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Good morning, everyone, and welcome to the fifth meeting of the Infrastructure and Capital Investment Committee in 2016. I remind everyone to switch off mobile phones, as they affect the broadcasting system. Meeting papers are provided in digital format, so tablets might be used during the meeting. No apologies have been received.
Agenda item 1 is oral evidence on Ofcom’s draft annual plan 2016-17. I welcome Sharon White, the chief executive of Ofcom, and invite her to make a short opening statement.
It is an absolute pleasure to be here. This is my first time at a parliamentary meeting in the Scottish Parliament and it is a great delight for us to get some feedback and comment.
As you know, the Scotland Bill will mean that there is a more formal and structured role for Parliament on our annual plan. As chief executive, I am focused on ensuring that communications work for consumers. There are all sorts of issues and priorities for us in relation to access, availability and speed of service. There are big issues of rurality, which come to life particularly in Scotland. We are keen to get your feedback today so that we can ensure that the needs of Scotland’s populace are properly reflected.
Thank you very much. We are pleased to have you in front of the committee this morning.
You mentioned the Scotland Bill, which is currently going through Westminster. That will bring about a number of changes to the way in which Ofcom operates in relation to Scotland. Will you provide a short update on the progress that has been made towards the agreement of a memorandum of understanding between the two Governments on Ofcom’s relations with the Scottish Parliament?
As you say, the Scotland Bill will further strengthen the relationship between Ofcom and Scotland. We are working hard on the memorandum of understanding with colleagues in the Scottish Government and the United Kingdom Department for Culture, Media and Sport. I hope that we are weeks away from agreement. The MOU will set out some clear formal structures for consultation, not least with a Scottish member of the Ofcom board, which we consider to be a positive step.
Will you say a little bit more about the difference that you think that appointment will make to the way in which Ofcom operates and the benefits that there will be for consumers in Scotland?
It will make a big difference. My main priority as chief executive is to think about UK connectivity looking 10 years ahead. Although the market has been competitive and has generally worked well, there are still some very significant parts of the UK—they are more than pockets—not least in Scotland, where that is not the case for businesses as well as for residential consumers.
To take the practical example of the universal service obligation, the issues in the Highlands and Islands will be very different from those in the Welsh valleys or in the city not-spots that we have in London. There will be different technological demands and requisites. Having an Ofcom board member from Scotland who is able not only to speak to all our agenda but to represent and understand needs in a more granular way is really important. It is one of the reasons why I am also increasing the size of Ofcom’s presence in Scotland. We are setting up a new Edinburgh office, and I hope to have more of our engineers, technologists and consumer experts on the ground here.
Do you see the role of the Ofcom board member as being Ofcom’s person in Scotland or the person on the board who represents Scottish consumers?
It is a bit of a fudge to say both.
We are used to fudge.
I know—it is my civil service background.
The ideal candidate for the position of Scotland representative would not only be able to speak to the broader Ofcom agenda—our remit is very broad and goes from broadcasting and determining which parties are rightly due party election broadcasts right through to some of the telecommunications issues—but have a real understanding and appreciation of the priorities in Scotland that can feed into the decision taking on our wider priorities. I do not quite see that person as Scotland’s consumer champion, but I do see them as someone who is credible to the committee and the broader populace in Scotland. That is critical.
Will the memorandum of understanding provide any detail on the positive engagement that Ofcom will have with the Scottish Parliament and this committee? What issues will it cover?
That is still up for debate. I suspect that some of the discussions will be about how much more, or less, specificity there will be. For me, what is really important about the MOU is that it sets out a positive agenda and a positive story for engagement. That applies at a working level but I hope that we can get into a routine in which the Parliament feels able to call us more routinely for evidence and there is early engagement on annual planning. I hope that it will be a continuing dialogue rather than a once-a-year discussion. For me, it is really critical to have Parliament much more tightly knit into our engagement and priority setting.
Do you anticipate that Ofcom will provide more detailed information at a local level in Scotland—that it will provide more granularity to the data?
Yes, very much so. Some of you may have seen a report that we did last autumn called “Connected Nations 2015”, which represents not the start but the building up of our desire to have much more granular information. We are now able to publish postcode data on mobile availability, which we have not been able to do in the past. Some of you have seen our mobile checker maps. You can now tap in your postcode in any part of the UK or Scotland, see whether you are able to make a mobile phone call and compare different providers in your area.
That is why I come back to the consumer. We are really keen to understand what connectivity is like for the individual consumer. I hope that, over the course of the next year, we will be able to do that at the household level, not just the postcode level, because many people combine mobile and wireless connectivity as well as having fixed-line connectivity.
