Digital Economy Bill

Lord Mendelsohn Excerpts

1st reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 31st January 2017 Lords Chamber

Moved by

[Lord Mendelsohn]

1: Clause 1, page 1, leave out lines 11 and 12 and insert—
“(2B) The universal service order shall say that broadband connections and services must be provided—(a) with speeds of 2 gigabits or more;(b) with fibre to the premises (FTTP) as a minimum standard; (c) with appropriate measures to ensure that internet speed levels are not affected by high contention ratios;(d) with appropriate measures to ensure service providers run low latency networks.”

[Lord Mendelsohn (Lab)]

My Lords, as well as moving Amendment 1, I shall speak to Amendments 9, 10 and 11. These amendments cover the nature of the universal service obligation and the setting of standards—issues relating to market structure and how best to roll it out are dealt with in group 5—so these focus particularly on those aspects. These are probing amendments that address whether, in passing such an important Bill that makes a further step in developing our digital economy, the measures contained are sufficient, and whether this legislation will provide leadership and adequately address our future needs. It is important that we remain ambitious and have a flexible policy and, now that we have an industrial strategy, have the mechanisms to meet it.

There is of course a strong case for a universal service obligation. A “universal service” is an economic, legal and business term used in regulated industries to provide a baseline of services to every resident. It establishes the availability of a quality service at just, reasonable and affordable rates, which should be available to all consumers. Universal services were widely adopted across Europe in the 1980s and 1990s, and there is a case to say not just why we should have one but why we have not had it. It is therefore welcome that the Bill establishes it. Across the EU, only Finland, Malta and Spain have provided for a minimum broadband speed in national law—Germany is on the way to it—but this Bill is an important step. That reflects the fact that communications, such as broadband and the like, have become a fourth utility that is crucial to modern life. Citizens face more and more encouragement to be online to access public services, commercial services or other things, and there are now penalties for those who cannot access, or are not adequately served by, broadband or who find it difficult to use.

The universal service obligation is a critical part of the Government’s strategy to ensure that the current model of broadband delivery does not risk ending up in a two-tier service, dividing the digital haves and have-nots and exacerbating the potential for holding back Britain’s regional economies. The Government are providing funding to support the rollout of fast broadband to those areas of the UK where commercial rollout has not been sufficiently attractive or where the market structure has not developed to incentivise it adequately. This is mostly, but not entirely, in rural areas. The broadband universal service obligation will act as a safety net, allowing those with poor connections the legal right to request a fast connection.

The Bill contains enabling powers for the USO to be specified in secondary legislation. The download speed will be specified in secondary legislation, and is expected to be 10 megabits per second. Amendment 1 would write that ambition on the face of the Bill, and it sets out the speed and nature of the delivery—fibre to the premises—and covers contention and latency issues.

Prior to getting into the meat of the amendments, I think that it is important to see broadband in the context of mobile. The universal service obligation should be on mobile as well, and we will come to that in later debates, but it is important to take note of it at this stage, because we are here following the market, not consumer behaviour. We are addressing much, although too little, of what is happening.

Ninety per cent of the UK adult population is online, which is about 48 million people. The share of adult users has held steady, suggesting that stubborn challenges remain to reach 100% use rates. Most room for growth lies in take-up and deeper usage of online services among the over-55s. With the growth of mobile, focus has shifted away from broadband, but the fixed broadband market is still slowly growing. Seventy-seven per cent of UK adult users connect to the internet via broadband at home, and this number has held steady. Regarding devices, laptops and smartphones, each of those boasted 38 million users; tablet ownership has been declining. Use of a desktop PC has been on a steady decline since March 2011, and this is forecast to continue over the next few years.

Mobile connectivity has become such an important part of our life that one of the central findings of the National Infrastructure Commission’s report was that,

“mobile connectivity has become a necessity. The market has driven great advances since the advent of the mobile phone but government must now play an active role to ensure that basic services are available wherever we live, work and travel, and our roads, railways and city centres must be made 5G ready as quickly as possible”.

Many in this Chamber will have digital services: many will connect via broadband; some will connect through 5G services; they are interrelated.

I turn to the issue of speed. The Government argued in the universal service obligation consultation early last year that 10 megabits per second was sufficient to enable,

“full participation in a digital society”.

Later, Ofcom was charged in its technical specification to model around that definition. It modelled 10 megabits per second—10+1 being the upload speed and 30+6 being a speed frequently mentioned by others.

Is 10 megabits per second really a sensible target? I would suggest that we look at the evidence supplied by Sean Williams, the chief strategy officer at BT Group, to the Committee in the other place. He stated that BT has,

“made clear our willingness to deliver 10 megabits to every premises in the country by the end of 2020 without any further public funding and without even really progressing the USO regulations”.—[Official Report, Commons, Digital Economy Bill Committee, 11/10/16; col. 5]

If it is that easy, is it a sensible target?

In its assessment on the technical specification, Ofcom made a very important point. Ofcom has published evidence showing,

“that a speed of 10Mbit/s is sufficient now to allow multiple users to simultaneously use the internet, including web browsing, video streaming, video calling and gaming”.

That would not be the opinion of my children, but that is another matter. It goes on to acknowledge that this minimum,

“may need to increase over time”.

Even if we took the argument that 10 megabits per second was sufficient at this stage, which I do not think is the case, it would not be a very sensible approach to start with.

What are our anticipated needs? Many representations have been made. I think the National Farmers’ Union made a very cogent argument as to the speeds it was looking at. It would need to establish, as a minimum, both upload and download of 30 megabits per second. Is that sufficient? European Union Governments are committed to providing this speed universally by 2020, and EU targets are now of 100 megabits per second by 2025. If the broadband USO is intended to be only a safety net, this means that there is currently nothing offered for the 5%, and they will have limited access to anything that is defined as superfast.

New York announced a plan that, by the end of 2018, there should be 100 megabits per second, and by the end of 2019 this should rise to 300 megabits per second. Included in the package to deliver this was an affordable broadband service to unserved, underserved and low-income residents. It is no accident that the list of top 10 countries does not include the UK but does include such luminaries as South Korea, Norway, Sweden, Hong Kong and the like. When it comes to an international comparison, looking at download speeds for fixed internet services, the UK currently resides in 23rd place. We may feel that we have achieved a huge amount, but we are only in 23rd place. If we aggregate download and upload speeds, looking for the average between the two, we drop another 15 places. That is hardly encouraging. I have to say that it is better than our mobile internet access, on which we are currently placed at 39.

