PARLIAMENTARY DEBATES

HOUSE OF COMMONS

OFFICIAL REPORT

Fifth Standing Committee on Delegated Legislation

DRAFT CONTRACTING OUT (FUNCTIONS RELATING TO WIRELESS TELEGRAPHY) ORDER 1996

Wednesday 10 July 1996

LONDON: HMSO

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The Committee consisted of the following Members:

Chairman: Mr. Frank Cook

Clapham, Mr. Michael (Barnsley, West and Penistone)

Devlin, Mr. Tim (Stockton, South)

Fox, Dr. Liam (Lord Commissioner to the Treasury)

Fox, Sir Marcus (Shipley)

Gorman, Mrs. Teresa (Billericay)

Harvey, Mr. Nick (North Devon)

Hoon, Mr. Geoffrey (Ashfield)

Hurd, Mr. Douglas (Witney)

Mitchell, Mr. Austin (Great Grimsby)

Olner, Mr. Bill (Nuneaton)

Pearson, Mr. Ian (Dudley, West)

Porter, Mr. Barry (Wirral, South)

Purchase, Mr. Ken (Wolverhampton, North-East)

Redwood, Mr. John (Wokingham)

Simpson, Mr. Alan (Nottingham, South)

Sutcliffe, Mr. Gerry (Bradford, South)

Taylor, Mr. Ian (Minister for Science and Technology)

Trend, Mr. Michael (Windsor and Maidenhead)

Yeo, Mr. Tim (South Suffolk)

Mr. M. Hennessy, Committee Clerk

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3 Fifth Standing Committee on Delegated Legislation Wednesday 10 July 1996

[MR. FRANK COOK in the Chair]

Draft Contracting Out (Functions relating to Wireless Telegraphy) Order 1996

4.30 pm

The Minister for Science and Technology (Mr. Ian Taylor): I beg to move, "That the Committee has considered the draft Contracting Out (Functions relating to Wireless Telegraphy) Order 1996." Thank you very much for calling me, Mr. Cook. This is the first time that I have sat under your chairmanship. I look forward to the debate. The order allows the Government to build on existing arrangements for managing programme-making spectrum and offers the opportunity to improve further the provision of spectrum to users. The order is made under section 69 of the Deregulation and Contracting Out Act 1994. Its purpose is to enable the Secretary of State to authorise another person or that person's employees to exercise his functions under section 1 of the Wireless Telegraphy Act 1949 insofar as they relate to programme making. Rather than go into a lengthy opening statement, I shall simply say that clean spectrum is necessary for programme making, whether it is for television, for outside broadcasts, in theatres or for relations between actors and producers. It may be necessary for only an hour or two or for longer. The difficulty is that there are often emergencies. For example, an outside broadcast might need to be set up suddenly because of the visit of someone such as President Mandela. All the necessary people have to be brought together and flexibility is needed at the point of management of the licences and use of the spectrum. The Secretary of State has already charged the Radiocommunications Agency with those powers. Our aim now is to devolve that down to one organisation which could take over responsibility for some—not all—of the powers under section 1 of the Wireless Telegraphy Act 1949. The second aspect of the order is that, at the moment, arrangements are made on a less devolved basis to two organisations that have managed spectrum. As a result of a review and consultation, the Government have decided that it would be better to recommend management by one organisation, with sufficient safeguards built into the contract to prevent abuse of power. There is an increasing need for more flexibility than is available in the current arrangements between the stable broadcasters—BBC and ITV—and the independents, particularly because there is now more co-mingling. Some BBC productions are made with independent companies and its production facilities are sometimes used by independents. The dramatic change in broadcasting has brought about the need for flexibility in 4 the administration of spectrum. I hope that that was as succinct an opening statement as possible. I shall listen to the comments of honourable Members and try to respond.