That is a strong yes.
I understand that the strategic review of digital communications is expected to report this month. I am not asking you to breach the embargo, but will you give us a flavour of the likely initial conclusions of that review? Obviously, Ofcom will be charged with implementing those. What key benefits will arise from that for businesses and consumers in Scotland?
I can give the committee a sense of the headline issues that we are covering. Much of the media attention over the past few months has been about Openreach and its relationship with the BT Group board, but the review is much broader than that.
Our starting point is that we are trying to step back as a regulator. We have not done a strategic review for 10 years and the market has changed a lot in that period. We are trying to look ahead to set out how we, as a regulator, can best support markets and communications working for all consumers over the next 10 years. We will consider issues such as availability, which we have just touched on. What can we do, working with Government and industry, to ensure that there is universal access to a decent service?
This is probably a question more for urban areas than for rural ones, but we will be looking at how we can maximise competition so that consumers are not reliant on an incumbent or a single provider but have a choice of, ideally, two or three providers.
We will be looking at quality of service. Some people have determined that communications have become the fourth utility, and we all rely on them. Customer service issues are therefore really important, so we will be looking at what our role as a regulator is there.
We will be looking at deregulation. We like to think of ourselves as a proportionate regulator. Given that technologies change—again, this is not an issue for much of Scotland, but in some parts of the country, mobile has become more of a substitute for land-line use—is there scope for having less regulation without leaving many people, particularly the most vulnerable, disadvantaged?
We will also be looking at Openreach, again in the context of the consumer. Would the consumer benefit from a different form of separation between Openreach and the broader BT Group? When we launched our discussion paper last summer, we said that we would be looking at four options—the status quo, the possibility of deregulation if there is more network competition for Openreach, the current model of functional separation, and a fuller and more structural solution whereby there would be a change of ownership.
Thank you. That is helpful. I hand over to my colleague David Stewart, who will ask some questions about the universal service obligation.
I say at the outset that, like Mike MacKenzie, I represent the Highlands and Islands. As you can imagine, broadband is a huge issue there, and speed of broadband and intermittent broadband are among the greatest areas of contention for my constituents. Some constituents have argued that having a minimum broadband speed should be a basic human right. Perhaps that slightly overstates it, but I am sympathetic to that view. What is your view?
I am sympathetic. Whether we talk about broadband being a basic human right or the fourth utility, it is the same idea. If we were sitting in this committee room five or maybe even three years ago, we would feel that it was a nice to have, but it has now become fundamental to people’s ability to have community, social and economic engagement.
Some interesting reforms are taking place in Scotland on public services and moves towards digitisation, and if a decent level of broadband is not available to both residential and business consumers, that will be not just an inconvenience but something that will potentially have serious deleterious impacts on both wellbeing and economic activity.
Let me give an example that I have picked up. A couple who moved to the Western Isles wanting to run a small guesthouse have found that they cannot use their booking system because of the lack of broadband. Do you accept that that is a real constraint on economic development?
I completely agree. Each week, probably 90 per cent of the concerns that are raised in my MPs mailbag are about broadband speed and quality of service. Ofcom encouraged the Government to introduce a USO, and I am delighted that one has now been announced. In the 2015 budget, a 5 Mbps universal service obligation was announced, and that was doubled in the Prime Minister’s speech last November. I will certainly want to work closely with the Government to ensure that that is implemented in such a way that everybody has a right to request a decent service and have it made available.
In fairness, the broadband delivery UK funding to Highlands and Islands Enterprise, which BT is now developing, has been a huge boost. We have had regular briefings about the work that is being carried out, and I welcome that.
However, the “Connected Nations” report in 2015 said:
“Scotland has the highest proportion of rural premises (57%) that are unable to receive more than 10Mbit/s.”
There is therefore an issue with rural areas being neglected. I am sure that the same applies in England, Wales and Northern Ireland, but since we are in Scotland, I just thought that I would flag up the Scottish issue. Do you accept that there is a real worry that rural areas are still losing out with regard to decent broadband speeds?
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I think that we are in violent agreement with each other. One of the reasons why we were keen to give more visibility to availability issues—this brings me back to the convener’s point about granularity—was to make it clear that although broadband expansion had been hugely positive for many people there were still issues in big chunks of the country, including in Scotland.
Small to medium-sized enterprises are another issue. For other historical reasons, many SMEs are caught in the big gap that still exists between the services that are available to residential consumers and the very high-end services, which they cannot afford. Over the coming period, one of my big priorities as chief executive of Ofcom is to close that gap, and I think that the proper implementation of the USO and the patchwork of things that are already happening through broadband delivery UK, the digital Scotland superfast broadband programme and some community initiatives need to deliver universality at a decent speed.
