Radio Authority.

Stephen Timms (Labour, East Ham)

The charging and trading arrangements that we are putting in place will provide new incentives for spectrum users to make the sort of change that the hon. Gentleman is calling for, and to relinquish or swap frequencies. A valuation mechanism will increase the incentives for them to do so. That will help to achieve the objectives that he describes, which everyone would support.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Minister for the nature of his response, and I do not want to appear churlish. I understand that clause 149 has travelled some distance, and that it is much more explicit about the potential for a harmonised set of duties to be applied across all spectrum use and management.

I confess that I had not understood that there were particular circumstances—I would hard-pressed to find them—in which the duties in subsections (1) and (2) or the factors to be taken into account would not be relevant to the activity of spectrum management by Ofcom. However, given the Minister's explanation that they would have to be literally not relevant for Ofcom not to have regard to them, I am content. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 149 ordered to stand part of the Bill.

Clause 150 ordered to stand part of the Bill.

Clause 151 - Directions with respect to the radio spectrum

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 293, in

clause 151, page 137, line 30, leave out '3A' and insert '3'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following:

Amendment No. 294, in

clause 151, page 137, line 31, leave out from 'licences' to end of line 32.

Amendment No. 322, in

clause 156, page 140, line 45, leave out subsection (3).

Government amendment No. 306.

Amendment No. 323, in

clause 159, page 143, line 10, leave out

'and grants of recognised spectrum access'.

Amendment No. 324, in

clause 159, page 143, line 13, leave out

'and grants of recognised spectrum access'.

Amendment No. 325, in

clause 159, page 143, line 17, leave out

'and grants of recognised spectrum access'.

Amendment No. 326, in

clause 159, page 143, line 18, leave out 'or made'.

Amendment No. 327, in

clause 159, page 143, line 20, leave out

'or grants of spectrum access made'.

Amendment No. 328, in

clause 159, page 143, leave out lines 34 to 36.

Government amendment No. 307.

Amendment No. 305, in

schedule 17, page 498, line 40, at end insert—

'(2A) The provisions of subsection (2) shall not apply to charges in respect of grants of recognised spectrum access.'.

Andrew Lansley (Conservative, South Cambridgeshire)

Of this group of amendments, Nos. 293, 294 and 305 stand in my name. In debating them, we anticipate to some extent the debate on recognised spectrum access, which we first encounter in clause 151, but this may be the right time.

Amendments Nos. 293 and 294 would remove from the directions that the Secretary of State can make reference to what will become section 3A of the Wireless Telegraphy Act 1998, which is about bidding for grant of recognised spectrum access. One would need subsequently to remove the relevant part of clause 156. The amendments would remove the references to recognised spectrum access and the potential for the Secretary of State to make directions in that respect. This is the first of a series of amendments, and we will deal with the views to which they relate in our consideration of subsequent clauses. One needs to disentangle and remove recognised spectrum access from subsequent clauses in order to accomplish the task effectively, which is what amendments Nos. 293 and 294 would do.

The Joint Committee considered recognised spectrum access only briefly, and many of my colleagues found it difficult to understand the nature of the Government's intentions. The Minister assures us that it is not the Government's intention simply to raise money. However, if that is so, it should be clear that the Government seek to achieve better spectrum management by granting recognised spectrum access. That should be apparent not only to the Government, but to the people who use spectrum and in whose interests the more efficient use of spectrum management lies. Most of those who would be affected by the granting of recognised spectrum access say that they see only difficulty and expense arising from it.

I shall not talk at great length about the issue, but it is difficult to build an incentive based on opportunity costs on to a system such as recognised spectrum access that is, in effect, voluntary. Those who want to comply with it will do so happily, because they secure some benefit. However, they may then be charged substantially more than the cost of providing that service. Those who do not see any benefit to them can simply walk away from it. The Government are therefore proposing only to deny them a service with which they were previously provided. We easily return to a situation in which it appears that the Government, by denying a service to people who currently have access to the spectrum, require those people to pay money to the Government to continue receiving a service at levels that are designed not designed simply to recover the costs involved in providing that service, but to reflect the opportunity costs of spectrum, which is not in the Government's gift to give.

The Trade and Industry Committee, of which I am a member, adopted the language of someone who gave evidence to us when it described that system as a protection racket. Where Government undertake the task of allocating spectrum that is in their gift to allocate, it is entirely reasonable that it does so on the basis of efficient use and opportunity costs through administrative pricing. To do so in relation to spectrum that it is not in their gift, however, is excessive. Amendments Nos. 293 and 294 are based on the proposition that the Government should simply give up recognised spectrum access, which many other amendments echo.

Amendment No. 305 applies if the Government believe that there is a continuing purpose for recognised spectrum access, if the material supplied to the Joint Committee and the Trade and Industry Committee seeks to offer illustrations of that in relation to those who receive Met Office data, and if it is conceivable that there are users of spectrum who are not required to have a licence but who receive benefits from the Radiocommunications Agency, or from Ofcom in due course. The amendment also applies if it is reasonable that those people should make some contribution and want to have a handle on the service that is being provided to them.

The amendment relates to schedule 17, which amends section 2 of the Wireless Telegraphy Act 1998 and provides that Ofcom can prescribe sums that are payable for grants of licences and recognised spectrum access. That would enable Ofcom

''to prescribe sums which would be greater than those that would be necessary for the purposes of recovering costs incurred by them in connection with functions under the enactments''.

That is the gateway to the incentive and opportunity cost pricing of the grant of a licence, or the grant of recognised spectrum access. The intention behind my amendment is that section 2(2) should be disapplied in respect of grants of recognised spectrum access. Hon. Members will see on page 489 of the amendment paper that the mechanism for that is a new subsection (2)(a), which disapplies subsection (2) in respect of the grant of recognised spectrum access.

Ofcom would still be able to prescribe sums greater than the costs incurred in respect of the grant of a

licence, so administrative incentive pricing would be unaffected in relation to the grant of licences. Ofcom could make a charge for recognised spectrum access, but only in relation to costs incurred. It would not, therefore, be possible for the whole rigmarole of incentive and opportunity cost pricing to be applied to recognised spectrum access.

In effect, the whole protection racket element would be removed. If someone wished to apply for recognised spectrum access that would be fine. If they wanted a service that Ofcom could provide, it would have the power to charge for the costs that it incurred. There would be no point in bidding, so amendment No. 292, which would remove bidding for grants of recognised spectrum access, would still apply and clause 154, which enables people to apply for recognised spectrum access, would still be in place. Amendments Nos. 293 and 305 are connected in that sense, and they are needed to achieve the objective of depriving the Government of their protection racket and enabling them, through Ofcom, to provide a service to those who want to purchase one.

John Greenway (Conservative, Ryedale)

My hon. Friend the Member for South Cambridgeshire hints that it might be in the interests of progress if our main contributions in respect of recognised spectrum access are deferred until we reach clause 154. With your agreement, Mr. Gale, my hon. Friends on the Opposition Front Bench and I would certainly prefer that.

My hon. Friend the Member for South Cambridgeshire proposed eloquently, displaying his incredible depth of knowledge of technical matters that I greatly admire, that clause 156(3) should be deleted, and amendment No. 322 does precisely that. Amendments Nos. 323 to 328 are consequential to the proposal that my hon. Friend has outlined. It will be obvious from what he and I have said that the Opposition are implacably opposed to recognised spectrum access. Having made that point, it would, perhaps, be better if we allowed the Minister to respond to what has been said and reserve our fire on the wider issue until we reach clause 154. That would, of course, be subject to your agreement.

Stephen Timms (Labour, East Ham)

Since the amendments cover many of the aspects of recognised spectrum access, it might be helpful to explain the thinking that underlies the concept of recognised spectrum access. I hope to deal with some of the criticisms advanced by Opposition Members, and perhaps anticipate points that might be raised in the future debate to which the hon. Gentlemen referred.

RSA is a new spectrum management tool that will meet a need identified during the passage of the Wireless Telegraphy Act 1998. We have already referred to some of the events of 13 November 1997 and I notice from my record of the consideration of the Wireless Telegraphy Bill in Standing Committee A on that date that an amendment was tabled by the hon. Member for Sevenoaks (Mr. Fallon), who was leading for the Opposition at that time, which called for something similar to RSA. I shall return to the debate in a few moments.

More recently, a similar point was made in the independent review of radio spectrum management carried out by Professor Cave. Radio spectrum is a finite resource and without some requirement to authorise its use, transmissions would interfere with each other and the value of the spectrum as a communications medium would be severely damaged.

Licensing under the Wireless Telegraphy Act 1949 is the mechanism for giving permission to use the spectrum, but not all radio equipment can be licensed. The transmitter may be outside UK jurisdiction, as in the case of satellites transmitting to the UK from space. The user may be a Crown body, thus exempt from licensing, or, as with radio astronomy, the user may want to receive radio signals without transmitting them. If the problem cannot be dealt with through licensing for one of those reasons, how do we deal with it?

The spectrum management regime has a significant gap in that formal recognition of spectrum use in such cases cannot be offered. Neither can we use pricing or trading to provide incentives to use spectrum more efficiently, which is particularly problematic when licensed and other services share spectrum and the deployment of one constrains that of the other. That happens in some frequency bands where satellites share spectrum with terrestrial fixed communications links.

We all agree that market mechanisms will help with spectrum allocation licences, but what do we do when licences are unavailable? The answer is recognised spectrum access. Professor Cave recommended that a form of spectrum licensing and pricing should be applied selectively to satellite services in such cases and that Crown bodies and radio astronomers should be given pricing and trading incentives to use spectrum more efficiently.

Terrestrial spectrum use for fixed communications can readily interfere with satellite broadcasting. The hon. Member for South Cambridgeshire made the point that satellite broadcasters appear not to be aware of these difficulties, but at the moment, efforts are made on an ad hoc basis to avoid licensing links that would damage satellite broadcasting. How can we replace the current ad hoc arrangement in the new circumstances where spectrum has a well-understood value and choices have to be made between conflicting spectrum uses? RSA will enable that to be done. It is a potentially versatile spectrum management tool, which Ofcom could deploy selectively to help manage the radio spectrum more effectively.

It will not be compulsory, but up to the operator concerned to judge whether the benefits of RSA are worth the charges. It will be open to operators to continue with RSA, forgoing the benefits, but it is only fair that, if they want the same privileges of licensees—security and quality of spectrum—they should pay on a comparable basis.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The Minister referred to the current activities that take place whereby the

Radiocommunications Agency will look at and deal with the fixed links that could interfere with satellite systems. Is he suggesting that only those satellite broadcasters who have purchased RSA under the new arrangement will benefit from that kind of intervention, and that therefore the protection racket that has been referred to does apply because the agency would say to those who have not bought RSA, ''Go ahead with the fixed link. We do not care whether it interferes with the satellite signal.''

Stephen Timms (Labour, East Ham)

I am not suggesting that. Ofcom will continue to be as helpful as possible to everybody—as is the Radiocommunications Agency at present.

However, there will be growing demands on the spectrum and difficult choices will have to be made. This is the key question: given those growing demands and the increasing importance of fixed wireless links for the roll out of broadband, how will some of these choices be made? We are saying that, if existing operators want the same sort of privileges that licensees currently have, they should pay for the spectrum on a comparable basis.

The point was well made on 13 November 1997 by the hon. Member for Sevenoaks, who was arguing in favour of an amendment for the official Opposition:

''there is growing concern among United Kingdom operators about the amount of spectrum being demanded by international operators . . . The international satellite operators will not pay the fees that the regulations will set. They will not pay tax for the use that they make of the spectrum in the United Kingdom—nor will they pay any other sort of tax because they are international operators. The amendment would enforce the principle of a level playing field.''—[Official Report, Standing Committee A, 13 November 1997; c. 59.]

These arrangements for RSA will provide that.

The Radiocommunications Agency has recently consulted on how and where RSA might apply, with particular reference to satellite systems. We are currently looking at the responses: we will take full account of all the views that were expressed, and there will be further consultation before decisions on the details are taken.

That consultation will cover three important areas, in particular. First, it will cover the areas where RSA will be available. RSA will be used selectively where there is a spectrum management need: the clause provides full flexibility to do that. RSA will be available only where Ofcom makes the necessary regulations.

