Digital Economy Bill

Lord Fox Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th December 2016 Lords Chamber

[Lord Fox (LD)]

My Lords, one of the most pleasing aspects of this Green Paper is the alacrity with which everyone in your Lordships’ House accepts the importance of access to fast and reliable digital connectivity, whether it is delivered through broadband or wireless telephony. This wide-ranging Bill rightly identifies how important this is in setting up jobs and in the growth of the creative and fintech industries. Yet the Bill seems unambitious—a word already used by many noble Lords—and fails to embrace what world-class really means. It also studiously ignores one of the key elements that drives wireless performance and service levels, namely the wireless spectrum allocation which is coming up.

The Government’s proposed creation of a broadband universal service obligation is a very positive development. We are obviously waiting to see what Ofcom’s response to this will be, not just on download speeds but on upload, latency, consistency and stability. In that regard, I support my noble friend Lord Foster, who described 10 megabits per second as insufficient. The overall effect of broadband reach was very elegantly illustrated by the noble Earl, Lord Lytton. Although it might, on the one hand, have a 10 megabit label on it, what is actually received in the sitting room or office is often very much less than that. Even if 10 megabits became the accepted minimum, for many people in far-off areas it would also be the maximum. A target of 24 megabits per second has to be our first objective. Parliament should require Ofcom to develop a USO to deliver this as soon as possible; and delivered to the front room, rather than to a box in a road or, indeed, to one of the noble Earl’s hedges somewhere out there. Therefore, we do not think it unreasonable for all of the UK to have access to superfast broadband, and this should include more consistent upload speeds. My fear is that Ofcom and, indeed, the Government are limited in their ambition, and at the heart of this timidity is the fact that they both know that the broadband ownership model is not fit for purpose. This is not directly addressed by this legislation but, in terms of the digital network, it is an elephant in the room.

I apologise for making my next point, which I have made elsewhere, but if you think about what BT is being asked to deliver through Openreach, you will see that the current ownership model of Openreach is the equivalent of asking a consortium comprising Network Rail, Eddie Stobart and Tesco to build our roads. We would not do it, but that is what we have. Until the digital highway is a proper utility, and one that is independent from a company which is a digital service provider and, indeed, a telephony provider, Ofcom will struggle to deliver these requirements. Therefore, we welcome recent announcements about the partition or segregation of Openreach, but we believe this has to be a step towards full partition of Openreach from BT. In the meantime, it is for the Government through this Bill and, obviously, through their relationship with Ofcom, to make sure that the highest possible standards are delivered in the shortest possible time.

Ownership is also an issue when we come to the wireless spectrum. Recent competition decisions have very clearly indicated that the regulator wants four players in this market, yet currently the market is not balanced, with two large players plus two much smaller players, which, we should remind ourselves, were recently prevented from merging. That means that, from what had been a rather balanced distribution of spectrum, we now have a very unbalanced spectrum—by some accounts, the least balanced spectrum distribution in western Europe. BT/EE has the largest proportion of the available spectrum currently allocated at around 39%, Vodafone has 27%, with Three and O2 having just 14% and 13% respectively. Currently, the situation is asymmetric, but with the potential to become more asymmetric as the next round of spectrum sales comes up.

Ofcom will decide the terms of its next spectrum auction, which will be the 2.3 and 3.4 gigahertz sale sometime around the end of next month. We believe that it plans to restrict BT bidding on the 2.3 gigahertz but, as I am sure your Lordships know, that is a small part of the overall band width that is for sale, and BT will still have access to the larger part of that 3.4 part of the spectrum. Therefore, even with more complete restrictions on BT, there is then also an opportunity for Vodafone to clean up on this. So, far from there being four competitors, there is a lot of work to do to enable there to be more than just two large competitors and two very weak ones. Therefore, we believe that this Bill should concern itself with the equitable distribution of spectrum as well as just ensuring the smooth management of spectrum that has currently been allocated.

In summary, we welcome the introduction of the USO but absolutely challenge the very unambitious 10 megabit per second target. A higher target of 24 megabits per second with good upload, latency, consistency and stability targets is very important. We need to make sure that this is available at the point of use in the farthest-flung parts of this country.

On wireless, we believe that the path to adequate competition lies with equitable distribution of spectrum. The Minister should interest himself vigorously in how to ensure that this equitable distribution can be achieved when the next spectrum round comes up. I would be grateful if he would let us know how he plans to do that.