What might seem like a left-field issue that has been raised with me by some academics relates to corporate planning across all services and Government. Let me give you an example. There has been a serious increase in the amount of road building in the north, including the A9, which is one of the longest, if not the longest, trunk road in the country. It has been argued that fibre optic cable, as a minimum, should be laid across the country while that massive road building activity is going on, instead of the roads being dug up later on. It just seems that there is a lack of corporate planning across departments and, perhaps, across Governments. Does that issue fall within your remit and responsibilities? Has it already been raised with you?
It has already been raised with us. I know from my past life at the Treasury that the issue is very much a feature of the implementation of the planning rules, but we are very aware of it. I believe that 66 per cent of Scotland is served by BT, which means that 34 per cent is not, and if we are talking about laying networks in a very large geographical area, that gets us into practical questions such as, “How many times do I want my road and my streets to be dug up?” Although it is not our responsibility, we certainly recommend that the planning rules be implemented in a way that makes it more likely that the networks will be laid.
In other countries, utilities open up their ducts and say, “Dear providers, you have six months to lay your fibre”, and afterward they place a moratorium on that activity for two years. That incentivises all the competitors to come in at the same time and demonstrates to residents that they will not be put through perpetual building work.
I have a very quick supplementary. Because I represent an urban area, my problems are the opposite of those that are being highlighted by my Highlands and Islands colleagues. The figures suggest that coverage is very good, but the problem is that what always seems to be taken is the low-hanging fruit—in other words, the areas that are easy to get to. In our area, cable and fibre optic broadband options are available, but for new estates, there is only fibre optic broadband, and those are the areas where most of the complaints come from. Is there anything that you can do to encourage the planning system and local authorities to ensure that when new estates are being built good coverage is available?
Although dealing with that matter is not in our direct gift, we are certainly involved in conversations about it. Indeed, your question about new build raises a broader issue, in that similar issues have been raised with us about business parks that, paradoxically, have been bypassed for fibre optic cable. We are working behind the scenes on the matter. I am having discussions with operators, and other discussions are now being convened by Westminster politicians through the digital infrastructure task force, which I sit on and which is looking actively at the issue.
Moreover, in the strategic review, we will make it clear that universality cannot just be written down on a piece of paper. A whole series of very practical steps need to be taken, and we feel that the first vital step is to make the gaps visible to ensure that we all have the same data to work from.
My next question, which is a bit of a chicken and egg one, is about rural areas. You will know that the Highlands and Islands is an area larger than Belgium with the population of Brussels—that is the shorthand that we occasionally use. From the market point of view, there is probably lack of demand. However, there is also a lack of operators. That leads me nicely on to the calls for BT to sell off Openreach, which you touched on in your opening statement. You explained that there are four different options. How likely is such a sell-off? Would it help the market and provide more competition, more operators and a better standard of broadband?
You will appreciate that, given that we have not quite concluded, I am slightly limited in what I can say. However, what I will say is that we will look at the issue of Openreach not as a sort of academic question about different models of governance but from the point of view of whether a different structure will encourage more investment and a better quality of service. We will approach the issue from the point of view of those metrics and criteria.
As you say, there will be some areas of the country where, with the best will in the world, one’s top priority is just to get access. There is not necessarily any likelihood of having a number of competitive rivals in Orkney and Shetland. Nevertheless, there is an interesting question about whether we can get some good competition between types of technology, so that you are not necessarily reliant on a fixed-line connection because wireless operators might be able to come in, too. Although I am afraid that I am unable to say more definitively about where we are going on the issue of Openreach, I hope that I can give some assurance to the committee that we will be judging that issue from the perspective of whether we will get more investment, whether the roll-out will be faster and whether we will get a better quality of service from a different model.
My final question is on my contention that broadband development is probably one of the most vital ways of increasing economic activity in the Highlands and Islands and indeed throughout the United Kingdom, particularly in rural areas. You will know that some of the technical solutions are not just about fibre optic because, in very hard-to-reach communities, broadband, wi-fi and 4G will require satellite development. Of course, there are problems with 4G as well. Can you give any comfort to the committee about developments with some of those technologies? Does Ofcom have a role in the technical aspects of broadband provision?
We are in a similar place to you, particularly when we think about the implementation of the USO. We would love to do that through a variety of technologies, partly because, as you say, fixed lines will not necessarily be the best solution for very remote communities. Also, from our perspective, we want there to be choice, and more competition in the way in which further access is rolled out.
I said that that was my final question, but I think that I was having a senior moment, because I had forgotten my other question.
