§ 2.37 p.m.
The Minister of State, Department of Employment (The Earl of Gowrie)
My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
§ Moved That the House do now again resolve itself into Committee.—(The Earl of Gowrie.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [THE LORD ABERDARE in the Chair.]
§ Clause 12 [Exclusive privilege of the Corporation with respect to telecommunication]:
Lord Lloyd of Kilgerran moved Amendment No 59:
Page 15, line 10, leave out from ("day") to ("telecommunication") line 11 and insert ("the Secretary of State shall have throughout the British Islands the exclusive privilege of licensing the running of").
§ The noble Lord said: I beg to move Amendment No. 59 and, with the leave of the Committee, to speak to Amendments Nos. 62 and 71. We are now coming to Clause 12, which is one of the most important clauses in the Bill. It deals with the grant of a monopoly or a privilege and, that being the case, it should be clear, fair and wholly in keeping with the Government's policy in relation to liberalisation.
The Earl of Gowrie
Will the noble Lord allow me? I am most grateful to him. I missed what he said at the very beginning. Is he going to speak to Amendments Nos. 63 and 64 as well as to Nos. 59, 62 and 71?
§ Lord Lloyd of Kilgerran
No, not at the moment. I shall confine my remarks to Nos. 59, 62 and 71. 726 In this subsection the corporation is given the exclusive privilege or monopoly of running telecommunications systems as they are defined. This exclusive privilege given to British Telecom is limited by Clauses 13 and 14, and in Clause 15 the Secretary of State has power to delegate this monopoly—not necessarily the corporation but the Secretary of State—by licensing others. And of course he could license the corporation wherever necessary. It seems to me that it is more in keeping with the Government's policy of liberalisation if the procedure is as follows. The sole object of my Amendment No. 59 is to put into the hands of the Secretary of State the exclusive privilege or monopoly of licensing the running of telecommunications systems. As it is at present drafted, the Bill gives the exclusive privilege to the corporation not to licence but to run all telecommunications systems of whatever kind—those present or in the future. I am usually reluctant to grant more power to a Secretary of State, but in this instance it seems reasonable to do so from a realistic, and, indeed, from a historical, point of view.
I should like briefly to refer to the fact that the Post Office Act 1969 transferred what was then the Crown's exclusive privilege in these matters to the Post Office, including all the network arrangements, all associated apparatus and all services provided for that network and apparatus. This transfer caused some difficulties, but I need not go into them now.
On 21st July 1980, when the Secretary of State in another place was considering the general policy in regard to telecommunications systems, he said that the Government would be reviewing British Telecom's present monopolies over the supply of terminal equipment attached to the telecommunications network, and over the provision of services to third parties using British Telecom's circuits. This position was taken a step further in the course of discussions during the first day of the Committee stage in your Lordships' House, because in dealing with Amendment No. 19, which was moved by the noble Lord, Lord Caccia, the noble Earl, Lord Gowrie, made a very helpful pronouncement at column 500 of the Official Report of 12th May 1981. He said:The terms of Clause 12"—that is the clause which we are considering now—refer only to the running of telecommunications systems and would not cover all the ancillary activities necessary to provide a system. Clause 12 does not indeed cover even the prime instrument".The position of British Telecom, and whether it should have the sole privilege of supplying the prime instrument, was discussed on the first day of your Lordships' Committee stage and it was resolved that that monopoly should reside with British Telecom; it should supply the first instrument. But the noble Earl the Minister went on to say that the position would be reviewed and that it was not necessarily a monopoly which British Telecom would have for all time. So my first amendment would give the Secretary of State the exclusive privilege of running all telecommunications systems, which seems to me to be a natural thing to do.
I accordingly come to my next amendment, No. 62, which states that if anybody does not fall within the necessary exceptions, or does not have a licence, then it will be an infringement for him to do anything of 727 this kind. Then my Amendment No. 71 states that if the Secretary of State has the exclusive privilege of licensing, then he shall licence British Telecom. In that way, British Telecom will get its first instrument under a licence from the Secretary of State, for such period as the Secretary of State shall determine.
May I remind your Lordships again that the noble Earl, Lord Gowrie, in dealing with the question of who should have the exclusive privilege of supplying the instrument attached to the terminal point which goes into premises, said that it would be considered in the future whether that monopoly should, or should not, be continued. Therefore, it seems to me that, historically and realistically, Clause 12 should contain a package to give the Secretary of State exclusive power to licence the running of telecommunications systems. Then, as a follow-up to that, if people did not fall within the exceptions granted in Clauses 13 or 14, or did not get a licence, it would be an infringement for them to do other than conform with that arrangement.
Under my next amendment, No. 71, if the basic principle of my Amendment No. 59 were accepted, the Secretary of State should mandatorily at this stage license British Telecom in regard to any apparatus, including the instrument to be attached to the terminal point, which was discussed on the first day of your Lordships' Committee stage. I hope that this does not seem very complicated, but when one is dealing with a monopoly the position should be clear.
The Crown originally had the privilege of this monopoly. Under the 1969 Act, it was granted to the Post Office, which caused what were almost constitutional problems; there were certainly difficulties. Therefore, it would seem historically logical, if that is an adequate connotation of words, that the privilege should go back to the Crown. But that is not possible now, so it should go to the Secretary of State, but only that exclusive privilege to licence the running of telecommunications systems. It seems to me that this package, which I have taken some time to explain in view of its importance, is wholly consistent with the Government's policy of liberalisation, as enunciated by the noble Earl, Lord Gowrie, in the Committee stage. I beg to move.
§ 2.58 p.m.
§ Lord Caccia
Before the Minister replies to that important question, may I ask him also to deal with the subsidiary point? So far as I read the Bill, it does not of itself prohibit the sale of unapproved apparatus, subject possibly to this amendment. It is therefore possible, though one would hope unlikely, that a purchaser might connect unapproved apparatus to the Corporation's system. If that were to happen, the Bill provides that in the case of an infringement of British Telecommunication's privileges the offender will be liable to conviction. Should it be assumed that the Crown intends, invariably, to initiate legal action against such persons found to infringe BT's privilege in this way? Or is it intended, as in some other cases, that, in practice, BT will itself on occasion be expected to initiate such action as may be available to it, based on breach of contract by its customers?
§ 3 p.m.
The Earl of Gowrie
With the leave of the Committee, I should like, as suggested by the noble Lord, Lord Lloyd of Kilgerran, to take together Amendments Nos. 59, 62 and 71, though I would point out to the Committee that it seems to us that the general issues which the noble Lord, Lord Lloyd, has raised are also covered by Amendments Nos. 63 and 64. I was going to speak to those amendments as well, but may I formally speak to the three which I have mentioned. In due course we shall see whether more words from me are needed on Amendments Nos. 63 and 64.
All these amendments, including Amendments Nos. 63 and 64, concern the proposal that the exclusive privilege should be transferred to the Secretary of State rather than to British Telecommunications. As the noble Lord, Lord Lloyd, pointed out, these amendments are broadly in line with the Government's plans for relaxation of the telecommunications monopoly except in one very significant respect: they would completely exclude BT from the market in telephone terminal equipment. Otherwise, as I say, they would indeed form an alternative to our intended mechanism for relaxation, but I think they would also pose new serious practical difficulties.
BT is, and would remain, the largest and most experienced supplier of terminal apparatus. Its presence in the market place, provided it competes there fairly, will surely be to the advantage of users. If it were forced by the amendments moved by the noble Lord, Lord Lloyd, to withdraw suddenly from a part of the market, there would surely be a damaging supply vacuum. Users would lose the advantages of BT's experience as well as of its direct knowledge of the network, which is constantly evolving. Means are available—we have gone over them at previous stages in the debate—to ensure that BT competes fairly. I can assure the Committee that no obstacles are being put by the Government in the way of the operation of these means: for instance, the competition legislation, the fair trading legislation and the overall work of the Director General of Fair Trading.
If BT were to be barred from the telephone terminal market, the ownership of the large installed base of such apparatus would present a very difficult problem. If these amendments were to be adopted, steps would have to be taken to make legal all those telecommunications systems which are now run by BT and others and which fall outside the exemptions of Clauses 13 and 14. This would be an impossibly detailed task in the time available unless licences amounted to a continuation, for the time being, of the status quo. But in that case the effect of the amendments would not be materially different from the Government's existing intentions except for the specific disadvantages I have mentioned. I hope therefore that the noble Lord will withdraw his amendments.
§ Lord Lloyd of Kilgerran
I am so sorry to interrupt the Minister when he is speaking, but he is quite wrong to say that my amendments would bar British Telecommunications from having that first instrument. My Amendment No. 71 specifically states that the Secretary of State shall grant a licence for that first instrument and for any other ancillary things to BT. 729 So it is not a question of barring BT from any market which the noble Earl has mentioned so far.
The Earl of Gowrie
Obviously I will consider what the noble Lord has just said and look it over again very carefully. However, as I said a little earlier, my advice is that the way in which the amendments are worded either does or certainly could, given of course the Secretary of State in question, exclude British Telecom from the market in telephone terminal equipment. I do not think that my department is always right, but certainly we have scrutinised the amendment very carefully and it appears to us to have that effect. However, if the noble Lord who has tabled the amendment insists that it does not or need not have that effect, obviously that would weigh with me. In that case I would rather doubt whether his other central purpose behind these amendments would be worth while, because the effect then would not be materially different from our existing intentions.
The noble Lord, Lord Caccia, raised the question of the sale of unapproved equipment. It is quite legal in many cases to use unapproved equipment—for instance, on those private circuits which do not reinforce the monopoly—but Clauses 17 to 19 are designed to deal with the problem raised by the noble Lord. These clauses enable the Secretary of State to require all telecom apparatus to be marked with information about whether or not the equipment has been approved. These powers are again similar to those in existing legislation, in the Trade Descriptions Act 1968, and it will be an offence to sell equipment in contravention of a marking order. This should ensure that the purchaser is aware of whether or not his apparatus is suitable for connection.
As to infringement of the monopoly, I would confirm the noble Lord's view that British Telecom would be able to bring a prosecution if it saw fit. I do not know whether my remarks have in any way reassured the noble Lord, Lord Lloyd of Kilgerran. If my answer is at variance with his interpretation of his own amendment perhaps we could return to it at a later stage. However, that is my present advice.
I cannot say whether the response by my noble friend Lord Gowrie pleases the noble Lord, Lord Lloyd of Kilgerran, but it certainly does not please me—not that that particularly matters. But what does matter—and this cannot be stressed more strongly—is that this clause is the nub of the Bill. We are not talking about a dry piece of administrative law. We are talking about the industrial and commercial future of this kingdom. There is no doubt whatsoever in my mind that at Second Reading the noble Lord, Lord Byers, got this absolutely correct. I must ask for your Lordships' forgiveness, but as I believe that nobody can possibly put it better than he did I should like to quote from Lord Byers at col. 1049 of the Official Report for Monday, 27th April. He said:I do not object to British Telcom having a monopoly of the basic network but I do not think it is a wise concept that British Telcom should manage the whole telecommunications environment when it must inevitably be in competition with private sector organisations in that same environment".We are not talking about the telephone on our desks. 730 We are talking about the whole telecommunications environment; we are talking about the radio spectrum; we are talking about the future. The extraordinary thing is that it is a Conservative Administration which has chosen not to make a fundamental change to the Post Office Act 1969 which places on a public trading corporation an immense responsibility and gives to it an exclusive privilege, a monopoly, to control this environment. It is a corporation which holds the future commercial and industrial development of this country in its hands. This flies in the face of my noble friend Lord Gowrie's own words on the first day of this Committee stage. He said—and I quote:my repeated assurance that British Telecommunications will only have a monopoly of the prime telephone instrument".—[Official Report, 12/5/81; col. 463.]
I am delighted to hear my noble friend say that it is right, but this is not what Clause 12 says. The side note is right. It says:Exclusive privilege of the Corporation with respect to telecommunication".This is the whole environment. It may well be the intention of Government through the powers exercised under Clause 15(1) to derogate from that power, but, with respect, I think that is a very dangerous way of going about it. There are those who support this approach and I can understand why they supported it at the time, namely, that it makes sense for this Administration in negotiating with British Telecommunications to be able to say to them, "In no substantive way are we going to take away from the powers that you at present hold under Clause 7 of the 1969 Act. In no way are we going to take down the exclusive privilege under Section 24 of the 1969 Act. What we shall do is only to put in those few words 'The Secretary of State shall have the power to issue licences'".
Those who support this approach might strain to describe it as a good example of the cautious respectability of Conservatism. In truth, to me at any rate, it smacks of cunning, of trickiness, to give with one hand and take away with another. It might have been good politics at a pre-negotiation stage of the Bill, but it is—and always will be—bad law, because it is neither sure nor certain nor straightforward; and that of course was the point made by the noble Lord, Lord Lloyd of Kilgerran, because—and this is vital—its effect will inevitably be to place a department of state on a war footing with a corporation of state.
Any chairman of British Telecommunications might rightly say, "I am not here to preside over the demise of a great institution". However, if the Government were to take upon themselves their responsibility and place the monopoly in their hands, where it resided before the Stonehouse Act, then any Government shielded by the will of Parliament rather than by ministerial whim will be better able to fulfil its role as a guardian of the industrial and commercial future of this kingdom. So sensitive, so volatile, so vital is the need to gear correctly the tempo of change that Parliament must get this right now. If it does not, we shall be responsible for casting this kingdom upon 731 a heap of industrial and commercial mediocrity. Our children—and indeed we ourselves—will watch as the Japanese, the Germans, the Americans and the French stock our commercial and industrial larder with their success.
I cannot believe that a Conservative Administration would wish to see this come to pass. I have too much faith in the rare ability, imagination, sensitivity and foresight of my noble friend Lord Gowrie to think that he would not—
I am being very serious about this—he would not use all his ministerial and personal authority, and I am sure he would at least take this issue back to his right honourable friend the Secretary of State for his further and urgent consideration.
§ Lord Derwent
Before my noble friend sits down, he is talking about a ministerial whim: does Parliament never have whims?
Indeed they do. However, where a whim lies in the hands of one man it is infinitely more dangerous than when it lies in the hands of 600 Members in the other place and a thousand or so in your Lordships' House.
The Earl of Gowrie
I do not wish in any way to cut short this debate, but I should be grateful to have the leave of the Committee to come in on the very stern points that my noble friend has raised. Of course it is the last wish of this Government in some way to jeopardise the commercial future of this kingdom in this area. In fact, the whole point of the Bill is to liberalise the existing system in order that a better and a more competitive commercial future in a growth area can be maintained.
I think I can see what my noble friend—very eloquently, if I might say so, but altogether over-apocalyptically—is getting at. But, with great respect to him, he is up the wrong telephone pole on this particular amendment, because the monopoly which is still vested and which the Bill continues to vest in British Telecommunications is not of systems but of the running of systems, and it is really impossible to divorce the prime instrument and the network which it needs to use in order to be operable, with the attachments which can be plugged into this network and which the Bill seeks to liberalise and which every kind of commercial organisation in this country (with some time protections in order to protect us from overseas competition) can really make use and take advantage of. Many common attachments—indeed the majority—are not systems and therefore no licence is required for their operation. That is reflected in Clause 16, which enables the Secretary of State to approve standards for apparatus to be connected to a system run by British Telecom.
Some of my noble friend's strictures might well be valid if the Government were seeking to act under the counter, as it were, although I resent any suggestion that they would do that and I do not think my noble friend actually made that suggestion, but he hinted 732 that an unscrupulous Government might go under the counter. The position is entirely above board in that the common attachments are not systems and it is the attachments to systems which provide the products where the liberalising legislation is taking place. Therefore, I hope that my noble friend in his turn will look again at what he said, and line it up with the provisions in the Bill, and I think he will find that his charges are quite unfounded.
§ Lord Underhill
I appreciate what the Minister has said about the references in the amendment to services beyond the first instruments, but I am also worried as to whether there is not a serious defect in this amendment in so far as the noble Lord, Lord Morris, quoted the noble Lord, Lord Byers, saying that we are not talking about the exclusive monopoly of the national network. But this amendment, No. 59, would take away the reference to the exclusive privilege of the licensing and running of the systems throughout the British Islands.
Later on, in Amendment No. 71, we find:The Secretary of State shall license the Corporation to provide telephone services".It does not say exclusively a network throughout the British Islands. Therefore, a Secretary of State could decide not to give a licence for the whole national network; he could, if he so desired, on my reading of these two amendments, do it on a regional basis, which would make an impossible situation. Unless there is a national network, with a monopoly, then surely BT could not function properly.
I do not think I have made myself absolutely clear. Clause 12 must be read with Clause 15. The danger in the way it is written lies in giving with one hand the monopoly to run the whole telecommunications system of the United Kingdom and derogating from it on the other hand under the provisions of Clause 15. If this is done, if it is handled in this particular way, the position of British Telecommunications will not be made absolutely clear and will depend entirely on the mood of the moment. I fully appreciate the fact that the present Administration is determined to liberalise the telecommunications environment. However, why is it necessary to vest the monopoly or to maintain the monopoly in the hands of a trading corporation when they have said themselves that they intend to derogate from it?
