Select Committee on Culture, Media and Sport Minutes of Evidence



Examination of witnesses (Questions 40 - 54)

THURSDAY 25 JANUARY 2001

MR ANDY GREEN, MR JOHN BUTLER and MR IAN MORFETT

  40. How does it work?
  (Mr Green) There is a great deal of demand for video services, not from BT. Then there are quite a lot of consumers from ourselves and Freeserve, BT Open World and Freeserve and a number of small businesses. I would think it would be probably 60 per cent consumers because the video service take-up is quite high.
  (Mr Butler) Can I just add to that. There are three parts to it. Firstly, because of unbundled local loop we have talked about companies other than BT can put ADSL and such equipment on the lines so there are a number of different companies who can provide ADSL services. Of the services that BT provides from its wholesale division, BT Openworld, which is the part of the company we represent, is one of a hundred people who offer services over those BT wholesale services. Then, in our own right, we offer services in BT wholesale services. There are three potential ways of doing that. It is not clear to us in our part exactly how many competitors are offering and what their take-up has been, which is why we are not as exact on the figures as you might expect. We know our figures, clearly we do not know what our competitors' figures are to any degree of accuracy.

  41. The flotation of Orange is not as successful as was anticipated. Telcom shares as a whole have taken quite a bashing, including your own. You have a £10 billion debt that you will be looking to find a solution to. Does BT have enough actual reserves to make it possible to modernise the country as fast as you would like?
  (Mr Green) I do not think it is BT who is modernising the country, I think it is the industry who is modernising the country. It is a competitive industry with a number of players. We have described how a number of those players play and, of course, in the mobile sector there are four people who have bought 3G licences who have a major part to play in all this. So, the question is, do we have all the necessary resources to do the things we think that consumers want and to keep the UK moving ahead? We remain committed to being a world class organisation and providing world class services and we are confident about that. We have very valuable assets all around the world. We are a substantial multi-national organisation and we have a programme in place we are very confident of.

  42. If you were in our seat would you be saying that the way in which to enfranchise people the fastest is through a digital television?
  (Mr Green) I do not think the company has a view on this. Personally, I would say to you that the areas which have progressed fastest to meet consumers' real needs have been mobile telephony, the Internet in general as a narrowband thing and the digital television. I think we are all relaxed about people with enough money who will take their own economic decisions. If you examine what we might call the disadvantaged then my own experience going out on site visits and things is if you walk into a house which is having a telephone put in for the first time, there is almost always a very good TV there. I think the telephone line connected to the TV will be a very strong contender in bringing the benefits of the information age to people on lower incomes.

Chairman

  43. Can you tell me why BT do not follow the United States telephone companies in offering free local telephone calls?
  (Mr Green) The United States telephone companies run in a very strange regulatory environment. Firstly, they have very small local telephone areas. The local telephone area you will get from here covers ten million people. I think normally you would find a couple of hundred thousand in a local phone area in the US. You have to be careful about what is free. That is the first thing. The second thing, the whole system is based on a subsidy which comes in from the long distance operators who are separate from a local area. Thirdly, you pay for it, so the rental price you pay is higher. So what we have done about that is given customers the option. You can indeed have free local calls across the whole ten million people from here for a modest fee, which is competitive with the sorts of rates that are available in the US, very competitive, and I think a million customers in five weeks have chosen to do it, so it has been a very successful initiative.

  44. Your calls are quite dear, are they not? I am a subscriber to Sky Digital and I get 40 per cent off my BT calls through Sky Digital while getting Sky Digital's programmes as well. So you are charging me that much more than I am paying otherwise so your calls are dearer, are they not?
  (Mr Green) Mr Kaufman, I think it is probably very difficult for me to legally go into comparisons of tariffs in a forum like this. What I would say to you is that it is general practice within the industry to compare their tariffs with our standard tariffs that we provide for low users who want to have a low connection rate to their telephone so that they can have it cheaply. It is one of the things which supports universal access and we charge them more for their calls. Customers of ours who use the phone a lot do not generally buy that from us; they buy something called BT Together which, indeed, also has discounts of 40, 50, 60 per cent off our standard tariffs. We are very confident about our tariff policies. We think they are very competitive.

  45. You are almost a total monopoly in many ways.
  (Mr Green) We are clearly not because, Mr Kaufman, you have made your economic choice for yourself. You are confronted and bombarded with offers to buy your telephone calls. I am pleased to see that you have taken what you believe to be the best economic choice for you; it is clearly not a monopoly.

  46. Better, I do not know about the best. The best would be if you were to do this. I am not looking at this from the point of view of making telephone calls, I am not getting into a great personalised diatribe against you, capable though I am of doing so, because I regard your telephone calls as too expensive, though I do, it is because what we are interested in in this inquiry is access to the Internet. Clearly free local telephone calls, or at any rate a system whereby you do not pay throughout the call on the tariff, would massively expand the potential of access to the Internet and therefore deal, amongst other things, which is a matter of great concern personally to me, with social exclusion.
  (Mr Green) We agree with you entirely. I am very proud that I, as BT Openworld, have more customers not paying for Internet access on a pay-as-you-go basis but on an unmetered basis than anybody else in the UK. We have three tariffs which I think meet the market need very well. We have a 24 by seven tariff, which I think I cannot talk about because I do not think it is announced until tomorrow, which allows you all-day access unmetered, all night, if you want to, unmetered, at a reasonable rate. We then have a £9.99 tariff for the evenings and weekends unmetered access, so that for £9.99 a month you are on the net and you do not have to worry about charging. When we are talking about social exclusion, very often what people want to be able to do is try the net out, therefore I am very pleased also to have a penny a minute tariff which means that if you are only using the Internet for, say, three hours a week, that is costing you £6, you do not have to pay £9.99, you can pay £6.

