Draft Bill overhauls legal framework for Communications Industry

The draft Communications Bill published on 7 May 2002 sets out the Government’s radical plans to overhaul and simplify the legal framework for the already converging Telecommunications and media industries.

Jointly published by the Department of Trade and Industry and the Department of Culture, Media and Sport, the draft Bill brings the current regulatory framework up-to-date, responding to technological and market changes and the harmonisation of EU law in the Electronic Communications sector.

The draft Bill is subject to a consultation period of three months as well as pre-legislative scrutiny by a joint committee of both Houses. The draft Bill:

1) establishes a single powerful regulator – the Office for Communications (OFCOM) – replacing the existing five regulators (the ITC, Radio Authority, Oftel, Broadcasting Standards Commission, Radiocommunications Agency); OFCOM will have extensive powers including the ability to draft secondary legislation, but also has a duty to secure “light touch regulation where relevant markets are found to be effectively competitive.

2) applies a consistent scheme for regulating the public service broadcasters, with greater regulation for some (the BBC) and more self-regulation for the others. The core responsibilities of the BBC Governors are kept, with additional oversight by OFCOM, but with back-stop powers resting with the Secretary of State for Culture, Media and Sport;

3) gives OFCOM powers concurrent with the Office of Fair Trading to apply competition rules in the Communications Sector;

4) requires OFCOM to establish and maintain a ‘Content Board’ that ensures that the public’s interest in the nature and quality of TV and radio programmes is strongly represented within OFCOM’s structure;

5) removes the requirement for “Individual and “Class licensing of telecommunications networks and services under the Telecommunications Act 1984 (Radio Spectrum Licensing remains), so removing about 400 licenses, and replaces it with “general authorisations in line with the new regulatory regime for electronic communications networks, services and associated facilities outlined in four EC Directives (Framework, Access, Authorisation and Universal Service) which came into force on 24 April 2002. OFTEL published draft “general conditions of entitlement which will apply to “all communications providers, on 22 May 2002. The draft conditions are largely based on existing licence conditions with similar wording and structure. However the Annex to the EC Authorisation Directive sets out a “maximum list of conditions which may be attached to “general authorisations and thus the number of conditions applicable to “communications providers has been vastly reduced. In addition specific individual conditions relating to communications providers who are deemed to have Significant Market Power (SMP) or Universal Service Obligations (USO) will be imposed, but draft proposals regarding those conditions are not expected until September 2002 after the EC Commission has published its “Recommendation on Relevant Markets and Products and “Guidelines on how NRA’s are to assess which providers have SMP and USO.

6) allows spectrum trading to secure more efficient use of the available radio spectrum.

7) sets out the general conditions applicable to telephone numbers and OFCOM’s right to deal with those in accordance with the national telephone numbering plan. The definition contained within Sub-section 6 of Section 43 defines telephone numbers extremely widely and carried within this definition there is scope for IP addresses to be considered within the definition of a telephone number. However sub-section 8 of Section 43 does give the Secretary of State power to exclude such numbers from definitions under this section and it is not clear whether this will be the case for IP addresses. It is likely that website addresses and e-mail addresses will be excluded as a result of Government policy.

The current draft Bill is still in an early form and a number of issues remain to be addressed in subsequent drafts, namely:

· The “Cave report of the independent review of spectrum management was published on 6 March 2002. The Government plans to publish its response in the summer and thus the spectrum provisions in the draft Bill do not reflect any changes that might be made as a result of that review.

· The Enterprise Bill, currently before Parliament, will impact on the provisions in the draft Communications Bill relating to competition powers, appeals against OFCOM determinations (to the Competition Appeals Tribunal) and consumer protection. The draft Communications Bill reflects some changes proposed in the Enterprise Bill, but as that Bill makes it’s passage through the House there are likely to be changes to it and so where that is the case the draft Communications Bill will require to be updated.

· The implementation of the dispute resolution procedures between undertakings as set out in Article 20 of the EC Framework Directive (2002/21/EC) have yet to be decided upon and so are not included in the draft Bill.