My noble friend Lord Trefgarne, on the first day of the Committee stage, argued that this would be very difficult because it would change the present situation; it would be administratively difficult. Surely Her Majesty's Government are aware that a licence is nothing other than a job specification writ large, and I cannot believe that with the proper transitional provisions this could not be done. This is why I believe that the amendment of the noble Lord, Lord Lloyd of Kilgerran, has a great deal of merit. It would place the nationalised trading corporation in precisely the same position as those in the private sector; it would place it as a licensee of the Government, who must be the right authority in these volatile times of technological change to gear the tempo of change correctly. If we get it wrong, it will be a disaster for this country.
§ Lord Torphichen
In reply to the suggestion of the noble Earl, Lord Gowrie, that British Telecom might be excluded from the terminal market altogether, I can only retort that they can do anything the Secretary of State cares to give them a licence to do under this amendment. So the only problem would be British Telcom doing its homework and listing the services it is supplying and the systems it is running and having the licence written out covering them. Except for the time factor, I do not see any objection at all.
On a much lower level than that on which my noble friend Lord Morris is talking, it comes down to a practical problem. What does a company do when it has a new product or service and it falls foul of British Telecom, which perhaps does not like some part of the service or system the company wishes to introduce and holds back its approval, maybe costing the company a great deal of money and ruining a lot of their trade? Does the company then use the Secretary of State as a last resort, and does it have to prove to the Secretary of State that it has been reasonable and gone to all possible lengths to obtain a licence from British Telecom; or can it go direct to the Secretary of State, and does British Telecom sit perched on the shoulder of the Secretary of State and, as it were, poison his mind so that licences it does not wish to see issued do not get issued?
May I give a practical example? There was a firm in Toronto which had a time-sharing network which offered terminal-to-terminal messages over Canada and several countries in Europe, with some links to the USA but only to selected cities. At some stage the Canadian telephone authorities got together with other countries' telephone authorities—I cannot remember which countries in particular—and decided that they did not like this service, because one day they might wish to introduce a service such as Prestel and it would compete with them. They doctored the licence of this company so that it no longer allowed terminal-to-terminal messages, and one or two other services which are irrelevant to this point. The telephone authorities which did this were at the time several years away from introducing any form of Prestel service or similar service. The service operated by this company was not comparable, but because it looked just a little bit like it the telephone authorities did not like it; they pulled the plug out and switched off this particular service. The question is whether British Telecom has the power to act as the first authority and delay, slow down and, eventually and only as a last resort, allow people to go to the Secretary of State, or whether the Secretary of State is the only authority and British Telecom is an equal competitor for the licences given by the Secretary of State, with the overwhelming advantage that it has the entire network and all its past experience.
The Earl of Gowrie
One of the reasons I am often envious of my colleagues in the House of Commons is that they do not usually find that the people grilling them on their Bills are professionals in the field. My noble friend is an electronics engineer, I understand; he has put very pertinent questions to me and I congratulate him on that. In fact I think he need not be alarmed. It is not a question of, in his rather vivid phrase, if I may say so, British Telecom sitting on the 734 shoulder of my right honourable friend and whispering restrictive messages in his ear, because where approvals are concerned we have the British Electronics Approval Board, which is not even a quango but a self-financing body financed by the people it supplies, wholly independent. They would be the operative approving body.
On the first point which my noble friend raised, if the privilege were, under Lord Lloyd's amendments, which my noble friend quoted approvingly, given exclusively to the Secretary of State he would have no practical option but to begin by licensing the status quo and then proceeding to derogate from that. This achieves the same as the Government plans and as the Bill allows for, but in a much more complex, and, if I may say so, tortuous way. That is why we prefer our way, and we do not see that the amendments are necessary, apart from the practical difficulties of, as we see it, excluding, under these amendments, the ability of British Telecom to compete with the provision of systems itself, not monopolistically, but at any rate to compete at all.
My noble friend has stated that the design which the Government see as the simplest and clearest way of going about this liberalisation of the telecommunications environment was of course the way which they chose. I am sorry to carry on about this, but it is very important. Clause 12(1) clearly states thatthe Corporation shall have throughout the British Isles the exclusive privilege of running telecommunications systems".Then I beseech my noble friend to go forward to subsection (4), which refers to a totally different privilege. It speaks of:References in this Act to services which…the Corporation has the exclusive privilege of providing".What are we talking about? Are we talking about the services which the corporation has the exclusive privilege of providing or about the running of telecommunications systems which the corporation has the exclusive privilege of providing?
The Earl of Gowrie
In answer to that question, I mean the latter. It is quite clear that the public telecommunications network is under the control of British Telecom and that the monopoly is therefore not of systems—which can include attachments and mechanisms—which are manufactured and bought or sold and which slot into the system. The monopoly is in the running of the system.
Why, then, maintain within the Bill itself definitions of systems which are outside the present public switched telephone network—namely, the whole of the radio spectrum, which comes under the definitions in Clause 12(1)(b)?
The Earl of Gowrie
The advice I have is that the monopoly extends to running systems, and that "running" is defined as in the dictionary, as to keep going, manage, and to conduct operations; "systems" is used to mean a complex whole set of connected things or parts. It does not seem to me to be obscure that the basic road network, as it were, is being retained in BT's monopoly and that what is liberalised are the 735 attachments or vehicles which can make use of that road system.
§ Lord Robbins
With respect to the noble Lord the Minister, he has made it perfectly clear that this controversy is about a system. The question I wish to put to the Minister is, is it within his power, or that of any of his advisers, to predict what systems may emerge in 10 or 20 years' time? Supposing such an emergence, is it not to be anticipated that those to whom the monopoly was originally given may impose obstacles to the introduction of new systems? One has only to recollect the way in which the BBC opposed from its inception the transmission of programmes by wire. It is not in the BBC's power to do so now, but there was absolute obstruction for a number of years.
§ Lord Underhill
I am sorry to interrupt again, but in his speech the noble Lord, Lord Morris, made no reference to the point which I made. When the noble Lord, Lord Lloyd of Kilgerran, replies, it might be helpful if the noble Earl, Lord Gowrie, could be asked whether my criticism was a valid one or not.
The Earl of Gowrie
I risked the odium of my Back-Benches when I gave a lusty "Hear, hear" when the noble Lord, Lord Underhill, made his point. He did reinforce very clearly the point that I had made earlier. With respect to what the noble Lord, Lord Robbins, has said, I believe we should all be extremely diffident and humble when anticipating the future, where technical changes can enormously reinforce a monopoly. I do take on board the criticism which the noble Lord made. In fact the Secretary of State has very considerable delegatory powers in this Bill; indeed, some critics of the Bill vest their criticism in the fact that too many powers are given to the Secretary of State. It seems to me to be provident to recognise that, because none of us knows the future in this area, there should be a certain amount of enabling legislation in the Bill.
Having said that, I do not believe that the fears expressed by the noble Lord, Lord Robbins, are necessarily justified because we would assume that this country and this kind of economy would wish, more or less permanently, to have a public service system with which the private sector and indeed the trading sector of the public service could compete with their products and attachments. We are, as it were, connected to each other by our need for a communications service, and we do not wish to see monopolies of the kind of services which can be offered along that broad connected network. That is the purpose of this Bill, and it would seem to me to be in line not merely with common sense but with a reasonably empirical sense of what most people want—whether they are consumers or are engaged in the business of supply.
§ Lord Torphichen
I believe I heard the noble Earl, Lord Gowrie, endorse what the noble Lord, Lord Underhill, said about the network being indivisible. I cannot see any reason why one should not license sections of the network in exactly the same way that the IBA licenses areas of the country for the running of television channels. It would be more complicated 736 technically and there would be more boundaries to be marked out; but it is no different from pointing out that there are a number of different countries in this world who run telephone systems which are all interconnected. One could just as easily have different counties running different telephone systems—or whatever other areas one cares to divide the system into. The example, of course, is Hull Corporation, which runs its own telephone network.
The Earl of Gowrie
To answer that point, I believe my noble friend Lord Torphichen is quite right when he says that there is no reason why this should not be so; but it seems to me that it would not be very sensible to arrange things in that way. As I am sure my noble friend is pertinently aware, the prime difference is that television is not a two-way medium; it is not a medium through which we communicate with one another. It is not that kind of broad service. I agree that television has now become historically or culturally in the realm of necessity rather than luxury, in that most people feel somewhat disenfranchised from the kind of society in which they are living if they do not possess a television; but it is still a very different kind of communications system from the telephone network. We also have to consider the fact that the telephone network is an international medium of exchange in the way that a television does not need to be.
§ Lord Lloyd of Kilgerran
I wish to express my gratitude to the noble Lords who participated in the debate on my amendments—particularly the noble Lord, Lord Morris, for his robust and persistent support for my general theme. I am tempted by the words in the second speech made by the noble Lord, Lord Underhill, when he directed his attention to me in particular. I am tempted to deal with his observations at some length, but it seems to me that I should not take up the time of your Lordships in this matter.
I believe it is agreed that Clause 12 is a very important clause. I should also like to revert to the opening part of the speech of the noble Earl the Minister. He was good enough to say some time ago that, in view of the submissions that I had made, he would look again at these amendments. In view of the fact that he proposes to look at the amendments again—and I now understand the position which the Government are taking up by what the noble Earl has said—I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 3.40 p.m.
Lord Lloyd of Kilgerran moved Amendment No. 61:
Page 15, line 14, after ("energy") insert ("except for light capable of being perceived with or without enhancement by the human eye").
§ The noble Lord said: I beg to move Amendment No. 61 and, with the Committee's permission, I should also like to speak to Amendment No. 65. This amendment does not raise any real question of basic principle, but it is an attempt to deal with the obscurity and, indeed, the absurdity of the position which arises under the present drafting, particularly of Clause 12(1). Clause 12(1) defines "telecommunication systems" as being systems for the conveyance of speech, music 737 and other sounds; visual images; signals serving for the actuation or control of machinery or apparatus. Those words include things which convey ordinary light. It is clearly absurd that there should be a monopoly as regards things that convey light, such as periscopes, binoculars or spectroscopes.
§ The Government recognise that the monopoly in Clause 12 does not cover such items, because in Clause 13(1)(a) there appears a very strange collection of words, and I believe that the object of those five lines in Clause 13(1)(a) is to exclude the absurdities of Clause 12(1) and to say, in effect, that things that convey light, which can be viewed by the eye, shall not be a monopoly of British Telecommunications.
Therefore, it seems to me that, when we are dealing with clauses which deal with monopolies—for example, Clauses 12 and 13—it would be better if in Clause 12(1), where it refers to the systems over which the corporation—as drafted—is supposed to have the exclusive monopoly, we were to include some more simple words; namely, that the monopoly should not extend to:
light capable of being perceived with or without enhancement by the human eye".
It really means that we are saying at the beginning of Clause 12 that the corporation has a monopoly in regard to a wide range of telecommunication systems, but it does not include any things or apparatus which convey:
light capable of being perceived with or without enhancement by the human eye".
If those words were accepted in Clause 12 in accordance with the amendment it would not be necessary to have the very strange collection of words which is now to be found in Clause 13(1)(a). Therefore, as a follow-up to Amendment No. 61 I have tabled Amendment No. 65, which would consequentially say that we should leave out Clause 13(1)(a) because it contains a collection of words which are in my view almost meaningless.
§ Lord Davies of Leek
This may be just an oddity, but I am capable of using a flashlight for communication with a ship or anybody else. Would I be infringing any provisions under this Bill by using an ordinary flashlight to give signals to someone from one end of a meadow to another or from a ship at sea?
§ Lord Lloyd of Kilgerran
I thought that there was another amendment to that effect before your Lordships, but I cannot find it for the moment.
§ Lord Lloyd of Kilgerran
There is a danger under the present wording of the Bill that that kind of apparatus might be held to be within the scope of the present wording.
In supporting the noble Lord, Lord Lloyd of Kilgerran, in his amendment I believe that I can answer the noble Lord, Lord Davies of Leek, by saying that he is absolutely correct. Under the provisions of Clause 13(1)(a), if he were to communicate with me, say, by heliograph—by mirror winking in the sun—or by torch across a meadow, then, strictly speaking, he would be breaking the monopoly 738 for the simple reason that I am wearing glasses. If I were not wearing glasses it would not be so. It states clearly:received or perceived by the eye"—how it can be received without being perceived I fail to understand—and without more".That is partly, of course, the reason for the amendment of the noble Lord, Lord Lloyd of Kilgerran. If I may speak partly as the Devil's Advocate to the amendment, I must say that I am concerned about the words, "without enhancement" because optical aids can both attenuate and enhance sight. I hate to quibble with the noble Lord's elegant drafting but I think that that is a matter which is worth considering.
In speaking to this amendment I am, at the same time, taking the opportunity to speak to my own Amendments Nos. 66 and 67 which remove the words, "received or" and the words, "and without more" and insert, "with or without optical aid". Whether that drafting is correct I cannot say. However, I believe that it would be a far happier position if the Government were to consider this very carefully for I have a great deal of sympathy for the principle of the noble Lord, Lord Lloyd of Kilgerran, that a proviso be brought in at the beginning of Clause 12 rather than be left out of Clause 13, which acts as a type of double negative because it is headed:General classes of acts not infringing the telecommunication privilege".
§ Lord Torphichen
The noble Lord, Lord Davies of Leek, has hit it right on the nail. The set of terms used to define the monopoly seems to have gone back quite a way in the telegraphy and wireless Acts. Obviously, if we did not give the monopoly to someone —the Secretary of State, the Post Office or whoever it happens to be—it would be perfectly legal for anybody to set up his wireless transmitter on any frequency he liked and ruin everybody else's communications. The answer to the problem might lie in an amendment saying, "without enhancement by the human eye et cetera". On the other hand, "enhancement" is a very flexible word. Would we allow any sort of amplifiers and the like? We could go a long way with "enhancement" and probaby ruin the terms of the Bill so that the Government would call it a wrecking amendment. The Government should, perhaps, have produced a more technical description of the frequencies seen by the human eye and put them into the Bill in order to exclude all other frequencies which they would wish to licence as radio frequencies. I am afraid that I consider it to be a measure of the way in which the Government have not done their homework that they have simply repeated the very badly worded 1969 Act.
§ 3.50 p.m.
§ Lord Lyell
I should like to thank all my noble friends and indeed the noble Lords, Lord Lloyd of Kilgerran and Lord Davies of Leek, for the fascinating discussion that we have had. I hope that it will be permissible to take these four amendments together—the two spoken to by the noble Lord, Lord Lloyd, and 739 Amendments Nos. 66 and 67, which were spoken to by my noble friend Lord Morris.
I am afraid that my noble friend Lord Torphichen lost me a little when he spoke about radio frequencies. I wondered what that had to do with being "received" or, indeed, going back to my studies of the deliberations of Bishop Berkeley and Mr. Locke on primary and secondary qualities, whether or not one "perceives" things through the human eye. I have no doubt that my noble friend has a point as to the frequency of signals which are visible by the human eye. However, I hope that both he and other noble Lords who have spoken might bear with me if I attempt to go down the middle of the fairway in this intensely complicated series of amendments, definitions and descriptions.
I am sure that all noble Lords who have spoken wish to improve the drafting of the Bill in respect of what is or may be "perceived" or "received" by the human eye, and especially in the case of the heliograph, or the flashing lights, as was mentioned by the noble Lord, Lord Davies. Of course, everyone who has spoken will agree that these amendments might make this particular part of the Bill—especially Clause 12(1) and Clause 13(I)(a)—much more explicit. However, I hope that the Committee will bear with me if I explain, briefly, the purpose behind the exceptions to the monopoly which are now contained in Clause 13(l)(a).
This particular exception is designed to remove the possibility that systems of communication which use only visible light—and in a way that means the human eye itself can receive and analyse the signals—might be caught within the exclusive privilege. Here, of course, we have the obvious example of the heliograph by day and in conditions which are not dissimilar to those pertaining this afternoon, and the flashing lights or the torch by night, which was mentioned by the noble Lord, Lord Davies. Certainly more than one of your Lordships asked whether it is the intention to allow any person to use spectacles, possibly even binoculars or telescopes in certain cases, to enhance the signal of light without infringing the monopoly. This, indeed, is the intention of the Bill and it would be quite absurd if we tried to exclude this.
I think that the main question is whether Clause 13(1)(a) gives effect to the policy which I have tried to spell out. I hope that it does. The exception in Clause 13(l)(a) is not cast in terms of how the light is actually perceived or received by the recipient, but much more in terms of whether the things conveyed by the light are capable of being perceived by the unaided eye; pace, the comment about telescopes, binoculars or spectacles. As long as they are capable of being received by the eye—aided or not—it does not matter if someone wishes to use these further aids. The exception clearly covers heliographs and similar methods of transmitting messages, even if these messages were to be conveyed over a very long distance; so, as indeed we recognise in Amendment No. 61, some kind of amplification or enhancement is needed.