A further point to make is about the nature of the digital economy. E-commerce underpins the UK digital economy. Much growth has come from online sales. Moving forward, we expect a lot of the drivers of e-commerce to be the additional interactive mechanisms —AI and other forms of activity—that require much greater speeds in order to encourage uptake. British brands enjoy great cross-border appeal among European and Asian shoppers. An important part of what we need to do, to give ourselves the infrastructure to be able to compete effectively, is to have the right broadband level.

However, this is not just about speed, and we do not just specify speed here. We go for a speed of 2 gigabits to be established by 2020. That is not an unrealistic objective. There are parts of the world servicing 10 gigabits already, so 2 gigabits is not an overly ambitious target, but it is not just about speed. There is the important issue of reliability and consistency. The noble Baroness, Lady Harding, made a good point in the Committee in the other place, when she said that,

“consumers and businesses would say that reliability and consistency are every bit as important as speed”.—[Official Report, Commons, Digital Economy Bill Committee, 11/10/16; col. 8.]

Indeed, for many people there has been a huge issue about the underinvestment in routers, which translate broadband speeds at a very low speed across the house, and among many international comparisons we have some of the worst performing routers.

Upload speed is also an important issue. We have no real specification for it, although it is as crucial as download speed.

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With that rather detailed explanation—I apologise—I hope that noble Lords will feel able not to press their amendments.

[Lord Mendelsohn]

My Lords, I have a confession: I did not expect the Minister to concede on all these points. I have another confession. One has to see the universal service obligation in context. It is a mechanism that addresses a market failure—the inability to get broadband extended across the country and to deal with the problems that are so replete in its delivery. I understand the Minister’s point, although we might disagree about how to use the USO. The Government are using it to nudge towards something that is otherwise not possible, but in the discussion on these amendments we have raised broader issues about what that means. I do not agree with the Minister when he says that we have to follow the market rather than define it. Everything that the Government have done has defined it. If you define it with such a low base, it is a major problem.

The noble Lord, Lord Fox, said that this was a minimum, not a target. Our target is a minimum, so we agree on that. I take the point made by the noble Lord, Lord Mitchell, that we are talking about gigabits because they are the future, whereas megabits are the past. We have to address that material failure.

We are disappointed at what the Minister said about the BDUK report. It established goals that it said were dynamic; it said that it was pegging itself in comparison with other countries in the achievement of its goals for the UK. If you do not measure against a changing goal, you do not believe in the goals. That is the problem. It is not a value-for-money exercise. It is about whether you believe in the goals that you have set for that organisation. If you are not prepared to report on it, it means that you do not believe in it.

In the new clause proposed by Amendment 11, we accept that the Government are looking at what is in paragraph (b), but I would be grateful if the Minister would write and say how the Government are trying to achieve what is in paragraphs (a), (c) and (d).

To finish, let me say quickly that 10 megabits is totally inadequate. If you are trying to establish a small business using 10 megabits and have a variety of people using it, it does not work. That is a huge failure for our country. You have to establish a reasonable target. As one noble Lord said, 30 megabits is certainly affordable.

Even if you get 30 megabits into a house, most people are reliant on using wi-fi to distribute it; they do not use a cable connection. I defy anyone to establish that most of the population is using anything near a definition of superfast in this country. We have a massive problem with routers and where they go. The Government talk about numbers as if they are giving us a proper and defined future. When we sell a USO, we have to have some sense that what is delivered to the public is really worth while. As a mechanism to nudge it forward, it is probably insufficient. Having said that, I beg leave to withdraw my amendment.

Amendment 1 withdrawn.

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[Baroness Janke (LD)]

My Lords, Amendment 4 deals with the introduction of a social tariff. At Second Reading, Members felt very strongly about exclusion, particularly digital exclusion, and the amendment seeks to address the issue of affordability.

Many people at the moment do not have access to broadband, particularly in some of the more deprived communities of the country. I come from a city and I know that it is easier there to access broadband than it is in rural areas. However, even where there is physical access, large sections of the population will not have broadband because the costs are unaffordable. I speak particularly of families on low incomes, children who need access to broadband for schoolwork and learning opportunities, unemployed people who are seeking jobs, people with limited mobility who have great needs and older people who may find the levels they are being asked to pay unaffordable.

It will become increasingly impossible to live in the modern world without having access to broadband, whether it is for the purposes of banking, claiming benefits, applying for a passport or any of the other things that we expect to do online. It is therefore important for the Government to consider during the passage of the Bill how they will address the issue of affordability.

The amendment seeks to introduce a social tariff. BT has a social tariff for telephones and the Government may wish to look at that. I hope that we can address this issue because, whatever the universal service obligation in regard to quality, accessibility and the extension of broadband to some of our less wealthy communities and vulnerable people is important. There is an opportunity to address this in the Bill and I beg to move.

[Lord Mendelsohn]

Very briefly, we on these Benches wish to associate ourselves with Amendment 4. It is an extremely good amendment which raises the important issue of ensuring that broadband is accessible to the unserved and underserved, and others.

The noble Baroness, Lady Janke, made a good point about online access for schoolchildren, particularly in communities where there are great challenges in teaching. You can already hear the reports from many schools about the divide between those who can and those who cannot afford access, with the expanding level of online teaching and resources. Schools are also administering other things online.

We have an amendment to remove the reasonable cost threshold because any extra cost associated with delivery of the USO should not be borne by the users of CSPs. It is important to make sure that the cost of ensuring delivery has been adequately taken care of in the Government’s considerations and that the companies provided to do this do not seek to transfer the costs to consumers. We must make sure that it as affordable as it can be and that it extends to the widest possible number.

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[Lord Foster of Bath (LD)]

My Lords, as my noble friend Lord Fox has said, I will very briefly address one element of the report, though I support the principle and all other aspects of the proposed list of things to be covered in that report. However, I draw the House’s attention to subsections (2)(g) and (h). Paragraph (g) talks about the take-up of superfast broadband as a proportion of connected premises and (h) about the measures taken by various bodies to improve that take-up.

I fully share the Government’s desire to create a digital Britain, with all the benefits that it can bring, including the online delivery of our public services. However, all the discussions I have had about broadband since joining the House have predominantly been about its speed and making it available. We know the figures—they are fairly clear: about 89% of households can currently access high-speed broadband, but we also know that only 31% of households have actually taken up the offer and 22% remain entirely offline. Furthermore, last year’s Ofcom study revealed that some 10% of households make it clear that they have no intention whatever of getting on to the internet at any speed. We also know that it is those with limited means—perhaps older and less well-off people—who make up the bulk of the 30% of the population who currently have either very limited or no access to the internet.