Just keep going.
I will do. I am quite interested in Government’s role in the award of contracts in which wi-fi and broadband is seen as a function, for example Caledonian MacBrayne’s Clyde and Hebridean ferry services. In a previous role, when I chaired the Public Petitions Committee, schoolchildren in Harris were very keen that there should be wi-fi provision on the ferries. The company picked that up and, in future tenders, wi-fi provision will be a condition. You will be aware that that is a condition in tenders for the east coast rail service to London and, increasingly, for ScotRail. That is another way in which Government can lead—by making that a minimum service condition. What is your view on that?
I agree. Given the priority to ensure that, whether you are going by road or by rail, wherever you are going about your daily life, you can have mobility of connectivity, we are strongly supportive of finding ways in which one can apply conditions on greater connectivity, along similar lines to the example that you gave. I know that, south of the border, the Government is looking at that in relation to rail franchising.
All of this needs to be on the table, and we are strongly supportive of it. We will advise on some of the technical details and the technological solutions, but we have got exactly the same objective, which is that, over the next period, good connections will be established everywhere.
I want to ask about the voluntary codes that apply to business broadband speeds and residential broadband speeds. How is that proceeding? Is it proceeding well? Are you getting buy-in from internet service providers? Will businesses and consumers have access to information that allows them to see how companies are performing and what particular service individual businesses and consumers are receiving from them?
It is early days. The committee will know that, last summer, we published a voluntary code. Certainly, all the big internet service providers such as BT and Virgin are in there. The companies have committed to making it easier for residential consumers who feel that the service that they have signed up to is not the one that they are getting to walk away without a fixed penalty, and we have done something similar in the past couple of weeks for small businesses. The issue ties to the issue about consumers thinking that they are signing up to a service of up to 10Mbps or 20Mbps but getting a service that might be appreciably lower than that, for a variety of reasons. Through the code, providers have signed up to being much more transparent and clearer at the point of sale, which means that, if things go wrong, the customer does not have to get into an argument about having to pay some sort of early termination fee.
It is too early for us to have data, but I think that we will get good evidence over the coming months about whether the code has had to be invoked or whether the fact that we have this voluntary agreement means that the point of sale has developed into a more robust process.
Are there any other outcomes that you would expect as a result of the introduction of the codes?
I hope that the codes will lead to consumers shopping around a bit more. I know that that is practically hindered in a situation in which you do not have a choice of providers. However, even with regard to a choice between cable providers and BT, it will be better for consumers to have clarity at the point of sale about what is being provided by companies, rather than having to look through a contract with 20 pages of small print and tick the terms and conditions before jumping out of the shop as quickly as possible. I hope that consumers will be able to exert more pressure at the point of sale, where there is competition.
Earlier, you mentioned that the possibility of separating Openreach from the broader BT group was being considered. Can you tell us a bit more about that process, what the timescales for it are and how you will go about evaluating the advantages and disadvantages of each of the four options that you referred to earlier, including the status quo?
We launched the review of the communications market last March and in July we published what we called a discussion paper, which essentially set out the half a dozen or so areas that we were keen to examine: deregulation, quality of service and so on. The Openreach question was included in that. At that stage, we set out our preliminary view of what had worked well over the past 10 years and what had worked less well, and we used the discussion document as a call for evidence.
Between July and October, we received a number of encyclopaedias of evidence, mostly from the companies but also from broader stakeholders. As an organisation, we have had lots of meeting to follow up on that evidence. Since October, we have been evaluating the evidence and checking it against the issues that we flagged up in July to identify where we have not got things right or have not attached the right priority and need to modify our approach. With a fair wind, we hope to set out initial conclusions at the end of this month.
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When will a final announcement be made?
The initial conclusions at the end of this month will set out the results of our deliberations. As you may know, in applying such recommendations to our practical regulatory tools, there is a process that we follow through Europe, so, as Europe requests us to do, we will review each individual market every three years. For example, if we recommend deregulation in a particular area, when the market review for that area comes up, we will take the initial conclusions that are reached at the end of February and start to apply them in detail to our regulatory tools. The implementation process will go on for a period of several years from now.
Regardless of which of the four options you finally go with, what are you looking for when it comes to how Openreach can better serve Scotland’s broadband infrastructure needs?
As I have said, the starting point is to consider how consumers up and down the country can get the service that they deserve, bearing in mind that consumer expectations are rising by the day. We will certainly look at quality of service, regardless of any discussions that take place about the structure of Openreach.