But it is not the intention that any system involving light should be exempt from the exclusive privilege. It would be wrong for systems which involve what we call lasers, which require complicated and often sophisticated apparatus, to receive or, much more, to analyse the signals to be excluded by statute from the 740 monopoly, although of course it will always be possible for specific systems, such as lasers and forms of laser, to be licensed under Clause 15 when and where this would be appropriate. These systems are, of course, equivalent to similar systems using other parts of what in the Bill we call the electro-magnetic spectrum and, of course, they should be treated accordingly. I think that the electro-magnetic spectrum appears in Clause 12(1).
I would confirm that any method used entirely and solely to magnify the signal of light is covered by the exception which is set out in Clause 13(1)(a). But what is not included is a system which would require equipment. This equipment would be needed to change any frequencies, and this I think is relevant to the point raised by my noble friend Lord Torphichen; for example, from an infra-red light to a light which is more readily visible to the human eye or, indeed, to slow down changes in the strength of a signal that could not otherwise be detected by the naked eye.
This has been a slightly complicated reply and possibly a little more lengthy than I would have wished, but I am sure the Committee will agree that many different points and many very technical points were raised by Members of the Committee. I hope that I have given some explanation as to why we believe that the Bill as drafted meets the points that were raised, especially by the noble Lord, Lord Davies of Leek.
§ Lord Davies of Leek
I am grateful to the noble Lord for that reply; I think that it covers the point I raised as regards Clause 13. I do not want to go into the laser issue in depth, because despite the amount of work that has been done on lasers, we are still in our infancy on that. Am I correct in thinking that the Minister, when talking of lasers and their use, said that this is a different kettle of fish as regards the general public? What about the man working on lasers in the laboratories in Switzerland and in this country? Where does he stand? Is there governmental control here? Does this Bill have anything to do with lasers in that respect? I do not expect an answer in depth, but I should be grateful for some kind of reply.
§ Lord Lyell
I shall reply briefly to the point raised by the noble Lord, Lord Davies. From my nonscientific description of laser, which I gave to the noble Lord and, indeed, to the Committee, I think he will find that the definition of lasers, as we have used them in Committee this afternoon, is covered by the words to be found in line 13 on page 15 of the Bill, Clause 12(1)—"electro-magnetic". Further down the noble Lord will find in paragraphs (b) and (c) the words "visual images". I understand that lasers are covered by the monopoly. Of course, we could spend the whole of this afternoon discussing different forms of laser.
The only point which I mentioned, and which indeed was raised by these four amendments, was the simple form of heliograph or, indeed, the flashing light or torches at night, which the noble Lord himself raised. From what I have read, I understand that lasers are different because it seems that anyone who glances at a laser endangers his eyesight very gravely. I suspect that that might be a preliminary answer.
§ Lord Torphichen
Can my noble friend say whether his words mean that the purpose of this clause, as continued from the 1969 Act, has now changed?—in that originally its purpose was to allow the then Post Office or the Crown to order the allocation of frequencies, et cetera, and therefore prevent people making unauthorised transmissions interfering in authorised transmissions. However, in the case of a laser transmission, which the noble Lord, Lord Davies of Leek, mentioned, the only reason for preventing that would be if it involved a safety hazard. There would be no question of one person's laser interfering with anyone else's laser. Therefore, has the purpose of this wording changed since it was first put into the statutes?
§ Lord Lyell
I am not entirely sure to which clause the noble Lord refers. Was he referring to Clause 12(1)?
§ Lord Torphichen
I was referring to the noble Lord's remarks just now about including lasers and suchlike devices in the monopoly.
§ Lord Lyell
I was referring to both Clauses 12 and 13 and subsection (I) in both clauses simultaneously. I am advised—I hope that this may bear some relevance to the query raised by my noble friend Lord Torphichen—that those lasers which are used entirely on a single set of premises are exempt from the monopoly by virtue of Clause 13(I)(c). But I am told that the control of the radio spectrum remains the responsibility of the Home Secretary. This is not governed by the Bill that is before the Committee today.
§ Lord Lloyd of Kilgerran
I may be able to help the noble Lord, Lord Lyell, in this matter, because it seemed to me quite clear that lasers are included in Clause 1 and are not eliminated by Clause 13(1). Obviously it is not the intention of the Government to exclude here systems involving also optical fibres. They are included in the monopoly and are not excluded by the exceptions raised in Clause 13(1). There is no real question of principle arising in this; it is a matter of drafting. It seemed to me that the few words that I had suggested in my amendment to go into Clause 12(1) were far better than the collection of words in Clause 13(1)(a), and I had the support clearly of the noble Lord, Lord Torphichen. However, in the circumstances, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 62:
Page 15, line 22, at end insert—
("( ) It shall be an infringement of this privilege for any person to run a system falling within subsection (1) save under licence granted by or with the authority of the Secretary of State under section 15 or save as provided in sections 13 and 14.").
§ The noble Lord said: This amendment was spoken about by me on Amendments Nos. 59 and 71, and is therefore not moved.
§ [Amendment No. 62 not moved.]
§ 4.3 p.m.
Lord Morris moved Amendment No. 62A:
Page 15, line 30, at end insert ("or to imprisonment for a term not exceeding two years or to both,").
The noble Lord said: This amendment raises the question of the penalties by virtue of Clause 12(2) of the Bill. This amendment attempts to put back the penalties provided for in the original Post Office Act 1969, which included as well as a fine,
imprisonment for a term not exceeding two years or …both".
This is in the nature of a probing amendment, in that I am puzzled as to why Her Majesty's Government under Clauses 17(2)(b) and 18(2)(b) of the Bill should provide the penalty of imprisonment for offences affecting approval of apparatus or marking of goods, and yet what would be the far more serious offence of abusing the state monopoly has a mere fine. I should be obliged to my noble friend if he would explain this apparent contradiction. I beg to move.
§ Lord Trefgarne
My noble friend referred to the position in certain subsequent clauses of the Bill. I hope he will forgive me if I do not go into those in detail now. There are amendments down on those points with which we shall deal in due course. I turn my attention just to the provisions of this particular clause. My noble friend is entirely correct that in reproducing the monopoly we have dropped the penalty of imprisonment which was contained in the earlier legislation. It seemed right that the penalty for what is essentially an economic offence should be confined to a fine. This also brings the telecommunications monopoly into line with the postal monopoly, where imprisonment has never been a penalty for infringement either under Section 4 of the Post Office Act 1953 or under Clause 66 of this Bill.
It is also in keeping with the position in patent law, with which the noble Lord, Lord Lloyd of Kilgerran, is particularly conversant, since infringement of a patent is not of itself an offence punishable by imprisonment. I can also tell your Lordships that British Telecom were content with this change. It may be of interest to your Lordships to know that there have been no prosecutions under Section 24 of the Post Office Act and consequently no one has ever been imprisoned for an offence under that section. I hope that my noble friend will find this explanation convincing and not take the matter further.
I am grateful to my noble friend for that explanation, and I hope that that explanation will also be helpful to my noble friend Lord De La Warr in relation to his amendments at a later stage of the Bill. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 63 not moved.]
§ 4.8 p.m.
§ On Question, Whether Clause 12 shall stand part of the Bill?
I have two questions which I should like to ask about the scope of this clause. I think we have been talking on clause stand part for a long time now, but I have reserved my questions for this. It seems to me that if we get the world of science fiction as foreshadowed by my noble friend Lord Robbins, who knows more about these things than I do, we may get power transmitted from a central 743 place over the air. Is this covered by subsection (1)(c)? It seems to me that it probably is.
Then on a more flippant note, when I was young the movies were the latest entertainment and there was much speculation that it would not be very long before we had the "feelies" and the "smellies" to enhance the pleasures of the ninepennies—alas, now £3, I fear. If the "feelies" and the "smellies" get broadcast is that also covered under this?
The Earl of Gowrie
I congratulate my noble friend on his imagination, even as I commiserate with him that many of his earlier anticipations have not been realised in terms of movie entertainment. My advice is that subsection (1), about which he asked me, establishes BT's monopoly, which is called "exclusive privilege", of running telecommunications sytems, and defines these in terms of what is conveyed—that is to say, speech or music—and in terms of the form of energy used for conveyance, which, as our debate on lasers and the rest showed, can include electromagnetic energy. Without being any great shakes as a physicist, it appears to me that electromagnetic energy covers most of the foreseeable systems of communication in this field that we can at present dream up, let alone identify as existing. I hope that my noble friend is reassured by that.
I am greatly unreassured because I understand the noble Earl to say that if we succeed in broadcasting power it will be covered by the monopoly of this body. Is that correct?
The Earl of Gowrie
I am again, which is perfectly appropriate under clause stand part, driven back, at the risk of wearying the Committee, to the central purpose of the Bill, which is not to divest BT of the monopoly of running the system but to divest it of any monopoly over the attachments to that system. Once that is clearly seen to be the purpose of the Bill, the other issues fall into place.
§ Lord Torphichen
Returning to what I was saying to the noble Lord, Lord Lyell, the wording of Clause 12 seems to have grown up for a very different purpose from that for which it is being used in this measure. Originally there was need to control who used what frequency or to prevent any Tom, Dick or Harry stringing up wires across the road, and the language of the provision has gradually accommodated most of the ways of getting round the Post Office, now the BT, monopoly. In the meantime, the allocation of frequencies is no longer any part of BT's responsibilities. Technology has given us ways of communicating across the street without stretching wires across to the danger of people.
The only real purpose in some circumstances of this monopoly, and the wording of the clause, is to prevent people doing for themselves efficiently what BT may do for them much less efficiently. I will give a brief example. If I were to set up a laser system between two islands off the north of Scotland, I should be in nobody's way and I could ensure that the strength of the beam was low enough not to endanger anybody. But I could not do it if I was not talking to myself 744 because it would infringe the monopoly. That is not what, looking back through previous telegraph and wireless telegraphy Acts, I understand this wording to have come into being to prevent. There are better ways of communicating with one's neighbour in some cases than getting the Post Office or BT to lay a line to the exchange and back again.
The Earl of Gowrie
I think the noble Lord has it wrong in the sense that existing wireless and telegraphic communications legislation is not covered by the Bill; that is covered by other legislation. He is right in saying that if he wished to run, as it were, a telephonic network but using lasers as a form of communication between one island and another, he would be infringing the exclusive privilege. But he could do so under licence from the Secretary of State; he could apply to the Secretary of State for such a licence and that might be granted or of course withheld.
My noble friend said on an earlier occasion that the exclusive privilege was limited to the running of telecommunications systems. I am still puzzled—I should be grateful for an answer, though I would understand if my noble friend were not able to give one immediately—why there is reference in subsection (4) to the exclusive privilege of providing services, an exclusive privilege which does not existing in the Bill.
The Earl of Gowrie
If my off-the-cuff answer is wrong, I apologise to my noble friend and will write to him. I think the difficulty he is finding with this provision arises from a confusion about what he means and. what we mean by "systems". We use "systems" in connection with running systems and "running" implies the control. I have tried to make it clear that the public telecommunications network, which was under the control of the Post Office, is now to be vested in the control of British Telecommunications. Therefore anyone who uses a telephone instrument, or even an instrument of the more science fiction kind that we have described in the electromagnetic field, in conjunction with the network, does not himself run the system he is using. The instruments involved are not themselves the system; they are, as it were attached to or slotted into the system.
Everything my noble friend has just said is absolutely correct and I entirely accept it. May I again ask him why there is reference in the Bill to the exclusive privilege of providing services when there should be a reference only to the exclusive privilege of running telecommunications systems?
The Earl of Gowrie
Again, without taking advice, it seems to me that one cannot run a system, which is what this monopoly is about, without being able to service it. That seems to be reasonably straightforward.
§ Clause 12 agreed to.
§ Clause 13 [General classes of acts not infringing the telecommunication privilege]:
§ [Amendment No. 65 not moved.]745
Lord Morris moved Amendment No. 66:
Page 16, line 13, leave out ("received or").
§ The noble Lord said: As a result of the work of my noble friend Lord Lyell, this has become simply a drafting amendment. Subsection (1) puzzles me in that it refers to light being received or perceived by the eye. I understand how light can be perceived by the eye. I fail to understand how it can be received by the eye. I beg to move.
§ Lord Lyell
We discussed this matter at some length when dealing with Amendments Nos. 5 and 61. I must apologise to my noble friend in that I have no separate note on the difference between perceiving and receiving in the human eye. However, subject to any assurance I can give him to the effect that the clause as drafted covers the points that were raised in Committee, if there is any logical or drafting matter here, perhaps my noble friend will permit me to get in touch with him before the next stage of the Bill. I suspect the answer will be more than esoteric, but I am afraid I do not have the esoteric answer with me this afternoon.
I am grateful to my noble friend for that answer and I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 67 not moved.]
§ 4.18 p.m.
Lord Mottistone moved Amendment No. 68:
Page 16, line 22, leave out ("or").
§ The noble Lord said: With the permission of the Committee, I will speak at the same time to Amendment No. 69, No. 68 being consequential upon No. 69. By way of introduction, I would remind your Lordships that the British merchant fleet is still the fourth largest in the world and that shipping operations are unique in that the only means of communication with merchant ships at sea is by radio. Experience over the years has shown that effective and economic communications have been hampered by the monopoly in the past held by the Post Office.
§ There are two aspects of the matter. When one talks about economic communications, increases in charges between September 1975 and March 1980 were about 90 per cent., which exceeded the rate of inflation, and a further increase of about 25 per cent. is expected in 1981. From the point of view of effective communications, they are always vulnerable to interruption, for many reasons—industrial action is one and plain incompetence is another—when one's communications are in the hands of a third party.
§ There is a precedent for what the amendment seeks to do. In many other countries shipowners are permitted to operate their own coast radio stations, for operating and business purposes. These countries include the United States of America, Canada, Equador, Kuwait, Bahrain, Libya, Algeria, and Morocco. That is a fairly substantial coverage, involving countries which among them have a very large number of ships.
§ There is, in a small way, a precedent also in that the Home Office has licensed a limited number of low- 746 powered private radio stations of very limited range, but these are suitable only for contact in the vicinity of ports. British Petroleum has one at the Isle of Grain. But even in such cases the Post Office (now British Telecom) does not permit live communication over the telephone network. Thus, for example, this kind of little network, which is suitable for berthing and for the careful control of valuable, and sometimes volatile, cargoes—which is the type of purpose for which it is intended—does not extend the possibility of operating. Under the existing Post Office rules it is not possible for a shipowner in his city office to speak direct to the master of an in-bound ship. So, though there is that kind of precedent, it is quite limited, and is designed for a totally different purpose.
§ I turn now to the details of the amendment, on which, I must declare to the Committee, I am advised by the General Council of British Shipping. We seek to give authority to shipowners, either singly or corporately, to operate a coast radio station to conduct business with their ships worldwide, on the lines of those of the countries that I mentioned earlier. I would emphasise that the station would be used solely for business and operating purposes. It is not the intention to obtain facilities for public correspondence with, for example, passengers, which would be expected to continue to be handled through the existing British Telecom network.
§ I consider that the amendment is a sensible one. Looking at it superficially as we have gone along, perhaps the Government will say that they can give a licence under Clause 15. However I note that in the initial provisions of Clause 15 the Government would issue the licences after consultation with BritishTelecom; and I return now perhaps to the general theme of our earlier debates, on the first amendment today, moved by the noble Lord, Lord Lloyd of Kilgerran. One is terribly suspicious about consultation with British Telecom, when it is supposed to be a competitor. This is the terrible worry about many parts of the Bill, and I believe that this particular kind of qualification was not in the Bill when originally written, but was inserted in another place. It is for that reason that we seek to have in Clause 13 the kind of powers that I am asking for in the amendment, rather than to rely on Clause 15. How can one trust one's competitor to advise one's masters on how best to suit one's own needs? Human nature being what it is, and bureaucratic human nature being a collective, amorphous mass of advice, this situation is even more suspect and vulnerable. It is not really reasonable to allow a body of people, whatever that body might be, to give advice in that way. If I were on the staff of British Telecom, I should be just as wicked as the rest of them. It is too difficult to expect them to advise the Government fairly on dealing with a competitive issue. So I ask my noble friends whether they can see a way to include the amendment, or something quite like it, in the clause. I beg to move.
§ Lord Trefgarne
I am grateful to my noble friend Lord Mottistone for the way in which he has moved the amendment. He will be aware that my own responsibilities at the Department of Trade have given me a special insight into the British shipbuilding industry, and 747 I certainly understand its need for quick and efficient communications. It is the Government's intention, when relaxing the monopoly, to do so through the licensing procedure, rather than by the grant of new statutory exemptions. This procedure will allow applications to be given careful consideration and the terms of any licence to be tailored exactly to the case in question, and indeed to be varied as and when the need arises.