Bearing those figures in mind, and while I welcome all the energy, enthusiasm, debate and deliberation going on in the House—and by the Government, Ofcom and others—to improve the availability of high-speed broadband, at the same time as addressing the supply side we need to do far more work to address the demand side as well. If we are to reap the full benefits of digital Britain—to bridge the digital divide and reduce the unit cost of the installation of high-speed broadband—we need a concentrated and co-ordinated demand-side management programme. I have argued before that such a programme would address issues such as: skills training, which we will come on to later in the Bill; marketing the benefits of broadband; addressing the cost barriers—we have already had a brief debate on that with the amendment of my noble friend Lady Janke in relation to social tariffs; and of course developing quality, technology and content.

I readily acknowledge, as I have in the past, that there is good work going on in this regard by BT itself, the BBC, Barclays and many others. Local councils deserve a great deal of credit for the work they are doing, and the Do It Digital campaign is trying to help businesses get online. The Government have played their part with changes to the IT curriculum and aspired improvements, at least, to digital skills.

However, given that the take-up rate is so low, far more needs to be done, from the skills agenda to having a digital TV switchover-style campaign, advertising the benefits of getting online. It needs co-ordination. I believe that BDUK would be best placed to do that—its business voucher scheme was a good demand-driver—and the Minister might comment on where we are with the next iteration of that in his response. I toyed with tabling an amendment adding to the purposes of BDUK to cover responsibility for that but, for the time being, so that we have an opportunity to hear the Minister’s reaction and find out a bit more about what the Government plan in demand-management measures, I thought it more sensible to leave it included as one of the issues to be reported under the excellent proposal of my noble friend.

[Lord Mendelsohn]

My Lords, I express our support for the amendment so ably produced by the noble Lord, Lord Fox. It is entirely consistent with Amendment 21, to which we shall come in the next group, and it provides a useful window on performance. In considering what the full report should look at, I just suggest that it would be useful if it considered upload speeds, outages and user experience. We talk far too often about what speeds are delivered to the home and not enough about the user experience; it would be very useful to include that in such a report.

[Lord Ashton of Hyde]

My Lords, Amendment 8 also relates to reviewing the delivery of broadband policy. We have spent some time discussing broadband policy and I do not wish to repeat myself by setting out the Government’s digital agenda again. We do not disagree with the urgency, and the noble Lord is right to mention it.

The amendment would require Ofcom to produce an annual report on progress in implementing the universal service obligation. We should remind ourselves that that is the point of this part. The amendment lists a number of areas that the report should cover, not all of which relate to the broadband USO. As noted previously, I agree that it will be crucial to monitor progress of this important consumer measure, but I think that it is reasonable that the reporting requirements should be decided once the design of the USO has been finalised, not before. This will be done following the consultation on the detailed design of the USO.

Some of the areas listed are already reported on by Ofcom. For example Ofcom’s Connected Nations report, which is published annually, already provides details of superfast broadband coverage and take-up, including the percentage of premises nationally connected via fibre. The length of time taken to repair lines is also monitored and reported on by Ofcom under its market review process. Ofcom also conducts mystery shopping exercises to check compliance with the broadband speed code of practice. Under Ofcom’s voluntary code of practice on broadband speeds, broadband providers agree to give clear information on broadband speeds to consumers when they consider or buy a home broadband service and provide redress when speed performance is low. Earlier, I mentioned the Advertising Standards Authority’s review.

The noble Lord, Lord Foster, mentioned take-up, as he did on Second Reading. We agree that that is an important issue. It is interesting that Ofcom’s report assumes an 80% take-up, which we will have to think about. We agree that it is important for the per-unit cost to reduce as it is rolled out. This will be one thing we can take into consideration in the consultation. He also mentioned the broadband voucher scheme. As I said earlier, the full fibre rollout consultation included the option of a further full fibre business voucher scheme alongside other options. We will publish the findings of the consultation and the next steps alongside the findings of the business broadband review.

Therefore, although we sympathise with the spirit of the amendment, we do not think it is the correct thing to do at the moment, before the decisions have been made, and I hope that the noble Lord will feel able to withdraw it.

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Moved by

[Lord Mendelsohn]

12: After Clause 1, insert the following new Clause—
“Universal service broadband obligation: fair and competitive market
The Secretary of State must ensure that rollout of universal service broadband obligations is delivered on a fair and competitive basis.”

[Lord Mendelsohn]

My Lords, I shall speak also to Amendments 13, 20 and 21. These are probing amendments: three are “why nots?” and one is a rather extended “why?”. Amendment 12 follows on nicely from the final contribution of the noble, Lord Fox, to the previous debate. It attempts to address the competitive dynamic of the market—what it is there to achieve—and whether competition works in the broadest interest. We contend that the structure of the market has impeded private investment.

In 2005, responsibility for the broadband network was given to BT, which already owned the copper landline network—that seemed like a good idea to achieve a certain series of goals. Those goals were achieved but, unfortunately, time has moved on and there are other requirements.

In those terms, BT has done a good job—there are limits to what it can do—and we have much to thank it for. I should declare an interest here: I am a very small shareholder in BT—since last week, an even smaller one—and I do not believe in BT bashing. We create frameworks and incentives, and it is not a company’s fault for following them. Markets have changed. BT receives a lot of criticism for its move into content, but that is adjustment to the market. Frankly, it can find people who are prepared to buy a service to watch the Bundesliga, and I have used it to watch Borussia Mönchengladbach, but the Government are finding it difficult to balance the needs of a national broadband infrastructure with BT’s corporate requirements. The market just does not work well and there are few incentives for new entrants and little scope for small players. Bluntly, the Government’s reliance on BT’s free cash flow moves it from having a real policy to being reliant on prayer.

The communications market revenue growth has accelerated from about 5% to about 5.5%, and this is driven by two particular factors. The main one is price rises which have been unsurprisingly in that 5% to 5.5% range, and there has been a movement to try to compete on the basis of ever-faster connections, or the marketing of ever-faster connections, even if they are not met.

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[Lord Ashton of Hyde]

I am grateful to all noble Lords who have contributed. Amendment 12 would introduce a new clause to require that the rollout of the broadband USO be delivered on a fair and competitive basis. Under the EU universal service directive, the USO is delivered by one or more designated universal service providers. Designation of the provider or providers is a matter for Ofcom under Section 66 of the Communications Act 2003. The Act enables Ofcom to set out the procedure for designation in regulations, and Section 66(7) requires that this procedure must be efficient, objective and transparent, and not involve or give rise to undue discrimination against any person. Existing legislation therefore already provides for a fair and open process for the designation of a universal service provider, which meets the concerns of this amendment.

