Digital Economy Bill (Second sitting)

Calum Kerr Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 11th October 2016 Public Bill Committees

[The Chair]

We have given the witnesses a good half-hour grilling, so if no one is seeking to catch my eye—yes, Calum?

[Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)]

May I move on to intellectual property?

[The Chair]

Fire away, sir.

[Calum Kerr]

Q Thank you. There are some welcome measures in the Bill relating to making the protection of intellectual property online as same as it is offline. I note, though, that there is some concern about search engines and how intellectual property would be policed. What is your view on how that will work? Do there need to be additional powers?

David Austin: To be honest, we do not deal with intellectual property. Our core work is the protection of children, and intellectual property is another issue. We do work with an industry for which the protection of intellectual property is very important, but I am afraid I am not the person to ask.

Alan Wardle: I am not an expert on intellectual property, regrettably.

[The Chair]

Colleagues, are there any other questions for these excellent witnesses? No. In that case, thank you very much indeed, David and Alan, for your evidence. We appreciate it.

Examination of witnesses

Dr Edgar Whitley and Mr Scott Coates gave evidence.

--- Later in debate ---

[The Chair]

That is known in the trade as a comprehensive reply. Thank you.

[Calum Kerr]

There was a Coates who played for Liverpool. He was from Uruguay, so they called him Co-ah-tez.

Scott Coates: He played against England once.

[Calum Kerr]

Q He will again.

I would like to ask you about the USO, and then I would like to come on to the mobile environment. I have a problem with the USO not just because of the lack of ambition and what 10 megabits means for people living in those areas, but because the tactical low-speed USO will not push fibre a lot further. The lines between wired and wireless are blurring all the time, so would a more ambitious USO with faster speeds help you, in terms of pushing fibre further and putting other infrastructure out there?

Scott Coates: I think it comes down to the cost element. The further out you go with fibre, the more expensive it becomes. Our infrastructure in rural areas tends to be bigger pieces of infrastructure, so quite often there is fibre coming through it or it links to a site that has fibre, and that creates more bandwidth to power the wireless services coming over it. More generally, I would say that the USO is a start. No one is going to be happy with 10 megabits in a few years, but I would say that you need to start somewhere and it needs to be manageable from a cost point of view.

[Calum Kerr]

Q I will not ask you, then, whether the Scottish Government’s policy to have 30 megabits everywhere is more appropriate. I think that everyone is in agreement that the electronic communications code needed to be reformed, and there are some welcome measures in there, but as an independent infrastructure provider, do you honestly think that that will lead to more coverage by mobile providers, or will it simply give them a better bottom line?

Scott Coates: There are certainly measures that will make it easier to get rid of the bottlenecks and faster to resolve disputes. Running cables to connect up mobile sites has been a real challenge, so being able to fix those problems—that is not really about economics; it is about having faster resolution. Some of the pricing elements I do not think will have a material impact in rural areas when the commercial case to invest is not really there for the mobile operators anyway. The only way you can deal with that is through the licences. The new code will help to remove some of the ransom costs that we see in the industry and certainly give us a much more powerful weapon against those, but on a day-to-day basis, we do not expect to be moving towards compulsory-based conversations with our customers. The industry needs to work on a voluntary basis. That is absolutely essential; it is how it works everywhere else in the world. We have busy infrastructure facilities. We are there on average every 12 days. We need to have a good partnership with our land providers. The code is a really helpful and powerful new tool of last resort, but our whole industry needs to maintain a voluntary basis of engaging as our MO for dealing with landowners.

[Calum Kerr]

May I ask two quick follow-ups?

[The Chair]

Very quickly.

[Calum Kerr]

Q Thank you very much. Mr Coates, I thought you gave a great overview of why independent infrastructure is really important. You obviously feel a concern, so is there specific wording that you would like to see in the Bill that we could discuss at the next stage to ensure that you are protected and the value of your assets is not lost?

Scott Coates: Thank you for that question. We have had a really engaging journey with the Minister’s officials. They have been very diligent and transparent in engaging with us all the way through this fairly long process on the communications code. Our concern generally is that there is a fine line between the technical drafting that says that what we do on land is not covered by the communications code, and the risk of a legal challenge that it might be and might have nil or low value. What we have really asked for is as much clarity as can be provided. That will help to enhance the investability of our business. We are in a different place from the mobile operators and some other network providers, because we do not get any economic benefit from our own infrastructure; it is built for other people to use, so we are not a net user of infrastructure.

[Calum Kerr]

Q So that is a, “Yes, if possible, please.” It is okay; do not answer that. You have already answered. My final quick question is this. Although this is not retrospective, is there any case for excluding existing sites, if this is really about building out more network, in terms of the valuation element, given that a lot of those sites are actually on publicly owned land?

Scott Coates: There is certainly a difference in the substance of a transaction when you are approaching a farmer, a sports club, a university or whatever and asking for access to build a new piece of infrastructure where there is new coverage, and you are having that negotiation in the context of a new communications code that has tighter reference points on pricing. You will have more leverage for that conversation. You will still end up, I believe, paying them a rate way in excess of what zero value would be because that is just how you have those conversations, but it will be less than what is paid today, that is for sure, because you have got this new reference point. The substance of that is very different from the substance of a voluntary agreement you entered into with a firm six or seven years ago and that comes up for renewal in two to three years and the infrastructure is already there.

I think it is important that we have a robust set of tools as an industry but, as I mentioned earlier, it is equally if not more important that the industry acts responsibly and avoids behaviour such as forcing situations where they need a new compulsory purchase tool, even though they have already got access today. There is definitely a way of engaging on existing sites that should be a bit different from new sites, as part of a package of trying to maintain the voluntary support of the land and property sector for our industry.

[Matt Hancock]

Q Could you set out in more detail—you have already gone into this a bit—about what you mean when you say that the code should include land owned by the infrastructure providers but not the apparatus, and the distinction there in the written evidence?

Scott Coates: It comes back to this. Under UK property law, anything that affixes to land could be considered land. At the moment, the code effectively is to regulate land coming into the telecom sector, not to regulate the relationships between telecoms companies. It carves out from land the apparatus.

I am advised that there is a risk of ambiguity. That is probably the best way I could describe it. It may be challenged down the line. This is an evolving and dynamic industry where we don’t exactly know the physical things we are going to be deploying in future. There is a risk that some of the things we do might receive a challenge that it is land not apparatus. I do not know.

Is a new runway at Heathrow infrastructure or land because it sits on top of land? Is the national grid transmission network an infrastructure asset or land because it sits on land? It is a fairly technical point. Like all these things, once the lawyers are running around looking at them, they will find concerns.

All we are saying is that we invest over 20 to 30-year horizons. The more clarity that can be provided is helpful. We acknowledge and clearly appreciate the intent behind Government policy to protect investment and passive infrastructure but more clarity around that will only help the investability of what we do.