That flexibility could well not be available if reliance had to be placed on an exemption in the statute book. Obviously the point there is that if the particular service proposed fell just outside the exemption provided for by Parliament, then to vary the terms of the exemption would need primary legislation, which might unduly weary your Lordships, if it came before you time and time again.
I can confirm that, as my noble friend pointed out, the Secretary of State's powers to issue licences in Clause 15 permit him to license shipowners to operate their own coast radio stations, should that be appropriate. I accept that ships are dependent on radio, and the Government would therefore wish to consider any application in this area with great care. But I must emphasise that of itself that is not a sufficient justification to single out this interest from all the other interests that wish to take advantage of the intended relaxation of the telecommunications monopoly by granting a statutory exemption.
My noble friend will also be aware that there would be a number of detailed implications flowing from his amendment, such as the availability of frequencies, and the financial effects on the service currently provided by British Telecom. All such points would need to be carefully considered before a decision was made. Again, this points to the use of the licensing procedure, rather than to a specific statutory exemption, and I hope that my noble friend will see the force of that argument.
My noble friend referred to the position of British Telecom as an adviser to the Secretary of State when he is considering whether or not to issue a licence in any particular case. It is the position that my right honourable friend the Secretary of State—and any subsequent Secretary of State, for that matter—has access to a wide range of advice, not merely the advice of British Telecom, and of course he will want to take into account all the various sources of advice before reaching his decision. Doubtless he will wish to consider my noble friend's suggestion that the advice of British Telecom might be couched in terms that reflected its own particular interest. I hope that my noble friend will see the difficulties in the way of what he proposes and will not seek to take the matter further.
§ 4.29 p.m.
§ Lord Lloyd of Kilgerran
In view of the importance of this proposal by the noble Lord, Lord Mottistone, in relation to the merchant shipping industry, I wonder whether the noble Lord, Lord Trefgarne, has considered the position that arises under Clause 15, which is the clause concerned with the granting of licences. The noble Lord, Lord Mottistone, very fairly raised the question of the difficulties that might arise when an application is made by merchant shipowners for a 748 licence under Clause 15, having regard to the nature of British Telecom.
I might have missed it but it does not seem to me that the Bill includes any appeal procedure in respect of the refusal to grant a licence under Clause 15. If I am wrong about that, I apologise to the noble Lord. But I cannot see how he can justify his argument that the point raised by the noble Lord, Lord Mottistone, is a licensing matter, bearing in mind that the noble Lord, Lord Mottistone, has quite clearly and reasonably indicated the difficulties that might arise when there is no appeal against refusal to grant a licence.
I myself have an amendment in relation to this matter, and the purpose of the amendment is that there should be stated in Clause 15 the circumstances under which licences should be refused and that there should be certain classes of licence applications which the Government would like to make it quite clear must be refused. But as far as I understand it (I may have missed, as I said, the position under Clause 15) I do not think the noble Lord can quite justify his answer to Lord Mottistone if there is no appeal procedure for dealing with applications for licences which have been refused.
§ Lord Trefgarne
I could see the force of the argument of the noble Lord, Lord Lloyd, and indeed the argument of my noble friend, if it was the case that British Telecom were the only people concerned with the grant of licences. But, of course, that is not the case; the Secretary of State has a role to play, as defined in Clause 15. I therefore hope that the Committee will be satisfied that, with the overseeing role which is given to the Secretary of State of the day by this clause, the commercial interests (among others) of the applicants for licences are properly safeguarded.
§ Lord Mottistone
I thank my noble friend very much for his clear explanation. I also thank the noble Lord, Lord Lloyd of Kilgerran, for taking up this particular point about the fact that the Bill itself, in Clause 15(1), says only,the Secretary of State after consultation with the Corporation".I very much take the point of my noble friend that there will be other bodies which he will consult in order to get a fair picture, but I would suggest that it might be wise to say so in the Bill, so that it read,after consultation with the Corporation and other parties which could give good advice",or some suitable phrase to the same effect.
This would have two effects. The first is that [...] would validate what my noble friend says, and says in good faith. I accept entirely what he says, but it does not say so in the Bill, and in years to come Secretaries of State may limit themselves to consulting the corporation only. That could happen. But, secondly, and much more importantly for the present, is the fact that we are embarking on, I think, a new chapter; an opportunity to bring competition to work in this great area of advancing technology, which is so important, as many other noble Lords have said. So it is going to be very difficult to get it right, and it is very important that there should be a minimum of suspicion. It would help, I should have thought, if in this part of the Bill, in Clause 15(1)(a), and in other parts which say the same, the words "and others" were inserted in 749 appropriate places right through the Bill. That would give confidence to the people who are applying for licences, or whatever, that the Minister really was taking more advice than from their main competitor. So I give that thought to my noble friend, and it may be that after consideration I might come to putting down an amendment to encourage him to keep that thought in his mind.
As to my amendment, I would make one other point. My noble friend mentioned in passing that shipowners will be among other applicants for a licence, and that frequencies have got to be set up between them, and so on. I hope he took the point—I think he did—that shipowners communicating with their ships are in a unique position, because they alone can use radio. I am not counting the fighting services; but most other bodies of people who require some sort of communication do not have to rely wholly on radio. Perhaps, if my noble friend does not agree with me, he will either say so now or consult with me between now and a later stage, because what I propose to do is to examine with care what my noble friend has said. I will not say that I will accept entirely what is there at this stage, and I may come back to it at a later stage of the Bill, but at this particular point I beg leave to withdraw my amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 69 not moved.]
§ 4.35 p.m.
Lord Morris moved Amendment No. 69A:
Page 17, leave out from beginning of line 6 to ("and") in line 12.
The noble Lord said: We come now to Clause 13(3)(c), which your Lordships will be aware is an exception to a proviso—or, if you prefer it, a proviso to an exception. Clause 13 is headed,
General classes of acts not infringing the telecommunication privilege",
and subsection (3) refers to conditions that do not infringe the telecommunication privilege. In other words, to put it back into the positive (which is rather more easy to understand so far as I am concerned), subsection (3)(c) states that signals that are conveyed for the purpose of imparting matter otherwise than to the person carrying on the business do infringe the exclusive privilege.
§ This particular, broad, negative power in the Bill vesting in a public trading corporation places that trading corporation in an invidious position so far as the general public is concerned, because that trading corporation is put in the position where it has to judge the matter which is being conveyed. With respect, that which is being conveyed is none of the business of the person carrying that information across where the conduit is carrying it, be it a telephone line or be it through the radio spectrum. I am concerned that if this paragraph is not removed then the stated intention of Her Majesty's Government to allow the corporation, in both the public and the private sectors, to run message-handling systems of any shape, size or description would be defeated.
§ I am thinking, in particular, of some of its applications; for instance, in the travel business, whereby travel companies can impart information on hotel 750 bookings, or whatever, from a centre by a computer to various customers. I would be very much obliged if my noble friend could reassure me on this point. I am particularly anxious that the holder of the privilege should be concerned as to the matter, or the quality of the matter, which is carried, rather than just carrying the matter, as he is instructed to do. I beg to move.
§ Lord Torphichen
May I give a very short example of where this could cause problems? There is a trade magazine, Electronic Times, which a few months ago was saying in its letter columns: "Just ring our number and dictate to our answering machine; or, if you have a facsimile machine, put your letter in the facsimile machine and we will pick it up off ours". So far as I understand it, under the terms of the 1969 Act they were quite at liberty to use their facsimile machine to talk to anybody else in their office—their reporters or other people—or to other branches of their office; but so far as I can see, if one of their subscribers, or whatever, used a facsimile machine to transmit information to them for their letters column, then probably—I am not sure about this—that would fall foul of the monopoly. Would the Post Office, now British Telecom, be entitled to look at the facsimile going across the wire to see whether it was an internal communication or an external communication, and decide whether or not it was allowed to go on? Would they be able to examine people's electronic mail like that?
The Earl of Gowrie
My noble friend's amendment is designed to give businesses the statutory right to compete with BT in providing services to third parties. I think I have made it clear to the Committee that it is the Government's intention to stimulate such competition but, through the licensing system, to retain its own ability to judge how far it is in the overall national interest to do so. It would not be responsible, in our view, if the Government were from vesting day to open the floodgates of competition without first examining what would be the overall effect of that on telecommunication services in this country. We have looked to the United States, who are further along the road to liberalisation than we are, and have been encouraged by what we see. But their situation is not an exact model for Britain. The Government have considered, as I believe any responsible Government must, that before they decide how far to allow competition in the use of the network—that is, in providing value added services, and in the provision of the network itself—they must carefully examine the consequences and proceed accordingly and at a pace dictated by those considerations.
We consider that the work of Professor Beesley (to whom I should like to pay tribute) as set out in his report is an essential part of the process in which we are engaged. My right honourable friend the Secretary of State for Industry has publicly said that the Government are very attracted by the free-market, please-the-customer approach of the Beesley Report recommendations. But these are far-reaching recommendations and we have to consider the time element in implementing them. We have therefore said that there will be a period of public consultation before we make up our minds how far to allow freedom of network use because we are also looking carefully 751 into the consequences of competition in the provision of transmission services and have not yet reached any decision on how far such competition would at this moment be to the overall benefit of the country.
This amendment prejudges the answers to these rather difficult and critically important questions of timing, particularly of the time-scale needed for British industry to adapt to the new liberalisation which, in fairness to it, it has asked for and which, in fairness to us, we have given it. But we want some flexibility in order to be able to order the growth of competition in a way that safeguards user interests and the network itself.
I am sure that my noble friend believes that his answer is the right one. If we were eventually to agree with him, we should be able to use our licensing powers to achieve as much as, and perhaps even more than, his amendment achieves. But I would ask him and this Committee to consider with me that the more deliberate and, in the end, more flexible approach based on our philosophy of licensing powers is the right way, on the one hand, to achieve greater competition and, on the other hand, simultaneously to promote a healthy growth and modernisation of the public network that is bound to remain the backbone of our telecommunications services
I hope I have taken correctly the point made by my noble friend Lord Torphichen. Is it that he wishes to assure operators of competitive services of an independence of regulatory decisions? Is that the point that my noble friend was anxious to draw to my attention?
§ Lord Torphichen
No. First, I was worried that two different organisations with perfectly legitimate licensed machinery attached to their telephone lines could fall foul of the monopoly by communicating with other people and passing third party information; and, secondly, how would the monopoly be enforced if the only way to do so would be by examining the messages going down the wires, which seems very undesirable?
The Earl of Gowrie
I will look at that point. I think it is covered by subsection (3)(b) of Clause 13. After I have studied what my noble friend has said, perhaps he will allow me to write to him.
I am grateful to my noble friend for that very full explanation. It is sad that not more people heard it. I know that that answer will be studied with great care by those interested. I rejoice in the recognition that tempo is all and that timing is the key to the whole of the changes that the industry, and indeed the consumer, envisage in this field. It is desperately important that this be got right. What concerns the industry in particular is the lack of certainty if, for instance, there should be a change of Government. This lies with the corporation of state rather than with the Minister of State. Notwithstanding that point, I beg leave to withdraw the amendment and to reiterate my gratitude for that full statement.
§ Amendment, by leave, withdrawn.
§ 4.47 p.m.
§ Lord Mottistone moved Amendment No. 70:752
Page 17, line 25, at end insert—
( ) In the case of a system and apparatus approved in accordance with section 16 and installed in premises used for the purposes of a business, the said privilege is not infringed by the installing, connecting, commissioning, testing, maintaining and operating of that system and apparatus for those purposes by suitably qualified persons.".
§ The noble Lord said: The purpose of this amendment is to enlarge the scope of Clause 13 to enable persons other than BT to operate and maintain as of right their own telephones and other telecommunication systems in the course of the conduct of their businesses. At Second Reading (in col. 1035 of the Official Report) my noble friend Lord Gowrie said that it was the Government's intention to work in stages towards this end, subject to understandable arrangements for independent technical approval of equipment. He also said that, towards the end of the proposed three-year period, PABXs would be liberalised. It is understood from a Commons Written Answer by my honourable friend Mr. Kenneth Baker that the present Government thinking is that PABX liberalisation might be limited to digital SPC PABX and the capacity for analog SPC PABXs to handle integrated voice and data seems to have been neglected.
§ Professor Beesley's statement that it is impossible to draw rigid boundaries in any aspect of telecommunications clearly is understood by the Government. My noble friend Lord Trefgarne said as much (in col. 1085) at Second Reading. Another point relevant to this argument is that perhaps the Government are not quite so aware that companies invest very large sums in PABX equipment, sums of the order of up to £500 per extension circuit. What companies are asking is that they should be allowed to choose and monitor how their investment is maintained. That is the crux of the argument.
§ The detailed purpose of this wider amendment is to allow freedom of maintenance on all PABXs much sooner than planned by the Government and much widely more than planned by the Government. In passing, I would mention that the current shortage of trained telecommunications technicians and engineers means that there is no threat to the employment of BT employees should this liberalisation come about sooner, as we hope.
§ Finally, once again I am putting forward an amendment to Clause 13 in order to establish the position. At the time when I put down this amendment I had not heard the argument that my noble friend Lord Trefgarne advanced against my Amendment No. 68—that Clause 15 would do just as well. My arguments—and I shall not repeat the whole of them—are exactly the same as the ones I advanced on Amendment No. 68: we were shying away from Clause 15 because it has this essential flaw of the consultation with the main competitor. In the area of this amendment, it would probably be even more important to be spared that than it was in that of my earlier amendment. I beg to move.
The Earl of Gowrie
I very much sympathise with my noble friend's wish to see the telephone subscriber given the greatest possible freedom of choice. This surely is what liberalisation is all about. But the subscriber would not gain at all if the result was a serious worsening in his standard of service because 753 of the widespread connection of unsuitable equipment or even of physical damage to the network. I am sure my noble friend agrees with me that there have to be some rules and procedures to maintain technical compatibility between the network and what is connected to it.
We go a long way in terms, as he said, of the independent approvals. Unfortunately, it is not just a simple matter of requiring a standardised approval. For instance, if items are added, even to quite simple installations, they may not work properly unless they are appropriate to that particular installation. Nor is the network itself the same from place to place, and what might work well in central London could fail altogether in a rural district, let us say, at a greater distance from the central exchange. A set of rules to cover every eventuality and every combination of system building blocks would surely be very complicated to draw up and rather incomprehensible to all but a handful of large professional users. That is one of the reasons why the Government have decided to keep a role for BT, as the network operator, in the actual connection of apparatus to its network. The installation of all apparatus, except the first telephone on direct lines, will be open to competition. But unless the apparatus can simply be plugged in—and this will be possible in most cases—the final connection to the network must be made by the operator of the network: that is, by BT. This is true even under the still more liberal rëgime in the United States. This commissioning is not a lengthy business when the apparatus is in place and ready, and I am quite confident that it is in the overall interests of subscribers.
My noble friend has said that the purpose of his amendment is to permit from an early date the private maintenance of all private automatic branch exchanges—or PABXs as they are known. This matter has been debated in another place and the Committee will be aware that the Government have announced that once PABXs are opened to full competitive supply it will be possible for approved private maintenance contractors to maintain digital SPC (stored programme control) private automatic branch exchanges installed after that time. Our decision to reserve the maintenance of certain PABXs to British Telecom is designed to strike a balance between the benefits of competition and the standard of service available to users.
British Telecom cannot avoid its responsibility to users for the standards of service that they receive, for although the individual user is unable to influence other users, their apparatus affects the quality of his service. In America this is known technically as "second party harm" and we consider that in setting the framework for competition, we have a duty to keep the risk of such second party harm within reasonable bounds. A faulty or a badly maintained PABX is capable of causing widespread disturbance to the network with bad effects on the service available to many subscribers. So the Government judge that this problem is sufficiently acute to justify placing responsibility for private exchange maintenance in the hands of the network operator. At the same time, we are aware that there are arguments from both sides and a particularly compelling argument is that this policy for PAXB maintenance could stifle innovation and seriously slow down the convergence of voice and data 754 technologies in Britain. This convergence is already taking place as increasing use is made of digital methods in voice transmission and is seen as being the mainstream of future technological change.
If I may tread on what is in my case the rather uncertain ground of high technology, we anticipate a move from voice analogue, where effectively the sound waves are reproduced, to digital transmission, where the sound waves are translated into the binary code and then retranslated at the other end. After careful consideration, we were persuaded that where a PABX employed digital stored programme control technology, British Telecom should be able to perform its network supervision remotely from a central location. This supervision is essential if BT is to be able to discharge its responsibility to protect the service quality.
My noble friend mentioned analogue stored programme control PABXs. My technical advice is that this technology unfortunately does not lend itself to the remote supervision which I have mentioned and therefore the Government do not yet feel able to extend the right of private maintenance to these PABXs. Effective maintenance is still very important and we have therefore considered it right that private PABXs maintenance should be carried out only by approved contractors. We also consider that these arrangements should be brought into effect when there is general liberalisation of the private branch exchanges.