As noble Lords may be aware, in April last year Ofcom published a call for inputs, seeking views from industry and consumers on the design of the broadband USO. The majority of respondents shared Ofcom’s preference for a transparent and competitive designation process for the universal service provider. At the same time, however, few industry stakeholders expressed a desire to be designated as the provider of the broadband USO. In light of this, Ofcom’s USO technical advice, published on 16 December, explained that it considered that a more restricted process, whereby all providers are considered and an appropriate provider chosen, subject to a consultation process, was more likely than a competitive process which was unlikely to bring forward any interested providers. It also indicated that the most efficient outcome may be for BT and KCOM to be designated as universal service providers. This will be a matter for Ofcom to consider fully, once decisions are made on the detailed design of the broadband USO. I should, however, stress that the universal service provider is only able to recover from a USO fund in respect of an unfair net cost burden, as calculated by Ofcom, so the method of designation has no bearing on whether the designated provider is incentivised to deliver the USO in the most efficient way.

Amendment 13 would require the designated universal service providers to roll out in rural areas before deploying their networks in urban ones. I do not think this would be appropriate. There are, I know, more rural consumers struggling with slow broadband speeds, but I do not think that the needs of urban consumers are any different from those of rural ones in the same position. As such, they should be treated the same. The USO is being introduced specifically to target those areas where commercial providers have not provided, and are unlikely to provide, connectivity, be they rural or urban areas, and to confront social exclusion wherever it is located.

The noble Lord, Lord Mendelsohn, talked about the role of smaller suppliers in the BDUK superfast programme. Of course, smaller suppliers can successfully deliver infrastructure into communities in the hardest-to-reach parts of the UK. There are now 11 smaller suppliers contracted to deliver superfast broadband projects through BDUK’s programme. The noble Lord also asked why we do not introduce an outside-in rollout, like Germany. We agree that has been very successful but unfortunately it is not comparable to what is proposed under the USO. In Germany there is no USO, but a publicly funded rollout programme. It worked by giving the commercial sector the opportunity to roll out in more commercially viable urban areas. The USO is intended to target areas that are not commercially viable.

Amendment 20—I pay tribute to the noble Lord, Lord Mendelsohn, for his measured remarks about BT, which is a bit of a whipping boy here—would give the Secretary of State a power to direct Ofcom to begin the process of legally separating the Openreach division of BT. We do not think this power is necessary, since on 29 November last year Ofcom announced its intention to do that very thing, as the noble Lord, Lord Fox, mentioned. In answer to the question from my noble friend Lord Arbuthnot, I am afraid I do not know the details about the way it has been operating. I will check that and get back to him in writing. According to Ofcom, the only thing that can stop the process is if BT agrees a voluntary arrangement that meets all of the regulator’s requirements.

Furthermore, through its comprehensive digital communications review, which reported in February 2016, Ofcom examined closely the whole of the UK telecommunications market. It concluded that changes to the governance of Openreach could benefit competition and consumers, and consulted last summer on the form that these changes should take. Last November it announced its decision that legal separation was the way to go. Therefore, Ofcom has already carried out most of the actions set out in paragraph (2) of this amendment. If the Secretary of State were to use the power granted by this amendment to direct Ofcom in the manner described, the result would be repetition and delay due to the requirements of the clause.

Because Ofcom is an independent regulator—I can say to my noble friend Lady Byford that it is Ofcom that holds it to account—the Government do not wish to take a power to direct how it should carry out its duties. However, I can assure noble Lords that the Government are listening to Ofcom in case there is anything we can legitimately do to ensure that the changes the regulator has proposed can be carried out expeditiously. I will leave that there for the time being.

Amendment 21 would require local authorities to take steps to ensure that alternative suppliers are in place to meet the requirements of the broadband USO where they identify areas which do not receive this. It would also give local authorities the option of publishing data on broadband speeds in their area and the extent to which the broadband USO is being met.

If I have understood the intention, the first part of this new clause seems unnecessary, as the process for designating the universal service provider is intended to ensure that no operator would be excluded from being designated. It would be for operators themselves, either on a national or regional basis, to put themselves forward to be considered for designation by Ofcom. This is not something that local authorities would have a role in. If, on the other hand, the intention of the new clause is that local authorities should take a role in procuring alternative suppliers to deliver broadband to the same standard required by the USO, this would fall outside the USO measures in the Bill. Local authorities can, of course, carry out procurements to provide areas with superfast broadband through the UK’s national broadband scheme, and areas covered in this way will not need intervention under the USO.

The second part of the new clause is also unnecessary as local authorities already have the option to publish data about broadband speeds in their area without the need for this legislative provision. They would, in any case, rely on Ofcom data. Ofcom has extensive data-gathering powers and reports to the Government on the availability, take-up and use of broadband in its annual Connected Nations reports. The reports include data at local authority level. In future, once the USO has been introduced, the Connected Nations report will also provide a means of reporting on the broadband USO and whether it is effectively meeting the needs of consumers and businesses. Given those explanations, I hope the noble Lord will withdraw his amendment.

[Lord Mendelsohn]

I thank the Minister for his very full answer in relation to Amendment 12, but it was to a completely different question from the one I had posed, which was about having an objective, efficient and transparent process in establishing providers. His answer concerned delivering on obligations. He should take from the Committee the important message that there is great concern about the nature of the competitive market.

Turning to Amendment 13 and the outside-in approach taken in Germany, I was under the impression that, given the amount of money we have put behind this, we have a similar publicly funded rollout programme. Germany has gone for a different approach—its USO occurs later in the process—and will meet a much higher standard over time. This is one of our big competitive pressures in Europe. Such an approach still has merit because it is the one occasion when you can get the private sector to factor in reasonable infrastructure spend, which it is not doing at the moment.

I thank the Minister for saying that I have been fair-minded concerning Openreach. However, I am sorely tempted to lose that tag. He made the crucial point that if there is a voluntary agreement to meet the requirement, it can stave it off. As he will have seen in the extensive commentary on this issue over the past two weeks, there is great concern that that is exactly its intention and it will delay the process. That is why we have suggested that much swifter action be taken.