The committee might be aware that, a couple of years ago, we were very concerned—to BT’s credit, it was equally concerned—about quality of service on the business side. I am talking about big businesses that were having bespoke superfast cables installed, which involves construction in the streets and having cables routed up buildings. There were long delays of several months. That was the first time that we dipped our toe in the water as a regulator to set minimum quality standards for BT. As a regulator, one feels quite conflicted about doing that, because we are an outside body. I feel that for an outside body to be setting the standards for a company that operates across the UK is a slightly second-best situation.
We will look at the experience of the impact of those quality-of-service standards—which, to BT’s credit, it has hit subsequently—and consider how we should go forward. We will think about whether we should strengthen the standards or set different, tougher targets. All that is up for consideration.
Alex Johnstone has some questions.
On the issue of competition, one of the concerns that have been expressed is that BT is squeezing the margin between wholesale and retail prices in order to squeeze out competition in areas where it has a near-monopoly. Does Ofcom still have concerns about the wholesale price of superfast broadband?
You probably know that we regulate that price. We have something that in the technical jargon is called the VULA—virtual unbundled local access—margin. We require BT to ensure that there is a big enough gap between its wholesale price and its retail price to allow other companies to come in and still make a profit. BT has an existing network and a historical cost advantage, so we have set a margin to allow companies such as TalkTalk and Sky to come in. That is a regulated price. It has to be said that we are currently in litigation—the regulated price is being contested by BT as we speak. At the moment, we set that to ensure that competitors are not squeezed out because of BT’s historical cost advantage.
As you said, BT is contesting that. Without speculating on what the outcome of that might be, do you have any alternative approaches to ensuring that competition remains viable in that area?
What I can say very strongly is we are absolutely committed to ensuring that, where there is a market, consumers get a choice of provider. I cannot speculate on whether the VULA margin will be struck down. If it is, or if it is modified, clearly we will have to look at alternatives, with the objective in mind of ensuring that there is competition.
In the broader sense, what is Ofcom doing to help consumers and businesses make informed decisions about the best telecommunications deals available?
Pricing is an interesting area on which we want to do more, because the market is becoming more complex. As you know, increasingly people are moving to what are called triple-play bundles—we are buying our telly, phone line and broadband together. With the BT and EE merger, we may move—like the rest of the continent has moved—to quad-play bundles. It has become more complicated for people to compare deals, and there are headline prices, discounts and so on.
We have been very supportive of the Advertising Standards Authority, which is trying to get better transparency on pricing. The committee might have picked up the issue of deals that say “Superfast broadband free” in a big-font headline and then say, in a rather smaller font, “By the way, you’re still paying your £16 monthly land-line charge.” We have been very keen to get more transparency at the point of sale.
We are also starting to collect much more pricing data. We have started to find—the committee is probably aware of this—that, although the market in aggregate is still very competitive, some prices, particularly land-line prices, have started to rise. That is particularly the case for customers who are over 75, who are more vulnerable and do not tend to switch providers.
As part of the communications review, we will be looking at options for greater transparency of pricing information. There is a careful balance to tread. In making prices more transparent, we do not want to standardise tariffs, because that would remove competition. However, we want to find better ways by which people can compare prices in what is an increasingly bundled and complicated market.
Where competition exists, the ease of switching provider is often a big challenge and, in some cases, is a barrier. What is Ofcom doing to make it easier for people to switch providers?
We are looking at making the process of switching easier. The team carried out a lot of work last summer, and the process is now much easier. If you are with a provider on the Openreach network, such as BT, Sky or TalkTalk, all you now need to do is ring up the company that you are trying to move to, and it will make the switch for you in one move—we call it “one touch”.
We are looking to do something similar for mobile. We have done some research. We are trying to make the process of ringing up one company and using the porting authorisation code to switch to another company a little bit easier. We have also said that we will look at triple play.
To my mind, there is a broader question that comes back to your point about pricing and complexity. We are all pretty inert and not many of us have time to spend calling a call centre to switch. Although we are looking at making the process easier, I am quite interested at looking over the longer term at whether there are other ways by which one can encourage consumers to switch. Even if we have a faster process, unless our service is really poor most of us will stick with the people we know.
When companies start to consolidate, I think that Ofcom needs to look at the process by which consumers switch and at how they can be encouraged to be less inert. Some of the other regulations have taken quite innovative approaches to this. This area is critical because, as soon as you move to bundle products, people stop switching. The rate of switching for those with triple play is about 7 per cent. They would lose everything if they switched, so why would they do that? It is a critical issue. We are making some progress, but I think that this is part of a broader piece of work that we need to look at.
For my information, do deals that offer broadband, land-lines, mobiles and, perhaps, television supply play a major part in excluding companies that cannot compete at the highest level?