I hope that the Committee will agree with me that this policy reconciles the interests of the open competition which we want with those of quality and service in a fair and reasonable way and does not place an impediment in the way of innovation and the competitiveness of the British Telecommunications manufacturing industry.
§ Lord Mottistone
My noble friend's speech—if he will forgive me saying so—was very much like the curate's egg. I understand what he is saying but I do not entirely accept it all. The earlier part of his speech—so far as I can see—was seeking to criticise my amendment on the grounds that any installation and maintenance that might be done independently of the Post Office might harm the network. My amendment begins with a reference to Section 16, which is the very one which makes it quite certain that you cannot do anything without having obtained approval from the Government regarding the quality of your equipment.
The other point which underlies a lot of what he said—and I take it that it is the way that he has probably been advised—is that it is perhaps assumed that the British Telecom maintenance engineers will be better than those in private companies. I would question that. In the first place, they are probably the same type of chaps. In the second place, we are only talking about the big companies that have the resources to have large internal PABX or other telecommunications equipment, and they take jolly good care to protect their interests. Indeed they have a greater incentive to employ good people to do the job well than the Post Office or British Telecom have, because they are protecting their interest. British Telecom are protecting their name, and that is absolutely splendid. We are all doing that: I am seeking to do it now, but when you are having to protect your 755 interests that is another matter. So I would question the fundamental point that seems to come out in my noble friend's latter remarks that the Post Office will maintain these things better than any private chap will—I think that is nonsense.
I take the point that the analogue PABXs, SPCPABXs, may be less able to be remotely supervised. One really wants to know what remote supervision we are talking about and how important it is. I shall read with great interest what my noble friend has said and shall probably come back at another stage of the Bill to try to make this point from another angle, because the one thing that really upsets me is the thought that we cannot free the large PABXs for the large people a good deal sooner than the Government are currently intending. That, at the root, is what we are after, because we know that maintenance of one's own expensive equipment is probably better done interally than by other people. Having said that, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 13 agreed to.
§ Clause 14 agreed to.
§ [Amendment No. 71 not moved.]
§ Clause 15 [Saving for things done under a licence]:
§ The Deputy Chairman of Committees (Lord Jacques)
Amendment No. 72, Lord Glenamara. If this amendment is agreed to I shall not be able to call Amendment No. 73.
Lord Glenamara moved Amendment No. 72:
Page 18, line 2, leave out from beginning to second ("by") in line 5.
§ The noble Lord said: I should like to discuss with this amendment Amendments Nos. 76, 79, 83 and 85. The purpose of the amendments is to delete from the Bill the Secretary of State's power to issue licences, and this of course is the heart of the whole Bill. The Secretary of State intends to use his licensing powers to introduce a competitive supply and maintenance of terminal apparatus, and he could use it also to introduce the recommendations of the Beesley Report.
§ The changes the Government intend to introduce to the monopoly are not of course specified in the Bill. Instead, Clause 15 gives the Secretary of State a new power to license exceptions to the exclusive privilege—that is the monopoly over the provision of telecommunication services—which is defined in Clause 12 and which remains with BT. However, the Government have made it clear how they intend to use this power to license, and the noble Earl, Lord Gowrie, has added a little to that today. BT will retain the monopoly of the provision of the first telephone in customer premises. So far as all other terminal apparatus is concerned, the supply, installation and maintenance is going to be opened up to competition. "Terminal apparatus" is any piece of equipment attached to the end of a telephone line, ranging from a telephone itself to complex and sophisticated private automatic branch exchanges (PABXs).
§ Originally BT was to be left with a monopoly of the 756 maintenance of PABXs and we have just been discussing that point. This was in recognition of the fact that PABXs form an intgral part of the network. Problems in one PABX can affect the quality and the provision of service to other customers. However, the Minister of State in another place announced that the maintenance of PABXs was also to be opened up to competition in future. However, the Beesley Report is quite another matter. It is even more threatening to the future of telecommunications in this country than the steps announced to date of which I have just been speaking.
§ Professor Beesley was asked by the Government last year to undertake a study for the possibility of "liberalising"—it is amazing how we misuse words in this context because there cannot be a more inappropriate word than "liberalising", so when I use that word it should be understood to be in inverted commas—the supply of what are called value added network services, which I can perhaps refer to as VANS. A VANS occurs when somebody hires a complete private circuit from BT and uses it to sell telecommunication services to third parties.
§ On this side of the Committee we have learned a great deal about the Beesley Report and how it was assembled, because we are extremely unhappy about this report. Professor Beesley is a very distinguished gentleman but I am talking about the way in which his report was assembled. It was produced with almost unseemly haste in three months, including Christmas and, I understand, a visit to Australia. It was a one-man report by a very busy gentleman who presumably was busy in his job as a professor. He took very little evidence and what he did take was in most cases taken in, to say the least, a highly informal way. We have some evidence, which no doubt one of my noble friends will be describing, about how this report was assembled.
§ The report is based upon a number of assumptions and is therefore highly susceptible to changes of the assumptions. Professor Beesley recommended that the free use of value added network services should be allowed. But he went further than that; he went further than his terms of reference in recommending that the use of international VANS should also be allowed, as should the development of private transmission services.
§ BT, as I pointed out in a previous debate, like most telecommunications authorities worldwide, makes its profit on long distance—that is trunk and international calls—and the profits from those services are used to finance the less profitable work of local calls and the provision of services to residential customers. That is how our system works and how every telecommunications system in the world works.
§ The Secretary of State has indicated that he favours the view taken by Professor Beesley, although he is undertaking consultations before coming to a decision in July—and the noble Lord might tell us why the people he is consulting are being given a shorter time than Professor Beesley was to draw up his report. If the recommendations are accepted, BT faces the prospect of a very substantial loss of revenue because private companies will be interested only in the provision of alternative transmission facilities, or VANS, in the most profitable routes. As I said last week, I 757 do not criticise that: that is in the nature of private enterprise.
§ Professor Beesley himself estimated the loss of potential revenues to BT as a result of his proposals at around 2 per cent. That figure has been hotly disputed by BT. Sir George Jefferson, talking about the effect on prices, said that the proposals would probably result in an increase of 50 per cent. in the ordinary domestic consumer's bill over and above any increases due to inflation. That is the estimate of the chairman of BT. Even Sir Keith Joseph suggested 10 per cent., and the Daily Telegraph suggested 20 per cent.; so noble Lords can take their pick. But certain it is that the Beesley Report will result in greatly increased telephone bills.
§ Of course, nobody in BT claims that BT's services as currently provided are perfect. But the major reason, in our view, for the imperfection of the services is the financial constraints which have restricted investment in the network. It is impossible for BT to modernise itself if it is not allowed an adequate investment programme. The test of the Government's proposals must be whether they are likely to improve services to the customer. The whole package will probably have a very substantial effect on BT's revenue. At the same time, there is no sign whatever—not even a whiff or a hint of a sign—from any Minister of any end to the cash limit system, under which BT is prevented from finding the sums needed for investment. Inevitably, therefore, costs to the ordinary residential customer will rise and the service will deteriorate. This is likely to be particularly true in rural areas outside the cities which have, up to the present, been subsidised by BT's profitable businesses in the cities.
§ But the customer is not only likely to have to pay higher prices for services. He is likely to be faced with having to pay higher prices for poorer services than he received in the past, because clearly, if BT's income is squeezed and, at the same time, it is allowed no substantial relief from the cash limits on its borrowing, it simply will not be able to afford to maintain existing standards for both the provision and the quality of service. Again, it is the customers in the least profitable sectors who are likely to suffer most and they are of course, as I said, the residential rural customers.
§ Clause 3 of the Bill lays a duty on BT only to provide the first telephone for a customer. That is the only duty laid on BT by this Bill. Any rural customer, who wants additional terminal apparatus, may find himself in difficulty in getting services provided at all. I asked this question the other day and I think that the noble Earl shrugged it off a bit. In an area like that, why, should BT support the overhead costs needed to provide a whole range of terminal apparatus available to residential customers, if this is going to involve it in loss-making work? It is highly unlikely that the private sector would be interested in performing unprofitable work, so the service will not be provided. So the residential customer, especially in rural areas, faces the prospect of higher prices for poorer services.
§ However, customers are also likely to be confronted with all kinds of other problems as a result of divided maintenance responsibilities. I should think, inevitably, British Telecom will be forced in future in the direction of charging for maintenance visits when something goes wrong with the 'phone. At present, 758 of course, that comes in the rental. The private sector, also, will doubtless charge for maintenance. Customers therefore face the frustration not only of a delay in establishing and correcting a fault, but of having to pay heavily in two directions to get it sorted out.
§ And what about the effect on the British manufacturing industry? I shall not quote the journals which I mentioned in the debate last week or in the Second Reading debate, which were Business Week, the Economist and Engineering Today. There is no doubt whatever that the indigenous telecommunications manufacturing industry faces the prospect of loss of work due to substantial imports, while the British customer may well be confronted with shoddy and inadequate foreign equipment.
§ One particular feature of the British suppliers' fears is, of course, their recognition of their interdependence with BT. BT buys over 90 per cent. by value from British suppliers. It is the predominant market. Indeed, it is virtually the only market for large, complex switching equipment. If foreign competition erodes BT's revenues, British suppliers will be hit twice over. They will not only lose out in competition with importers, but they will also lose orders from BT, as BT's expenditure is threatened.
§ There is no doubt whatever that, as the liberalisation time-table comes closer, the fears and apprehensions of British manufacturers are mounting. Moreover, the Government have no answer to their fears. The noble Earl, in answering this point in the Second Reading debate, was extremely weak on the question of imports. He could offer very little in the way of practical assurances or comfort to the British manufacturing sector. He rested his case purely on faith. "I do not believe this need be so", he said.
§ The Government also talked about gaining reciprocal trading opportunities for British manufacturers in foreign markets. I believe that this needs to be approached with a good deal of scepticism. Even where foreign administrations agree at government level to such trading agreements, it is extremely difficult for them to deliver. Members of your Lordships' House may be well aware that the most effective barriers to the import by British manufacturers are often erected not at government level, but by standard-setting institutions and other bodies laying down detailed specifications for equipment required that cannot possibly be made by other than the domestic supplier.
§ France is a very good example. It is an expert in this tactic and, despite liberalisation of the supply of terminals in France, very little non-French equipment ever reaches the point of sale in France. I think the noble Lord might tell us how much success he has achieved in his negotiations with the French about reciprocal trading agreements in this field.
§ The second leg of the Government's argument about imports is that they will take account of them in planning their liberalisation time-table. If I may say so, this is a very much more sensible and constructive approach. It is only by phasing in the programme for liberalisation on terminal apparatus very slowly indeed, that there is any hope that British manufacturing interests can be protected. However, at the end of the day, when full liberalisation is introduced, despite any measures that are taken, such as slowing down the time-table, the result will inevitably 759 be a substantial growth in imports of telecommunications equipment, and a corresponding reduction in the profitability of British manufacturing industry.
§ In this, as in many other areas, the Government are following a policy which is directly detrimental to the British economy and which will, in the long run, inevitably lead to the export of jobs and skills. I apologise for speaking so long, but I believe that this group of amendents is the very heart of this Bill. These are the reasons why we are proposing to remove from the Secretary of State the power to licence competitors in this field. To give him such powers would not be in the interests either of the subscriber or of the economy. I beg to move.
§ 5.19 p.m.
§ Lord Lloyd of Kilgerran
It is always a great delight to hear the noble Lord, Lord Glenamara, in view of his great experience in the other place and here. I am afraid that I rather get carried away with the cadences which he uses and sometimes I listen to the euphony of his speech rather than to its content. But I heard at the beginning of his speech his bitter attack on the use of the word "liberalisation". If that word had been used with a capital "L", there might be some foundation for his attack upon the word. But I was delighted to hear him use the word "liberalisation" in its proper context twice in the 13th minute of his speech and twice in the 14th minute. So I am pleased that he found it effective for that part of his speech, anyway—
§ Lord Lloyd of Kilgerran
Yes, but I always find it difficult to pronounce a word when it is in inverted commas. But I understand that the amendment of the noble Lord, Lord Glenamara, would leave subsection (1) of Clause 15 in this way:A licence may be granted by the Corporation".Nowhere in that clause—indeed, nowhere in the Bill—are there any guidelines as to how this corporation should behave. The noble Lord, Lord Lyell, who, in view of his experiences under the Patent Acts, is very experienced in patent matters drew an analogy between the function of the corporation and the function of the Patent Office in granting licences. The noble Lord said that licences could be granted under the Patent Acts. Where a licence is granted by some institution under a monopoly, guidelines are usually—certainly this is the case under the Patent Acts—given. But nowhere in this Bill are any guidelines given as to how this monopolistic corporation should act when an application for a licence comes before it.
Earl De La Warr
I do not agree with the amendment. I think it is a wrecking amendment. There is no way in which it could be accepted while leaving the intention of the Secretary of State about the Bill intact. So I personally would have nothing to do with it.
I disagree with the noble Lord, Lord Glenamara, apart from what he said about the Beesley Report. As I think he may know, because I spoke about it at 760 Second Reading, I have grave doubts about it. I do not object to Professor Beesley's report as such but I think that he came to his conclusions mainly on preconceived notions. I do not believe that his reasoning was good enough to justify the conclusions in the report, whether they be right or whether they be wrong.
I am unhappy about the timing of the report. If the Secretary of State wanted a report about how to go about liberalisation, it seems to me that the introduction of the Bill should have been preceded by a report of this type. To produce it when the Bill, in terms of time, is getting towards the stage of Royal Assent seems to me to have been unwise.
I do not agree, either, with the noble Lord, Lord Lloyd of Kilgerran, that the Bill should spell out the way in which liberalisation is to be carried out. That is not a matter for primary legislation. Having said that, let me return to the Beesley Report and say that it is totally inadequate as a base document upon which to found the whole of one's liberalisation policy. I say once again, as I did at Second Reading, that what we now need, even though it be late in the day, is a properly appointed commission consisting of British Telecom, of users, of manufacturers and of outside experts in order thoroughly to sift the evidence and make a report to the Secretary of State upon how he should proceed from now on. Therefore, I very much welcome the opportunity the noble Lord has given us by moving this amendment, with which I disagree, to discuss Professor Beesley's report and its very considerable shortcomings.
Like my noble friend Lord De La Warr, I believe that this amendment should be resisted. It is a wrecking amendment. In moving his amendment the noble Lord, Lord Glenamara, drew comfort from painting a horror story of mounting telephone charges, at the same time mounting an attack on the Beesley Report.
I have spent a considerable amount of time hearing Members of this House, and reading statements made in another place, slamming chairmen of Royal Commissions and of official reports for their tardiness. The first time that a person given the onerous responsibility of reporting on a very important matter shows delightful expedition, he is immediately criticised. It is very unfair. In so doing, the noble Lord failed to point out what was a vitally important part of the report, which I believe counters his suggestion that we shall be visited by ever-mounting, increased charges from British Telecommunications. Professor Beesley stated quite clearly:We find that British Telecommunication's own estimates of losses are probably exaggerated. Moreover, they fail to account for changes in British Telecommunications' tariffs which are in prospect, independently of the outcome of the present inquiry. On British Telecommunications' own evaluation, 1984–85, the maximum loss would be equivalent to an increase of £6.40 on a residential rental of £60".
§ Lord Torphichen
The noble Lord, Lord Glenamara, has stressed, among other things, that one of the reasons for moving this amendment is to protect those parts of British industry which can or would supply attachments. Could I draw to his attention the problems which this industry has had to face during the past 761 five, six or more years. The industry has been making instruments for attachment to the telephone network which, because they have had to comply with the Post Office's, now British Telecommunications' requirements (which are rather different from those of other public telephone authorities) have not been saleable overseas.
The very stringent requirements for the rental and supervision of equipment have necessitated high rental charges for machines produced in this country. They have been totally unable to compete with surplus equipment which has been not illegally imported but which has been illegally attached by the end user, mainly from the United States: equipment which in no way endangers the safety or security of the network. It is fully approved in the country of origin to design and manufacture standards which are quite compatible with the standards of this country. Because the British Post Office, now British Telecommunications, has insisted on the particular requirements of British manufacturers, it has been possible for foreign manufacturers, without any dumping or unfair price cutting or anything else, to sell far more telephone answering machines, for instance, than British companies have ever managed to rent. This has been simply because of the conditions imposed by British Telecommunications.
§ 5.29 p.m.