I confess that with Amendment 21, we shoehorned in something completely different that does not and cannot really fit within the USO. However, it does provide for effective support for the local and regional economies. We should look at this issue. This is a broader policy arrangement to try to solve some of the problems that we are running headlong into, because the structure of the market just will not service them in the long term and will not maintain our competitiveness. Frankly, when Chattanooga is choo-chooing along at such an incredible pace and we are falling behind, something needs to be done, and that is a bigger policy. I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

Digital Economy Bill

Lord Mendelsohn Excerpts

Report: 1st sitting: House of Lords
Wednesday 22nd February 2017 Lords Chamber

Moved by

[Lord Mendelsohn]

1: Clause 1, page 2, leave out lines 4 and 5 and insert—
“(2B) The universal service order must specify that the target for broadband connections and services to be provided before 2020 must have—(a) speeds of 2 gigabits or more;(b) fibre to the premises (FTTP) as a minimum standard;(c) appropriate measures to ensure that internet speed levels are not affected by high contention ratios;(d) appropriate measures to ensure service providers run low latency networks.(2BA) The universal service order must specify as soon as reasonably practicable that, by 2020, the following will be available in every household in the United Kingdom—(a) download speeds of 30 megabits per second;(b) upload speeds of 6 megabits per second;(c) fast response times;(d) committed information rates of 10 megabits per second;(e) an unlimited usage cap.(2BB) In meeting the obligations set out in subsection (1), internet service providers have a duty to ensure that their networks offer at least the minimum standards specified in subsection (2BA) to every household in areas of low population density, before deploying their networks in urban areas.(2BC) The Secretary of State must ensure that—(a) the premises of small and medium-sized enterprises are prioritised in the roll-out of the universal service broadband obligation;(b) rollout of universal service broadband obligations is delivered on a fair and competitive basis.(2BD) The universal service order shall, in particular, say that mobile network coverage must be provided to the whole of the United Kingdom.”

[Lord Mendelsohn (Lab)]

My Lords, I am pleased to move Amendment 1 in my name and that of my noble friend Lord Stevenson of Balmacara and the noble Lords, Lord Fox and Lord Clement-Jones. I thank Ofcom for its helpful advice and clear and comprehensive responses to our questions, as well as the excellent documents it has published on the matter. I also thank the Minister for his willingness to listen. I hope he appreciates that we have also listened carefully. We have not moved amendments that, while touching on important aspects of broadband policy and its delivery, are not appropriate for the Bill.

These amendments are about making the universal service obligation meet the Government’s objectives and should rightly appear on the face of the Bill. We provide for further definition to be placed as was originally planned in regulations after this Bill, but they provide the correct framework to set them out properly. Placing these limited areas on the Bill ensures that the universal service obligation provides an operable legislative framework and mixes the right amount of direction, constraint and enabling. In short, these amendments set a floor for the USO; they create the means to ensure that progress can be properly monitored and reported, and they provide an aspiration to ensure that the universal service obligation helps to set a direction and does not become a limiting factor.

Amendment 1 makes a series of changes to the Bill. It places the universal service obligation for broadband on the face of the Bill and sets the following conditions: a target for broadband connection speeds of 2 gigabits or more; a minimum standard of 30 megabits download speed; that rollout must be rural and SME-focused; a requirement on the Secretary of State to ensure fair competition; and a universal service obligation for mobile coverage. In proposing the introduction of proposed new subsection (2BA) we ensure an explicit commitment to the initial, universal service obligation download speed of 30 megabits.

The case for this is made most strongly in Ofcom’s technical advice to the Government on the broadband universal service. Its evaluation of three options is carefully written but it essentially puts the Government in a tough spot. It is clear that the only option that meets all the requirements is scenario 3, with download speeds of 30 megabits and upload speeds of 6 megabits, and other aspects which are all in the amendment. But given that it will remain a question of cost it leaves the Government to introduce that constraint. However, here is where the report is most valuable. Detailed work by Ofcom and its consultants suggests that the worst option, scenario 1, will cost £1.1 billion; scenario 2 —which is also 10 megabits, with a couple of frills—will cost £1.6 billion; and scenario 3 will cost £2 billion. Crucially, the costs per household resulting from the economies of scale provided by option 3—the option which provides for 30 megabits download speed and 6 megabits upload speed—move down from scenario 1 and are almost the same as scenario 2. The economic case for an additional £800 million is extraordinarily well justified.

It is also clear that in defining what decent broadband is, the report indicates that 10 megabits will not be sufficient. It argues that this may be sufficient today, but not by the time the USO is proposed to be delivered. Even if it is possible that data usage might not require any more—a point that it says is unlikely, even when the technology gains in compression and transmission techniques—other issues such as contention rates and latency would render 10 megabits unfit for usage in a very short time. The best the report can muster in defence of a 10 megabits download speed is that if it were adopted it would have to be reviewed almost immediately. The case is compelling and it is economically justified—I look forward to the Minister’s agreement on this.

Proposed new subsection (2BB) suggests that the rollout prioritises that the universal service obligation needs to be met in areas of low population density before providers can deploy their networks in urban areas. This ensures that the economic models encompass the entire economics of a rollout rather than cherry picking the most profitable parts, which inherently leads to the outlying parts becoming uneconomic and uncommercial. This also ensures that the government funding is most efficiently employed in meeting the right outcome. During Committee I outlined the well-known German example of how to tender on an outside-in basis in relation to the mobile market, and how companies which said that it was uneconomic here were able to produce and deliver commercial models in Germany. It is not therefore a surprise that this model is used more widely now as a template to modify, and it would improve the universal service obligation for us to do so as well.

Proposed new subsection (2BC) places a duty on the Secretary of State to ensure that the market is sufficiently structured to benefit from all the advantages gained by competition, and to make sure that there is some focus in ensuring that the needs of SMEs are properly addressed. It is clear that while they are demand-led, without some explicit focus, their needs will not be adequately addressed.

Proposed new subsection (2BD) introduces mobile network coverage into the umbrella of the universal service obligation. This reflects the current patterns of consumer and citizen behaviour, and the increasing use of mobiles as the growing means—particularly in younger demographics—of accessing all sorts of digital and other services. Ensuring that social exclusion is properly met requires embracing mobile requirement, and this can be easily met by addressing the 5G tendering through the German process, or even limited forms of roaming.

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I will finish by suggesting to noble Lords that if we pass this amendment today, while we may go home satisfied that we have publicly stated our ambition to do better, we may also set back progress. We will delay the implementation of the USO that will bring change, and we will feed frustrations and fuel anger among the final 5%. With that, I hope that noble Lords will not press their amendments.