That is a very interesting question, which plays to the sort of changes in market structure that we see at the moment.
In Europe, quad play—mobile, land-line, broadband and TV—is a much more typical way of selling. We have seen BT become a television company and we have seen it going back to mobile with Cellnet. A merger has been proposed between the mobile companies O2 and Three. Sky said that it is going to do a tie-up deal with O2 later this year. You can see that companies are starting to converge. The telcos look more like TV companies and the TV companies need to get into broadband, particularly because mobile has become a device for viewing programmes.
It is absolutely true that we will see growing convergence, and we could possibly catch up with the continent, buying more of our services in a four-package bundle.
I was very interested in what you said about consumer information and choice where they are looking, and I was particularly interested in the postcode areas that you were talking about. Ofcom has a map that shows fixed broadband information by administrative authority, but that map has not been updated since 2013.
We are about to do it.
You are about to do it. That is fantastic.
That was the right answer.
Exactly. I think that it is now due in March. We are trying to pull together the updated mobile data on whether you can make a phone call on a smartphone with updated fixed-line data. Ultimately, we will try to splice those two things together by household. That is the plan over the course of this year, but we will get the fixed-line data out very shortly.
Excellent, thank you very much.
I was pleased to hear you mention the Highlands and Islands in your opening statement, because Dave Stewart and I both represent the Highlands and Islands.
I am not sure that Dave Stewart fully articulated the scale of the problem. Despite the theoretical coverage, if you were to go to the Highlands and Islands and draw a map, I think that it would be the equivalent of a medieval map that says, “Here be dragons.” When you disappear over the digital divide, my personal assistant says that you are about to go dark; I think that she watches too many spy thrillers, but that is the reality.
Over many years, I have talked to colleagues of yours and I have been reassured constantly that things are just about to get better. However, things are not getting better; they are getting worse. The digital divide is like the Grand Canyon, and it is getting both deeper and wider. Part of the reason for that seems to be that there is more demand and that more people are using digital services.
Another part of it seems to be the content and the services that are available. What used to be a simple newspaper website now has loads of theatrical stuff going on, such as embedded films. Shortly, no doubt, people will have avatars that pop out of their phone and dance across the table. Such content is driven by good availability of service provision elsewhere in the country. The contrast is getting wider and wider between the services that my constituents can get and those that other people can get.
If I have understood it correctly, part of the game changer is the new Scottish board member. Will that be a game changer? Will I be able to go back and look my constituents in the eye and say to them with integrity that things will get better and not worse over the coming years?
10:15
I completely recognise the picture that you have just painted, and the issue is at the top of our in-tray. Consumer expectations are in a completely different place. Even two, three, four or five years from now, it will not just be about your dancing avatars, but about whether you will be able to get through to the NHS and search all your medical records and figure out whether your kids are going to school or whether you will be able to set up a business without having to leave the Highlands and Islands and head off to Glasgow. Those issues are fundamental. The conversation about utilities or human rights is at the core.
The Scottish board member is important. My character is such that, if there is a problem, I need to figure out how we will fix it. Key for me is how the universal service obligation gets implemented for the Highlands and Islands—that is the test case. For all the reasons that you have mentioned about geography, the costs of getting backhaul out and all the rest of it, along with the questions about the choice of technologies and how wireless technology will work, we will need to provide the service in such a way that, by the time that the Highlands and Islands has coverage, we are not finding that 40Mbps has become the new 10Mbps. The trick of putting in the foundation stone in a way that allows the gearing up in line with consumer expectations—our desire to do stuff, and without necessarily having to take a car or a train—is important.
Part of that is about the Scottish board member; to be frank, part of it is about my colleagues’ understanding and my understanding as chief executive as we progress the USO, which we expect to implement once the Government has set out the policy parameters.
I ask my teams questions, such as, “What does this mean for connectivity, not in Aberdeen but in the Highlands and Islands? Over what timescale will that happen? What’s the roll-out?” It is clear that there will be a cost premium, so as a matter of practicality I ask how that will be shared and provided for—by an individual user or by a broader community, given that, in a sense, we all benefit. However, although governance matters, the test for me is universality with a regulator that puts the consumer first. That is a top priority.
What will 3G and 4G coverage look like in Scotland over the next year?
The next year is critical. As you know, there is a lot of proposed market structure change among the mobile network operators. There is a commitment to have coverage by 2017. Partly through making it more visible who is providing what services and where in Scotland, we will be working—I am sure that there will be constructive engagement—with the mobile network operators to see where they are in meeting their 90 and 95 per cent coverage obligations on geography and on premises over the next year. I cannot quite believe that I am in 2016 already. The deadline is becoming very close.