The Earl of Gowrie
When the noble Lord, Lord Glenamara, and the noble Lord, Lord Lloyd of Kilgerran, had their little exchange about the semantics of the word "liberalisation" I could not help thinking how politics have changed since I was a young man, when the Labour Party was widely seen to be the radical party. It has now become one of the most conservative parties that we have had, dedicated to the defence of large public monopolies and finding every conceivable conspiracy in any attempts to open them up to competition and to freedom. I really was depressed by the speech of the noble Lord, Lord Glenamara. Without going quite so far or being quite so robust in my expression as my noble friend Lord Orr-Ewing in the debates at a previous sitting of the Committee, it is stretching public credulity too far to think of what the noble Lord referred to as "the poor Post Office" in some way unable to compete, unable to defend its interests, unable to use its enormous experience in this field and the dedication of the many people who work for it, to keep its head above water in a liberalised rëgime which is indeed rather more cautious, particularly in its timing, than many of my own noble friends would like.
I agree with my noble friend Lord De La Warr that this is quite clearly a series of wrecking amendments. The amendments would remove the Secretary of State's power to license the running of telecommunications systems and they run contrary to the principle of empowering the Minister to intervene in order to see that this monopoly is relaxed and in the most important areas they would leave to British Telecommunications the last word over what competing systems were to be allowed. Of course, this is in fundamental conflict with the whole, albeit in timing, cautious approach to liberalisation and I see no reason whatsoever to use that word in inverted commas.
762 It is not sufficient to think of telecommunications liberalisation only in terms of a competitive supply of apparatus, important though that is. A major part of this information revolution which we are facing is the provision of services and that is the sector that has enormous potential to create jobs, to create employment. It is our Government's aim to stimulate growth and innovation in this sector, as much in the supply of apparatus, by, so far as possible, lowering the barriers created by a monopoly.
Complete freedom to provide VANS—value added network services—depends on complete freedom of network use, and, in most important cases, on a right to run a variety of terminal systems. The risks of complete freedom have been analysed by Professor Beesley, who has made far-reaching recommendations. Although the Government will not make decisions on exactly how far to liberalise network use until there has been an opportunity for public consideration of the Beesley Report, I cannot agree either with the noble Lord, or with my noble friend, that there is not time for that, in view of the large enabling and licensing powers still vested in my right honourable friend. However, I agree with them that this report must be considered if we are to get the right degree of liberalisation. The noble Lord's amendments would place the timing of any liberalisation solely in the hands of British Telecom and they might be tempted to be a little grudging at the speed at which they proceed. I think the noble Lord, Lord Glenamara, was in his place when, about two amendments ago, I spoke to the points made by my noble friend Lord Morris, in which I stressed how important I thought it was, and how important the Government thought it was, that this liberalisation policy should be carefully and intelligently phased so that the winds of competition could, as it were, get behind the sails of British industry but not blow the boat over all at one go.
The introduction of competition in the market for attachments where it does not already exist will be introduced in a phased licensing programme over the next three years or so. That is to allow our manufacturers, who so far have been designing their products primarily to meet the particular specifications of the Post Office, to adjust to the new competitive conditions and to develop products to match those produced elsewhere. I am quite certain that our manufacturers are watching the progress—this final progress, so to speak—sof the Bill through Parliament very carefully and they really have little excuse not to get to work right away in order to adapt to the changed conditions which we are creating and which overwhelmingly they themselves have asked for.
On the specific issue of imports, on which the noble Lord, Lord Glenamara, asked me, we are of course ourselves looking carefully at what other countries do to assist their own suppliers and, within what is legally possible to us, within our international obligations, of course we shall not lose opportunities to "crib" from them, if I may put it that way. Contact so far with other Governments and the initiatives of the European Commission all point to movement towards greater reciprocity on trading opportunities, but the timing of licensing can—and indeed will—be used to control the onset of competition, so that, as I said, 763 British industry may prepare adequately to meet its competitors on even terms.
One more answer—and again this is a technical point. There are very many kinds of value added network services that are not dependent on the re-sale of circuits. For instance, word processing bureaux, message handling and information services. The Beesley Report concentrated on VANS within the United Kingdom but firm boundaries cannot be drawn in telecommunications by their very nature and the report clearly saw its main area of study had implications in the international sphere and in relation to competition in the network itself. Professor Beesley's recommendations in these areas are subsidiary ones and the Government have at no time made a commitment to implement them. At most, they represent pointers for the future, especially in the international field, where the United Kingdom is trying to achieve agreements with other countries.
That being said, I hope that even those Members of your Lordships' Committee who are not, as it were, party free or committed to this Bill as a central part of the Government's programme, will read carefully tomorrow what the noble Lord, Lord Glenamara, has said and see how pervasive and indeed, I think, how damaging (not least to employment) this passionate and unyielding commitment to the maintenance of monopoly can be.
Perhaps I may give an illustration of that by way of answer to the point raised by my noble friend Lord Torphichen about the experience of the United States. We find that experience very illuminating. Competition in inter-state service is allowed there and competitors of AT and T, which is the main long distance carrier, have in fact grown at exceptional rates. Certainly I, as an employment Minister rather than as an industry spokesman, have had many conversations with the previous Labour Secretary in the Carter Administration, Mr. Ray Marshall, about potential job growth because some of America's traditional industries are going through some of the same difficulties that ours are going through, and he was able to give me chapter and verse of the rate at which this was proceeding in the States. Yet the total traffic that these carriers carry is very small in relation to the whole and analysts are still agreed that AT and T will be able to retain its commanding market share.
What has happened though, as so often, as in the case of British Airways in response to Freddie Laker if you like, is that the competition has sharpened the attitude of AT and T to its customers' requirements and users have gained, therefore, from a network operator more responsive to their needs. Surely this is exactly what we all as consumers want to see happening in Britain, whatever side of the fence we happen to stand politically. I really do find that these are purely wrecking amendments, and if the noble Lord, Lord Glenamara, is so unwise as to press them I hope your Lordships' Committee will roundly reject them.
§ Lord Glenamara
I was very grateful to the noble Earl, Lord De La Warr, for supporting me on the Beesley Report; he said it was wholly inadequate, and indeed it is. The noble Lord, Lord Morris, thought I was being unfair to Beesley. I have the greatest respect 764 for Professor Beesley, but what I am complaining about is his report, not the contents but the, if I may say so, very unprofessional way in which it is produced. He really ought to look at a one-man report produced by, say, Lord Scarman, to see how a report should be produced and how conclusions should be drawn.
Lord Morris said I was painting a horror picture of increasing charges. Does the noble Lord believe that charges will not increase as a result of this Bill? He does. Then he believes that Sir George Jefferson, Sir Keith Joseph and the Daily Telegraph are all wrong, because they all said they would increase considerably. Anybody who knows anything about this—I am not saying the noble Lord does not—but the experts in this field, all say that the proposals in this Bill will result in considerable increases. If that is painting a horror picture, then I am painting a horror picture.
I really must protest about the noble Earl, Lord Gowrie, resenting the Opposition doing its job. One of the jobs of the Opposition is to point out to the country the possible effects of Government legislation which is before the House, and I shall continue to do that; this is our job as the Opposition. This Bill will result in greatly increased telephone bills for subscribers. It will also result in poorer services, especially in the rural areas. There is no doubt whatever about that. That is not painting a horror picture but giving an objective view of what will happen. The noble Earl said that my speech depressed him. I am sorry to depress him or to depress anybody, but I must tell him that his Bill depresses me a great deal more than my speech depresses him, and I think it depresses a vast number of other people in the country, people living in remote rural areas and manufacturers of telephone equipment and the tens of thousands of people who work in the Post Office; they are all depressed by this Bill as well.
Then he trotted out his old thing about the poor old Post Office; that I am saying it cannot compete. It is not a case of the poor old Post Office; it is a case of British Telecommunications having to provide a telecommunications system which will enable this country to compete against the high technology of our competitors in future years. It wants to do that, but the Government will not allow it to borrow, as any other business can borrow.
This is a business, it is one of the biggest businesses in this country. Not only that, but they are forcing it now to compete against private companies which can go to the market and borrow—in other words, to compete with its hands tied behind its back. That is not fair competition, and yet that is what this Bill does. It is competition which will make it no longer possible for British Telecom to subsidise loss-making areas such as rural areas.
Finally, the noble Earl trotted out the contention about AT and T. I did say in our last debate that I hoped he would not do this, because he knows quite well that AT and T is an entirely different animal from British Telecom, with vastly greater resources and able to go to the market to borrow what it needs for its investment programme. There really is no comparison at all.
These amendments would remove the Secretary of State's power to licence. You may call that a wrecking 765 amendment if you wish. I prefaced my remarks by saying that this is the heart of the Bill. It is this power to enable the Secretary of State, especially the present Secretary of State in the present Government, to license private firms to undertake part of the activities of British Telecom now being carried out by the Post Office which is going to do untold harm to the economy, to British manufacturers and to telephone subscribers in this country, especially the poorer subscribers. I very much hope that my colleagues and I will press this to a Division and that noble Lords will support us.
§ 5.45 p.m.
§ On Question, Whether the said amendment (No. 72) shall be agreed to?
§ Their Lordships divided: Contents, 39; Not-Contents, 99.766
|Bacon, B.||Janner, L.|
|Blease, L. [Teller.]||Jeger, B.|
|Blyton, L.||Listowel, E.|
|Boston of Faversham, L.||Lovell-Davis, L.|
|Brockway, L.||McCarthy, L.|
|Bruce of Donington, L.||Masham of Ilton, B.|
|Cledwyn of Penrhos, L.||Molloy, L.|
|Collison, L.||Noel-Baker, L.|
|David, B. [Teller.]||Oram, L.|
|Davies of Leek, L.||Peart, L.|
|Davies of Penrhys, L.||Shinwell, L.|
|Elwyn-Jones, L.||Stewart of Alvechurch, B.|
|Fisher of Rednal, B.||Stewart of Fulham, L.|
|Gaitskell, B.||Stone, L.|
|Glenamara, L.||Taylor of Mansfield, L.|
|Goronwy-Roberts, L.||Underhill, L.|
|Hale, L.||Wells-Pestell, L.|
|Houghton of Sowerby, L.||Whaddon, L.|
|Howie of Troon, L.||Willis, L.|
|Airey of Abingdon, B.||Gainford, L.|
|Allerton, L.||Gladwyn, L.|
|Amhertst, E.||Gormanston, V.|
|Amulree, L.||Gowrie, E.|
|Auckland, L.||Gridley, L.|
|Avon, E.||Hailsham of Saint Marylebone, L.|
|Balfour of Inchrye, L.||Halsbury, E.|
|Bellwin, L.||Hampton, L.|
|Belstead, L.||Hanworth, V.|
|Bessborough, E.||Hawke, L.|
|Brookes, L.||Holderness, L.|
|Caccia, L.||Hornsby-Smith, B.|
|Cairns, E.||Hylton-Foster, B.|
|Cathcart, E.||Killearn, L.|
|Chelwood, L.||Kilmarnock, L.|
|Cockfield, L.||Lloyd of Kilgerran, L.|
|Colville of Culross, V.||Long, V.|
|Cranbrook, E.||Loudoun, C.|
|Croft, L.||Lyell, L. [Teller.]|
|Cullen of Ashbourne, L.||Macleod of Borve, B.|
|Daventry, V.||Mancroft, L.|
|Davidson, V.||Margadale, L.|
|De La Warr, E.||Marley, L.|
|De L'Isle, V.||Morris, L.|
|Donegall, M.||Mottistone, L.|
|Ebbisham, L.||Murton of Lindisfarne, L.|
|Eccles, V.||Newall, L.|
|Elibank, L.||Norfolk, D.|
|Ellenborough, L.||Nugent of Guildford, L.|
|Elles, B.||Ogmore, L.|
|Exeter, M.||Onslow, E.|
|Fortescue, E.||Orkney, E.|
|Fraser of Kilmorack, L.||Orr-Ewing, L.|
|Pender, L.||Sudeley, L.|
|Rankeillour, L.||Swinfen, L.|
|Rawlinson of Ewell, L.||Swinton, E.|
|Reigate, L.||Torrington, L.|
|Romney, E.||Thorneycroft, L.|
|Sainsbury, L.||Torphichen, L.|
|St. Aldwyn, E.||Trefgarne, L.|
|Salisbury, M.||Trenchard, V.|
|Sandford, L.||Vickers, B.|
|Sandys, L. [Teller.]||Vivian, L.|
|Sharples, B.||Waldegrave, E.|
|Skelmersdale, L.||Walston, L.|
|Soames, L.||Ward of Witley, V.|
|Spens, L.||Willoughby de Broke, L.|
|Stamp, L.||Young, B.|
|Strathcona and Mount Royal, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 5.53 p.m.
Lord Ponsonby of Shulbrede moved Amendment No. 73:
Page 18, line 2, after ("State") insert ("for the supply, installation and maintenance of subscribers' apparatus").
§ The noble Lord said: This amendment is specifically about the Beesley Report. I am afraid that in discussing the previous amendment a number of noble Lords did in fact cover aspects of the Beesley Report. In speaking to this amendment I also wish to speak to Amendment No. 87 and Amendment No. 88. The purpose of Amendment No. 73 is to restrict the Secretary of State's powers to license the competitive supply, installation and maintenance of subscribers' apparatus and to alter the definition of subscribers' apparatus in Clause 16 so that it would effectively prevent the Secretary of State from licensing either value added network services or alternative systems of private transmission.
§ This group of amendments would ensure that the Secretary of State could not implement some of the recommendations made in the Beesley Report. In a sense this amendment is a fallback from the previous amendment, which specifically took the power to license away from the Secretary of State and gave it to the Post Office. This amendment would restrict the actions of the Secretary of State. The recommendations of the Beesley Report could have a profoundly more damaging potential than do the proposals to open up competition in the area of terminal equipment.
§ If the Beesley Report's recommendations are implemented the consequences could be very far-reaching. There can be little doubt that the first consequence would be a sharp rise in prices to the residential customer. In his report Professor Beesley estimated that the consequential price rise out of the loss of income to British Telecom would be around 2 per cent., but British Telecom itself believes that, to take just one category, the consequence would be an increase in residential charges of the order of 63 per cent. However, the major cause of this discrepancy is that in estimating the cost of consequentials for British Telecom, Professor Beesley took no account of the first step which British Telecom would have to take in response to his recommendations. This would be, to rebalance the whole of British Telecom's pricing 767 structure in order to achieve a more even spread of profit across its services.
§ British Telecom, like the vast majority of postal and telegraphic administrations throughout the world, runs at present a wide-range of services at a loss because they can be subsidised by high profits on the trunk and international lines. Those newly-engaged in offering resale services would concentrate on trunk and international calls. In order to compete effectively, British Telecom would have to cut its charges for these services and so alter its tariff structure, in order to make a profit on the services it currently provides at a loss and which includes the supply and installation of most residential apparatus and local, non-trunk calls. The figure of 63 per cent. is probably an underestimate of British Telecom's response if private transmissions were allowed in addition to resales. The impact of these proposals on the ordinary customer would be profound.
§ In the longer term the Beesley Report's recommendations threaten the provisions of a modern, effective national network through the proliferation of special, optimum networks without the assurance of a minimum national standard. British Telecom itself could be seriously affected by the loss of revenue and by the inevitable loss of morale when it is transformed from a corporation able to serve the national interest by being right in the vanguard of world developments in telecommunications to being an ailing and financially crippled corporation unable to perform more than a minimal task.
§ The Beesley Report makes it clear that Professor Beesley himself was profoundly influenced by the American experience—which he studied for a total of one week. In particular, Professor Beesley believed that the American experience demonstrated how allowing the total liberalisation of value added network services would open up the possibility of innovative developments in new types of services.
§ We do not believe that the American experience in fact supports that conclusion. The leading interconnect company in America has in fact ceased to innovate; it merely undercuts Bell and has been truthfully described by the American Telegraph and Telecommunication Corporation as being a parasitical organisation. It contributes nothing to the development of telecommunications in the USA. In practice British Telecom both domestically and internationally offers a range of innovative value added services and is considering a wide range of new services and facilities which are second to none. Those services include Datel, packet switching transmission and in the future there will be Teletext, multi-destination broadcasting, remote video and conferencing.
§ We would also like to dispute the conclusion that Beesley draws from the American experience that new services would operate at the periphery of British Telecom's market rather than threaten it in any fundamental way. In America some groups estimate that interconnect could, by the end of this decade, provide some 20 per cent. of trunk communications and it is hard to avoid the conclusion that a development which is in its infancy in America is being foisted on to Britain with totally inadequate consideration for its longer term consequences.768
§ The most likely consequences of Beesley is that it will simply price the telephone service out of the reach of a high proportion of residential customers. An additional potential consequence of Beesley is that foreign ownership could be introduced into telecommunications provision in this country. That alone should perhaps give the Government some cause to pause for thought. Again we appear to be moving towards an absurd generosity about letting foreign interests into our markets without the real possibility of entering theirs.
§ As a signatory to the International Telecommunications Union Convention we should be aware of the recommendation that third party use of leased circuits should not be allowed. The Government, if they allowed this, would be going against that recommendation and there would undoubtedly be harsh opposition from the international community, but also retaliatory action.