4.33 pm

Mr. Geoffrey Hoon (Ashfield): The primary purpose of the order is to allow the Secretary of State to divest himself or herself of the responsibilities under section I of the Wireless Telegraphy Act 1949 and authorise another person or that person's employees to exercise the Secretary of State's functions on programme making. Section 1 of the 1949 Act prohibits anyone from establishing or using any station for wireless telegraphy and from installing or using any apparatus for wireless telegraphy except under the authority of a licence granted by the Secretary of State. Doing so without a licence is an offence under that section. The first curious aspect of the order, in a legal sense, is that there is no reference in section I to programme making. I recognise that the section covers a wide variety of uses of spectrum and programme making is a modern aspect of that, but if the Government intend to make changes, it would be helpful if they did so comprehensively rather than through a series of specific orders. Anyone looking at section 1 of the 1949 Act will not find any reference to programme making, therefore they will not necessarily make the connection with this order. I hope that the Minister will tell us whether the Government intend to make further changes to the way in which spectrum is regulated. It would be helpful to both Members of Parliament and people working the relevant industries if those changes were made in a comprehensive way, rather than piecemeal. Currently, licences are distributed on behalf of the Secretary of State by two separate organisations: first, the Joint Frequency Management Group, which was originally established in 1986 as a joint BBC-Independent Broadcasting Authority frequency management group for ensuring the efficient use of the spectrum; and, secondly, the Association of Service Providers, a commercial company also established in 1986 to represent independent programme makers. It is clear that those two organisations have very different approaches to this matter. One essentially represents users and the other represents independent programme makers, and they have clearly distinct approaches to the problems of frequency allocation. One organisation's approach is based on the public service ethos, the other's on a commercial basis for the allocation of frequency. The Government propose to establish a single organisation to bear those responsibilities. The Minister should comment on how that is to be achieved, given the different approaches that have been taken hitherto. The issue of spectrum for programme making has been the subject of a number of reviews, the latest being that conducted by the Radiocommunications Agency in a report published in May 1996. That report recommended that: "a single spectrum management organisation should be established with responsibility for licensing all programme making spectrum". The report stated that an agency steering group should be set up to oversee the letting and negotiation of the contract with that organisation. 5 My understanding is that the establishment of a single organisation is going ahead, that a new contract was advertised in June, that expressions of interest will have to be submitted by 14 August 1996, that the agency expects to draw up a shortlist by the end of August with bids to be submitted by the end of October, and that it is intended to announce the successful bidder in mid-December. I hope that the Minister will confirm that timetable. The report did not specifically suggest that the Secretary of State's powers to award, amend and revoke licences should be contracted out to the new spectrum management organisation. The report gave a series of reasons why a single organisation would be sensible. Will the Minister say why, when the report makes no such specific recommendation, the Government have decided that the contracting out is necessary? Why should we allow the Secretary of State's powers to be passed on in that way? As for the establishment of a single organisation, does the Minister have a view on the different approaches that have been taken hitherto by the two separate organisations? The argument used by the Minister and, indeed, in the report, is that the change will promote flexibility. Will the Minister explain why the present arrangements are so inflexible when the responsibility is, after all, already administered on behalf of the Secretary of State by the Radiocommunications Agency? In those circumstances, I should have thought that simply ensuring that existing procedures are reorganised to provide flexibility would be sufficient. Instead, the Government are changing the law and taking a significantly different aproach. The two organisations that currently have resposibility are, not surprisingly, less than enthusiastic about the proposals. The Joint Frequency Management Group is concerned that quality issues may be lost and that the whole process of issuing licences could fall apart if not managed properly. The Association of Service Providers believes that it is not treated equally with broadcasters, who have 90 per cent. of the existing spectrum. It has also said that it is unhappy with the conclusions of the recent Radiocommunications Agency report because it undervalued the independent programme-making sector. It also believes that a single organisation would be damaging, not least because it would create a monopoly, which. I trust, the Minister is anxious to avoid. I am sure that he is committed to competition and to the other policies that the Labour party now supports much more enthusiastically than the Government appear to do. [Laughter.] Conservative members appear to find my statement amusing. However, if they support the order they will help to create a single organisation in place of the present two organisations. That sounds monopolistic and it would not encourage competition. No doubt the Minister will explain the matter. British Telecom is less than enthusiastic about the proposal. It told me that a single organisation would not necessarily be a good idea because it could become unwieldy. It also said that, where appropriate, it would prefer to work with the two existing organisations. In conclusion, the Secretary of State's powers are being passed on to others. How will the proposed system work? The only justification that we have so far been 6 given for the proposal is that the present arrangements are inflexible, but why do the Government take that view? Are we concerned with a one-off exercise, or will further changes in the Secretary of State's powers be made? Is the proposed system a pilot for a more extensive process of contracting-out the Secretary of State's responsibilities? Are there implications for spectrum pricing, which the Government have previously considered and which resulted in auctions in the United States? There have also been significant developments in spectrum pricing in New Zealand. Although section 2 of the 1949 Act is relevant to the question of charging for the spectrum, the Government's proposals have various implications. I am grateful to the Minister for his initial explanation, and I look forward to his answering my questions.