Andrew Lansley (Conservative, South Cambridgeshire)

Does the Minister recall that on 13 November 1997 the Minister with responsibility for this matter at the time, now the Minister for Social Exclusion and Deputy Minister for Women, resisted the amendment of the hon. Member for Sevenoaks on the grounds that it would create bad law because it could not be enforced—that comment is recorded in column 65 of the volume of Hansard that the Minister quoted from. That is the same point that I am making about applying incentive pricing for people who would have to submit themselves voluntarily to this.

Stephen Timms (Labour, East Ham)

I recall that response vividly—as, I am sure, does my hon. Friend the Member for Milton Keynes, North-East. What my hon. Friend the then Minister said in response to that debate was absolutely right because at the time no mechanism was available

for issuing licences to people outside UK jurisdiction. That is why the concept of RSA has been developed; it is intended to fill the gap that the hon. Member for Sevenoaks and others referred to in that debate.

As we are referring to what was said in that debate, let me remind the hon. Member for South Cambridgeshire of his own comments. He made some telling points and I am very glad to remind the Committee of them. He said:

''We could become bogged down in the technological issues associated with the interaction of satellite and terrestrial transmissions, but the issue really comes down to one of equity between those services that can bring themselves under the ambit of international satellite agreements and those that are currently confined to terrestrial licensing . . . In those circumstances, it is right that the Government should ensure that the licensing requirement necessary for the use of the radio spectrum should apply to all users of that part of the spectrum including international satellite operators.''—[Official Report, Standing Committee A, 13 November 1997; c. 62.]

He was absolutely right about that.

Andrew Lansley (Conservative, South Cambridgeshire)

Will the Minister give way?

Stephen Timms (Labour, East Ham)

Let me finish. The point made by my hon. Friend the then Minister in response to the debate was that, at the time, there was no mechanism to allow that to be done. We have now developed the mechanism that will do precisely what all members of the Committee recognise is the right thing in order to ensure the equity for which the hon. Gentleman was calling.

Andrew Lansley (Conservative, South Cambridgeshire)

Let me finish that quote. It went on:

''The extent to which international satellite organisations are obliged to pay the fees that would imply the full valuation of that part of the spectrum is a separate and subsidiary matter.''

Yes, spectrum access should be recognised, but not on the basis of full opportunity cost pricing. It would not work on that basis because people cannot be charged, as opposed to offering something, which allows them to be considered as part of spectrum management. Opportunity cost pricing will effectively be unenforceable.

Stephen Timms (Labour, East Ham)

I had hoped that the hon. Gentleman would finish the quotation:

''I hope that the international agreements into which we enter do not constrain us from ensuring that we move towards a level playing field between our domestic industry and international satellite organisations.''—[Official Report, Standing Committee A, 13 November 1997; c. 62–63.]

That is absolutely right. That is what the RSA mechanism allows.

The special spectrum duty in clause applies in relation to RSA as well as Ofcom's other spectrum management functions and will require Ofcom, in making RSA regulations, to take account of factors such as availability of spectrum as well as present and future demand. RSA will be focused on frequency bands where there is actual or expected congestion and play a role in promoting optimal use of the spectrum.

The second area for further consultation is fees for RSA—the charges that will be levied, as mentioned by the hon. Member for South Cambridgeshire. Charges for RSA, like those for licenses, will be no higher than necessary for spectrum management purposes. The same statutory safeguards will apply. RSA fees will be

set according to spectrum management considerations, not in order to raise revenue. In accordance with clause 149, incentive pricing, as opposed to cost recovery, will apply only where there is a spectrum management need, for example, where total demand from both satellite and terrestrial systems cannot be met. The same considerations must be applied to RSA as to licensing. It would be a mistake to have two sets of arrangements.

The third area for further consultation is the timing of the introduction of RSA and RSA fees. As for spectrum pricing, fees for RSA would be phased-in over a period of years to give businesses time to adjust. In the case of licenses, incentive pricing has been phased-in over five years. That may be appropriate in this case.

RSA is a versatile, potentially very valuable tool, filling a gap in the spectrum management regime. We understand the concerns expressed by the industry. We recognise the conclusions of the Trade and Industry Select Committee in its recent report on RSA. We take their views seriously. However, it would not be right to drop RSA and deprive users of the opportunity to safeguard their spectrum usage, alongside license holders, if they judged it worthwhile to do so. Instead, the Bill provides effective safeguards for the way in which RSA will be deployed and charged. They should be sufficient to meet the concerns expressed. Now let me turn to the amendments that have been moved.

Amendments Nos. 293 and 294 would remove from clause 151 the references to RSA. On their own they have limited effect. They would not diminish the generality of subsection (1) that applies the clause to any and all of Ofcom's functions under legislation relating to spectrum management. That would include granting and charging for RSA under the Bill. I do not believe that the amendments would have the effect that the hon. Gentleman argued they would, and I would not support that effect anyway, as I have explained.

Amendment No. 322 would remove Ofcom's power to auction RSA. I find the amendment surprising given the enthusiasm that Opposition Members have shown for spectrum auctions in the past. The principle of spectrum auctions is sound. The hon. Member for Maldon and East Chelmsford earlier put the case for the use of market mechanisms, and I agree with him on that issue. The principle of spectrum auctions was recently endorsed by both the independent review of radio spectrum management and the Trade and Industry Select Committee. Auctions have the advantages of economic efficiency, openness and transparency. Certainly, they are not suitable in all cases, but to say that Ofcom could never use an auction for RSA would be contrary to principles of sound spectrum management.

Amendments Nos. 323 to 328 would take RSA out of clause 159. That would lead to a great loss of transparency and would not benefit spectrum users. Clause 159 sets out the procedure that Ofcom must follow to comply with article 7 if it intends to limit the use that may be made of spectrum. The clause requires

any limitations on numbers of licences to be objectively justified, non-discriminatory, proportionate and transparent. Ofcom must publish and consult on the orders in draft in accordance with clause 388, which provides for a period of open consultation before the orders are finalised. The clause also requires that such limitations be regularly reviewed.

To not include RSA in the clause would run counter to our policies on openness and transparency. It would also mean that restrictions on the numbers of grants of RSA, or the uses to be made of spectrum subject to RSA, would not be subject to the requirements of subsection (4), and would not need to be objectively justifiable, non-discriminatory, proportionate and transparent.

Amendment No. 305 would ensure that fees for RSA were no higher than necessary to recover Ofcom's costs, as the hon. Member for South Cambridgeshire said. However, that would run counter to developments in spectrum pricing since 1998 that were strongly endorsed by the Cave review and supported by the Trade and Industry Select Committee in its recent report on spectrum management. The Select Committee was not happy with the concept of RSA, which I have defended to the Committee today, but it advocated more extensive use of administrative incentive pricing. If it is accepted that there is a case for RSA, it is essential that administrative incentive pricing can be used, too.

By ''administrative incentive pricing'', I mean setting fees at roughly the level of spectrum management costs in order to provide incentives to use spectrum more efficiently in the interests of promoting optimal use of the finite spectrum resource.

Andrew Lansley (Conservative, South Cambridgeshire)

As a member of the Trade and Industry Select Committee, may I advise the Minister that it is clear in the Select Committee report—I do not have it in front of me—that not only was the Select Committee not persuaded of the case for the introduction of RSA, but it felt that if the Government wished to proceed with RSA, incentive pricing should not be applied to it. I fear that the Minister is praying the Select Committee in aid, even though it considered the issue and took the contrary view to the Minister.

Stephen Timms (Labour, East Ham)

The question is whether we should establish a level playing field. I believe that there is an overwhelming case for doing so. At the moment, it is not possible for satellite broadcasters and others that I have listed to benefit from the licensing regime. We have developed an arrangement that allows safeguards to be provided to spectrum users as well as licence holders, and the basis on which charges are set should be as similar as possible in both sets of arrangement. There is no case for a different set of considerations to apply to RSA from those that apply to licensing.

John Greenway (Conservative, Ryedale)

I apologise for not being able to attend this afternoon's sitting. In case we do not reach amendment No. 318 before 11.25, will the Minister accept that his entire argument overlooks the fact that

RSA is to enable organisations that have satellite spectrum to enter into an arrangement voluntarily? I cannot understand why he says that charges should be similar to licence fees, when they are to be entered into voluntarily.

Stephen Timms (Labour, East Ham)

They are to be entered into voluntarily. It is a question of operators deciding whether it is worth the charge involved to obtain the benefits of RSA. It is a matter for them. However, licence-holders are paying on one basis, which is why we supported the safeguards. Others wishing to have the same safeguards should pay on a comparable basis. The arrangements allow for that to happen.

The two Government amendments correct a detailed drafting error in clauses 156 and 162, which concern arrangements for auctions of spectrum licences and RSA. New section 3A(8) of the Wireless Telegraphy Act 1998 which is inserted by clause 156, and new subsection (3)(6) which is inserted by clause 162, refer to sums payable under section 1 of the 1998 Act. In fact, sums will be paid under regulations made under that section, rather than under the section itself. The two amendments correct that error by adding a reference to regulations. I hope that those amendments, at least, will commend themselves to the Committee.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Minister for the courtesy of responding in detail to our arguments. There is an argument to be had over the desirability of spectrum access. The Government's argument is that there is conceivably a benefit in spectrum management terms of encompassing the whole of the spectrum in a system of management. It is perverse to suggest that parallel arrangements in relation to incentive pricing must apply. The Minister is essentially arguing that RSA should be granted on the same basis as licences.

Licences are different, however. The Government do not have control of the spectrum and there is no basis on which the Government can effectively deny spectrum to users. If people are charged an opportunity cost that they believe to be in excess of its economic value, they will walk away from the system and not seek recognised spectrum access. They will deny us spectrum management possibilities, or alternatively, contrive their business so that they are not subject to the Government's intervention. The risk is that people will walk away from the system.

I shall not wish press amendment No. 293, but I leave it to my hon. Friends to consider whether amendment No. 322 continues to have sufficient merit. I believe that it does in restricting bidding, which is a perverse additional way of allocating recognised spectrum access. However, when we reach amendment No. 305—probably sometime in February—I see every merit in continuing to constrain the charging to the level of cost incurred by Ofcom, rather that adopting the perverse idea that one can somehow impose incentive pricing. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Roger Gale (Conservative, North Thanet)

If hon. Members wish to press amendment No. 322 to a Division, they should notify the Chairman at the appropriate time.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders No. 68 and 89, That the clause stand part of the Bill.

Question agreed to.

Clause 151 ordered to stand part of the Bill.

Clause 152 ordered to stand part of the Bill.

Roger Gale (Conservative, North Thanet)

Eagle-eyed hon. Members will notice that clause 153 is missing from the selection list. It will appear later, when we debate broadcasting.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee E

Communications Bill

Bill O'Brien (Labour, Normanton)

I am taking the place of Mr. Jimmy Hood, who is indisposed. I remind Committee members that that, in accordance with the programme resolution, all the questions necessary to the disposal of relevant proceedings ending at clause 192 and questions on all outstanding amendments will be put at 5 o'clock this afternoon.Clause 154 Grant of recognised spectrum access

Clause 154 - Grant of recognised spectrum access

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 318, in

clause 154, page 139, line 14, at end insert—

'(1A) OFCOM shall not issue any regulations under subsection (1) until they have consulted all interested parties, and considered any representations received, on whether the application of such regulations to any particular circumstances of use is appropriate and proportionate, having regard to all the circumstances.'.

I begin by welcoming you to the Chair, Mr. O'Brien, even though you are a replacement for a replacement. The ability of the Chair to draft in fresh horses is rather attractive, and we on the Opposition Benches envy that.

This morning, we rehearsed some of the arguments about recognised spectrum access in respect of the amendments to clause 151, but clause 154 is the main clause that introduces the principle of recognised spectrum access. The next group of amendments goes to the heart of that issue. The amendment is a taster of what is to come—its scope is much narrower than the group that follows it.

In his response this morning to my hon. Friend the Member for South Cambridgeshire (Mr. Lansley), the Minister defended the Government's insistence on proceeding with RSA, and laid great stress on the fact that the implementation of that concept would proceed only subject to close consultation with the industry. The hon. Gentleman said that both the Government and Ofcom intend to undertake further consultations beyond those that have already taken place to ensure that RSA would apply only in circumstances in which spectrum management was needed. On the question of the fees to be paid, he said that those would be no higher than were necessary for spectrum management purposes. We welcome that commitment, but the Bill as it stands does not require there to be consultation. I hope, therefore, that he will be willing to look sympathetically on an amendment that would simply introduce into the Bill a requirement in respect of which the Minister has, in many ways, already given a commitment. It adds a general consultative requirement to the legislation.

