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1.14 pm
The Minister for Small Firms, Trade and Industry (Mr. Michael Wills): I thank the hon. Member for Northavon (Mr. Webb) for raising such a vital issue and congratulate him on securing the debate. I share his enthusiasm for the liberating and empowering potential of the internet for every individual and every business, large and small. He is right to identify that potential and the Government wholly agree with him.
I agree that we are in a transitional period. The technology is remarkably new--in fact it is remarkable in every way. If I may be a little extravagant at this point, never before in human history has a technology with such a profoundly transforming potential become available to so many people so rapidly. Inevitably, all sorts of questions arise about how we as a society cope with such an incredible new technology and, during this transitional period, we have to consider carefully every aspect of our actions in that respect.
I also agree that the widespread availability of a speedy access infrastructure and a high-quality backbone telecommunications network that is available at an affordable price are vital to the growth of the internet. Ultimately, those things will be best provided through effective competition in both telecommunications infrastructure and in the services provided through it.
That competition is already at work in the UK to give us the networks that we need in order to lead the world in this field early in the next century. However, I agree with the hon. Gentleman that effective competition depends on effective and appropriate regulation. We have one of the most liberalised telecommunications markets in the world. As a result of competition, the cost of calls is steadily decreasing, and that is to the benefit of all internet users. I shall run through the range of competition in this country, which is remarkable for the rate at which it has increased over the past few years.
In fixed-line telecommunications, 45 domestic public telecommunications operators are now licensed, an increase of nearly one third since May 1997, when there were 33. They provide their own infrastructure and services in competition with the former monopolist,BT. Three major cable television companies offer telecommunications services over their lines. In March 1997, there were 125 active cable franchises passing 8.2 million homes, with 2.3 million homes connected. By January this year, the number of active cable franchises had increased to 134, with 11.5 million homes--more than half of all the homes in the UK--passed by cable and approximately 3.5 million connected. Those figures show an increase of more than 50 per cent. in less than two years.
More than 14.5 million people subscribe to the four mobile phone networks--a figure that has more than doubled since March 1997, when only 7.1 million people subscribed. The mobile phone market is now worth approximately £3.5 billion, or roughly one third of the fixed-line market. New pricing packages mean that the mobile phone market is increasingly competitive with fixed-line services. More than 100 companies are licensed
to provide international facilities. The DTI has licensed 73 new operators of international services since the general election, and BT's share of the international market is now less than 52 per cent.
As a result of all that competition, call prices have fallen by more than 50 per cent. in real terms since 1984, and there have been even more dramatic price cuts for international calls. However, competition is still increasing: the roll-out of cable and other fixed-line telecommunications is progressing steadily and, later this year, we are to auction off the third generation of mobile telephone licences, which will dramatically increase competition in that sector. As the hon. Gentleman will be aware, that third generation will enable the provision of internet access through mobile phones.
We have an effective competitive framework for telecommunications in this country, but the hon. Gentleman was right to remind us that we must not be complacent. The Government are not complacent and are working to ensure that the regulatory framework develops in a way that continues to encourage competition and the provision of new services available to everybody.
A range of EC directives has reduced regulatory burdens and promoted competition across the EU. We continue to work with other member states on the 1999 review of the telecommunications regulatory framework in the EU to ensure that that process continues. Within the UK, the Government are reforming telecommunications regulation to ensure that it continues to promote competition effectively. For example, we are streamlining the process for modifying licences and we are consulting on a new appeals mechanism. In the longer term, as the hon. Member for Northavon mentioned, the Government are considering more fundamental reform to move away from the current prohibition-based licensing regime to a more flexible system. We shall publish further ideas on that in the follow-up to the convergence Green Paper later this month.
I receive much correspondence about the specific question of internet access. At present, most consumers access the internet through dial-up services--so-called narrowband access. That can be slow and cumbersome and, as the hon. Member for Northavon graphically described, is not necessarily the best way to access the internet. A key current issue is the provision of broadband access in the local loop. The question is how can we provide faster internet access and the ability to transfer much more data at high speeds, because that is the key to the effective roll-out of the technology.
Many new technologies are coming on stream to help to give consumers access to broadband services in the home. The hon. Member for Northavon mentioned digital subscriber line--or DSL--technology. Cable, satellite and terrestrial digital television services incorporating new interactive services will become available later this year. Cable modems, in particular, offer the prospect of much faster internet access without the need to dial up every time the user wants to go on to the net. As I have mentioned, third-generation mobiles will be another key innovation. We hope shortly to launch a consultation on making new spectrum available for fixed radio broadband access services.
Mr. Webb:
The Minister mentioned cable modems. The chap who e-mailed me was concerned that those
Mr. Wills:
I shall address the impact of the current competitive situation in a moment, but we believe that competition is the best way and is working. I do not want to sound complacent, but all the lessons of recent history tell us that competition is the most effective way to roll out the technology, although that does not mean that there is no place for regulation.
OFTEL has just finished consultation on access to bandwidth which aimed to determine whether there were barriers to the commercial provision of high bandwidth services to residential and small business users, especially services using that approach. It also considered whether OFTEL needed to intervene to allow competing network operators to offer such services directly to customers, by renting BT's copper wires--the so-called local loop unbundling.
The outcome of that consultation will have a significant impact on the UK telecoms market and in particular on achieving our goal of affordable high-speed internet access to consumers. We are in close touch with OFTEL and I understand that it expects to publish its conclusions later this month. I hope that the hon. Member for Northavon will forgive me, but I cannot pre-empt that process. However, I can assure him that the issue is at the forefront of our minds.
The hon. Gentleman asked what effect competition is having and he gave us some figures. He is aware of the Government's intention to make this country the best place to do business electronically by 2002. We are making progress. More than 1 million people in the UK became internet users for the first time during the third quarter of 1998. Worldwide, the speed of take-up is unprecedented. We should not only compare the position in the past in this country, but examine what our competitors are doing.
Some 16 per cent. of our population had internet access by 1998 compared to 28 per cent. in the US. We are behind the US and we have to catch up, but the comparison with other competitors is better. We have higher figures than Japan at 11 per cent. and much of Europe--only 9 per cent. of the population of Germany have internet access and only 5 per cent. in France. Those comparisons were made before the recent developments in internet pricing, such as Freeserve, and we expectthose figures to increase considerably. However, our competitors are also increasing access and we cannot be complacent. Our recent benchmarking survey showed that more than 60 per cent. of UK business now has internet access. More than 50 per cent. has a website. Website use has almost doubled and e-commerce has trebled since 1997. We have seen faster growth in that area than either Japan or the US. We had 30 per cent. growth in internet penetration among British business, and 40 per cent. growth in website penetration since 1998. That compares to 6 and 11 per cent. growth in Japan and 20 and 30 per cent. growth in the US. I accept that the US is starting from a higher base, but we have made considerable advances that show that competition is working.
The ambitious target that we set for 1 million small and medium-sized companies to be hooked up to a network by 2002 will probably be achieved by 2000. The technologies are rolling out quickly and, as I have said, that shows that competition is working.
I know that the issue of the cost of access is of great concern to the hon. Member for Northavon and many other people. Is the cost affecting the take-up of the technology? The short answer is no. Of course cost is a consideration, but there is no evidence to suggest that it is a significant barrier to take-up, especially for businesses. As the hon. Gentleman acknowledged, we are just below the OECD average costs for internet access for peak times and, at off-peak times, we are cheaper than the US. The hon. Gentleman, as a distinguished economist, will understand that there is no such thing as a free service: it must be paid for at some point in the process. The question is whether the packages are put together in a way that encourages as many people and businesses as possible to take them up.
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