Examination of witnesses (Questions 19
THURSDAY 25 JANUARY 2001
and MR IAN
Chairman: Gentlemen, thank you very much
for coming to see us today. As I said, this is our first public
evidence session on what is a major inquiry for us. We will launch
into questioning right away.
19. To what extent is BT becoming or aspiring
to become a broadcaster?
(Mr Green) In general terms, that is not an immediate
wish of ours. What we expect to see happening in the total communication
industry is a steady development of new types of services. As
we see the roll out of broader band networks over time, they will
become more and more capable of streaming video into numerous
devices in the home: personal computers, televisions, all those
sorts of things. We will see steadily the development of a new
range of information and entertainment services which both combine
linear broadcast material with the opportunity to interact with
that. You can think of all sorts of silly examples like changing
the end of a soap or finding out more about a particular part
of an item or games programme, which is truly interactive with
people taking part online, a whole range of things. This is the
point where we will get particularly involved in broadcasting
per se, so I would not expect to see us becoming a Channel
4 or a BBC or anything like that. We will get involved with many
media partners, both small and large, in terms of developing these
new types of interactive services.
20. If I can quote what you say in the document
you sent us, you argue that providers of content for the Internet
should be obliged to rate their material. Is there any role for
OFCOM in all that?
(Mr Green) There is a significant role in promoting
this whole point. We are very concerned that, as we see this hybridisation
of services, we do not get confused about the regulation necessary
for broadcasts which are pushed into your home whether you like
it or not and the sort of regulation you would expect for communications,
where you do not expect when you make a telephone call for anybody
to be monitoring that call. You would expect a completely different
type of regulation. We are going to see a world with huge, vibrant
creation of new content, everything from a local school putting
on a play through to lots of wacky things none of us in the room
can think about that are of interest to lots of different people.
The Internet enables all that. It enables the economics of creating
and distributing content to come right down, but it is very much
a question of choosing what you see. Alongside that, you have
a pretty significant risk of people being able to go into this
wild, open space of the Internet and choose to do things which
we would not want them to do. You also have the opportunity for
people putting illegal things on. Therefore, the two tasks are
to see how we can promote a general standard internationally which
says that everybody will rate the content they have and there
will be a level of monitoring through Internet Watch, which enables
us to see where things are going wrong. Until we get government
support for that, until there is a strong push from something
like OFCOM to do that, people will not do it. When you try to
use your browser to say, "I want to screen out all these
things", you end up screening out nearly everything because
people have just not rated their sites. We think there is a very
important role to play in a promotion of this approach.
21. What approach do you think the Government
should take on that? Is the White Paper not strong enough? Is
it not saying what you want it to say?
(Mr Green) I think the White Paper takes a reasonable
line on this point. The approach it takes is sound. Our view is
that the danger is rather the other way. There is a real opportunity
here both for economic and social revolution in the way that the
Internet enables people to interact. We need to try and create
regulation which allows for that while aiming off for these risks.
We are going to have to learn as we go along.
(Mr Butler) It is really important that consumers
have informed choice, that they know what they are going to see
and particularly they can exercise their choice and not be surprised
by coming across material that they would wish to avoid.
22. Is that what you meant by illegal stuff?
(Mr Green) That is a matter of taste. There are things
that are legal which you would not want your children to see.
There is also the straightforward question of illegal material
and having the infrastructure there to be able to take off material
which is straightforward illegal, paedophilia or any material
(Mr Butler) There are proposals in Brussels to have
a European-wide set of rules and regulations on illegal material
which will inhibit that and enable us as Internet service providers
to remove that material and to make sure that it does not appear.
It does need to be an international effort to do that and we fully
support that legislation.
23. How important do you consider it is to have
an easy unbundling of the local loop to make real progress?
(Mr Green) We are blessed in the United Kingdom with
more competition in the local loop than anywhere else in the world.
We have five million homes already using an alternative local
loop. Germany is next in Europe with 150,000. We have established
a clear lead in competition in the loop. The current programme
will create advantages and further opportunities for people to
compete. It is most likely for the foreseeable future that the
advantages will fall to small businesses and others in the normal
use of Internet connections and telephone lines rather than adding
greatly to the roll out of consumer services. That would be my
guess from an economic point of view.
(Mr Morfett) I would agree with everything you have
said. BT has been working with OFTEL and the industry to make
it a smooth process. There have been some glitches along the way.
Those are a lot about the fact that the industry as a whole is
very crowded, given the amount of competition. There are 28 operators.
They have a wide range of objectives and BT has been trying to
fulfil those. OFTEL has been setting down some very clear rules.
24. How much did you learn from the disastrous
unbundling that went on in the USA? Did you learn some very important
lessons in what not to do or did you go on regardless?
