Debate on the Address

My Lords, I should like to focus on communications and, within that, the increasingly convergent industries of telecommunications and broadcasting. I have to declare an interest as chairman of Ofcom, which received its duties and powers from the Communications Act 2003, which your Lordships’ House spent a great deal of time considering. The UK communications sector plays a key role in the dynamism of our economy and society. It is difficult to think of any sector of the economy which does not depend on its ability to communicate with customers and suppliers at home and around the globe—whether through electronic and broadcast media or through telecommunications and the internet. Communications matters to us all as citizens and consumers. A successful communications sector is also crucial to society more broadly and to the health of our political system. I think it is fair to say that we have a strong story to tell about the UK communications sector. Consumers enjoy lower prices for a widening array of services. Competition has driven down the price of residential services by one-third on average in the past five years. Research published by Ofcom last week shows that this has not come at the expense of customer satisfaction, which remains high, nor of choice, which is wider than ever. For the first time, total household spend on communications fell during the past year. We are getting more for less. But greater competition and choice also raise wider social policy questions and the need for effective consumer protection. I therefore welcome in principle the Government’s intention as part of their legislative programme to give consumers a stronger and more coherent voice, but, importantly, in a way that leaves unchanged the highly effective consumer representation in Ofcom through the consumer panel given by the Communications Act. I look forward to the detailed debate of these proposals. Under the Communications Act, Parliament rightly gave Ofcom marching orders that involved a complex balancing of a range of duties; that is, to drive competition, choice and deregulation, which has been emphasised particularly in this debate, to sustain the range of public service broadcasting and to provide appropriate safeguards for consumers and citizens. Sometimes these duties pull in different directions and entail more rather than less regulation. To take a case in point: our recent proposals on the restriction of TV advertising to children of food high in fat, sugar and salt shows that conflict of duties. On the one hand, there is concern about the influence of advertising on the diets of our children and, on the other hand, concern to maintain the quality of UK-originated children’s programming. We have had to consider carefully the evidence that TV advertising shapes children’s food preferences. But other influences, particularly parents, are much more significant. Some draconian measures, such as a pre-watershed ban which is favoured by many, would cut broadcast revenue by more than the entire commercial TV-sector spend on children’s programming and national news coverage combined. We have had to consider carefully what goes into children’s stomachs but also what goes into their minds, and judge what we think to be proportionate and effective action—regulatory, to be sure, not deregulatory, but, in our view, proportionate. Inevitably, however, the decision has not been without controversy. I have spoken about how competition and choice have taken hold over the past few years, to the general benefit of consumers. Ofcom welcomes the Government’s measures to simplify regulation wherever possible—although I have illustrated that sometimes it is not possible—but we should all recognise that simplification can be complex. For example, we have been able to remove retail price controls on BT line rentals and calls, 22 years after they were first imposed at privatisation. This significant bit of deregulation could only have happened with the reality of a competitive market, made possible by the operational separation of BT, the creation of Openreach and the commitment of BT to deliver what has become known as ““equivalence of input””, delivering to BT’s retail competitors the same service as BT Retail itself receives from the other parts of BT. One could argue that that operational separation was a regulatory intervention deep into the heart of BT’s business; more interventionist, possibly, than what went before. However, it has enabled major deregulation of other parts of BT, with substantial benefits overall. The high level of investment in local loop unbundling deep in the network signals the wider benefits of this policy, and supports the view that competition benefits consumers much more than retail price controls. Market mechanisms have been extended to that other crucial national asset, the radio spectrum, an economic asset now worth at least 3 per cent of GDP. We will see, as a result of the extension of market trading, the radio spectrum’s value and importance growing further, together with a flourishing of innovation as new services and technologies find it easier to gain and trade spectrum rights. Over the next three years Ofcom will make available a large tranche, 400 megahertz, of new, prime spectrum. Together with the liberalisation of existing spectrum use and allowing spectrum trading, this will make it easier for new applications and technologies to emerge faster for innovative companies to bring new services to market and thus for consumers to benefit quickly. Already we are seeing the emergence of new technologies that could make dramatically more efficient use of the available spectrum and render its scarcity less of a factor. When the next big thing emerges, its spectrum needs will be met by the market, not regulatory fiat. That will make it more likely to emerge quickly, and more likely to emerge in the UK than elsewhere. Within that major use of spectrum broadcasting, the changes are no less significant. How public service broadcasting is sustained through the transition to a fully digital world is a crucial question, particularly now that digital switchover is a near-term reality. The BBC has a central role to play in the provision of public service broadcasting, but we need to sustain plurality of provision in the digital world, as we have had in the analogue world. That is why we are undertaking a major review of the finances of Channel 4, thinking hard about the future of television news reporting and fleshing out the idea of a public service publisher. The noble Lord, Lord Truscott, has spelt out the considerable benefits that will flow from digital switchover, and I will not repeat them. The process will affect every household in the UK. It is right, therefore, that the Government are bringing forward urgently needed measures to ensure that the information is available to allow targeted help to those who will need it in what for some could be a confusing process. Looking ahead, we should recognise that the digital age will bring important challenges to the traditional model of linear broadcasting to mass audiences. Traditional TV and broadband are colliding, as viewers switch to content delivered on demand via the internet and online viewing cuts into traditional TV viewing. Internet content is viewed within a different context, if not in a different way. I have no doubt that consumers will need to rely much more in future on self-regulation and co-regulation of that content, probably taking advantage of smart navigational devices that will become available, and much less on the centralised decisions of the Ofcom Content Board. It is welcome, therefore, that the British Government have successfully argued against a general extension of content regulation to the internet, in the context of the review of the audio-visual media services directive that has been considered by Sub-Committee B of the European Committee of your Lordships’ House. The old model of content regulation cannot be extended to new media and to internet content, and will come under pressure elsewhere as well. I cannot leave broadcasting without alluding to a more immediate issue. Your Lordships will not have missed the widespread and sometimes noisy comments in the press on the recent acquisition by BSkyB of 17.9 per cent of ITV’s shares. Ofcom has invited both ITV and BSkyB to comment on whether this acquisition represents a change of control in any of ITV’s licences. We will in due course consider the evidence on that point, as the Communications Act requires us to do. I have little doubt that your Lordships will be hearing much more about this in the coming weeks. To conclude, the story is of a sector that is growing in value and significance to the economy and society. There are significant challenges ahead, but I believe Parliament, particularly your Lordships’ House, can allow itself some satisfaction that the regulatory approach it set in train with the Communications Act—an effective balance of powers and obligations, with a healthy presumption against doing things but with a capability to act when necessary—is bearing fruit, and will continue to do so.