To be fair, Inverness, which is the city within the Highlands and Islands, gets reasonable 4G coverage and so on. However—this is where we must be careful—we talk about 10Mbps being unacceptable, but a very high proportion of my constituents would die for 10Mbps. The speed is maybe closer to 2Mbps; sometimes, it is 500Kbps. It is very poor, to the point at which it is almost not worth having.
Similarly, when we talk about 90 per cent coverage, it is always the same 10 per cent who are left out. We all understand why that is. You might describe it as market failure. Surely it is a definition of regulatory failure to have a missing 10 per cent. Are there any plans to address the issue of that missing 10 per cent?
As you will know, the Government’s initiative to try and fill the rest of the gap that the commercial providers had not set out in their coverage obligations—the mobile infrastructure projects or MIPs—has had a difficult history in Scotland.
In this case, one looks to the regulator, but one also looks to the regulator working with companies and the Government. For example, there are plans on the emergency services front involving a mobile infrastructure. That will be UK-wide. There is a really interesting opportunity to use that roll-out to get broader coverage. That does not just involve your ability to make a 999 phone call on your mobile; it means getting broader coverage. That is part of the work of the digital infrastructure task force; that is the conversation that we are keen to have.
To give you some assurance, although this stuff is hard to deliver, I start at 100 per cent, not 90 per cent. Forty per cent of the UK does not get 10Mbps today. We are talking about a very differentiated story, which is mostly because of rurality.
Both Mike MacKenzie and David Stewart have articulated the challenges around the digital divide in rural and remote parts of Scotland. Could you specifically address the issues around digital exclusion that face people on low incomes and people in receipt of benefits, as well as how you, as a regulator, seek to address those issues?
This is partly why we have been focused on issues of pricing. Our particular focus—as a regulator, not as Government—is to try, where we can, to maximise competition. I know that that has limits in Scotland. Where that is commercial is relatively limited. The key way in which we have observed that we can get prices down and get the most affordable prices is through having rival players that are competing for business.
On the question about what happens with pricing in rural areas, that takes us to where we regulate pricing. Where BT is a dominant player, as a regulator we have tools to apply what we call charge controls. That ensures that, in the prices that BT charges to other wholesale operators and, potentially, the prices that it charges directly to consumers, advantage is not taken of its dominant power in the market. Ninety per cent of BT Openreach’s prices are regulated by us directly.
You spoke earlier about this being the “fourth utility”. In other utilities, energy companies in particular will seek to provide a different tariff for people in receipt of benefits. What is the equivalent in this sector?
There are some equivalents. We have spoken a bit about land-lines. From everything that we know, that is the area where there is the greatest reliance by the most vulnerable people and the most vulnerable consumers. BT and others have basic tariffs that try to ensure that vulnerable people are able to get a decent service even if they are on a fixed or unstable income.
More generally, I want to look into that area over the next period, because of the concern—although this is not yet realised—about whether consolidation in the sector may have an impact on pricing and because of the concern about what that does not just for people who are able to pay but for people on low and fixed incomes in particular. Whether it then becomes necessary for the regulator to come in or whether a public policy intervention is required is a different question.
Are you as the regulator doing enough? What more can you do?
As I said, you can always argue about whether you are doing enough. I think that we are at a potential turning point in the market. If you look at the last 10 years in aggregate—as it is in aggregate, I take the point about the people at the end—we have been paying about the same for a much broader set of services. Technology and so on has meant that, particularly on the mobile side, we have basically been getting more for less.
Companies are converging and wanting to consolidate. The evidence that we see from other countries is that that can have a material impact on pricing, particularly in what we call the horizontal mergers, such as a mobile company buying another mobile company. That is why we are starting to do much more detailed analysis of pricing. If there appears to be a regulatory problem in that area, we will act.
I want to change the subject. You mentioned earlier that you see a switch happening from land-lines to mobiles. I have also noticed a change in how land-lines are used; a lot of calls are going straight to voice mail. A lot of that is created by what we can call nuisance calling but is often more like harassment—the constant calls that we get about payment protection insurance compensation or boiler replacements, the computer-generated calls or calls from foreign call centres. Such calls are the reason why people stop using their land-lines as they used to do.
First, do you think that that is a problem, particularly for people who may be vulnerable? Secondly, what are you going to do about it?
The issue of nuisance calls is incredibly important. I talked about my mail bag; when the complaints that I get are not about the quality of service, they are almost entirely about nuisance calls. As you say, not only are such calls frustrating but, particularly for vulnerable people, they can be very distressing.
As an aside, I would say that another part of the reason for the shift from land-line to mobile is the smartphone. We can just do more stuff with the mobile.