(Mr Morfett) We have learned a great many lessons,
particularly that it became very litigious in the US. There were
not clear rules in advance. There was not significant cooperation
between the industry and the incumbents. We have tried to build
on all of those lessons and improve that. BT has fulfilled each
of the deadlines that has come along. It is only one country of
two in Europe that is fully compliant with the EU regulations
that came in on 1 January. Their trial sites are up and operating.
The other operators are installing their equipment. It is designed
to a design that the operators agreed but which is a shared design.
One of the problems they had in the States was there was no agreement
as to the design. I think it is going to be smooth. The issue
which Andy has touched on is that there was some hype in the early
days and this would be a mass roll out of broadband to every consumer
in the home. The economics and technology do not allow that. The
economics will focus this with competitors competing for the small
and medium businesses. That is why I think we are seeing some
rationalisation in the industry but nonetheless those who want
to come into BT exchanges have the opportunity. The designs and
processes are there. It will operate.
25. You made it sound as though we have done
it rather well and it has all been rather smooth and without a
glitch. How would you answer criticism that I have had from local
businesses that have been concerned about this that BT have been
rather obstructive and unhelpful about it? It has caused problems
for the people who are trying to develop businesses in this area
and those who are service providers on the loops have found it
very difficult. I wonder how you would answer that criticism?
(Mr Green) I am the Chief Executive of BT Openworld.
I am a service provider and I deal with the rest of BT on arm's
length terms and sit in that same space. When we look back in
a year's time, we in the United Kingdom will have the most competitive
environment and clearly will have done more local loop unbundling
and will have more successful businesses, more lines and more
everything else in place than anywhere else in Europe.
26. We do need to keep ahead, do we not?
(Mr Green) We do and I am perfectly content that we
will be and that we are ahead. I think there is more competition
in this arena. We are completely supportive of that. This is quite
a difficult process. The problems that occur in the US do not
come about because people are ham-fisted; these are quite difficult
things. Both the roll out of ADSL which has caused significant
problems all around the world, and local loop unbundling need
to be done well and thoroughly. We do not want exchanges going
down because people short out things on an exchange when taking
out people's telephone services. We want it done properly; it
will be done properly and I am confident we will have as competitive
an industry here as any.
27. You mentioned ADSL and in the White Paper
it states that BT intends to cover 70 per cent of the country
with ADSL technology by 2002. Could you give us a bit more detail
about the 70 per cent of the country covered? How many households
will that be and where are they? How do you feel you are going
to address the 30 per cent that will not be having ADSL technology?
When do you expect those households to have it?
(Mr Green) I do not think we should have any expectations
that everywhere will get ADSL. It is only one technology in many
which will address the needs of consumers and businesses. It is
a technology which has two particular issues associated with it
which we need to understand. Firstly, it does not work if you
have very long local loops. You cannot pump down the line that
bandwidth if you have a long distance between yourself and the
exchange you are connected to.
28. As it is in rural areas.
(Mr Green) Particularly in rural areas, it is not
the technology which is going to bring the broadband. We are going
to have to wait for another one and work on another one to bring
broadband to rural areas. Secondly, it has pretty clear economic
characteristics. We are not expecting over the next five years
or so much more than ten per cent take-up of households covered.
At the moment, the minimum economic sign for a broadband connection
is 2,000 lines. If you have an exchange with much fewer than 20,000
lines, it is not going to be a very economic proposition to roll
this out. These are vast sums of money we are talking about in
terms of making these services available. Those two things are
where the 70 per cent comes from. It is 70 per cent of households
29. Where will they be?
(Mr Green) They will be generally in major conurbations
throughout the United Kingdom. We already have them throughout
the United Kingdom but they will be in Belfast and in the core
concentrations of economic centres. That of course is where the
demand is. Absolutely clearly, where the demand comes in the early
stage of development is where the economic power of the nation
30. When you say there is a projection of only
a ten per cent take-up, to some extent in the business that you
are in you would expect, would you not, just on ordinary telephones
you have provision that anybody who is a citizen virtually in
the United Kingdom could have a telephone but, because you are
saying there is only ten per cent take-up at the moment you are
only going to put the necessary investment into this so that possibly
by 2002 we could have coverage of 70 per cent. You are making
the decision to pick the best bits of market share and to hell
with the rest and marginalise those.
(Mr Green) We are doing what business people do which
is take rational, economic decisions. We need to recognise how
different the world is from a year ago. A year ago, the world
believed that we would move to a broadband world on fixed networks
and on mobile networks everywhere; that it had no cost and everybody
would have it free. Today, we face an economic environment where
banks throughout the world are issuing warnings about debt on
telecoms companies and we are seeing the real, very significant
investment costs that are required to bring these fantastic benefits
to the United Kingdom and elsewhere round the world, but it is
not for free. If it is to be done well and if it is to bring the
economic and social benefits that can be brought to society as
a whole from these things, it is absolutely imperative that we
concentrate on doing the rational things, that we put these services
where the demand is and that we move forward speedily and effectively
within a framework to provide these services. If we fantasise
about being able to give 100 per cent universal service and agree
that we will subsidise it by £40, £60 or £100 if
we really wanted to do it per household, I do not know where the
money is coming from. It is certainly not going to come from the
telecommunications industry. We can see that very clearly from
what is happening. It would be an irrational set of economic decisions.