4.42 pm

Mr. Austin Mitchell (Great Grimsby): It is nice to hear a murmur of excitement among Conservative Members now that I am on my feet. I had not intended to speak—or, to be more accurate, I had intended to speak, but on another order, the draft regulation Wireless and Telegraphy Order 1996, which would have 'removed the licence fee of £3.50 per annum from radio and television dealers. My thoughts have concentrated on that matter all day, and it is hard to jump tracks and speak on the order that is before the Committee. I am encouraged by the fact that the Minister's remarks were unnecessarily terse, brief and unilluminating. Usually on such occasions, members of the Committee have to sit uncomprehendingly while technical matters, sounding like science fiction, zoom over our heads. At least, that is how it appears to Conservative members of the Committee. However, the Minister might have given us more information to bite on. I am grateful to my honourable Friend the Member for Ashfield (Mr. Hoon) for illuminating the situation and for giving us the information that the Minister should have given us in order to allow us to reach a judgment. My honourable Friend has just passed me a note saying that the Minister will have to be brief, but I do not think that the same applies to me. I know that Conservative Members await my remarks with eager anticipation. It is important to re-enforce the questions that have been put to the Minister. Will the Government's proposals implement in full the report of the Radiocommunications Agency? The Government's proposals are presumably based, on that report. The Minister has not told us exactly what is wrong with the present structure. Why is the proposed change necessary in the first place? He has not given details about the new organisation that will replace the present system. We believe that there have been advertisements and that bids have been called for. If bids have been called for, is a privatised organisation involved, and will it provide the service for a fee? What are the financial implications? I do not understand from the Minister's remarks what the alternative structure will be, but we need to know if we are to agree to abolish the present structure. What are the financial implications? My honourable Friend rightly mentioned the possibility of charging for spectrum. A charge has been imposed successfully in New Zealand and has produced substantial revenue. Is this the preliminary stage to such a charging system? 7 What will happen now to the power that the Minister previously had to regulate and control? If that power is now handed over to another body, who will safeguard the public interest? Those powers were included in the 1949 legislation in order to safeguard the public interest. What will happen now? Perhaps, in the new Tory deregulated state, the public interest is as disposable in this matter as it has been in so many others. Finally, I am concerned about the position of the independent producers. They do not get a fair deal in the arrangements and tend to be squeezed out. In the present structure, they have their own service provider to defend their interests, but that body already thinks that they do not get a fair deal and have to battle for every concession made to them. Surely, they will be in an even weaker position in a unified organisation. Yet, if the duopoly dominates the new organisation, they will not be able to articulate their views and needs through a separate organisation, so how will their interests be defended in the new structure? The Minister must answer those questions, rather than blandly dismissing the whole thing and asking us to approve the order.

4.47 pm

Mr Ian Taylor: I am rarely assailed by anyone for brevity so, on this occasion, I shall not fall prey to the temptation of a lengthy reply. I thought that I had set out with terrific clarity the purposes of the measure. Indeed, knowing the broadcasting skills of the honourable Member for Great Grimsby (Mr. Mitchell), it would have been churlish of me to try to spoon feed him about the technical detail of which he is only too well aware. As we share that expertise, I thought that I would save it from the rest of the Committee. The purpose of the order is a welcome sign of the Conservative Government's flexibility in applying our liberalisation policy in so many areas. The honourable Member for Ashfield blushes every time he says that the Opposition have suddenly found competition. The Labour party opposed liberalisation in telecommunication spectrum management throughout the 1980s. It cannot now get away with claiming responsibility for the benefits that have resulted from the success of our policy. However, I shall refrain from that general debate and deal with the specific points. Section 1 of the Wireless Telegraphy Act 1949 does not mention any specific proposals. Indeed, in 1949, quite a few things would not have been thought about. The Act confers a series of general powers on the Secretary of State. The order by no means devolves all of them; it is a cautious policy, which I believe is consistent and the right way to implement the proposals under the deregulation and contracting out powers. Obviously, I cannot commit myself or the Secretary of State to any future changes. But the order is entirely consistent with the White Paper on spectrum management, issued two to three weeks ago, which is an extremely interesting signal that the Government are thinking through managing the spectrum for the rest of the decade and into the next in a way that will increase the efficiency of a scarce national resource, bringing forward ideas of administrative pricing and even spectrum auctions. That is not a subject for discussion today, but the order is consistent with such an approach. 8 The timetable referred to by the honourable Member for Ashfield is accurate. We shall be in a position to appoint some company at the end of the year, and the advertisement has already led to expressions of interest. The need to devolve flexibility, judgment and discretion to the point closest to the management is the result of the enormous flexibility required by the users of the spectrum. It is not easy to set up a programme at short notice. It may be needed for only one or two hours—the length of time is not necessarily predictable. News stories break all the time, and it is incredible how live television news coverage of events has put an increasing demand on spectrum. In addition, new uses of spectrum develop quickly. The cameras in wickets in cricket matches require spectrum, but no one knows how the innings or match will last. Therefore, we must make provision at the lowest possible level. I should have thought it consistent with the views of Conservative Members that we should not burden the Secretary of State with powers that he does not need to exercise. The valid question is what could happen in the event of the powers being abused? We have therefore made it clear that we are not devolving all the powers of the Secretary of State. Secondly, no powers of enforcement will be devolved—they will still be held by the Radiocommunications Agency. We have not settled contractual terms—they will be negotiated. Therefore, even powers of revocation are not yet certain. We shall need to discuss that when we consider the contractual arrangements. As far as I am concerned, those points will still be covered if Opposition Members wish to call the Secretary of State to account in the House of Commons. Ultimately, any Secretary of State is responsible for the actions of any agency that reports to him.