We continue to be apprehensive about the concept of RSA. We will discuss that subject shortly, but

before we do so, it would be helpful if the Minister said a little more about the consultation that he has promised, and considered whether he is willing to accept the amendment.

Stephen Timms (Labour, East Ham)

I, too, bid you a very warm welcome to the Chair of our Committee, Mr. O'Brien. You are not a replacement horse, as the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) suggested, you are a welcome incumbent of the Chair during our deliberations this afternoon.

I have no difficulty with the spirit of the hon. Gentleman's proposal. It is desirable that Ofcom should consult before making regulations, take account of the views expressed, and ensure that the regulations that are introduced are appropriate and proportionate. As he said, I made some points along those lines during this morning's sitting.

I can assure the hon. Gentleman that the principles that the amendment supports are already firmly embedded in the Bill. Clause 154(9) refers to ''Section 388'', and clause 388 includes a requirement to consult and take account of the representations received. The principles that he supports are therefore included in the Bill, including ensuring that the application of the proposed regulations is appropriate and proportionate—the Committee has debated the general duty in clause 3(3)(b) that expressly requires Ofcom to have particular regard to those qualities. Clause 6 imposes a duty on Ofcom to avoid unnecessary regulatory burdens.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Minister refers to clause 388, but it deals with the regulations and orders made by Ofcom, whereas we are currently dealing with what he says will be a voluntary arrangement. I am therefore unsure whether clause 388 provides the requirement that he suggests it does.

Stephen Timms (Labour, East Ham)

I think that it would, and that is why clause 154(9) refers to ''Section 388''. It will be necessary to make regulations to put the arrangement in place and to make it work, even though RSA will be voluntary, as the hon. Gentleman rightly says. We will return to that point this afternoon, but the safeguards that clause 388 provides will apply. In the light of that assurance, I hope that that the hon. Gentleman will feel able to withdraw the amendment.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The argument, ''Oh well, it is covered elsewhere in the Bill,'' is not wholly convincing if the Minister is not able to provide any good reason why it should not also be covered at this point in the Bill. As there is an element of doubt about this in some minds—if not in the Minister's—there are people who would like that commitment to be strengthened by the inclusion of the amendment. I will not press it to a Division at this stage, as we will have a more fundamental disagreement about the next group of amendments, but I hope that the Minister will ensure that his words are put into practice when the Government proceed on this matter. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 320, in

clause 154, page 139, line 18, leave out subsection (3).

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take the following amendments: No. 321, in

clause 154, page 139, leave out subsections (5) to (7).

No. 337, in

schedule 5, page 355, leave out line 36.

John Whittingdale (Conservative, Maldon and East Chelmsford)

We now get back into the meat of the debate, which is about the principle of the introduction of recognised spectrum access. The amendments would remove some of the worst elements of the Government's proposals. I assume that you will adopt the practice of the two other Chairmen, Mr. O'Brien, which is that, when we have a substantial debate on a group of amendments to a clause, it becomes, in effect, the clause stand part debate. With your permission, I will to speak about the overall effect of clause 154 and the introduction of RSA.

It is probably worth reminding the Committee of some of the ground that we covered this morning. We should consider the reasons the Government have given for proceeding as they propose to do—an argument that the Minister repeated this morning. Like so much else in this part of the Bill, the measure originates from the review conducted by Professor Martin Cave, who rightly points out that, at present, transmissions to satellites from installations within the United Kingdom are licensed, but there is no requirement for the licensing of transmissions back down from the satellite.

In justification of the principle that he recommends, Professor Cave says that

''the users of the spectrum could face some uncertainty that their services would be protected from interference if they shared bands with other (usually terrestrially-based) services'',

and suggests that

''Spectrum access licences could be introduced as a way of providing such certainty.''

He says that that

''would have the advantage of defining the interference protection afforded to satellite and terrestrial systems operating in the same or neighbouring bands. It would also provide greater clarity to operators of satellite systems''.

Professor Cave claims that he is suggesting the RSA concept for the benefit of the satellite operators and that they would see some advantage to be gained from obtaining RSA. That is not the view of the satellite operators. It becomes clear in the report that there is another motive—not dishonourable in any way—for such proposals. Professor Cave makes the matter plain when he says:

''There may also be scope to use spectrum pricing to ensure that satellite operators face the opportunity cost of the UK spectrum which they occupy.''

There is a suspicion that the system is more about raising revenue than assisting satellite operators.

As was said this morning, the proposals have encountered strong resistance and opposition from those currently operating in the satellite market. All the European and United States of America satellite

industry associations are opposed to the proposals. The industry has repeatedly made clear its strong opposition at each stage of the consultative process. The Minister said this morning that the satellite industry had expressed concerns, but that is putting it very mildly.

Stephen Timms (Labour, East Ham)

I am listening carefully to the hon. Gentleman's argument. He made a strong point this morning about the effectiveness of market mechanisms in helping spectrum allocation decisions to be made. Does he accept that the principle that he enunciated must apply also to that part of the spectrum used by satellite broadcasters?

John Whittingdale (Conservative, Maldon and East Chelmsford)

It is different when dealing with a section of the spectrum that it is not within the power of the British Government to licence, whether or not they wish to do so. The Minister said that the arrangement would be voluntary, but it is not only Britain that receives such satellite broadcasts. We are debating broadcasts from satellites that cover a large area of Europe. For Ofcom to take it upon itself to say that we will somehow give recognition at a price does not offer a concrete advantage to the satellite operator. It is not possible to make the comparison with other areas of the spectrum in which, quite plainly, it is wholly within the power of Ofcom—and rightly so—to allocate bands for particular purposes. A market-based solution is much more appropriate for dealing with that.

Stephen Timms (Labour, East Ham)

Does the hon. Gentleman accept that there is a possibility of damaging interference between use of spectrum for satellite broadcasting and use of spectrum for other things? The licensing arrangements provide protection for terrestrial users in those circumstances, so surely it is right that satellite broadcasters should have access to comparable safeguards on similar terms.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The question whether there is potential for damaging interference is subject to considerable debate. Satellite operators do not accept that there is such a risk. They point out that

''in shared bands, satellite space-to-earth transmissions are made at very low power levels governed by the International Telecommunications Union . . . regulations, and . . . there is no risk of interference with terrestrial transmissions.''

There are already some arrangements for ensuring avoidance of interference in the regulations agreed by the ITU.

Stephen Timms (Labour, East Ham)

The hon. Gentleman is generous in giving way, and I shall not continue to interrupt him. I accept that there is not much danger of interference with terrestrial communications from satellite broadcasting, but there certainly is real danger of interference the other way round. The arrangements will help to provide a safeguard for the satellite broadcasters.

Mr. Whittingdale rose—

Andrew Robathan (Conservative, Blaby)

Will my hon. Friend allow me to intervene?

John Whittingdale (Conservative, Maldon and East Chelmsford)

Let me respond to the Minister, and then I shall of course give way to my hon. Friend.

The Minister suggests that the provision is a safeguard for the satellite operators, and that as it is they who face the risk of interference, they should welcome with open arms the protection that the Government will give them. However, the fact that the satellite operators themselves do not think that there is any danger suggests that if anyone is to be concerned about possible danger, it is not them. If they do not think that there is a risk, the Minister's argument is somewhat undermined.

Andrew Robathan (Conservative, Blaby)

I am grateful to my hon. Friend for giving way to me. I think that our hon. Friend the Member for South Cambridgeshire would also like to speak on this subject. Paragraph 31 on page 13 of the third report of the Select Committee on Trade and Industry on radio spectrum management says:

''The satellite operators and broadcasters did not need or want such protection from interference as the Government was offering.''

That seems pretty clear.

John Whittingdale (Conservative, Maldon and East Chelmsford)

My hon. Friend is absolutely right—that is precisely my point. The Trade and Industry Committee has done a valuable service in making that plain and obtaining that evidence.

Andrew Lansley (Conservative, South Cambridgeshire)

The Select Committee was relying not on its prejudices, but on the evidence that it took. On the matter under discussion, we relied on the evidence of Mr. Amiel, the director of European affairs for SES Global. He was asked about quality of spectrum, and said:

''We do not cause interference but we may potentially get interference from the others. It has not been the case in the past. Until now, we have not been aware of any problems of interference. That was the case because the Radiocommunications Agency, under its obligations following the ITU rules, has ensured the co-ordination between the different radio operators and that no interference occurred.''

The final sentence is probably the key one for my purpose:

''We do not really understand why suddenly there should be such a charging mechanism for a service which has been guaranteed for years.''

John Whittingdale (Conservative, Maldon and East Chelmsford)

That clearly makes our point. The contributions of both my hon. Friends demonstrate that although the measure might be for the protection of the satellite operators, it is not being introduced because they have said that they need that protection. Indeed, they regard the measure not as advantageous, but as deeply disadvantageous.

Michael Fabricant (Conservative, Lichfield)

This morning, we very quickly considered clause 150—in fact, I think we did not debate it because it was so clear and so desirable. The clause is headed ''Advisory service in relation to interference'', and in it reference is made to the Wireless Telegraphy Act 1949. My hon. Friend will know that in that Act there are powers to protect legitimate broadcasters not only from interference from cars and electrical equipment, but from co-channel interference from other broadcasters. That protection already exists.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Radiocommunications Agency has long experience of dealing with matters of interference, which work would, as my hon. Friend suggests, be continued by Ofcom.

Having spent a little time on the question of whether it was necessary to have protection against interference, I will move on to some of the arguments that have been advanced by the Government. The Government have said that the new ability to obtain RSA will be voluntary and that there will be further consultation by Ofcom on precisely how it will be priced and on the methodology of its introduction. However, for all the Minister's claims that the scheme is entirely voluntary and that there is no coercion involved, that is not how the industry sees it.

The industry has suggested that the RSA scheme will afford purchasers a right to use the spectrum and that that will necessarily restrict the rights of those users who decide not to purchase the protection associated with it. The industry feels that operators are likely to be forced to purchase RSA simply so that they do not lose existing rights of use of certain frequencies and to guarantee against the possibility of interference and a consequent loss of quality. That aspect led one of the witnesses to the Select Committee to say that it was essentially a protection racket, with users being told, ''Unless you pay me something, I will do nothing to stand in the way of someone else coming along and causing you a great deal of harm.'' It was right that the Select Committee took up that analogy in its report and described the Government's proposal as a protection racket.

There is a feeling that if the United Kingdom were to proceed down that road and introduce such a requirement, other countries would almost certainly do the same, regarding it as a useful, new source of revenue that they could obtain from satellite operators. If satellite operators required protection in the UK, why should they not also need similar protection in France, Germany, or any of the countries within the footprint of the transmission footprint from the satellite? One begins, therefore, to talk about the satellite operators being required to pay a substantial sum of money. The Government have already published indicative prices, which are substantial. If those are reproduced across the rest of Europe, we are talking about a significant additional cost burden on the satellite operators.

Andrew Lansley (Conservative, South Cambridgeshire)

Before we move on from the ''protection racket'' issue, it was not simply that the proposal was so described. When taking evidence from the Radiocommunications Agency, I asked whether if someone did not seek a grant, or did not bid, for RSA it that would mean that the Radiocommunications Agency would offer them no service, in which case they would not be protected. The answers to that were,

''We would not be obliged to'',

and

''We will not consider them in the planning process. We might put other things, terrestrial, in that place.''

We were led to our conclusion in part by the manner of the Radiocommunications Agency's evidence.

John Whittingdale (Conservative, Maldon and East Chelmsford)

That is most illuminating. While I congratulate the Select Committee on getting its report out, the full minutes of evidence are, sadly, not yet available. My hon. Friend is—

Andrew Lansley (Conservative, South Cambridgeshire)

I have the document here.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Trying the Vote Office is clearly hopeless—it denied that it had it. Happily, my hon. Friend is here to provide me with the information that I seek. His intervention is helpful, because the Minister suggested this morning that whether or not someone had decided to participate in the voluntary agreement would have no effect on the service provided by Ofcom. However, operators who did not would suspect that their concerns would be dealt with at 5 o'clock on a Friday afternoon, long after every other person's concern had been addressed. I am afraid that the evidence quoted by my hon. Friend supports that view and must cast an element of doubt over the assurance that the Minister gave earlier today.