· Media Ownership was the subject of a joint DCMS/DTI public consultation that closed in January 2002. Because of the extra phase of consultation involved it is the only significant policy area not covered in the draft Communications Bill and thus further clauses will be needed, e.g. on the remaining “must offer/must carry provisions, changes to Channel 4 powers/regulation, the radio licensing regime, Public Teletext services, ITV Networking arrangements etc.

In its final form, the Bill will reform the rules on media ownership. Firm proposals for reform were published alongside the draft Bill. These include significant deregulation to promote competition and investment, but a few core rules would be retained to protect diversity and plurality.

The Government plans to remove most ownership rules within the TV, radio and newspaper markets where competition law tends to encourage dispersed ownership. But some will be retained as minimum guarantees of plurality.

The rules that would be scrapped include:

- those which prevent single ownership of ITV;

- those which prevent ownership of more than one national commercial radio licence;

- the criminal sanctions that apply in the newspaper merger regime;

- those that prevent the joint ownership of TV and radio stations;

- those which prevent large newspaper groups from acquiring Channel 5, or radio licences; and

- the inconsistent rules that prevent the non-European ownership of some broadcasting assets in order to boost inward investment and allow the UK to benefit rapidly from new ideas and technological developments.

Three key limits on cross-media ownership would be kept to safeguard the vibrancy of debate at every level of society – national, regional and local:

a) first, recognising that most people get their news and information from national newspapers and from terrestrial television, the simple rule that any newspaper group with over 20% of the national market will not be able to own a significant stake in ITV – the only commercial public service broadcaster with universal access to a mass audience – would be kept;

b) second, A parallel regional rule would prevent anyone owning all the newspapers and the regional ITV license in any region or major city; and

c) third, there would be a scheme to ensure that at least three commercial local or regional media voices exist (in newspapers, TV and radio) in addition to the BBC in almost every local community.

Where necessary the Government plans to retain and strengthen content regulation to ensure the quality, impartiality and diversity of broadcasting services. Therefore OFCOM would:

- have the power to investigate the news and current affairs programming of any local radio service if they have concerns about accuracy or impartiality;

- have a new duty to protect and promote the local content of local radio services;

- be able to vary licences on change of control, to ensure the character of the service is maintained. For ITV, this would protect regional production and programming requirements;

- oversee the nominated news provider system for ITV, to ensure high quality and independent news on free-to-air public service television.

Changes to the Regulatory regime not contained in the Bill.

Much of the details of the proposed regulatory regime, particularly in relation to electronic networks and services will be set out in Statutory Instruments and so are not included in the draft Bill. In particular Oftel will need to carry out further consultations on various aspects of the new regime following the publication of EC Guidelines (on designations of Communications Providers with Significant Market Power and Universal Service Obligations) and EC Recommendations (on Relevant Markets and Products). Both are already overdue and should have been published at the same time as the Directives came into force. They are now expected be published in July.

All Provisions of the four EC Electronic Communications Directives, (Framework, Access, Authorisation and Universal Service) which came into force on 24 April 2002, which impose positive obligations on Member States, have been included in the draft Bill (except for the dispute resolution procedures under the Framework Directive). Those obligations over which Member States have discretion, are not contained in the Bill and will be implemented by way of Statutory Instruments.

However, because all four of the Directives must be implemented into UK Law on 25 July 2003, if the Bill has not have received Royal Assent by that time, the Directives will have to be implemented in the interim by Statutory Instruments which will subsequently be repealed when the Communications Act is passed.

Some of the regulatory proposals as they apply to the BBC will be implemented by way of changes to the BBC Agreement rather than through the Communications Bill and the DCMS will be consulting on this later in the year.

The details of the mechanism for “Spectrum trading will be dealt with by way of Statutory Instruments and the Radiocommunications Agency will be consulting on their proposals later in the year.

The Bill does not regulate Internet Content.

For further information please contact David Roberts at [email protected] or on +44(0)20 7367 3678 or Richard Eccles at [email protected] or on +44(0)20 7367 3996.