Mr. Hoon: Is it not in practice the case that the Secretary of State's powers are exercised on his or her behalf by the Radiocommunications Agency and that there is not a complex bureaucratic process whereby matters are referred to the Secretary of State? The Minister did not really deal with my earlier point about why that cannot be resolved by ensuring that the Radiocommunications Agency is as flexible as the Minister hopes the new organisation will be. That, surely, is simply a question of reorganising the way in which the Radiocommunications Agency works. There is no guarantee that a new organisation will be any more flexible in its operation than the present agency.

Mr Taylor: The honourable Gentleman has it the wrong way round. The closer an organisation is to a specific market the better it will be able to respond to that market. If the honourable Gentleman has accepted that powers can be devolved from the Secretary of State to the Radiocommunications Agency, I cannot see the intellectual problem with those powers being devolved to a specific agency for a fast-moving sector. It is also a fast-developing sector, as new technology offers new ways of using the spectrum. I hope that I have allayed the honourable Gentleman's doubts but, even if I have not, I do not think that they will keep him up all night. The point about only one contractor is important. At present, two companies deal with this matter, largely because, from a historic point of view, that was the way in which matters were divided in the past between public service broadcasters and independents. The reality is that the independent sector is 9 increasingly important. The answer to the honourable Member for Great Grimsby is quite simple—the independents are currently confined to rather narrower spectrum opportunity administered by one of the two organisations. If it was administered by one, they would have greater access. There is no doubt that the independents are quite forceful and can be specific. I want to free that sector so that it can be more influential in the future than it is now. There are several arguments in favour of having one organisation instead of two. It will maximise sharing opportunities and allow the most efficient use of spectrum by amalgamating all the available spectrum into a single pool, it will allow all programme makers access to the available spectrum on the same terms, regardless of size or status, and it will give flexibility, which is needed to cater for changing patterns in broadcasting and programme making in the foreseeable future. A point that 10 I, as Minister for Science and Technology, consider important is that every time I direct my attention to any section of the industry, I find that it has made a technological advance, largely through the encouragement and economic management of the Conservative Government. Nevertheless it is very difficult to make a judgment about what will happen. I think that I have answered the points that have been made by Opposition Members, and I commend the proposal to the Committee.

Question put and agreed to.

Resolved, That the Committee has considered the draft Contracting Out (Functions relating to Wireless Telegraphy) Order 1996.

Committee rose at five minutes to Five o'clock.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

Cook, Mr. Frank (Chairman)

Clapham, Mr.

Devlin, Mr.

Fox, Dr. Liam

Fox, Sir Marcus.

Gorman, Mrs.

Harvey, Mr.

Hoon, Mr.

Mitchell, Mr. Austin

Olner, Mr.

Pearson, Mr.

Porter, Mr. Barry

Purchase, Mr.

Redwood, Mr.

Sutcliffe, Mr.

Taylor, Mr. Ian

Trend, Mr.

Yeo, Mr