Let me return to the issue of cost, because satellite operators already have to pay for the uplinking that takes place. That is a licensable service. The country in which the operator is based is, rightly, entitled to impose a charge for the licence granted. If operators are to be required to pay an additional fee for downlinking, that is double pricing, which will result in substantial extra cost.

On the basis of figures supplied so far, it is estimated that the introduction of recognised spectrum access will impose an annual cost on Astra—the biggest operator—of £7.5 million, which is a substantial sum. That sum is calculated on the basis that the 47 existing UK transponders will all be charged a rate of £160,000, which is the figure in the document published by the Radiocommunications Agency.

There is also concern about how the scheme fits in with European legislation and policy, the direction of which has been to reduce and eliminate barriers to the transmission of satellite services. Under the proposed RSA scheme, the digital reception of television programmes by satellite will be charged in a way that does not feature in any other member state of the European Union.

Moreover, the effect would conflict with the general ban on restrictions on the freedom to provide services within the European Community established under article 49 of the treaty. Under that provision, member states are prevented from introducing national restrictions that are liable to prohibit, impede or render less advantageous cross-border economic activities. There is already a precedent in case law because the transmission and broadcasting of television signals falls within the rules of the treaty relating to the provision of services.

The concept also runs counter to the television without frontiers directive, which aims to establish the conditions necessary for the free movement of television broadcasts. The directive states:

''Member States shall ensure freedom of reception and shall not restrict retransmissions on their territory of television broadcasts from other Member States for reasons which fall within the fields coordinated by this Directive.''

There is concern that the direction in which the Government are going appears to be precisely opposite to the one promoted by the European Union.

Finally, we have discussed digital switchover and the take-up of broadband services, which the

Committee agrees are highly desirable public policy objectives. There is no doubt that satellite platforms offer a wide range of services, including digital broadcasts and the possibility of access to broadband services. If our aim is to promote digital switchover and, at the same time, extend broadband access, especially to those areas where fixed-wire access is not available, it is odd that we should be adding burdens to the very operators that we hope will supply those services.

For all those reasons, we regard the introduction of recognised spectrum access as unnecessary, inappropriate, unfair and potentially highly burdensome to an industry that will be of great importance to this country in the future. My amendment seeks to reduce the impact, but our objection to the measure is far more fundamental: we do not support the clause and will not vote in its favour.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The amendments are designed to reduce the impact of recognised spectrum access and encourage the Minister to elaborate on the meaning of his earlier comments. There is still confusion about the way in which the scheme would be implemented. If it were implemented in the wrong way, as described by the hon. Member for Maldon and East Chelmsford, considerable costs could be incurred for what appears to be little benefit.

I approach the matter from the angle of the consumer, which I hope is shaping the whole debate on the future of the communications industry. The consumer has two interests, the first of which is not to have to pay unnecessary charges. We have discussed the costs that will fall on the satellite industry. It is estimated that Astra would have to pay an additional £7.5 million per year for RSA. That cost would have to be recouped from the consumer through satellite television services

Sitting suspended for a Division in the House.

On resuming—

Richard Allan (Liberal Democrat, Sheffield, Hallam)

Before we were whisked off to deal with the problems of health in Wales, I was about to discuss our approach to recognised spectrum access such as the consumer interest in not having to pay more than is necessary. When we refer to charging businesses, we must recognise that they pass on charges to consumers. Ultimately, we are talking about charging our constituents for recognised spectrum access, if it were to be expensive. If the broadcasters for whose services they subscribe felt that they had to take it on board and pay the costs, the costs would eventually be transferred to our constituents.

The second interest of our constituents is to receive signals that are not subject to undue interference. We must try to balance the two interests. The hon. Member for Maldon and East Chelmsford said that the satellite industry does not consider that it is necessarily in need of additional protection and, therefore, suspects that there are ulterior motives.

The proposals can be implemented over a broad spectrum, if I can use that word in such a context. RSA could be considered compulsory by the satellite broadcasters and something for which they have to pay. That is similar to a terrestrial broadcasting licence to enable terrestrial broadcasters to use the normal frequencies for which they have to pay a licence fee.

When the Minister uses phrases such as a ''level playing field'', it comes as no surprise that people in the business gain the impression that that is precisely what the Government intend, and that they are talking about fees that are equivalent to those that are paid for using terrestrial frequencies. If that were not the case, such a phrase would become worrying and inappropriate. One end of the spectrum is that RSA is something that everyone considers that they must have, while at the other end, we end up with a free for all whereby no one takes it up. We must decide whether we are debating a new mechanism for Ofcom that will not be implemented.

Satellite broadcasters have clearly suggested that, to date, they have not suffered significant problems with interference with their signals and that they do not anticipate that happening. If the regulator—in future, Ofcom—requires people to conform to international standards, such as the ITU standards, in particular, satellite broadcasters say reasonably that there should be no reason for interference if everyone is conforming to those standards. Clearly, when policing the airways, Ofcom has within its remit the fact that it should require compliance with international standards.

The crunch question is the difference in the level of protection that will be afforded to satellite operators, in particular. What additional protection will they receive under the recognised spectrum access arrangements, owing to the fact that, presumably, Ofcom will require everybody, including potential interferers, to conform? The Minister has referred to people putting in local wireless network loops. If potential interferers will be robustly policed by Ofcom to conform to international standards that are designed to prevent interference from anyone else, what is the difference between an RSA protection regime and the regime that people would expect to receive anyway by virtue of Ofcom doing its job and implementing international standards?

The hon. Member for Maldon and East Chelmsford asked whether we were double charging. We are in the European market, so let us suppose that satellite broadcasters, in particular, pay a fee to the Radiocommunications Agency—Ofcom, in future—for the fact that they have an uplink service leaving the United Kingdom and also pay a fee to the authorities in Luxembourg from where they uplink to the satellite. If they chose to use a service in Luxembourg and pay a fee for using the airwaves there, that should not be charged again in another country. We in the European Union try to encourage the free movement of goods and services, so companies should have the choice to operate in that way. If they are paying somewhere in the EU, there is a serious question as to whether they should be required to pay again within it for something that is broadly comparable. It does not matter whether they have paid large fees in

Luxembourg, Belgium, the UK or anywhere else in the European Union; they have paid for the use of airwaves within the EU.

There are genuine questions to be asked about the extent to which everybody should add additional charges, particularly given—as the hon. Member for Maldon and East Chelmsford said—the nature of a satellite system whereby one is potentially broadcasting into a range of countries, regardless of whether they have chosen to receive those broadcasts.

I hope that the Minister can satisfy us about the way in which this could operate. Specifically, I wish him to answer this key question: if the industry is correct in its assumption that it does not need additional protection, and therefore chooses not to take up the offer of being able voluntarily to purchase RSA, and that does not happen at all, because the industry does not need it, would the Minister be content with that? Are the Government happy that that should be the case, or are they positively trying to push everyone to adopt this new mechanism regardless of whether they need it? In other words, should we be looking for any other motive? Is this purely for the benefit of the industry and the consumers? If the industry does not need to take it up because it is not necessary for operators or consumers, will the Minister leave things alone and say, ''Well, that's fine; we have offered it to you, but you do not need it, so we will let it sit on the statute book and it will never really be brought into play?'' That is the test that needs to be applied to discover whether we are debating a measure that is towards the more compulsory end of the spectrum or one that is more towards the ''if necessary'' end of it where, as the Minister has suggested, if there are cases in extremis where Ofcom needs to carry out extensive work to protect an area of spectrum and, for valid reasons, a reasonable charge is made against that. To refer to the helpful comments of the hon. Member for South Cambridgeshire, that reasonable charge is about the work that Ofcom has to do to protect the spectrum rather than an opportunity cost—as he described it—for some notional value of what that spectrum could be worth.

Brian White (Labour, North East Milton Keynes)

The exchange between the Minister and the hon. Member for Maldon and East Chelmsford about the need for satellite operators to be protected reminded me of something that I read in the Cave report over the Christmas break:

''These developments could enable MOD in future to access a wider range of its communications services . . . A key challenge facing the RA and MOD jointly is to reconcile the increasing demands for both civil and military spectrum.''

Perhaps the conspiracy theorists should congratulate the Department of Trade and Industry on finding this novel way to ensure protection against the wiles of the Ministry of Defence in grabbing the satellite operators' spectrum.

I have several concerns about RSA, so I want to ask the Minister a couple of questions about them. I asked about the role of the United Kingdom Spectrum Strategy Committee—the committee that reconciles spectrum use between the Ministry of Defence and different civilian organisations. At present, that power

comes about because the Radiocommunications Agency is part of the DTI; therefore the DTI is represented by its Secretary of State and the Ministry of Defence is, in effect, represented by the power of the Secretary of State for Defence. Given that Ofcom is an independent regulator that is also now a part of the UKSSC, which directs spectrum use, I suspect that there might be a conflict of interest, and I am concerned about that, especially when we come to recognised spectrum access.

I would appreciate it if the Minister would address that, assuming that I have missed the point, there is no conflict of interest, and everything is wonderful.

Similarly, I am concerned about Ofcom having a duty to deal with competition law and to make sure that competition works. The satellite operators argue strongly that the provision is not necessary, but they also argue that it could distort competition. If Ofcom is arguing for RSA and for being the body that determines it, but is also supposed to reconcile issues of competition, will there be any internal conflict within Ofcom, and how would it resolve that? I should be interested in the Minister's comments on how that will work.

The hon. Member for Maldon and East Chelmsford stated that there is a considerable body of legal opinion in Europe that the provision will fall foul of various European Union directives. If we go ahead with the provision, there is likely to be a legal challenge. Will the Minister outline the argument that convinces the Government that they will not fall foul of EU law? What will be the fallback position either during the legal case, or if the satellite case should prove to be valid? Do we have a fallback position, or is it the provision itself?

The Minister will be aware that the ORBIT—Open-market Reorganization for the Betterment of International Telecommunications—Act in the United States forbids spectrum auctions. The satellite operators strongly argued that we had misunderstood the system in the United States. I am sure that the Minister has seen the letter sent to members of the Committee that makes that point. Perhaps the Minister could point out where the satellite operators have not got the position right.

Finally, I am concerned about how Ofcom will operate across Europe with the other EU regulators. Will RSA be a UK provision, or will it be discussed with the other EU regulators? If that is the case, will RSA be a European common standard, or will it be UK-specific? If it will, what is the implication for satellite footprints that cross more than one country?

Michael Fabricant (Conservative, Lichfield)

It seems to me that the system is very irregular as far as the European Union is concerned. I want to mention a couple of my fears, in addition to those outlined by my hon. Friend the Member for Maldon and East Chelmsford.

My main concern is that on the margins a number of satellite operators will think that RSA is in effect a compulsory system. That is borne out by the quotes that my hon. Friend the Member for South

Cambridgeshire read from the evidence that the Radiocommunications Agency gave the Trade and Industry Select Committee. The agency said that it would not offer protection from interference to companies that did not take up RSA. As I said earlier, I would have thought that that was in breach of the Wireless Telegraphy Act. If satellite operators think that RSA is compulsory, they may well take the view that they need to take up RSA for the sort of costs that we have discussed, and far from being an optimal system, RSA will become a compulsory system.

Let me remind the Minister, if he is not already aware of the fact, that although satellite broadcasters might enjoy spectrum free of interference at the moment, they might not in future. Additional sources of radio frequency—RF—might arise from additional transmissions. Also, I draw to the Minister's intention the increasing use of the national grid and other main electric lines for data transmission. He may well be aware that that is giving rise to considerable concern, as it already causes interference in the HF—short wave or high frequency—bands. The same could happen with VHF and super high frequency, and that would be getting very close to the sort of frequencies used by satellite broadcasters. Those frequencies may be interference free now, but they may not be in future. What could be the effect of that, if satellite broadcasters consider that RSA will end up compulsorily if they are successful in providing their service, interference free? The result will be that satellite operators will have an increased cost. They will want to maintain their profits and, when the negotiations are renewed for the renewal of contracts with operators of the satellite, the costs will be passed on.

What will follow from that? Provision of services at the financial margin may be discontinued in the United Kingdom. It may not be worth while providing them. I am talking possibly about arts programmes that are currently available on satellite, which may not be very profitable and may fall into unprofitability if the charges increase. I am also drawing attention to the increased use of satellite both geostationary and low earth orbit constellation systems for the provision of broadband internet connections, to which my hon. Friend the Member for Maldon and East Chelmsford alluded. They are the only way in which to achieve internet connection in certain rural areas in of the United Kingdom.