[Lord Mendelsohn]

My Lords, I thank the Minister for this comments at the beginning, although I thought we were nice to each other all the time. I also thank him because I am now slightly encouraged by the strength of our position, due to his retreat towards the idea that it is in some way a contravention of EU law. He has his lawyers, we have ours, and commercial organisations also have lawyers who tend to agree with us that this is an obstacle and that EU directives are against it. This may not be an argument for long, but for now I am encouraged by that being the Minister’s defence.

I thank the noble Lord, Lord Fox, for an excellent speech. I also thank the noble Lord, Lord Mitchell, for his very good point about the number of devices, the consequences of the internet of things and other matters and how they will affect what we are establishing as the USO. I was told a curious fact: there are now more phones in the world than toothbrushes. We are now looking at a world where the importance of providing the right level of capacity is essential.

I thank the Minister for his reply, but I find I am in rather an invidious position. I feel as though I am arguing the Government’s case in the face of determined opposition. The core rationale for the construction of the amendments is based on the Government’s own Broadband Delivery Programme: Delivery Model as published in September 2011, outlining their policy and goals for their operating arm, Broadband Delivery UK. I shall quote one sentence from the report. In relation to what has to be delivered for the customer by 2021, it says:

“Everyone able to access 30Mbps capabilities. 50% to access 100Mbps capability”.


So with one addition—the establishment of a gigabit target, which was not so predictable at that time—the amendments seek no more than the Government’s own targets, which they themselves have given up on. It seems that they are caught by the failures of the market structure and are unable to address those adequately, being somewhat constrained by the pension fund deficit. The amendments are not outlandish; they are a conservative defence of the Government’s goals. They are about making a policy fit for the future, rather than one fit for the past.

The Minister seems to make the case for the future but is not prepared to deal with the consequences by addressing and amending the USO on the face of the Bill. The USO is being established to address the problems of social and economic exclusion, particularly for those in rural areas and those who are vulnerable. The USO’s construction has necessarily been shaped with the imperfections of a market structure that has succeeded in getting us on a journey but is inadequate to address current or future technology. It is consistent with the Government’s desire to propose reasonable rather than wholesale change.

The amendments do not drive market change; they follow it. They would make sure that the current list of proposals did not limit the capacity of the market to constrain predictable and certain changes. They recognise the problem that the UK has with low levels of fibre but would not restrict the market’s capacity to limit competition and distort choice so as to maintain such a low level. At the minimum we would have hoped that the Minister would be forthcoming on the issue of speed.

In view of the certain negative consequences of the Bill as currently drafted, I wish to test the opinion of the House.

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[Lord Clement-Jones (LD)]

My Lords, Amendment 5 is an enhanced version of Amendments 14 and 15 in Committee, which the noble Lord, Lord Stevenson of Balmacara, introduced, but it includes additional principles that I raised and which were contained in the Government’s 2016 paper Switching Principles: Government’s Response and Action Plan. It deals with two issues very close to the interests of consumers: billing and switching. As the noble Lord, Lord Stevenson, said in Committee, mobile phone billing is,

“one of the most complicated areas of domestic expenditure”.—[Official Report, 31/1/17; col. 1145.]

There may be, in particular, some danger of vulnerable customers getting into difficulty and it should be possible for a consumer to set a cap on expenditure on their mobile phone.

As my noble friend Lord Foster pointed out in Committee, most mobile phone contracts are similar to credit card contracts, in that,

“they are a credit agreement, paying retrospectively for services that have been received. Yet with the credit card, of course, a limit is imposed upon you, which is not currently the case with mobile phones”.

He cited evidence from Citizens Advice that,

“in 2014-15 it helped no fewer than 27,000 customers who had problems with mobile phone debts”.—[Official Report, 31/1/17; col. 1147.]

He reminded us that Ofcom alerted us to this problem five years ago and proposed that it could be addressed by mobile service providers offering an opt-in cap to their consumers. The remainder of the amendment would give explicit power to Ofcom to set the gaining provider-led switching rules, which we all want to see, and sets out the principles which the rules must follow—the very principles which the Government themselves have set out.

We would like to see both these aspects enshrined in primary legislation. In her reply to these amendments in Committee, I am afraid that the Minister—the noble Baroness, Lady Buscombe—was not convincing when she talked of providers offering apps, warning text messages and the like to manage usage, the Government’s expectations for providers to manage bill shock, and of course the guidance issued by Ofcom, which I am sure every consumer reads avidly. That is not enough in this day and age. This is not a draconian requirement. This is a voluntary, opt-in capping system that is being proposed.

As regards switching, the Minister said that Ofcom was being given the necessary powers by Clause 2 and had an existing overarching duty to consumers. This is a much more explicit duty. It also ensures that the Government’s own principles are enshrined in a duty to make rules, which the Minister, however, could not assure me were the ones in contemplation by Ofcom. I hope that the Government will welcome this carefully thought-through amendment as being very much in the interests of consumers when mobile phone usage is, if anything, even more important than broadband. I beg to move.

[Lord Mendelsohn]

My Lords, I support the amendment and thank the noble Lord, Lord Clement-Jones, for an outstanding summary. In relation to caps, it is important to understand the consequences of bills which cause stress to people in particular circumstances, and why this is another part of ensuring that we have the right social impact in such policies. Mobile phones are not luxury products. Actually, low-income households are more reliant on their mobile phones than other households: they are five times more likely to be mobile- only—that is, no landline or broadband—than the highest earning groups. The major cause of mobile phone debt is unexpectedly high bills which are usually caused by consumers using services not included in their standard monthly tariffs—very frequently with no real conception about how the complexity of the tariff has an impact on their bills. These unanticipated bills can make it harder for consumers to budget, especially if they are on a low income. Unexpected bills can exacerbate a consumer’s debt problems. Citizens Advice reports that 70% of its clients who receive mobile phone debt service also receive advice on other debts. The consequences are significant and only these measures outlined in this amendment will in our view have the impact to address this problem. In other ways, complicated information and other consequences will limit the capacity of people to manage their debts.

I must confess that I think ensuring roaming capacity —not a national roaming programme—for those people in the absence of service in order to increase their ability to access mobile services is a terrific idea. I thought it was a very good idea when I first heard it, so I got one, and it is outstanding. I have cracked many of the problems of very poor mobile service, including in that far-fetched place, which never seems to have decent service, called Hampstead. I now have perfect service—it is an absolutely terrific system.