We are working closely with the information commissioner on nuisance calls. We have a very particular division of labour, in that Ofcom has statutory responsibilities for silent and abandoned calls and the information commissioner has responsibility for calls related to classic PPI mis-selling. However, we work in a very co-ordinated way. Both Ofcom and the Information Commissioner’s Office now come under the Department for Culture, Media and Sport, which I think has helped. As a matter of practicality, we, and particularly my technical experts, have been looking at working with the communications providers and the ICO to get more technical fixes for nuisance calls. Fingers crossed, we think that we are making quite a lot of progress.
As you know, a lot of those calls originate overseas. Lots of them are not necessarily wrong numbers, but they mask their number with a real number and they bounce around various points of contact before they come to the user. We think that we might have a technical fix that could have a significant impact on the number of calls that are coming through. I hope that shortly we will be able to say more about it publicly. It is absolutely a critical issue.
I take your point about technical solutions, but eventually people tend to get round them. Is there not a case for stronger legislation?
10:30
You probably know that, in the previous parliamentary session, the Government took stronger powers in the area of nuisance calls. Partly on the back of that, the information commissioner is now taking much tougher enforcement action and issuing higher fines. When I refer to technical fixes, however, I do not want to give the sense that I am being naive and that I do not know that if you squeeze one bit of the balloon it bursts somewhere else.
At the same time, it is interesting that I have lots of difficult conversations with a number of the companies that we regulate and nuisance calls is probably the area in which there is the strongest and clearest consensus that something needs to be done. The technical side is important, but I do not think that it is the whole picture by any means.
The Government has already taken new powers for the information commissioner, and I am not sure whether it will want to come up with new statutory obligations. If the committee has ideas for what more can be done, I would be interested in taking them away.
Clare Adamson has a question.
It is an idea.
My pen is poised.
One of the ways in which to limit, if not stop, nuisance calls would be for consumers to be able to not accept anonymous numbers. A lot of service providers charge people to use that service. Can you do anything to encourage the service providers to provide that as a free service to customers?
We will definitely take that idea away with us. As you know, we have been doing work with some of the premium numbers and we are reviewing some of the changes that we introduced last summer to see whether transparency is leading to prices falling. I will certainly take that idea away. Thank you.
I have a technical question on the back of that. A number of constituents have written to me about nuisance calls. They are part of the Telephone Preference Service, my understanding of which is that people opt into it and should not get those calls. However, some companies have responded by saying that they are exempt because they are a marketing company. Have you come across that? Is that a reason for exemption from the Preference Service?
One of the things that happens with the TPS is that, when someone is buying something on the internet, for example, they might accidentally tick the box. They think that they are ticking the box to say that they do not want any marketing but they have ticked the box to say that they do want marketing. If someone signs in to marketing, inadvertently or not, they will still get calls. That is one of the issues that we need to make clearer to consumers.
When marketing companies say that they are exempt, they will have a form or an email from a consumer that says, “Yes, I have bought some theatre tickets and I am happy to hear about a whole bunch of other things that I didn’t think I’d signed up to.”
When constituents are signing up to things, they should be clear about what they are signing and watch that. Is the solution then to go back and sign up to the Preference Service again or does that not make any difference?
I dug around to find out about that because, when I came into the job, I surprised to find that the TPS has a hole in it. It was news to me that the fact that someone has agreed that they are happy to receive marketing material—the question might have been in a very small font—means that the company has taken it that they are happy to receive all marketing material. The message needs to get to consumers but there also needs to be greater clarity about what the TPS can and cannot do.
If a company breaches the terms of the TPS, what sanctions can be used? I presume that you have a role in regulating that.
If you have constituents who have signed up to the TPS but are still being bombarded with calls, they should get in touch with Ofcom and the Information Commissioner’s Office.
Might that be a role for your new Scottish representative?
Yes. They can take some of my letters.
As members have no further questions, are there any final comments that you would like to place on the record, Ms White?
This has been a huge pleasure. Thank you.
The feeling is mutual. We have found today’s session to be useful and we welcome your attendance and your positive and constructive engagement with the committee.
The committee will keep a close eye on developments, foremost among which is the strategic review on digital communications. We will also look at what difference the new Ofcom board member for Scotland will make, the voluntary codes of practice for business and residential broadband speeds and the review of Openreach’s provision of superfast broadband.
There is clearly a huge agenda that is relevant to the committee and the people of Scotland and we welcome your engagement with the committee. We hope that this will not be your final session with us.
I hope that you will invite me back.
You can be sure of that.
10:35 Meeting suspended.Previous
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