That brings to mind a scheme operated by BT with great success in the Outer Hebrides. The costs already are high. That is not because BT is greedy, but BT with so few subscribers finds the charges high. What will be BT's choice? It will either have to subsidise the service under the provision or it will have to pass on the costs, which will make the service prohibitive. It will also be in total breach of the Government's laudable aim—although it has not been very successful so far—of spinning out broad broadband throughout the United Kingdom. That will not happen in rural areas, which

will be dependent on satellite if the provisions are accepted.

The Minister must answer the question that was so pointedly made by the hon. Member for Sheffield, Hallam (Mr. Allan). What will be the advantage to the operator of subscribing to RSA? Does he agree that the costs to some operators could be as high as £7.5 million? If he does, where does think that that £7.5 million will come from? It will come from us. We may be living in the Outer Hebrides or another rural area and want broadband access via satellite or be interested in watching programmes of a marginal, not popular, nature. I am trying to think of a popular satellite service, but I shall not name one because that will imply that it is not a good service. I was referring to a popular and good service. The Minister must answer such questions clearly.

Andrew Robathan (Conservative, Blaby)

My question follows on from what was said by my hon. Friend the Member for Maldon and East Chelmsford and the hon. Member for Milton Keynes, North-East (Brian White) about EU legislation. Have the Government taken legal advice on satellite tax and EU regulations? I shall quote from the Select Committee report. Did the Government say whether RSA would meet

''the criteria of justification and proportionality within the context of the EU Internal Market rules, specifically Article 49 of the EU Treaty on the freedom to provide services and Article 3 of the Electronic Commerce Directive''?

It would be unfortunate if the Government turned up with egg on their face, having pushed through the provision and then discovered that it was illegal.

Andrew Lansley (Conservative, South Cambridgeshire)

The arguments are piling up against the Government. I wish to clarify one or two matters. I refer first to the pricing issue. The illustrative calculation of administrative pricing that was attached to the Government's document in July when introducing recognised spectrum access is where the figure of £160,000 for each earth station that is shared with terrestrial fixed links is derived. That may be an expression of the opportunity cost. It would helpful at this stage if the Minister could provide further guidance on what the Department regards as the illustrative cost of RSA, because, as far as I can see, that was intended to reflect a figure that was above cost recovery, as distinct from cost recovery. It would be interesting to know what the respective figures are.

I am especially worried about the figure of £160,000, which applies if the spectrum is shared. It is surprising that where the spectrum is used exclusively, the figure of £80,000 is quoted for a large earth station. I cannot imagine that it would cost the Radiocommunications Agency £80,000 to provide a service for that purpose. Elsewhere in the Cave review it is clear that the charge for exclusive use involves nothing more than a theoretical opportunity cost. In practice, there is no opportunity cost, because the spectrum would be designated for that purpose and could not be allocated for other purposes. How could an opportunity cost could be calculated and then applied to an exclusive use of spectrum? That seems strange.

My hon. Friend the Member for Lichfield (Michael Fabricant) referred to the cost to broadband users. It is helpful that SES Astra, in its evidence to the Committee, illustrated what that cost might be. If the cost per transponder were £160,000, and there were a maximum of 20,000 broadband users, the cost to each user would be £8 per year. We can see where that cost would arise and to what extent that would fall on users. That is anything but an aid to the development of innovative services, especially, as my hon. Friend rightly said, in rural areas and it raises the issue of whether that is consistent with the development of innovative services, which is one of the duties that it is intended should be secured.

I want to finish with a straightforward question that arises from evidence presented to the Select Committee. What would happen if the Government instituted a process of RSA and a satellite operator chose not comply with it and simply ignored it? What would the Government do about that? Would they withdraw services? Either the Government will comply with their ITU obligations, in which case there will be a continuing obligation to coordinate between radio operators and to provide a service without a mechanism for recovering costs, because no grant of RSA has been applied for, or they will withdraw that service and contravene their ITU obligations and all that flows from that. Both those routes are inherently undesirable.

Stephen Timms (Labour, East Ham)

I have had a number of discussions with different groups of users about spectrum charging and I have found that a similar, twofold point of view is always expressed, which is that spectrum charging is regarded a good idea, but not when it would be applied in the case of the person with whom the discussion took place. This morning the hon. Member for Maldon and East Chelmsford argued the case for spectrum charging. All the arguments that he and other Opposition Members have marshalled this afternoon against the proposals for spectrum charging could equally be applied against the principle of spectrum charging. The hon. Gentleman will find that the same applies if he discusses the matter with other spectrum users.

It is not that satellite operators do not want the safeguards that are envisaged in the RSA mechanism; they want those safeguards but they do not want to pay for them. One can be sympathetic about that. Others in the same position would also say that they did not want to pay for the safeguards, but that does not make them right. If we accept, as we did this morning, the principle that the market mechanism is the right one to use, that principle also applies in this case. We agreed this morning that we should move to a system in which the value of spectrum is recognised and acknowledged. Therefore, there cannot be a substantial group of spectrum users completely outside that system. If that were the case, there would not be a robust arrangement.

Michael Fabricant (Conservative, Lichfield)

Following that argument, the Minister is saying that the arrangement is compulsory.

Stephen Timms (Labour, East Ham)

That is not what I am saying. RSA is certainly an option, but it will be entirely a matter for the operators whether they take it up. If operators

want access to the safeguards provided to licence holders, that opportunity should be available on an optional basis, as it is to others. That is the basis on which we can look forward to the arrangements promoting efficient use of the spectrum.

The hon. Member for Sheffield, Hallam asked some interesting questions. He asked whether I would be happy if there were no take-up of RSA. Operators might decide that there was no benefit. It would depend on where they were in the spectrum, and I anticipate that some would take that view. It is entirely a matter for them as to whether they wish to avail themselves of the opportunity and pay the associated costs.

There will be demand for new terrestrial communications links in some parts of the spectrum. Several hon. Members have mentioned rolling out broadband and I would expect demand for terrestrial links to do that. However, how can we decide whether to permit such links if they interfere with satellite broadcasting? In other cases, we agree that the charging mechanism is a helpful way of making such decisions. The same applies in this case.

John Whittingdale (Conservative, Maldon and East Chelmsford)

But is it not the case that demand from terrestrial users is falling? They are finding it better and cheaper to invest in fibre-optic links rather than use wireless.

Stephen Timms (Labour, East Ham)

There has been a downturn in the past two years, but demand is rising for broadband infrastructure. We passed the 1 million mark of broadband users in October and there are 30,000 new broadband connections every week. The legislation plans not only for current market conditions, but for those expected to develop over the next decade or more. There will be rising demand for fixed-wireless access for terrestrial communications links using parts of the spectrum that are already in use and decisions about access will have to be made.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I seek clarification on that point. Is the Minister suggesting that there is a prospect of people bidding for some of the spectrum currently in use by satellite to be brought into the terrestrial ambit, and that Ofcom could offer that part of the spectrum to a new service without being in breach of its other agreements, such as the ITU obligations to which the hon. Member for South Cambridgeshire referred? Is that a realistic possibility?

Stephen Timms (Labour, East Ham)

Yes, it is. At present there are links using parts of the spectrum used for satellite broadcasting. Whether permission can be given for the link to be operational depends on where in the country those links are and the position of the satellite relative to the area in question. Currently, if there appears to be a problem for satellite broadcasting, the link is not permitted. The question is should that be continued or should we allow such decisions and choices to be made on the same basis that we all agree should apply elsewhere in the spectrum? That is the principle before the Committee. RSA will allow those decisions to be made on the same rational basis that we all agree should apply elsewhere in the spectrum.

My hon. Friend the Member for Milton Keynes, North-East and a couple of Opposition hon. Members asked about the legal position. I do not believe that RSA is contrary to the treaty. It will be voluntary, as we have explained. Even if it were the case—as was suggested by either the hon. Member for Blaby (Mr. Robathan) or the hon. Member for South Cambridgeshire—that article 49 would be engaged, our view would be that the restriction is justified because it is in pursuance of a legitimate public interest, it is proportionate to achieving that aim and it will be applied without discrimination. We believe that that view will be sustained.

Andrew Robathan (Conservative, Blaby)

This was my specific question: have the Government—and specifically the Minister's Department—taken legal advice that states that they were acting legally within the EU regulations on this matter?

Stephen Timms (Labour, East Ham)

I am pleased to say that, as the hon. Gentleman knows, we have the services of excellent lawyers; we have explicitly obtained their advice on this matter, and I am now giving him the benefit of that.

Reference was made to the TV without frontiers directive, which requires member states to ensure freedom of reception of broadcasts from other member states. However, it does not require that frequencies should be made available for those transmissions, so I do not think that there is a problem there either.

Several hon. Members have asked about the continuing protection for satellite services if they were not to avail themselves of the benefits of RSA. Satellite services would continue to be protected from interference from unauthorised sources on exactly the same basis as other legal users of the spectrum even if they did not have the benefit of RSA. However, they would not have the kind of arrangement that they currently enjoy, where when a particular terrestrial link is applied for, it will not be permitted if it looks as though it might conflict with satellite broadcasting. That protection would not be available in the future.

There has been some discussion about the fees that would be charged. I want to emphasise that no decisions have yet been made about them. In answer to the question of the hon. Member for South Cambridgeshire, I cannot give further details on about them, not least because this is one of the areas where there will need to be a lot of discussion with the industry before decisions are made. However, on the basis of the illustrative figure of £150,000 a year that has been mentioned, the sums would work out at rather less than £1 per year per Sky subscriber—to cite a specific case that Committee members are familiar with. The context of the sums that we are talking about must be emphasised.

I think that the hon. Member for Sheffield, Hallam asked whether those charges would be passed on to consumers.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I wish to clarify the point about charging. The Minister has described scenarios where

he could envisage a potential problem: for example, someone might say, ''I want to put in this wireless network in my area, even though we know that it might interfere with satellites.'' Presumably, under the RSA scheme, if the satellite purchaser purchased RSA, they would be protected from that. Does that mean that we will create a market value where the person who wants to put in the new wireless network can say, ''I will pay this much for that bit of spectrum,'' and the satellite operator will have to bid against them, or are we talking about a fixed fee so that once that has been paid, it is protected for the duration?

Stephen Timms (Labour, East Ham)

Once the fee had been paid, the matter would be settled for the duration of the agreement that had been entered into. Ultimately, we want market valuation to be attached to spectrum use. That is a big part of the value of all the arrangements set out in this part of the Bill. We need to know the value of spectrum, and the price that people pay to use spectrum should reflect that value. That should apply to satellite operators as well as other spectrum users. I think that we all accept that.

Of course, fees will not necessarily be passed on to consumers. Operators will charge what a competitive market will bear. I come back to the point that if terrestrial sources are constrained by the need to protect satellite broadcasting, that will impose costs on consumers of terrestrial services. The cost of broadband provision increases if the establishment of terrestrial links is not permitted in those parts of the spectrum. We should take account of that, too. The mechanism provided in the Bill gives us the opportunity to do that.

Andrew Lansley (Conservative, South Cambridgeshire)

Before the Minister moves away from the issue of the costs of granting recognised spectrum access, if he cannot give an estimate of how much RSA will cost, will he give us some idea of the order of the costs if charges were limited to cost recovery? For the sake of argument, let us take the example of a satellite operator such as Sky. How much would the costs be for the service currently provided by the Radiocommunications Agency, if not £7 or £8 million, on the basis of an opportunity cost analysis, and how much does it cost the RA to provide its service?

Stephen Timms (Labour, East Ham)

That is not the figure that I have. I should like to come back to a point that I made this morning. It is essential that the basis on which the charges are set is the same as that used for licensing. I certainly do not agree that there should be one basis for satellite operators and another for other spectrum users. The Trade and Industry Select Committee—and some members of this Committee—recognised the value of the approach that we have taken to licensing more generally. The same principles should be applied to the spectrum users under discussion as to others.

Michael Fabricant (Conservative, Lichfield)

The Minister gave the example of the system costing possibly £1 per subscriber for Sky, but as I have said, I am not as concerned about popular programming as about specialist programming and the provision of broadband. As I understand it, RSA is chargeable per transponder. The Minister will be aware that there are difficulties in using geostationary satellites for broadband access

because of the time taken to access the satellite, as the speed of light is the limiting factor. If RSA is chargeable per transponder, in future we will have low earth orbit satellite constellations, which might consist of up to 16 satellites that are not geostationary but whizzing around in low earth orbit.