I think that there is a very strong case for this. We are not talking about a national programme, but it certainly addresses a large part of the problem about coverage. There seems to be no particular issue: it gives us good customer experience, it is not particularly difficult to roll out, and that is why it is sensible and worth while for it to be in this Bill. Now that I have another phone, I of course endorse the provisions on switching, but I would make this point about switching and compensation. These strengthen and make explicit the powers of Ofcom to require certain changes in relation to compensation to make sure that companies automatically compensate customers who experience poor levels of service. I think there is a very strong consensus, and that Ofcom will come to the conclusion that it is vital that consumers are financially compensated. An automatic compensation scheme will act as an incentive to telecoms companies to improve their performance.

[Baroness Buscombe (Con)]

My Lords, I am sorry that I was unable to satisfy noble Lords at Committee, so let me try again. Amendment 5 raises important issues for many customers, and we really do appreciate consumer concerns. Following previous debates that we have had on these matters, my officials have spoken with mobile network operators to check progress in this area.

Currently, providers offer consumers various ways to manage their usage, including the use of bill caps. So I say to the noble Lord, Lord Clement-Jones, that it is possible already for a consumer to put a cap on his or her expenditure. Tesco Mobile, for example, already provides capped contracts for the benefit of its customers. This includes a safety buffer which can be set to suit preference. Three allows consumers to block calls that go over their monthly allowance and calls that may be not be included as part of their allowance. Vodafone allows a cap to be set up through an app. Additionally, EE, Virgin Media and O2 offer the facility of notifying customers through warning text message alerts when approaching the limit of their allowances.

The Government expect providers to continue to take steps to minimise bill shock and ensure that their customers are adequately equipped to manage their mobile phone usage. We will underline this further in the forthcoming consumer Green Paper, which will be published in April, a Green Paper that my noble friend Lord Ashton has referenced today. This is an issue that needs careful thought, which is why the Government believe it is only right that we do so in a consultative manner. We need to consider and mitigate unintended consequences in that process.

Universal bill caps do not exist for other utility services for good reason—the essential nature of them. Mobile phone services are indeed an essential service for many; I agree with the noble Lord, Lord Mendelsohn, that they are not a luxury. We need to ensure that the outcome from this debate does not risk putting people in vulnerable situations, whether that is leaving them unable to make a vital call when they break down at the side of the road or having to contact a friend or relative in their hour of need.

I know a number of elderly people living on their own who rely wholly and completely on their ability to use their mobile phone if they are afraid or concerned or have a fall. They may have forgotten to pay their bills and so on. Suppose they did not have that opportunity to contact someone in an emergency. They would be put in a difficult and frightening situation. I know there is a feeling that, “Well, the bill cap is there, but people could still contact the emergency services”. However, we already have an enormous burden on our emergency services, and we fear that this would increase that burden. So would this really be in the interests of consumers, as suggested by the noble Lord, Lord Clement-Jones?

I agree with noble Lords that mobile providers need to take responsibility for looking after their customers. The Government have previously negotiated a voluntary agreement with providers that means there is already a £100 liability cap to cover lost and stolen mobile phone handsets, provided that they are reported as lost or stolen within 24 hours. There was good reason not to put that agreement in primary legislation: it would have been too prescriptive and offered no flexibility as technologies progress. That is an issue that we keep returning to: do we want to be prescriptive in the Bill when we are talking about the digital economy, when we know the technology is constantly changing? So we have considerable concerns with putting such a prescriptive amendment into primary legislation.

It is worth highlighting that Ofcom, as regulator, has a duty to protect the interests of the end-user in the telecom markets. It would therefore seem improper to progress the amendment without due consideration to what the role of government and Ofcom would be regarding enforcement. There is no point putting this in the Bill if there is no practical enforcement. This is yet another reason why the Green Paper will allow us to reach a well thought-out solution to address the concerns that noble Lords have rightly raised.

The switching principles that noble Lords have proposed putting on to the statute book are broadly those on which the Government consulted in an October 2015 call for evidence. Following the end of that consultation, the Government published a response in May 2016, including revised principles based on responses received to the call for evidence. The Government’s response also confirmed our commitment to work with Ofcom to ensure that consumers could switch their telecom services, by legislating through the Digital Economy Bill. However, the Bill does not mandate the switching principles, as this would go against the spirit of them as principles and would not take account of the different characteristics of different sectors and consumer needs. We know that it would risk creating a power that could prove to be, again, too prescriptive for the future needs of consumers as technologies continue to develop.

Digital Economy Bill

Lord Mendelsohn Excerpts

Report: 3rd sitting (Hansard - continued): House of Lords
Wednesday 29th March 2017 Lords Chamber

[Lord Clement-Jones]

The noble Baroness, Lady Drake, has asked a number of very pertinent questions, but I have one question—probably because I am a bear of small brain in these circumstances. Would the new section apply on full structural separation of Openreach from BT, if that were to arise in future?

[Lord Mendelsohn (Lab)]

My Lords, this group of amendments addresses two crucial issues—first, the Crown guarantee on BT pensions and, secondly, the relationship between Openreach and BT. In relation to the Crown guarantee, I have added my name to Amendments 33ZYEA and 33ZYEB in the name of my noble friend Lady Drake. These Benches support her arguments completely, and I hope that the clear, comprehensive and compelling case that she made will receive a good reception across the whole House. I thank her for her excellent and assiduous work on this matter.

It is clear that these government amendments do not yet have the robustness that assures this House, and I think that my noble friend’s unequalled expertise has come up with an impressive formulation. I look forward to hearing the Minister respond to these issues and would wish to hear some specific reassurances, if he is not minded to accept her amendments. It is important that nothing weakens the covenant on pensions; it is extremely important that the Crown guarantee is carried across and that nothing undermines the responsibilities of the trustees in exercising their duties properly. It is a colossal task. BT has the second-worst-funded pension scheme in the world, according to the MSCI survey of 5,000 company pensions, second only to Du Pont, which is the subject of a merger which will make it better funded, so BT will become the worst-funded pension scheme in the world. In addition to uncertainties about the Crown guarantee, that will put trustees in an impossible position, if these amendments are not addressed as my noble friend suggested. The Government and all those concerned in this discussion should be in a position to confirm—as indeed Matthew Hancock, the Minister responsible, did in a meeting with Members of this House—that the proposed arrangements for the pension scheme should ensure long-term assurance to pension holders whether Openreach is legally or structurally separated.

This brings us to Amendment 33M in my name and that of my noble friend Lord Stevenson of Balmacara, which proposes the structural separation of Openreach. I will make a few very brief points to support this view. This is not a negative statement about BT, which is an excellent British company and one that we hope will continue to grow and thrive. There are many keen to criticise BT’s behaviour in relation to the supply of broadband but this must be properly balanced by the realities of the regulatory framework and policy context it was given to operate in and which has incentivised and guided its approach. It is slightly unfair to create such arrangements and then criticise someone for following them, and many of the criticisms of BT have been unfair and misdirected.