§ In the domestic context Professor Beesley does not even comment on the real constraints on the course which he proposes. Since Britain is a very crowded island and the frequency spectrum is infinite, the Government should well be aware of the intense competition that already exists for frequency allocations. Did Professor Beesley take advice on this point? What is the view of the Home Office on the way in which this can be resolved, since that department is in charge of frequency allocation?
§ We believe that there is a very good case for your Lordships' Committee to pass this amendment and to refuse to allow the Government to rush into a situation with potential disastrous repercussions for telecommunications in this country, on the basis of a totally inadequate consideration and debate on this issue. I beg to move.
§ 6.4 p.m.
§ Lord Underhill
References have been made both in this debate and in the debate on the previous amendment to the report of Professor Beesley. I should like to add a few comments to those which have been made particularly in the light of the remarks that I made during Second Reading. I believe that there are some who support the Government's proposals on the competitive supply of terminals who are concerned about Professor Beesley's recommendations on the "opening up"—I prefer that phrase—of domestic and international value added network services or the development of private transmission services.
There is deep concern that the Government appear to be prepared to go ahead and implement the recommendations on the basis of the study undertaken by Professor Beesley. We must question whether a report prepared by one man—no matter how eminent he may be—is a suitable basis for determining Government decisions. It is very rare to place such a burden with such important decisions on one man's report. It would seem that the Government required him to complete the report and gave him, as he himself states in his foreword, three months to complete the preparation of the report that contains these important recommendations. In his foreword Professor Beesley has stated:There are in consequence interested parties whose views have not been in time for incorporation".769 He had three months to prepare a report of a study in a field that is widely acknowledged to be highly technical and extremely complex. During those months understandably Professor Beesley could not devote himself full time to that task. He had other private commitments. I am not criticising him for that because we all understand the problem—busy and eminent men have a lot of calls on their time. But Appendix 1 to the report lists a total of 36 individuals and organisations in the United Kingdom who were consulted.
Your Lordships will be aware that the Post Office Engineering Union, which is the largest union in British Telecom, takes a close, critical but constructive interest in the Government's proposals for telecommunications. When it saw this impressive list of persons and individuals it decided to write to the organisations and to ask for copies of their evidence to Professor Beesley in the hope that it might shed some more light on the reasons why he had reached these important conclusions. It found it impossible to trace certain organisations and individuals, but it was able to write to 20 of those listed. By last week it had received seven replies.
Naturally your Lordships will understand why I shall not give the particular names of those persons and bodies who replied. Six of the seven said that they had submitted no written evidence and no detailed explanation or analysis of their views. Two of them expressed the view to the POEU that they were openly astonished to find themselves listed. The others had provided an estimate here and an informal comment there. It is bad enough that the Government should ask us—
I think, in fairness, that the report says quite clearly that during the course of the study verbal evidence was received.
§ Lord Underhill
That may be, but we are discussing a very important report with very far-reaching consequences and I am certain that on other issues noble Lords would wish to see a far more detailed report with far more detailed investigations than have been made in this particular case. I am not criticising Professor Beesley; I am criticising the Government which sought to ask for this report to be produced at such short notice and therefore the study had to be carried out in this particular way.
What is the possibility if Professor Beesley is wrong? What if the Secretary of State is wrong in accepting these recommendations in a report which everybody must admit has been rather hastily compiled? Noble friends have already given what they believe are some of the consequences which may ensue and it must be emphasised—and this was pointed out by the noble Earl, Lord De La Warr—that Professor Beesley's report was not available in the other place until after this Bill had gone through all stages. I am wondering what comments there might have been if it had been produced before the Bill had even started its passage through the other place.
As I said on Second Reading, it would seem that the Government's main inspiration in all they propose to do in telecommunications comes from looking at the United States—that is, despite the geographical 770 differences between a relatively sparsely populated continent and a densly populated island like our own and despite political and social differences also between the two countries. It must also be mentioned that the States carried through their changes over a period of some 20 years and built up over that period a very substantial machinery of safeguards, but there is little of that in this particular Bill.
So I would say that the Government appear to be basing their proposals in this particular clause as regard which my noble friend has moved his amendment, mainly on the report of Professor Beesley. I make no criticism of him; my criticism is of the Government which, on an issue of this great importance, requested that the report should be compiled in a period of three months. I hope noble Lords will consider that that is not satisfactory, and will therefore support the amendment which my noble friend has moved.
§ Lord Mottistone
I hope that as they continue with these arguments, the Opposition will stop saying "No criticism of Professor Beesley; he did a very bad job but that was not his fault; that was the Government's fault because they constrained him". That is nonsense. First, this report contains much solid, good, practical and technical commonsense. Secondly, those areas which the Opposition are attacking are areas which the Government have as their their basic policy for this Bill anyhow. Whether or not there was Beesley, the Bill would be roughly in this shape. In fact, it was because as the noble Lord, Lord Underhill, has just said, Beesley's Report was not published until after the Bill had been through the other place. So the Opposition are miscasting their criticism of the Beesley Report.
The Beesley Report is a good underpinning set of technical recommendations to which the Government may or may not adhere, but it provides a useful basis from which to work. I think that we should have a little less of this trying to debunk Beesley when, in fact, you are trying to debunk the Government's main policy which was in existence before Beesley reported. That at least would be honest and would be a better approach altogether.
Earl de la Warr
It is now obvious that Amendment No. 73 was designed to be the Beesley amendment. However, as the noble Lord said, matters overlapped a bit and we have presumably now said all that needs to be said about Professor Beesley. I certainly have. However, I should like to suggest that we do not get into the frame of mind whereby, if the noble Lord is to press this amendment, we vote about Beesley. In fact, we will vote about whether the Secretary of State should be constricted in what he may do as regards the licensing of end apparatus. We well know that the intention of the Secretary of State is wider than that; that there may be matters, like leasing of lines and other matters, that go beyond the question of the supply and installation of apparatus. Therefore, I would suggest to noble Lords that this, in its smaller way, is again a wrecking amendment because it tries to constrict the Secretary of State to something which is much less than the whole orbit of liberalisation, which I fully support.
§ Lord Trefgarne
My Lords, first, I want to thank my noble friends Lord Mottistone and Lord De La Warr for their interventions, which said much of what I would have wished to have said to your Lordships. On the question of Beesley, it is of course the case that we are not debating the Beesley Report this afternoon. The recommendations of the Beesley Report are not those that are enshrined in this Bill because, of course, as my noble friend said, the Beesley Report appeared long after this Bill had started its passage through Parliament.
It is true that when my right honourable friend the Secretary of State published the Beesley Report, he made some fairly receptive noises about the contents of that report, but that, of course, would be only natural because the Beesley Report contains a number of recommendations which by any yardstick are good Tory philosophy and naturally find a welcome echo in the breasts of my right honourable friends. However, that does not mean to say that we follow each and every detail of the recommendations made by Professor Beesley. They are all important recommendations; some of them are very detailed and technical and will, of course, require much careful consideration before we are able to come forward with new proposals following that consideration.
These amendments take away the Secretary of State's power to license the running of the telecommunications systems and leave him able to license only the supply, installation and maintenance of subscriber apparatus. In several important areas they would leave to British Telecom the last word over what competing systems were to be allowed. I submit that this is in fundamental conflict with the Government's whole approach to liberalisation. As my noble friend Lord de la Warr mentioned, that is, of course, the amendment which your Lordships are now asked to consider.
I do not think that it is sufficient to think of telecommunications' liberalisation only in terms of the competitive supply of apparatus, vitally important though that is. A major part of the information revolution is, of course, the provision of services. This is a sector that has very considerable potential to create jobs, and it is the Government's aim to stimulate growth and innovation in this sector, as much as in the supply of apparatus, by lowering so far as possible the barriers created by monopoly.
The Government consider that relaxation of the monopoly at the Government's initiative and in pursuance of the Government's policy, should primarily be carried out by the Secretary of State who is, of course, answerable to Parliament. We, therefore, envisage the main strategic licensing decisions being made and implemented by the Secretary of State, mostly by means of general licences to minimise the degree of bureaucratic involvement. These decisions will be made in the overall national interest of improving the equipment and services available to users, through the introduction of competition rather than in the particular interest of British Telecom. It is, therefore, right that these decisions should be made by the Secretary of State.
At the same time we foresee that there may be individual licensing decisions where the Secretary of State wishes the applicant to have a licence but the proper determination of its terms requires a detailed knowledge 772 of the technology or British Telecom's operating methods concerned. In such cases British Telecom ought to be involved in granting the licence, and that is the reason for the power to direct British Telecom to license.
There were two specific points raised. One was about the ITU recommendation on third party use of international circuits, to which I believe the noble Lord, Lord Ponsonby, referred. We accept that the liberalisation of international circuits can only be a longterm matter where, of course, the United Kingdom must have regard to its international obligations. My noble friend Lord Gowrie, referred to that matter during the discussion on the previous amendment. Another noble Lord—I think that, again, it was the noble Lord, Lord Ponsonby—referred to the question of frequency allocations. Of course, the unavoidable restrictions due to scarcity of frequency limit the possible growth of competitive transmission services. This is one of the factors which the Government will take into account in reaching decisions on licensing policies. The optimum use of scarce national frequency resources must be, and is indeed, a very important Government objective, though it is not clear to me precisely how this need rule out competition.
I hope that your Lordships will agree that I have sufficiently explained our objections to these amendments and that at the same time your Lordships will have regard to the points which my noble friend Lord Gowrie ventured to put before the Committee on the previous amendment; after all, this amendment covers much similar ground. Therefore, I hope that your Lordships will see fit to reject these amendments if they are pressed.
§ Lord Ponsonby of Shulbrede
I thank the noble Lord for his reply. Of course, the purpose of our amendment was to restrict the Secretary of State's powers in relation to the proposals in the Beesley Report, because we are very concerned about a number of the proposals there. It was our desire in moving this amendment to limit the potential area of damage. I do not intend to press this amendment to a Division this evening. I shall read what the noble Lord said in reply to this debate and also what his noble friend Lord Gowrie said in reply to the previous debate, because to some extent they both touch on the Beesley Report, and decide whether to come back to this whole issue at Report stage.
§ Amendment, by leave, withdrawn.
Lord Lyell moved Amendment No. 74:
Page 18, leave out line 13 and insert ("section 12(1)").
§ The noble Lord said: This is a small, technical drafting amendment. It seeks to correct a drafting error. This is consequential upon an amendment made at the Report stage in another place. If Members of the Committee were to consult line 13 they would find that the word "that" has nothing to refer to. This amendment gives the necessary reference and makes a lot more sense. I beg to move.
§ On Question, amendment agreed to.773
§ 6.23 p.m.
§ Lord Ponsonby of Shulbrede moved Amendment No. 75:
Page 18, line 13, at end insert—
("( ) The Secretary of State shall not issue such licence unless he is satisfied that he will not thereby impede or prevent the proper discharge of the Corporation's duty under section 3(1).").
§ The noble Lord said: This amendment is essentially a fall-back requirement on the Secretary of State to consider the impact of any licensing decisions on British Telecom before reaching a decision. It seeks to insert into Clause 15 a constraint which is already imposed on the Secretary of State by the Bill in relation to his powers to direct British Telecom to divest itself of assets as in Clause 6(6), which noble Lords will find at the top of page 10 of the Bill.
§ I am sure that the Government will accept the logic of placing the Secretary of State under the same constraint in respect of his power of licensing as in respect of his power to direct British Telecom to sell assets, for the exercise of both powers involves the same potential problems for British Telecom. Both threaten British Telecom's income and financial viability, and both therefore could potentially impede or prevent British Telecom from carrying out its duties as laid down in Clause 3(1). The Government are on record as saying that they wish British Telecom to continue in the future as a successful and viable public sector enterprise capable of carrying out the duty which is imposed on it in Clause 3(1).
§ We very much expect that the Government will be able to accept this amendment, because what we are asking them to do is merely to put their money where their mouth is. We are confident that whatever our individual views of the service which British Telecom currently offers, there will be a large majority in this House who accept the need to ensure the continuing of national telecommunications services capable at the minimum of providing telephones anywhere in the United Kingdom on request. Passing this amendment will contribute to ensuring that that is so. I beg to move.
I am puzzled at the fears of the noble Lord, Lord Ponsonby. I am convinced that in the main the Secretary of State's power to grant licences will invariably be exercised by the issue of licences for services which are not performed at present by British Telecom. As such, there is nothing really to be protected. They will be very careful before they erode either directly or indirectly the current business of the Post Office. I fail to see the necessity for this amendment.
§ Lord Mottistone
I should like to add my remarks to that. In earlier amendments I was objecting to the fact that in Clause 15(1)(a) the Secretary of State could not make a decision without consultation with the corporation. My noble friends on the Front Bench indicated that they would consult with other people, so it would not be a judgment purely by one's principal competitor. By the same token, if in Clause 15(1)(a) the Secretary of State must consult with the corporation, presumably the corporation will raise the very points which the noble Lord's amendment says may arise. 774 Therefore, this amendment is unnecessary because it is taken care of by the fact that no licence can be issued without consultation with the corporation.
§ Lord Lloyd of Kilgerran
Although I agree partially with the noble Lord, Lord Mottistone, that possibly this amendment is not absolutely necessary, it would be helpful to include a subsection on these lines in Clause 15 as giving a guideline and emphasising a guideline under which the Secretary of State should operate. Clause 3(1), defining the general duties of the corporation, is an important subsection, and I would support an amendment on these lines.
§ Lord Trefgarne
I have listened to the noble Lord, Lord Ponsonby, and to the other noble Lords who have spoken with much interest, but I confess that, like my noble friend Lord Morris I remain unclear exactly what effect the noble Lords believe would be achieved by these amendments. As has been pointed out, their amendment follows the tailpiece to Clause 6(6), but there the effect is clear, since disposal of some of BT's assets could well impinge on its ability to fulfil its duty. This follows from the fact that some parts of BT's network are the subject of a number of statutory privileges which would be lost on disposal by virtue of Clause 4(3).
We have already discussed how the Government intend to use their licensing power, and I do not think your Lordships would wish me to go over that ground again. But I find it difficult to see how the issue of a licence could affect British Telecom's ability to fulfil its duty to provide reasonable telephone services. The Government do not intend to put BT's finances at risk and indeed it would be in no one's interest that it should. We all want to see a vigorous and dynamic corporation, and I am sure that competition will stimulate and encourage British Telecom. In so far as the proposed amendments would place any constraint on the Secretary of State's powers to licence or direct British Telecom to licence—although I confess I do not think that they would—it is so unclear how the constraints would operate in practice that they would only serve to introduce uncertainty about the scope of the powers. I do not believe it is right to have obscure or confusing legislation, and I hope that your Lordships will agree with me with regard to these two amendments.
I would finally add to the point made by my noble friend Lord Mottistone about the Secretary of State's reasoning process when considering the various licence applications which will come before him, that in the last resort my right honourable friend and whoever his successors may be are of course answerable to Parliament, and I believe that that is a most important constraint upon them. In the light of these concepts, I hope that your Lordships will agree that these amendments should not be agreed to.
§ Lord Ponsonby of Shulbrede
The amendment would have the effect of giving the Secretary of State a guideline when deciding whether to grant a licence. As the Minister said, the Secretary of State is bound to consult the corporation. He is not however bound to take the views of the corporation into account before granting a licence, so we felt it was necessary to include 775 in the clause, as is included in Clause 6, a guideline to the Secretary of State.
One reason the noble Lord gave for rejecting the amendment was that he felt its effect was not clear; he was not satisfied about exactly how it could be determined whether the grant of a particular licence would or would not impede or prevent the proper discharge of the corporation's duties under Clause 3(1). If the Minister is prepared to examine whether there is a case for some form of guideline to be placed on the Secretary of State regarding the granting of licences, I shall not press the amendment to a Division. On the other hand, if he is not prepared to look at it further, I shall have to do so.
§ Lord Trefgarne
I should be misleading the noble Lord if I suggested that there was much ground for him to hope we would change our position on the matter. The guidelines, as he calls them, are, I submit, not guidelines at all but almost a straitjacket, and I must reject that concept. When discussing an earlier amendment my noble friend Lord Mottistone complained that the Secretary of State might be too closely allied to the views of BT on a related but different issue. I think we have it about right in the Bill and I would be misleading the noble Lord if I gave him any expectation of a change of position by the Government on the matter.
§ 6.33 p.m.
§ On Question, Whether the said amendment (No. 75) shall be agreed to?