At any one time, at least one satellite would be available to provide broadband service. However, each satellite would have a transponder. Therefore, there might be very few subscribers and up to 16 transponders. Surely the cost will be prohibitive, and that would be in total opposition to the Government's aim—which, as I said earlier, is laudable—of extending broadband to all areas of the United Kingdom, including rural areas.

Stephen Timms (Labour, East Ham)

I do not agree. I think that the approach that we are taking will be helpful in spreading broadband around the country for the reasons that I have given. Particularly in rural areas, there will need to be more use of the radio spectrum and more use of wireless broadband, because in many instances it is not yet economical to upgrade British Telecom exchanges for ADSL and there are not yet cables there. In such cases, we will need to use wireless, and the arrangements in the Bill will facilitate that.

I do not have calculations in front of me that allow me to outline the cost in a specific case, but the costs that have been quoted are only illustrative at this stage. Much discussion will be needed with the industry about the appropriate costs before the arrangements are introduced.

I should probably conclude quite quickly because I have not yet referred to the point raised by the amendments, although I am not unique in doing that. My hon. Friend the Member for Milton Keynes, North-East asked about conflicts of interest. I do not think that there will be conflicts of interest, but I think that the position will be no different from that which applies to licensing. That goes back to the point that was first made by the hon. Member for South Cambridgeshire about the need for a level playing field for different users of the spectrum.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I hesitate to detain the Minister further but he said that he does not think that there will be any difference between this provision and that relating to spectrum licensing. There is an essential difference owing to the initial voluntary nature of the arrangements. For example, in the real world, the satellite broadcasters might choose not to take up a specific area spectrum but they could be informed at some point that a person has come along with a proposal to put in a local network meaning that 3,000 subscribers in area X would suffer damage to their services. That person might pay £20,000 to do that but say to the broadcasters, ''If you offer us £25,000, we won't do it.'' That is different from a stable situation in which everyone has a licence. The market is quite different if people do not have licences but somebody could come along and suddenly create a requirement for a licence.

Stephen Timms (Labour, East Ham)

I accept that there are differences. My point is that we should, as far as possible, treat all groups of spectrum users equitably. Several arguments

advanced by Opposition Members suggested that satellite broadcasters, for example, should be treated on an entirely different basis from other spectrum users, but that is not right.

In order to achieve effectively optimum use of the radio spectrum and to give RSA holders additional security of spectrum access and quality, RSA will have to include technical details about frequency, power levels, coverage, strength and type of signal for such reasons as to give operators assurances that they need about the levels of signals that might be expected to impinge on their services from transmissions on adjacent frequency bands. They will require the information in order to plan their coverage with the assurance that they will be able to provide the quality of reception that their customers demand because, without that, RSA holders would be in the dark about the technical quality that they could expect and might be subject to an unexpected shock such as that described by the hon. Member for Sheffield, Hallam. That would make RSA less effective as a spectrum management tool.

We want Ofcom to give operators greater certainty and the clause permits it to do that with the requisite amount of technical detail. In the interests of ensuring optimal use of the radio spectrum, Ofcom might also find it necessary to impose conditions on the strength and type of signal, the sharing of frequencies and the content of transmissions. Those factors might need to be regulated in order to manage the radio spectrum effectively and to ensure optimal use. The provisions mirror parallel provisions for wireless telegraphy licences.

Ofcom will determine how the powers need to be used. It would be premature to speculate about the detailed technical and regulatory content of RSA at this early stage of developing detailed proposals—a good deal more discussion is needed. However, restrictions, terms and conditions may well be necessary and, in view of the range of services that may be covered, the uncertainty about market conditions and technical developments, it is prudent to give Ofcom wide flexibility.

The exercise of the powers will be subject to the general duty on proportionate and appropriate regulation and to the clause 6 duty to avoid unnecessary regulatory burdens. It will also be necessary for Ofcom to consult about regulations governing the procedure for granting RSA, as we discussed earlier. I hope that, in the light of my explanation, Opposition Members will withdraw their amendments. I also hope that they will recognise the substantial benefits that will come with the introduction of RSA and the fact that the absence of such an arrangement would create a serious hole in the framework under the Bill. I hope that members of the Committee will agree that recognised spectrum access should be a feature of future spectrum management in the United Kingdom.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Minister began his response by repeating that it would be a voluntary arrangement, which satellite operators are free to enter into or not to enter into. He said that he would not be concerned if no one entered into it. However, as he went on, the arrangement sounded less voluntary and the consequences of not entering into it seemed to increase. We will not agree. I am disappointed that the hon. Gentleman is not willing even to consider the safeguards suggested in the amendments and, given that there is considerable disagreement, we will press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 11.

Schedule 5 - Procedure for grants of recognised

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 338, in

schedule 5, page 356, line 18, at end insert 'but such a revocation or modification may only be made—

(a) with the consent of that person, or

(b) where that person has contravened a condition or restriction of the grant and OFCOM consider that the revocation or the proposed modification is proportionate and appropriate in the circumstances of that contravention.'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take the following:

Amendment No. 339, in

schedule 5, page 356, leave out lines 22 to 40 and insert 'give notice of the proposal to the holder of the grant, and that notice shall state the reasons for the proposal.

(2) The holder of a grant who receives a notice under paragraph (1) shall be entitled to make representations to OFCOM within such period, not being less than one month after the day the notice was given to the holder, and OFCOM may, if they think fit, extend that period on one or more occasions.

(3) OFCOM may specify a shorter period than one month in the notice given under sub-paragraph (1) if—'.

Amendment No. 340, in

schedule 5, page 356, line 42, leave out 'or an urgent case'.

Amendment No. 341, in

schedule 5, page 357, line 2, leave out from 'appropriate' to end of line 3.

Amendment No. 342, in

schedule 5, page 357, line 4, leave out subparagraph (7).

Amendment No. 343, in

schedule 5, page 357, line 28, at end insert 'or such shorter period as may be agreed with the person to whom the notification was given'.

Amendment No. 344, in

schedule 5, page 357, line 30, leave out from 'proposal' to 'and' in line 31.

Amendment No. 345, in

schedule 5, page 357, line 41, leave out from 'modification' to 'compliance' in line 42 and insert 'in order to secure'.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The amendments relate to schedule 5. Once recognised spectrum access is granted, by virtue of schedule 5(5), Ofcom

''may revoke . . . a grant of recognised spectrum access, or''

modify

''the restrictions or conditions to which . . . a grant is subject''.

However, there appears to be no constraint on the grounds on which Ofcom may modify or revoke a grant. For Ofcom to have such unfettered power to amend or remove an RSA during the period for which it has been granted must be contrary to the legitimate rights of the RSA holder. Therefore, we believe that paragraph 5 should be amended to limit Ofcom's power to modify or revoke RSA. That is the purpose of the amendments.

Stephen Timms (Labour, East Ham)

The communications sector is subject to rapid and unpredictable change and we need to give Ofcom sufficient powers to modify or revoke RSA when necessary and after due process. That power must be balanced against the rights of RSA holders. The schedule as drafted strikes the right balance.

Amendment No. 338 proposes that Ofcom should be able to revoke or modify RSA only with the holder's consent unless conditions are breached. That could create difficulties for Ofcom in circumstances such as the need for spectrum re-farming, or if problems of harmful interference arise due to some unforeseen problem—which may happen despite the best efforts of the spectrum manager. Such circumstances may not be frequent, but it is important that Ofcom has the power to act appropriately should the need arise. The amendment would tie Ofcom's hands unacceptably.

Modification or revocation of RSA will be subject to the full appeals procedure established under clauses

187 to 191, including appeal to the Competition Appeal Tribunal on merits. We will discuss those clauses shortly, but they will give a good deal of assurance that a fair balance is being struck.

Amendments Nos. 339 to 342 propose relaxing the period of notice for varying or revoking RSA. Again, the schedule as drafted strikes a fair and reasonable balance. Occasionally, Ofcom will have to act speedily. The period allowed in the schedule is the same as that allowed for licences. It follows the requirements of the new directives and there is no reason for doing things differently in the case of RSA.

Amendment No. 343 inserts a provision to permit holders to agree a shorter period of notice, but there is nothing in the present drafting to stop that being agreed so the amendment is unnecessary.

Amendment No. 344 proposes that Ofcom's proposals to revoke or modify RSAs should not then be modified. However, that would make the procedure much less flexible, especially if a late accommodation could be reached with the applicants, so the amendment is unhelpful.

Amendment No. 345 suggests amending the wording on how revocations or modification made to secure compliance with international obligations can override other provisions. The original wording gives Ofcom a margin of appreciation in judging what is necessary or expedient. However, it is subject to the right of appeal that I mentioned, so I see no need to amend the wording.

The amendments do not help the Committee and it would be better to leave things as they are.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Plainly, there will not be much meeting of minds this afternoon. In an attempt to make further progress in the short time available and without any enthusiasm, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Stephen Timms (Labour, East Ham)

I beg to move amendment No. 308, in

schedule 5, page 357, line 15, leave out 'vary or revoke' and insert 'revoke or modify'.

The amendment corrects a detailed drafting inconsistency in schedule 5. Paragraph 6(8) refers to

''a proposal to vary or revoke the grant''.

The amendment changes that wording to ''revoke or modify'' to make it consistent with language elsewhere in the schedule. I move the amendment with enthusiasm.

Amendment agreed to.

Schedule 5, as amended, agreed to.

Clause 155 ordered to stand part of the Bill.

Clause 156 - Charges in respect of grants of

Clause 157 - Conversion into and from wireless

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 299, in

clause 157, page 142, leave out lines 26 and 27.

I must admit that, when I first read clause 157, I was not sure whether to try to remove subsection (1)(a) or subsection (1)(b), or both. However, on reflection, I decided that, technically speaking, the regulations that could be made for managing the conversion of a grant of recognised spectrum access into a licence could entail the necessary protections, but that it would be less likely for them to be satisfactorily transferred in the other direction—from a licence into a grant of recognised spectrum access. By its nature, the protection attached to a licence would be diminished substantially if it were translated into a grant of recognised spectrum access. I do not want to dwell long on the amendment, but use it to explore a point. To some extent, the grant of a wireless telegraphy licence implies the individual right of use of spectrum in an area or over some part of the frequency. That is implied under clause 161, which will exempt the need for a wireless telegraphy licence in circumstances where there is no risk of interference arising from use. That, in itself, is a reflection of article 5.1 of the authorisation directive, which states:

''Member States shall, where possible, in particular where the risk of harmful interference is negligible, not make the use of radio frequencies subject to the grant of individual rights of use''.

Therefore, by implication, the structure of the legislation should be such that it avoids the use of licences wherever that is possible.

I am none the less sceptical about the process by which RSA is to be turned into licences and vice versa. I am looking for a degree of assurance that we would not arrive at a situation in which the grant of RSA in the first instance could, for trading purposes, be translated into a licence without all the safeguards that would necessarily apply to the grant of a licence. Otherwise, we run the risk of going in the opposite direction to the demands of article 5.1, which are that individual rights of use should not be created where

they are not needed. The philosophy behind the clause still gives me a problem. The idea is that people should be able to change the nature of their licence or recognition for trading purposes, rather than backing out and changing it by making a new application in the proper way if the recognition they have, or the licence that they have received, is not appropriate to their use.

Stephen Timms (Labour, East Ham)

The question is whether spectrum trading is a good thing. It is widely agreed throughout the community that it is a good thing. The aim of the clause is to allow an extension of the benefits of trading, which is permitted through the arrangements that allow licences to be converted into RSA.

We have already discussed the fact that some frequency bands are shared between licence services and services that could be subject to RSA. In order to avoid interference it is often necessary to partition the spectrum between such services. Spectrum trading will allow that to be done by those who are directly involved in the market, rather than by regulation. That should lead to better use being made of the spectrum. For example, if a satellite operator wanted to extend its service, it could buy fixed-link licences from the present licensees, convert those into RSA in accordance with Ofcom regulations and use the spectrum for satellite downlinks. That would allow a reassignment of spectrum as circumstances changed and markets developed, which is how all of us believe that things should unfold.