The key question we need to get to in terms of connecting people
to the information age is a development of an end-to-end service
which is of value to all parts of society. We are playing our
part in that in the work we are doing with schools and other places,
to bring the benefits of these things to society, and in supporting
the Government and others in providing the information services
that will be of value to people, particularly people who would
otherwise suffer from the digital divide. That is much more important.
I believe personally that digital TV and analogue TV and the hand-held
devices, the mobile phones, are much more likely to bring us universal
access to the information age and real, usable things that consumers
can work with than a concept that we must have whatever megabit
that you might choose available in any household. It is absolutely
important that we realise that what people are really worried
about are things like ease of use, security, the total cost of
ownership including the device they are accessing. It is not today
an issue of bandwidth to the home.
31. When you said this was a benefit that would
be to all in society, do you think there is a role for government
to play there, because commercial companies are not going to do
it. You are not going to do it for us, are you?
(Mr Butler) I think there is a role for government,
particularly in the more disadvantaged areas. We have seen that
happen in the past. For example, we have seen European Union funds
being used to accelerate the deployment of ISDN services in the
north of Scotland and in parts of Ireland. We have seen government
take a very proactive stance and I believe that the Scottish Executive
are looking at this for parts of Scotland now, which is the extent
to which they can work with industry to improve the economic case
and encourage competitive companies to want to provide these kinds
of things. I think there is a role for government there in working
with industry to achieve those social goals.
32. Good morning. I wonder, it may be confidential,
if it is confidential perhaps you would send it under those rules,
but if it is not I wonder if you would put it into the domain,
where ADSL roll-out is going to be in the next ten years so we
might as a Committee focus on the 30 per cent?
(Mr Green) We do not have a programme for anything
like 30 years, we have a programme which is
33. No, 30 per cent. You said 70 per cent by
(Mr Green) We would not wish to be accurate about
that now because what we want to do is listen to customers about
where they want the service and put our exchanges there. We can
certainly help you with understanding the economic characteristics.
I also feel we should be very careful about DSL. What I think
is important is the services customers want. If you choose a technology,
are you saying that it is correct to subsidise DSL but not cable,
it is correct to subsidise DSL but not the new satellite services
which people are working hard to develop all over the world which
would be much more suited to rural areas? I think that being hung
up on the technology in that sense is probably not the role of
government. It seems to me highly unlikely that you will guess
the technology correctly versus all the innovation that is going
on in the world in these spaces. So, the question, I think, is
what are the objectives you are trying to achieve? What is the
thing that you believe is important in avoiding a digital divide
and making services available to people? Moving down into the
technology layer I think would mislead and would be a mistake
to worry about our roll-out programme versus all the other technologies
34. That may be your view, it is not actually
my view. I would still like, if possible, to have some ideaI
assume your evidence is accuratethat by 2002 70 per cent
of the country will have access to the technology. If we could
have an indicative map of which communities those are then we
could have a better idea which will not. That is all I ask. What
do you say to that?
(Mr Morfett) The map for the first 50 per cent, which
is the plan up to March of this year, is already on BT.com. In
fact I can say that the constituencies represented here are all
on that bar two. I think you can see that there are already plans
to be completed in two months' time which cover a great deal of
the country. In terms of this point about the remaining section,
there will be another 20 per cent next year and we will announce
that fairly early on. In terms of the 30 per cent, Andy has already
mentioned it, for example we are working with the Welsh Development
Agency. They have a particular interest in bringing broadband
to smaller communities and they are part-funding the application
of DSL in some Welsh rural communities. We would expect to see
that more and we would want to work with government on that. There
is the point that the Government has made a significant amount
of money out of the UMTS licences and one of the things that we
are talking to them about is bringing access to broadband services
closer to people who really need that for social reasons, so schools,
libraries, Citizens Advice Bureaux are all areas where you could
put both services, support and training as well as equipment and
the connection very close to communities of interest. You do not
have to have it at home. As has been said, people who live in
more deprived areas are unlikely to have the thousand pounds that
buys a PC to begin with but they might well go to their library
to get access to it. I think there are a number of ways that government
can work with industry and industry can work with government to
take broadband further up but it is only one technology.
35. Just remind me what the costs of ADSL are
now if I take a line?
(Mr Green) Basically £40 a month.
36. To put it in in the first place?
(Mr Green) £150, that is for half a megabyte.
37. £40 a month for unlimited access to
whatever I want.
(Mr Green) Yes. Of course, you can get that much cheaper.
38. How many, would you say, currently have
switched on to ADSL?
(Mr Green) 25,000-ish.
39. 25,000 and 24,000 businesses and a thousand
(Mr Green) No, no.