§ Their Lordships divided: Contents, 42; Not-Contents, 77.776
|Amherst, E.||Jeger, B.|
|Bacon, B.||Kilbracken, L.|
|Beaumont of Whitley, L.||Kilmarnock, L.|
|Blease, L. [Teller.]||Listowel, E.|
|Boston of Faversham, L.||Lloyd of Kilgerran, L.|
|Brockway, L.||Molloy, L.|
|Collison, L.||Ogmore, L.|
|David, B. [Teller.]||Oram, L.|
|Davies of Leek, L.||Peart, L.|
|Davies of Penrhys, L.||Ponsonby of Shulbrede, L.|
|Elwyn-Jones, L.||Shinwell, L.|
|Gladwyn, L.||Stewart of Alvechurch, B.|
|Glenamara, L.||Stewart of Fulham, L.|
|Goronwy-Roberts, L.||Stone, L.|
|Hale, L.||Taylor of Mansfield, L.|
|Hall, V.||Underhill, L.|
|Hampton, L.||Wells-Pestell, L.|
|Houghton of Sowerby, L.||Whaddon, L.|
|Howie of Troon, L.||Willis, L.|
|Jacques, L.||Winstanley, L.|
|Janner, L.||Winterbottom, L.|
|Airey of Abingdon, B.||Cockfield, L.|
|Allerton, L.||Cranbrook, E.|
|Alport, L.||Croft, L.|
|Auckland, L.||Davidson, V.|
|Avon, E.||De La Warr, E.|
|Bellwin, L.||De L'Isle, V.|
|Belstead, L.||Donegall, M.|
|Bessborough, E.||Ellenborough, L.|
|Brookes, L.||Elles, B.|
|Caccia, L.||Ferrers, E.|
|Cathcart, E.||Feversham, L.|
|Chelwood, L.||Fortescue, E.|
|Fraser of Kilmorack, L.||Rankeillour, L.|
|Gainford, L.||Reigate, L.|
|Gormanston, V.||Romney, E.|
|Gowrie, E.||St. Aldwyn, E.|
|Gridley, L.||Salisbury, M.|
|Hailsham of Saint Marylebone, L.||Sandford, L.|
|Sandys, L. [Teller.]|
|Halsbury, E.||Shannon, E.|
|Harmar-Nicholls, L.||Sharples, B.|
|Holderness, L.||Skelmersdale, L.|
|Hylton-Foster, B.||Slim, V.|
|Killearn, L.||Soames, L.|
|Lauderdale, E.||Stamp, L.|
|Long, V.||Strathclyde, L.|
|Lucas of Chilworth, L.||Strathcona and Mount Royal, L.|
|Lyell, L. [Teller.]|
|Macleod of Borve, B.||Sudeley, L.|
|Mancroft, L.||Swinfen, L.|
|Margadale, L.||Swinton, E.|
|Marley, L.||Thorneycroft, L.|
|Morris, L.||Torphichen, L.|
|Mottistone, L.||Trefgarne, L.|
|Murton of Lindisfarne, L.||Trenchard, V.|
|Newall, L.||Vickers, B.|
|Nugent of Guildford, L.||Vivian, L.|
|Onslow, E.||Ward of Witley, V.|
|Orkney, E.||Young, B.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ The Deputy Chairman of Committees (The Earl of Listowel)
Before I call the next amendment, I should point out that if it is agreed to, I cannot call Amendment No. 77.
§ [Amendments Nos. 76 and 77 not moved.]
§ 6.40 p.m.
Lord Glenamara moved Amendment No. 78:
Page 18, line 21, at end insert ("not exceeding ten years").
§ The noble Lord said: The purpose of this amendment is to provide a statutory maximum period for the issue of an irrevocable licence that corresponds to the current practice of BT in issuing licences. Clause 15 makes several references to the irrevocability of licences, and indeed this point was raised in the Second Reading debate by the noble Earl, Lord Gowrie. A licence is a contractual document, and it is normally current practice that where considerable investment is required by a licensee, that investment should be protected by making the licence irrevocable for a period. Indeed, in the past few years I had a great deal of experience of this matter in Cable and Wireless, which undertakes the external telecommunications for independent countries, and which in a typical small country might invest £1 million to £2 million in a station and so on, and in return is granted an irrevocable licence for perhaps five or 10 years; I think that in one case a licence was granted for 15 years.
§ The period of irrevocability is normally determined by the scale of the investment. However, it has been BT's practice to have a maximum irrevocable period of 10 years. We should try to find out what are the Government's intentions in this matter, and I should be grateful if the noble Lord enlightens us when he replies.
I think that the most straightforward argument against the introduction of irrevocable licences exceeding a period of 10 years is that which was acknowledged
by the Government, by the noble Earl, Lord Gowrie, in his Second Reading speech, part of which I quote:
Telecommunications technology is developing at such a bewildering speed…that any detailed competitive régime that we, either here or in another place, enshrined in statute would, I believe, run the risk of being left high and dry…".—[Official Report, 27/4/81; col. 1034.]
The noble Earl went on to say that the enabling powers in the Bill could be modified flexibly as needs arise.
§ That recognition is in itself a very strong argument for restricting the period during which a licence is irrevocable. As the noble Earl, Lord Gowrie, himself acknowledged in that section of his speech, there are few areas in which the pace of change is as rapid as it is in telecommunications technology. What is thought to be technologically desirable today, can be turned on its head within a very short period. If the Government wish their policy to be flexible, they should no more tie their hands by the issue of irrevocable licences for periods longer than 10 years than they should set down in statutory form the detail of what they propose.
§ There might also be a more profound constitutional point involved. The Government have asked for general enabling powers, for which they cannot effectively be held to account by Parliament. They will exercise the powers by executive action, directives, and the granting of licences. It would be quite wrong for them to give weight to their executive actions which would be implied by a period of irrevocability in excess of current normal practice. That is why my colleagues and I believe that a statutory maximum period for the issue of an irrevocable licence should correspond to the current practice of BT in issuing licences, which is for 10 years. I very much hope that the Government will feel able to accept the amendment. I beg to move.
§ Lord Lyell
It would appear that the wish of the noble Lord, Lord Glenamara, and the purpose of his amendment is to build into the Bill a limitation that we simply do not find in the 1969 Act, but which is indeed at present laid upon British Telecom through its authorisation to license from the Secretary of State. We believe that that would be a retrograde step, and an unfortunate one, too, for in effect the amendment would require all licences to be renewed after not more than 10 years, or perhaps even to lapse. Furthermore the amendment would take away the discretion of the Secretary of State. We believe that it would create some uncertainty, which would be very undesirable in some particular cases that I shall enumerate later. Any uncertainty and the removal of discretion is the opposite of what is needed if any liberalisation is to be effective.
So far as possible the Government intend to relax the monopoly and to introduce competition by issuing general licences to anybody, or indeed to all persons, who apply, and such persons would be allowed to run systems, subject to certain conditions. We envisage that that will be the means by which full competition will be introduced into the supply of terminal equipment and the provision of services using the network, in so far as we decide to liberalise use of the network in the light of Professor Beesley's study. General licences of the kind that are envisaged in the clause will embody a permanent relaxation of the telecommunica 778 tions monopoly, and we would all expect the terms of the licence to reflect that and not to include a time limit.
A time limit for licences as envisaged in the amendment would introduce the uncertainty that I have already mentioned. I should like to give one example here. A time limit on a general licence allowing the use of privately-supplied private branch exchanges, provided that they met the necessary technical requirements, would expose users to the possibility that they might find themselves infringing British Telecom's exclusive privilege. We consider that that would give an unacceptable trading advantage to British Telecom and would certainly diminish one leg of our policy which is concerned with the effectiveness of liberalisation.
We understand that when a particular enterprise is granted an individual licence, perhaps to run a system to provide a very complex telecommunications service, where only limited competition is possible, such a licence should be subject to renewal. However, we envisage such a case being not common and I doubt whether a period of 10 years would always be long enough. I say that because such a system would be complex and expensive, requiring many years of development before there would be a return. We can foresee that too short a time limit—and in such a case 10 years might well be too short—could easily deter innovation (which was mentioned in the Second Reading speech of my noble colleague the Minister, as referred to by the noble Lord, Lord Glenamara) and entry into the market by new firms to supply equipment would be inhibited.
For the reasons that I have just spelled out, we believe that my right honourable friend the Secretary of State should have complete discretion when issuing a licence to decide whether it should be irrevocable and, if so, how soon it should be revoked. My answer has been fairly detailed and I hope that it will go some way towards persuading the noble Lord, Lord Glenamara, that his fears are unfounded.
I agree entirely with every word that my noble friend has said. I was puzzled when I saw the amendment tabled, because this particular subsection of the Bill contains precisely the same wording as that of Section 27(2) of the Pot Office Act 1969 which, as we all know, was the child of the previous Administration. It is vitally important that the Secretary of State be given as much flexibility as possible, since it is very difficult to limit the lead time in any investment. One of the major criticisms of this Bill which has been put to me, at any rate, is the lack of certainty in both the private and, indeed, the public sector with regard to this Bill. That is a very important question, but I will not develop it. However, I do believe that this flexibility is absolutely necessary.
§ 6.50 p.m.
§ Lord Lloyd of Kilgerran
I am afraid I find it difficult to follow the noble Lord, Lord Lyell, when he says that it is going to be the policy of the Government to give general licences, many of which would be irrevocable. He is permitted to do that, of course, under the terms of Clause 15(1), because a licence can be given irrevocably. But, surely, is it not a mistake from a practical point of view to grant licences which are 779 irrevocable? If the noble Lord were to include in his observations one to the effect that there would be some kind of escape clause put in as one of the conditions, I would understand the attitude of the Government; but to grant irrevocable licences in this field of high technology seems to me to be a mistake.
Therefore, some limit to the maximum period ought to be put in—subject, however, to the possibility of a renewal. As the noble Lord, Lord Lyell, knows so well from his experience in patent matters, certain inventions take a long time to develop commercially, and therefore licences should be given for a long term. But in practice, of course, in the [...]case of patents quite often a licence is given for a limited period and then it is said, "If you do some good work with this invention, then the licence will be renewed".
§ Lord Glenamara
I think the Government are very foolish not to accept this. The noble Lord stood the argument on its head, I thought. He said that it would limit the discretion of the Secretary of State. Surely it would increase the discretion of the Secretary of State. If licences fell in after 10 years, he could remove an unsatisfactory or a barely satisfactory licensee. I should have thought it would increase his discretion, not limit it. Ten years is a fairly long period. Licensees would be kept on their toes, and if they were not satisfactory they would be replaced; if they were satisfactory, they would continue. I should have thought the ITV franchise system was perhaps the reality. The companies tender for the franchises and they are awarded them, and they all try to do their best (they have to do their best; they have to compete with the BBC) in order to have them renewed at the end of the period. But in this case the licences are going to be irrevocable.
The noble Lord spoke about the return on capital. Here again, from experience of Cable and Wireless I would say it is sometimes year four or year five before something becomes profitable. I should have thought that 10 years was an ample period. If the whole thing becomes unprofitable long before that there is something sadly wrong with the business acumen of the licensee, I should have thought. All I can say is that the next Labour Government will have to devote a lot of their legislative time to revoking these licences, but if the Government will not accept this then—
§ Lord Lyell
I wondered whether the noble Lord had concluded his remarks or was drawing his remarks to a close, because I have one or two comments which I should like to make before the noble Lord decides how he will deal with his amendment; and it may be that it would be convenient if I were to make them now.
So far as the noble Lord, Lord Lloyd of Kilgerran, is concerned, I thought I said "revocable". If he thinks I said "irrevocable", I might have said that—I did stumble a little over the word—but if there is any confusion in the noble Lord's mind perhaps I might say that I have a short note that irrevocable general licences without time-limit will not be granted to particular individuals. Nor will they be applied for; but they will be issued when the Secretary of State decides to introduce competition—that is, into the supply of private branch exchanges. In this particular 780 case all persons will be thus entitled to collect such brands of private branch exchange. Licences would be issued to an individual, but if they are issued to an individual then they will have a time limit. What we are referring to here are general licences.
The noble Lord, Lord Lloyd, kindly referred to our great battles of four years ago on the Patents Bill. I think the argument that he raised as to the lengthy development and lead time for such complicated equipment as I suggested is an equally reasonable argument for extending the limit beyond 10 years. Indeed, he will recall the very hearty arguments that we had over extending the existing patent laws. But with that said, I think we should not refight the battles of four years ago. I hope I have gone some way towards satisfying the noble Lord, Lord Glenamara.
§ Lord Glenamara
Before the noble Lord sits down, may I ask whether what he has just said means that an irrevocable licence without a time limit could be granted to a private limited company?
§ Lord Lyell
I would require to take further guidance on whether a private limited company was the same term as an individual, but I could not add anything to that. I did say that an irrevocable licence would not be granted to an individual. Licences issued to an individual will have a time limit. I said that. As to whether an individual is classified as a private limited company, I do not think I would want to define that immediately; but I could write to the noble Lord.
§ Lord Lloyd of Kilgerran
May I ask the noble Lord whether, therefore, the Government will be proposing an amendment to Clause I5(1), at line 8, where it gives powers to the corporation or the Secretary of State to give licences which are irrevocable? I did not quite understand whether he is now saying that the Government will not give a licence other than a licence which is capable of being revoked. I agree with the noble Lord, of course, as I said in my previous remarks, that some inventions take a long time to develop; but I am just taking the point so ably taken by the noble Lord, Lord Glenamara, when he said that if a licence was being successful because the licensee was doing good work it was capable of renewal. Therefore, I would cover the point about inventions taking a long time to develop. I find it very difficult to understand his speech in the light of the word "irrevocably" in line 8 of Clause 15(1), where the powers are quite clearly given to the Secretary of State or the corporation to give such licences. It may be that the Government are proposing to remove that word at a later stage.
If I may take up the point made by the noble Lord, Lord Lloyd of Kilgerran, the Government have fallen into the trap of using the wording of the original Act of 1969. Strictly speaking, if one thinks about it, the issue of an irrevocable licence is impossible, because if it is an irrevocable licence it is not a licence; it cannot be. But as I understand it—and I should like confirmation of this from my noble friend—the licences they are thinking of are those general licences which will totally and completely free the corporation or persons to do things which under this Bill they are not 781 free to do. But that cannot be called a licence. Neither can the Government take upon themselves the credit for giving back a freedom. In other words, the lifting of a prohibition is not the granting of a licence.
§ Lord Lyell
I must admit that my noble friend is leading me, and, I suggest, some Members of the Committee, down a fascinating path as to the lifting of restrictions upon individuals being a licence or not. I do not necessarily accept his drafting and legal point at the moment. Possibly, we might return to it and we might read what all of us have said on this point. I am advised that when I mentioned "individual" that includes a company or group of companies. I hope that that will help the noble Lord, Lord Glenamara. Also, I am advised that general licences may be, as I call it "irrevocable" or as perhaps the noble Lord, Lord Lloyd, calls it "irrevocable". We shall have to consult the dictionary to see who is correct. I am given to understand that licences to individual companies will be subject to time limits; therefore they will not be irrevocable.
§ Lord Glenamara
That is, irrevocable during the period of time set out in the licence. If the licence is for 15 years, then they are irrevocable for 15 years except by legislation. But will the noble Lord tell us—I think we are all confused now; and it was not the noble Lord, Lord Morris, who led us down the path, but the noble Lord himself who led us down the path and into the wood—whether any irrevocable, infinite (and I mean by that no time-limited) licence can be issued to anybody under this Bill?
§ Lord Lyell
Perhaps I should have replied to my noble friend. I think that it was the noble Lord Lloyd of Kilgerran. I must apologise to my noble friend. Nowhere in Clause 15(1) does it say "irrevocably" and we connect the word "individual" either as a company or as a group of companies. The query he had was covered. So far as all the answers I have given—and I have given three if not four answers to the noble Lord, Lord Glenamara in trying to answer his point—I think I have covered licences to individual companies. These will not be irrevocable. Then, going back, I said that the word "individual" included a company or a group of companies. I said that general licences may be either revocable or irrevocable. I do not know what other cases the noble Lord might have had.
§ Lord Glenamara
I am still confused; and the noble Lord has not answered my question. I am intrigued as to why he said that one of these licences would not be issued to individuals. When he put in "individuals", it implied that it could be issued to somebody. Could it be issued to a county council, for example? Reverting to the regional idea, could it be issued to the metropolitan county council of, say, Tyne and Wear or Greater Manchester? Can an irrevocable licence without a time limit be issued to any body, any organisation under this Bill? It is simply that that I wish to know.
§ Lord Lyell
If the noble Lord's direct question is not covered by what I have given in the course of my reply 782 to his amendment and to his remarks, I will endeavour to find out and will write to him. I would lightly reply to the noble Lord, Lord Glenamara, that if he has led us down four different paths, in the bosky dells of Glenamara or in this House, I have attempted to answer his amendment. So far as I have not answered his one point, I will try to find out and communicate with him.
§ Lord Glenamara
In view of the promise given by the noble Lord—and he is rather vulnerable to that sort of pun, so he had better look out—I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Trefgarne
I understand that it has been agreed in the usual channels that now will be a good time to adjourn this Committee State and to take other business. I beg to move that the House do now resume.
§ Moved accordingly and, On Question, Motion agreed to.
§ House resumed.