There is a lot of rapid and unpredictable change in the communications market. The amendment would make it more difficult for the distribution of spectrum to be adjusted in response, which would hold back innovation and competition. It is not right to characterise what is happening as the opening up of some kind of back-door route into licensing, or as a surreptitious way to impose licensing where it would otherwise not exist. We want to facilitate the trading of spectrum. The interchange between RSA and licences will do that and it is important that that remains as part of the framework that we are introducing.

Andrew Lansley (Conservative, South Cambridgeshire)

We could come back to that during the debate on clause 161, although I suspect we shall go through it like a train. I do not wish to press the matter any further, but I want to be sure about things. I shall put it on the record and leave it with the Minister.

The nature of a licence is different from RSA. We have been struggling with that issue for most of the day. The Minister is right, in a sense, to talk about the desirability of efficient spectrum management. I subscribe to the general proposition that the recovery of costs for spectrum management and incentive pricing should be included where it is appropriate, and I subscribe to the view that spectrum trading is desirable. It does not, however, necessarily follow that it is right, in all circumstances, to enable people to switch from RSA to licences and vice versa. The change of use should be subject to safeguards and the regulations will need to address that.

If article 5.1 seeks that member states should avoid individual rights of use wherever possible—and RSA, by its nature, does not grant that—the switch from

RSA to a licence is actually the grant of individual rights of use, and it may be sought in circumstances where there is no harmful interference, because otherwise there may not have been a need for a licence in the first place, and that may grant individual rights of use when it is undesirable for us to do so.

Therefore, I will leave the Minister with this thought: the regulations need to be very clear about the relationship between licences and RSA, and the distinctions between them, and the desirability of avoiding people gaining individual rights of use in circumstances where that does not give rise to harmful interference. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 157 ordered to stand part of the Bill.

Clauses 159 to 161 ordered to stand part of the Bill.

Clause 162 - Bidding for wireless telegraphy licences

John Whittingdale (Conservative, Maldon and East Chelmsford)

I had intended to spend quite some time on clause 162 because it deals with spectrum auctions, which is a significant matter. However, given the time, I will try to be brief.

With regard to this clause, it is worth bearing in mind the experience to date, which is mainly the auction of the 3G licences. That surpassed every conceivable expectation by raising £22 billion, and it led many other countries to identify such auctions as a potential pot of gold. However, that expectation was realised with only varying degrees of success: Germany achieved an even higher sum from the auction of their licences, but other countries found that they could not raise the proceeds that they had hoped for.

The auction has raised great concerns, in particular about the dramatic change in the telecommunications market and the sentiment towards that market that has occurred since it took place. The main concern is that the effect of raising these huge sums by auction of licences might be to delay, or make it harder to achieve, roll-out of new services.

I am not one of those who believe that auctions are therefore a bad thing. As I said, they are a market mechanism, which is probably the best way of achieving our aims. Those who bid enormous sums for the licences now have an incentive to get a return on that investment by rolling out the services as soon as possible. However, some fears have been expressed: in particular, there is concern that this might lead to spectrum speculation—people might bid to acquire chunks of spectrum and then sit on them because they believe that they might become more valuable. The Select Committee on Trade and Industry identified these concerns in its report and it said in its conclusion that it hoped that the Government would consider

attaching conditions to sales to prevent hoarding, or even to specify roll-out and usage.

Given that those concerns have been raised and that this is an important part of the overall process of spectrum management, it is worth briefly pondering the matter. I will allow the Minister to say a few words.

Stephen Timms (Labour, East Ham)

I agree that auctions are a good thing; they remain our preferred mechanism for awarding licences.

On the 3G auction, it is worth pointing out that all the UK mobile operators are proceeding with the roll-out of 3G networks and I am confident that UK consumers will be among the first in Europe to benefit from 3G services. There is no evidence that the auction process—the sequence of events in an auction—has held back the development of 3G in the UK; in fact, it is quite the reverse. Those who bought licences and invested substantial sums in them now have a big incentive to roll out services and recoup their investment. UK consumers will certainly be among the first in Europe to benefit from 3G.

Andrew Robathan (Conservative, Blaby)

I am grateful to the Minister, but his statement should not pass without remark. Of course it is true that those who have invested have a great incentive to recoup the money that they put out, but I think I am right in saying that none of the operators that I have talked to are currently making profit. At any rate, a lot of them are having trouble. All say that investing their money in the licences has severely affecting their ability to invest elsewhere.

Stephen Timms (Labour, East Ham)

Having spent money in one direction, of course the investors do not have it available to spend in another. The mobile sector in the UK is in pretty good shape. Within a few weeks, we shall have the first 3G services in the UK. I expect that those services will be offered by a new entrant brought in through an auction. There have been many benefits from the process that we adopted.

The clause fine-tunes the provisions in the Wireless Telegraphy Act 1998, under which spectrum auctions were introduced. All the changes are minor in character, and simplify or clarify the arrangements. I shall not go through them in detail. I want to reaffirm the value of auctions as a tool in managing spectrum and in making appropriate and economically efficient allocations of spectrum. They are not suited to every circumstance—they should be used selectively—but they are certainly an important part of the toolkit available to Ofcom.

Question put and agreed to.

Clause 162, as amended, ordered to stand part of the Bill.

Clause 163 - Spectrum trading

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 329, in

clause 163, page 146, line 28, at end insert 'and'.

Bill O'Brien (Labour, Normanton)

With this we may discuss the following amendments: No. 330, in

clause 163, page 146, line 32, leave out from 'transfer' to end of line 40.

No. 331, in

clause 163, page 146, line 42, leave out

'or grant of recognised spectrum access'.

No. 332, in

clause 163, page 147, line 2, leave out 'or grant'.

No. 333, in

clause 163, page 147, line 6, leave out

'or grant of recognised spectrum access'.

No. 334, in

clause 163, page 147, line 7, leave out 'or making'.

No. 336, in

clause 163, page 147, line 29, at end insert—

'(3A) Subsections (3)(a), (c), (d), (i), (j) and (k) shall also have effect as if they applied to the grant of recognised spectrum access.'.

No. 335, in

clause 163, page 147, line 30, leave out 'or grant of recognised spectrum access'.

John Whittingdale (Conservative, Maldon and East Chelmsford)

We have already said that we support the concept of trading spectrum, and so we do not disagree with the principle of clause 163. However, the clause allows Ofcom to alter the conditions of a grant of recognised spectrum access, perhaps requiring further payments to be made or that a financial security be given before it is willing to consent to a transfer. Such provisions could fundamentally alter the rights and value of RSA that has been granted, and that seems inconsistent with underlying principles of property, and even human rights. The amendments would address that.

We suggest that subsection (2)(c) be deleted, as it relates to the transfer of

''rights and obligations under a wireless telegraphy licence''

to an RSA, and vice versa.

Stephen Timms (Labour, East Ham)

The amendment would go a little further than the hon. Gentleman says, and would prevent Ofcom from making regulations that allow wireless telegraphy licences to be converted into RSA and vice versa through spectrum trading.

As the hon. Gentleman has reaffirmed, there is broad support for the introduction of spectrum trading as a worthwhile reform to help achieve optimal use of the radio spectrum. The Trade and Industry Select Committee endorsed spectrum trading, too. There is no reason to restrict the benefits of trading to wireless telegraphy licences. They apply equally to RSA. Our view is that Ofcom should have the same flexibility to introduce trading in the case of RSA as well. As some frequency bands are shared by licensed services and services that could be subject to RSA, trading ought to be used to adjust the boundary between them in the interest of securing optimal use of the radio spectrum, as we discussed in an earlier amendment. Otherwise, the present compartmentalisation of spectrum between licensed services and those that might be subject to RSA would

become frozen and much more difficult to adjust in response to change in demand. Trading will be an entirely voluntary act between a willing buyer and a willing seller. RSA and licences will not be converted unless both parties agree that it is in their interests. The amendments would reduce the scope for trading.

It is important to ensure that there is an opportunity for trading to take place, and for changes in demand to be reflected in the way in which spectrum is used. By reducing the scope for trading in RSA, the amendments would make it significantly more difficult to achieve optimal use of spectrum that is subject to RSA. I hope that we do not incorporate them into the Bill.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am not sure that the Minister is correct that what we suggest would have such a dramatic effect. However, I am anxious that we should make more progress. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Michael Fabricant (Conservative, Lichfield)

We discussed this morning the whole question of whether spectrum trading should be a free, capitalist exercise or whether there should be control over it. I gave the example of a willing seller and a willing buyer. There could be a willing seller and willing buyer of spectrum for telephony in rural areas, and then people connected to a mobile phone system on that particular network might find themselves unable to use the network in certain parts of the country where previously they were able to do so.

Can the Minister, now that he has had the chance to cogitate on this issue over lunch, give me and the many users of mobile telephony, an assurance that there is nothing in clause 163 that would enable that to happen; that there will be safeguards—despite our love on both sides of the Room for the open and free market—for control of the free market in order to protect the consumer?

Stephen Timms (Labour, East Ham)

I can give the hon. Gentleman the reassurance that he seeks. Any given spectrum trade will need to be authorised by Ofcom, so it would be possible to prevent any particular trade taking place. It is difficult to imagine circumstances in which one of the big mobile operators wished to shut down its network in a particular part of the country. It is competition between the operators that has been most effective in spreading out the networks. Although the scenario being proposed is an unlikely one, any given spectrum trade would need to be authorised by Ofcom.

Michael Fabricant (Conservative, Lichfield)

That is very reassuring. When Ofcom gives that authorisation, what criteria will it have to consider? In particular, is it concerned with the public interest as well as that of telephony operators?

Stephen Timms (Labour, East Ham)

Yes. The criteria that Ofcom needs to take into account in that decision are those more broadly set out in the Bill. Certainly, the public interest, as the hon. Gentleman knows, is central to them.

Clause 163 ordered to stand part of the Bill.

Clauses 164 to 169 ordered to stand part of the Bill.

Clauses 173 to 175 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clauses 176 and 177 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clauses 178 to 180 ordered to stand part of the Bill.

Clause 181 - Action by OFCOM on dispute reference

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 133, in

clause 181, page 163, line 8, at end insert—

'(3A) OFCOM must make their decision no more than two weeks after the dispute is referred to them under section 180 (or, as the case may be, two weeks after the dispute is referred back to them under subsection (6)).

(3B) Where it is practicable for OFCOM to make their decision before the end of the two week period, they must make it as soon in that period as practicable.'.

Let me put on record that we would have liked to raise several points related to the preceding clauses, but I was anxious that we should have the opportunity to consider the amendments, which we would otherwise not have been able to consider due to the absurd knife system under which we must operate.

We have reached the point at which the Bill addresses disputes and appeals, about which there are serious concerns. Clause 183 helpfully lays down a time limit for Ofcom to reach a determination of a dispute that has been referred to it. However, there is a worry that there might be a loophole in clause 181. The amendment would provide extra certainly that Ofcom would reach its decisions properly. A common complaint about Oftel is that it has not reached decisions on disputes between communications providers as quickly as it might have done. Examples of that are the protracted disputes about local loop unbundling, which we dealt with at length previously.

Clause 183 seems to effect requirements of new European directives that require national regulators to adjudicate disputes within four months, which is a helpful time limit. However, the provisions appear to contain a loophole because the four-month timetable runs only from the day on which Ofcom decides that it is appropriate for it to handle the dispute. There seems to be no limit on the time that it can take to decide whether the matter is appropriate, which is addressed in clause 181. The amendment would correct that by allowing Ofcom a two-week window in which to reach a preliminary decision of whether it should adjudicate. Two weeks is plenty of time in which to reach a decision that is simply yes or no. The amendment would not place an undue burden on Ofcom but would give extra certainty and address the worries of several operators that there might be a loophole to get around the maximum four-month wait outlined in clause 183.

Stephen Timms (Labour, East Ham)

I am aware of the worries expressed by some in the industry about the time that has been taken to resolve several disputes under the current regime. I share the industry's desire for the situation to improve in the future and, therefore, I sympathise with the objective of the amendment. That is particularly

important under the new regime because Ofcom will be able to decide not to resolve a dispute if it considers, under clause 181(3), that there are adequate alternative means of resolving it.