  47. It is quite a lot for a pensioner with no other income.
  (Mr Green) The provision of Internet services is not a free good. It is a very expensive technically convoluted process which takes a significant amount of investment. Right the way across the world you can see that the economic price is roughly $22; that is what people are paying. They are paying roughly that sort of price everywhere for an unmetered access package. On a world benchmark basis we have our ordinary calls for voice and our Internet calls for voice coming out in all the studies throughout this year as one of the most competitive nations, as well as being one of the things that the Government has pushed for. We can see clearly the move up the league tables over this period. I think we are now in a position where people have the opportunity to buy at highly competitive rates. Of course things are expensive for people, and it is expensive to do all sorts of things in life, but I believe we have world class costs and world class prices available and I think you can see that with the penetration of the Internet which outside the USA is one of the strongest in the world. You can see that with the take-up of these unmetered services which are very strong.

  48. You have to make an exception from the United States. In the United States they have free local calls.
  (Mr Green) In the United States it is not possible to access the Internet any cheaper than it is here. These £9.99 tariffs are much cheaper than the cost for accessing the Internet in the US.

  49. Tell me about something else which is not universal throughout the United States but certainly exists in certain localities, namely free connection by the telephone company to those who cannot afford to pay for connection, which is another very good way of dealing with social exclusion. There are not all that many people in this country who will be affected by that. BT is not exactly an impoverished organisation. Why do you not do that?
  (Mr Green) We already have, I think, a fantastic array of services for consumers. We have something called the Light User Scheme, can you remind me what the tariff is on that at the moment?
  (Mr Butler) No.
  (Mr Green) You do not remember it?
  (Mr Butler) No.
  (Mr Green) It is a very low monthly fee indeed. We have a whole range of opportunities. We have enormously high penetration of the telephone around and that, of course, brings with it Internet access. I am not convinced, I would love to hear if the Government feels it is something that is important to move forward.

  50. We are not the Government. We have nothing to do with the Government. Some of us may be members of the Government party.
  (Mr Green) From a Committee point of view. Penetration of telephone lines in the UK is very high indeed. I am not aware that there are significant issues with people being unable to afford to be on the telephone. Many of the people who are not on the telephone are because they have been on the telephone and found they could not pay their bills or would not pay their bills. I am just not aware that it is a major issue for the UK at the moment, people being unable to be on the telephone.

  51. You used earlier on, Mr Green, the adjectives "vibrant" and "creative". Would you like to give us an example or two of the way BT is being "vibrant" and "creative" in this new age?
  (Mr Green) As I have said, we have embraced and led on the unmetered access to the Internet. We have in Genie, our mobile Internet service provider, clearly the European leader, in fact outside Japan the world leader in terms of the access to the Internet via mobile phones. Great exciting services. We have by far the best DSL both small and medium enterprise, small business and residential portals. We have partnered with those with over a hundred organisations, including many small start up companies who have had specific interests in being able to demonstrate the future of the broadband world. I would love to invite you along to our next exhibition—we had one recently, where everybody who came to it, I think, was impressed by the whole network of people, creative people, we pulled together around beginning to demonstrate what the broadband world was doing. I am really very confident that we are on top of that whole set of issues.

  52. Why do you not want to be broadcasters?
  (Mr Green) Because we are a communications company. We are very good at communications. We believe that the future of the way the world will develop is that each individual around this table will have different interests and they will access content from many different people in different ways. What we believe we can do is help them get to that content, to organise that content for them so they can find it, so they can send it to their friends, message their friends, so they can share the experience, they can invest their own thoughts and processes within it. It is very clear to me that what has driven the Internet has not been content, it has been e-mail, it has been communications, and that is where we feel we are very strong. We believe that the benefit that will really come is the ability for people to create their own content and drive forward as a communications experience. It is not like broadcasting. It is all about people creating their own content and sharing it with people. We think people will create videos of their parties and share them with others. We think all sorts of things like that will happen. This is a communications experience.

  Chairman: I do not know whether the smile on Mr Maxton's face is because he deeply agrees or disagrees with you but we are about to find out.

Mr Maxton

  53. Not on the question of roll-out of the Internet, certainly in its early stage it was not driven by e-mail, I am not going to say what it was driven by either.
  (Mr Green) Good point.

  54. I must apologise for coming in very late but I have been chairing a Committee just along the corridor. I am interested in ADSL, in two particular aspects of it. One is your roll-out programme, it may already have been answered. I recently went into a web site of another ADSL provider who had on their web site that they were unable to provide the service they promised because BT were unable to provide them with the ADSL lines. What is your comment on that?
  (Mr Green) We were explaining earlier that my role is exactly the same as that of a service provider. I sit in the same position. We all buy, all 100 of us, from a BT company called Ignite. As everywhere else in the world I think the team in Ignite have been struggling with the roll-out of this. There have been capacity problems. We have had a very significant waiting list for periods of time, I am sure our competitors have faced the same thing. I think the problems are being got on top of but this is a difficult technology. It is overlaying a very new thing over all the old systems that are needed to run a telephone company. Therefore, it is not something you can pick off the shelf. The fact you have cracked it in Wyoming does not necessarily mean you can crack it in London, which is the difficulty because you have to integrate it with all the systems. I know that has been causing very significant problems.

  Mr Maxton: It is being whispered to me by my colleagues that you have covered this.

  Chairman: Thank you very much, gentlemen. Thank you very much for coming to see us and answering our questions. We might take you up on visiting an exhibition.


 
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