The differences between the benefits of legal and structural separation are important to note. Legal separation, which has been proposed by Ofcom, is where the upstream business is established as a separate legal entity within the wider group but remains under BT’s complete ownership. It includes functional separation with independent governance. There is a clear benefit to a regulator that would lend itself to suggesting this approach. It certainly makes the regulatory task of overseeing this arrangement much more economic. But having one place to look at is a benefit only for the regulator. The alternative is structural separation, where the vertically integrated operation is split with no significant common ownership and “line of business” restrictions to prevent them re-entering each other’s markets. There are some issues that people think are reasons to achieve separation, such as improvements to service levels, broadband speeds and end-customer services, but these are not dependent on separation.

BT has contributed massively to getting us to where we are now, where we have—in relative terms to international peers—availability of superfast average speeds and lowish prices. But the challenge is the future, and this is where investment needs to be higher. Crucially the UK is lagging in fibre to the premises; the majority of the network is either fibre to the cabinet or cable. The future will require us to commit to FTTP. Other solutions such as G.fast will not keep us as a leading nation. Structural separation is the only mechanism that can sufficiently address the investment issues, and this was the matter that Ofcom did not adequately address in its proposal. The legal separation does not address the problem that strategic decisions on investment will still be dependent on BT, even though I hope that it takes note of the Minister’s exhortation for it to do better.

Ofcom’s statement of reasons for its approach says that this will provide improved investment outcomes from new models of investment such as co-investment and risk sharing. But BT has never lacked access to capital, which is why even Ofcom acknowledges that this model will be reviewed in order to ensure that the new structure achieves its objectives. This is not an equivocal “may” or “could”, but an emphatic “must” and “should” be reviewed. I hope that the Minister can confirm that this will be done and a broad timetable for it.

Our concern is that policy is drifting and opportunities to ensure that we maintain a leading position in the new communications technologies are being weighed down by compromise, confusion and a terrible lack of clarity. It is surely better to provide leadership and certainty by choosing the only arrangement that will ensure the necessary level of investment to make our broadband fit for the future.

[Lord Ashton of Hyde]

My Lords, I thank the noble Baroness, Lady Drake, for the time and effort that she has put into examining this matter and meeting with me and my officials to explore the details. The noble Baroness is an expert in pension matters and we have all benefited from her advice, and I am very grateful. Government Amendment 33ZYE is explicitly designed to ensure the continuation of the Crown guarantee for those transferees from BT plc to a future Openreach or other successor company. Amendment 33ZYEA is a technical point and concerns the adequacy of the word “undertakings”. I believe that our existing wording on undertakings is sufficient and would cover any transfer of staff, including one that was consequential on the application of the TUPE regulations about the movement of activities from one company to another. The “activities”, suggested by the noble Baroness, if moved to another company, are part of the undertaking of BT.

We agree with the noble Baroness on the policy intent. We intend to cover all ways by which BT staff might be transferred to the new Openreach company, but technical detail is important here, and I will table a technical clarification for Third Reading.

Amendment 33ZYEB seeks to delete a subsection of the Government’s amendment that provides a power to vary the Crown guarantee. I understand the reasoning behind this amendment but want to remind noble Lords that the Government have been clear that we are providing a power to ensure that, following Openreach’s separation, the extent of protection afforded by the Crown guarantee is no less and no more than at present. I reassure noble Lords that nothing in the Bill or in the delegated powers it gives to the Secretary of State will change or alter the Crown guarantee to BT plc pension liabilities.

We have seen the documents published by BT and Ofcom that outline plans for a legally separate Openreach Ltd. On the basis of those, the Government fully intend to ensure that the Crown guarantee protection continues to be maintained for all current members of the BT pension scheme, including those who will become part of the wholly owned subsidiary Openreach Ltd. So, our clear intention is that the protection of the guarantee provided to BT pension scheme members should be maintained. That is why the power includes an ability to define that protection in secondary legislation so that it may be neither wider nor narrower than existing protections. However, until we see the detail of the agreement on Openreach separation, and how the liability for payments to the BT pension scheme will be divided between BT plc and the new Openreach, we cannot say that the power defined in new subsection (5) will not be required. In applying the Crown guarantee to the pension liabilities of the new company, we are creating new risks. There is the potential for unintended consequences, which concerns us particularly. This power helps guard against them, while enabling the Government to maintain Crown guarantee protections for pension scheme members in line with our clearly stated intention to do so.

New subsection (5) gives the power for the Secretary of State to consider whether to maintain the Crown guarantee for any staff who then move on to spin-off companies: for example, if part or all of Openreach were sold. I believe that the need for this power is clear. I reiterate that it is the Government’s intention to ensure that current members of the scheme who transfer to Openreach are certain that their pension rights will continue to be safeguarded by a Crown guarantee.

I turn now to Amendment 33M, which seeks to place obligations on the Secretary of State to direct Ofcom to begin the process of “legal and functional separation” of Openreach from BT plc. Functional separation of Openreach and BT has been in place since 2006 by means of undertakings that BT gave to Ofcom pursuant to the Enterprise Act 2002. On 10 March 2017, Ofcom and BT announced that they had agreed on a legal separation. By the end of this year “legal and functional separation”, as required by the noble Lord’s amendment, should have been achieved, according to Ofcom. On that basis, if the timetable set out in Amendment 33M were to be followed, separation would take much longer. Ofcom is currently consulting on the details of the transition to a legally separate Openreach. This consultation closes on 14 April and the timetable for completion should be achievable. Moreover, if Ofcom had to impose its decision on BT rather than having a voluntary agreement as now, the decision would have to be referred to the European Commission under the electronic communications framework directive. The remedy of separation has never been used before, so the timetable for a response from the Commission is unknown. It could be nine months or more. It is also possible that BT would appeal against forced separation, further delaying the process. A long delay would be likely to inhibit investment in the sector at a time when we all want to see great strides being made in the UK’s broadband coverage and quality.

The purpose of having our independent communications regulator, Ofcom, is to make exactly these assessments. It is Ofcom’s duty and role to take decisions and regulatory interventions on the strength of its expert analysis of competition in the market. As such, it is our view that it would not be appropriate for the Government to legislate in this way in view of the independence of Ofcom from government. It is therefore not necessary or right for government to legislate on this matter both because Ofcom can take such decisions and because it has already done so, specifically in respect of the separation of Openreach. With that explanation, I hope that the noble Baroness will withdraw the amendment.