Clause 8 will require Ofcom to publish promptness standards for its initial handling decisions under the disputes provisions, as well as its other functions. That should go some way toward meeting the industry's concerns. We considered whether we should go further and include a specific provision of the type proposed by the hon. Member for Maldon and East Chelmsford. The legal requirement to comply with a statutory deadline would be rigid, allowing no flexibility to take account of the widely varying circumstances of different cases, whereas the obligation to have regard to the standards set by Ofcom under clause 8—which, as we discussed before Christmas, is legally binding on Ofcom and enforceable by judicial review should Ofcom ignore it—contains the necessary flexibility. As an approach of the kind proposed by the amendment does not allow that flexibility, we have concluded that it would not be helpful.

The main difficulties with imposing a deadline on Ofcom for taking its initial decision on whether to handle a case are practical ones. Ofcom will deal with a wide range of cases from many different sources. Some of the cases will be straightforward and well presented—the nature of the dispute will be precisely identified and all the relevant supporting information will be provided in the initial submission. However, it is also likely—particularly in the early stages of the operation of the new procedure—that some initial submissions will not contain all the information needed for Ofcom to take a decision: for example, the precise scope and nature of the dispute and the possibility of there being alternative means of resolving it may not be clear from the documents provided. In such cases, Ofcom will have to contact some or all of the parties to the dispute, and there could be a large number of them; one recent case that Oftel handled involved more than 150 operators—and there might be others as well. Ofcom would need to obtain more information from those sources before it could take a proper decision on whether to handle the case. In a situation of that kind, the limit envisaged in the amendment might be impossible to achieve.

In the great majority of cases, I hope that a longer period of initial consideration than the two weeks that the amendment specifies would be unnecessary—indeed, in many cases, the decision should take significantly less time than that. I hope that placing that statement on the record will provide some comfort to those who are concerned about this, and I urge the Committee not to impose a straitjacket, which might be impossible to achieve in a few cases.

Michael Fabricant (Conservative, Lichfield)

I take on board the Minister's point that some cases are inordinately complicated, with evidence required from several different parties, and that therefore it might sometimes be necessary to extend beyond that two-week period. However, is some sort of right of appeal envisaged for people who make applications to Ofcom and find that things are taking an inordinately long time for the reasons that

the Minister described? If they feel that the process is taking longer than is necessary for the gathering of the evidence can they go somewhere to appeal, or do they just have to lump it?

Stephen Timms (Labour, East Ham)

There are a lot of incentives for Ofcom to act promptly. In addition to its obligation to publish the promptness standards, it is under a general duty to have regard to regulatory best practice, and clause 181(4) and (5) requires it to inform the parties to disputes of its decision about whether to handle them along with the reasons for its decision as soon as is reasonably practicable after taking it, and to inform the parties of the date on which it was taken. To pick up on the specific point of the hon. Member for Lichfield, if there is an unreasonable delay by Ofcom, that information could form the basis of an appeal to the tribunal under clause 187(7)(b), which is something that Ofcom would be very keen to avoid. Therefore, he is right that that is a further helpful safeguard.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am grateful to the Minister for that response. I draw some comfort from his statement about his expectation of Ofcom's behaviour, which I am sure that those who will be charged with carrying out these responsibilities will have taken note of, and from the helpful point raised by my hon. Friend the Member for Lichfield, which has led to the identification of an additional possible safeguard.

Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 181 ordered to stand part of the Bill.

Clauses 182 to 184 ordered to stand part of the Bill.

Clause 185 - Resolution of referred disputes

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 134, in

clause 185, page 166, line 16, leave out paragraph (a).

This is a matter to which some of those who are involved in the industry attach much importance; in particular, the proposal that allows Ofcom to award costs against a losing party in a dispute. It is reasonable that if a complainant makes a vexatious or frivolous complaint they should be required to make a contribution towards Ofcom's costs. That is provided for in subsection (6)(b). However, the general power to award costs, which is included in paragraph (b), represents a major shift in policy and that has given rise to a number of serious concerns. Each side in the dispute currently bears its own costs in respect of regulation and each player in the industry usually has an internal department to deal with that. As a result of that there is a degree of certainty and everyone knows what are the likely costs. It is also reasonably efficient and provides an incentive for each side to minimise their costs, and it is practical. In the ''loser pays'' scenario we would expect parties to be increasingly represented by external lawyers. That would bump up costs further.

Players in the market who are in competition with the dominant provider would be much less likely to submit complaints if it were possible that they would have to meet the other party's costs. Equally, there might be a situation in which it looked like that the dominant player would submit a complaint. There is concern that the measure might represent a disincentive for smaller players to complain against a dominant player, because they could risk paying significant costs. Any award of costs would have to be made via a thorough framework. In court proceedings there is an industry of lawyers who determine the awards. It is not clear whether that would be done by Ofcom, or whether it would spawn a whole new industry.

The Minister will be aware of such concerns from his discussions with the operators in the industry and in the interests of time I will not go any further. I would, however, invite the Minister to consider these amendments that stem from significant interests in the industry who have serious concerns on the issue.

Stephen Timms (Labour, East Ham)

The power to award costs between parties in a dispute is a well-established feature of our legal system. The ability for the successful party to recover its costs should deter badly founded cases from being brought or defended and also encourage those with good cases to come forward. It is reasonable to allow Ofcom the power to award costs, just as a court could, but not to require it to do that in every case. There is a concern that some in the industry would be deterred even from bringing well-founded cases, because the risk of being faced with a large bill for an opponent's costs might be more than some companies would be prepared to bear. There are, however, steps that those concerned could take to minimise their exposure. They might, for example, agree that neither party would seek costs, or they might agree to seek a decision from Ofcom that it would not award costs. That could cut both ways and it may be that opposing parties will be encouraged to concede in negotiations, rather than face the risk of losing a face the award of costs against them.

A concern has been raised that the risk for the largest operators, such as BT, is much less that for the smaller ones, since the former are likely to have deep pockets and be more able to bear the risk of loss. The effect on the smaller operators profitability could be significant. Equally, however, I hope that smaller players will be encouraged by the ability offered in the Bill for them to have their costs awarded if the decision goes in their favour. In recent cases brought by operators against BT, the majority have not left the process empty-handed. Several operators could jointly bring a dispute to Oftel, which would reduce the individual risk.

The hon. Gentleman asked how the assessment of costs compared with court procedures. Ofcom will undoubtedly develop a practice of deciding when to award costs and how much they should be. The availability of appeal to the Competition Appeal Tribunal will mean that the practice will have to have a sound legal base, and I hope that that provides reassurance.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am grateful for the Minister's comments and, because I am anxious to cover a few more points, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 185 ordered to stand part of the Bill.

Clause 186 - OFCOM's power to require information in connection with dispute

Michael Fabricant (Conservative, Lichfield)

Having raised the issue of disputes and the speedy manner in which we would want them to be determined, the clause deals with the way in which evidence may be acquired. Under subsection (3), evidence must be provided

''within such reasonable period as may be specified by OFCOM.''

I hope that the Minister will be able to reassure me on the question of confidentiality, because information will occasionally be required by Ofcom to make a decision regarding a dispute. Such evidence will have a commercial value. Although to some degree Ofcom must be transparent in the manner in which it makes judgments, what freedom does it have to preserve the confidentiality of any commercially sensitive information provided?

Stephen Timms (Labour, East Ham)

I would certainly expect Ofcom to preserve the confidentiality of commercially sensitive information. I may be able to offer more explicit reassurances on that particular matter. If that is the case, I will drop the hon. Gentleman a line and send copies to all members of the Committee.

Question put and agreed to.

Clause 186 ordered to stand part of the Bill.

Clause 187 - Appeals against decisions by OFCOM, the Secretary of State etc.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Briefly, the clause introduces full rights of appeal on facts of law to the Competition Appeals Tribunal for decisions, directions, approvals and consents made under part 2 of the Bill. Clearly, we support that: it places strong safeguards that are necessary. However, it contrasts with provisions in part 3 of the Bill, in which there is not the same requirement for decisions to be reasoned, or the equivalent safeguard or full right of appeal as in this part. Why do two different regimes apply in parts 2 and 3 of the Bill?

Stephen Timms (Labour, East Ham)

Regulation of content is excluded from the scope of the directives and there is no EC requirement for an appeal on the merits involved. Matters of content regulation are strongly connected to public policy and we believe that it is wrong for courts to have the task of reviewing the merits of relevant public policy as part of an appeal process. The judicial review process provides the appropriate mechanisms and standards for an appeal. When

powers in the Broadcasting Acts 1990 and 1996 are used to promote competition rather than regulate content, it is appropriate and consistent with the drafting for there to be a formal appeal to the tribunal. That is the distinction that the Bill makes.

Question put and agreed to.

Clause 187 ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 188 - Reference of price control matters to the Competition Commission

John Whittingdale (Conservative, Maldon and East Chelmsford)

I beg to move amendment No. 135, in

clause 188, page 168, line 42, at end insert 'which period must not exceed three months'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take amendment No. 136, in

clause 190, page 169, line 35, at end insert—

'(3A) The Tribunal must make its decision either—

(a) in a case falling within section 188, no more than six months after the day on which the appeal was made; and

(b) in any other case, no more than four months after the day on which the appeal was made.'.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The amendments would set time limits on the hearing of appeals on Ofcom's decisions about communication services and networks. The new European framework provides that such decisions must be subject to appeal on the substance of the decision, but similar arrangements have caused problems in several European countries, notably Germany and Spain, where appeals are habitually used by those who are subject to unfavourable regulatory decisions. That happens when there are no good grounds for the appeal, but the appeal is used as a gaming mechanism to frustrate and delay the original decision.

In an environment in which the original decision must be made within four months, it would be absurd if appeals took much longer than that because it would circumvent the welcome provisions to ensure that decisions are reached relatively swiftly.

Given the time available I shall say no more, and I press the Minister to respond.

Andrew Lansley (Conservative, South Cambridgeshire)

While we are considering clause 188, may I ask one question? I am grateful to the Minister for the provisions because they respond to evidence taken by the Joint Committee on the desire to refer price control matters to the Competition Commission, which is better suited for the task of considering that. If the Competition Commission is suited to the task in relation to SMP services with a price control condition, why will it not be suited to the task if there is an appeal on an SMP condition attached to the apparatus market?

Stephen Timms (Labour, East Ham)

Amendment No. 136 would impose a time limit on the determination of appeals by the tribunal. Our reply to the Joint Committee's similar recommendation on that made it clear that we do not consider that it is practical to set statutory time limits that would constrain a court of law. Of course, courts

could and should establish timetables and adhere to them. However, if a party raises a new point at any stage—even a late stage—the court must have flexibility to give the point as much consideration as it merits. I am not aware of any precedent for applying such limits to a judicial body determining an appeal, and we should not try to do that now.

Amendment No. 135 raises a different issue because we envisage that it may be appropriate to set limits for the determination by the Competition Commission of matters referred to it. Subsection (3) provides powers for the tribunal rules to make provision for such limits. However, there is not a strong argument for imposing a maximum duration through the Bill. It is more appropriate that the Secretary of State should prescribe appropriate tribunal rules, and that the tribunal should set the period to be allowed case by case according to circumstances. The objective of the amendment will be met, but in a different way from that envisaged.

The hon. Member for South Cambridgeshire asked about consistency. The commission's role when determining price control matters in an appeal under clause 187 will be different from that when considering a proposed licence modification referred to it by a sectoral modification. The Competition Commission is not excluded from SMP apparatus decisions. Any price control matter must go to the commission irrespective of the case in which it arises. If I can

provide the hon. Gentleman with further information on that point separately, I shall be happy to do so.

John Whittingdale (Conservative, Maldon and East Chelmsford)

We have rather galloped through our consideration of the amendments, but it is helpful that the Minister's comments are on the record. Although the comments might not deliver what the industry hopes for, they provide useful clarification.

Andrew Lansley (Conservative, South Cambridgeshire)

Before my hon. Friend concludes, will he note that if it were the intention that price control matters should be dealt with by the Competition Commission, surely subsection (10) would have included a reference to conditions set under clause 89(3)? Such a reference is not present, which might be something that the Government would like to come back to.

John Whittingdale (Conservative, Maldon and East Chelmsford)

That is an extremely interesting point. I am sure that the Minister has taken careful note of it and will give it the proper consideration that it deserves.

We have, at least, managed to address the issues, which is something. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 188 ordered to stand part of the Bill.

Clauses 189 to 192 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Jim Murphy.]

Adjourned accordingly at Five o'clock till Tuesday 14 January at five minutes to Nine o'clock.