Select Committee on Culture, Media and Sport Minutes of Evidence


Examination of Witnesses (Questions 120 - 127)

WEDNESDAY 31 JANUARY 2001

MR STEPHEN A CARTER, MR PHIL KIRBY AND MR JERRY ROEST

  120. And would I be right in saying that, of the houses you pass, approximately one in four take up your service?
  (Mr Kirby) No; it is considerably higher than that.
  (Mr Carter) It is considerably higher than that. I think our aggregate penetration of that is 48 per cent, so nearly one in two take some form of service from us.

  121. We heard last week from BT that the roll-out of ADSL will actually create ghettos; there will be 70 per cent access to ADSL, but 30 per cent will not, which is a very high figure; and if you have 48 per cent now you will hope to get higher and higher and higher. We have got competing wireless technologies; the community out there is a bit confused, and I do not think this White Paper has really pointed them in any correct, or any, direction at all. Do you think we should just bite the bullet and give out a box to every home, so that we can be enabled tomorrow, it will be the best in the world and the best in the knowledge economy and the first; it would not cost very much, would it?
  (Mr Carter) I have to say, it would cost you quite a significant sum of money, unless you had managed to strike a deal with the set-top box manufacturer, that we have not yet met. And I think our view on that is that there is a range of companies, our own included, who have made a substantial investment in creating the environment that we have now got, and that that form of intervention would alter substantially the economics of that historical, and, indeed, planned, future investment. As I said to the Chairman earlier, we have a very confident view, borne out, I think, by take-up rates to date, that by 2005, 2006, a significant majority of the population will have access to the form of set-top box technology that you refer to, and, as you also refer to, there will be the emergence of third generation wireless providers and the technology that comes with that. So I am not sure that is the stimulant that is needed to deal with the issue that I think you are referring to, which is BT's planned role into radio itself.

  122. You would say that, would you not, because you are a commercial person, but if you look at our perspective, we do not want to disenable lots and lots of people in the country, which is what we are going to do if we are not careful, and, in that, where Chris Smith's speech at Cambridge, three years ago, sort of hinted at 2010, but did not understand that digital television took the Internet; so his understanding three years ago was not as full as it could have been then. So that, if you say 2010, basically you are saying to the rest of the world, "Oh, well, we're just not going to wise up here, we're just going to allow you a competitive advantage," but, currently, on digital and 3G and 4G, we are the leaders in the world; so the Government really ought to step on the gas. Now it may upset you, because you have got your own five-year plan, but, the fact is, if we could roll it out as fast as possible, really it would enable the whole economy?

  (Mr Kirby) It is certainly a very interesting proposition, but what we have discovered, with the ADSL technology which BT is now trying to deploy, is that you go on learning, as time goes by. You may remember that BT, basically, have been peddling the advantages of that technology for the past ten years, and they used the threat of it very effectively against cable for much of the 1990s. When they introduced it finally, what I believe they told you last week is that they see it primarily as a business service, rather than a consumer service; that may or may not turn out to be true, and ADSL may or may not turn out to be the variant of digital subscriber line technology which is most successful. So while the policy thrust of what you are describing is one which is very attractive, there remains a risk that the way that the policy is implemented turns out to be a dead end. And, at the moment, we would say that the take-up rate for the services in addition to digital television is still relatively low, it is in its early days, the most efficient way of serving all of the customers who ultimately take up those services is not yet fully apparent. One of the things that cable has learned, over the last ten years, is that, arguably, the most valuable investment that we have ever made is burying a whole lot of plastic ducts in the ground; that gives us the flexibility to run new services and new technologies through them, if that turns out to be needed. Now BT does not start from the advantage of having plastic ducts in the ground, though it started from the advantage of being handed a network for free; but, nevertheless, as technologies develop, we do believe that the market is actually better positioned than the Government to decide either which single technology or which multiple technologies are going to get you fastest towards the goal that you are aiming at.

  Derek Wyatt: I will just remind you, in 1936, Logie Baird and Thorne were in a competition with the Civil Service as to how many lines there should be on a TV set, and 405 won and Mr Thorne became a very rich man. So the Government has made decisions in the past to say, "This is the technology, chaps; take it or leave it." Thank you, Chairman.

Mr Keen

  123. Like Mr Wyatt, I would like to compliment you on the thoroughness and comprehensiveness of your report, and also the way you have answered the questions. If I can compliment my other colleagues on their questions, they have asked most of the ones I was interested in asking, but I am very satisfied with the answers you have given. So can I move on to something else then. What do you think is going to happen with the provision of local TV, if I stick to TV, and how will that be able to be expanded?
  (Mr Carter) It is an untapped vein, would be, I think, our view of that. I think, at the moment, we have strongish regional television, although, in some areas of the country, I have always struggled with the notion of regional television, in that I think few people are from regions, most people are from places, or towns. One of the strengths, I think, of the way in which the cable industry was created is that it was from, if you like, the towns upwards, the local franchises upwards. And so we have long held the view that local services, I am not sure whether we would say local television, but local services, and that could be led, actually, to the earlier point, just as easily through Internet streaming or broadcasting as it could be through digital television, will be a growth area in the future. Because, actually, as we go into a world where there is substantially increased capacity, and therefore spectrum scarcity sort of disappears, then you are afforded the opportunity to do lots of interesting things in your locality, and we have more localities, in that sense, than our competitors, and are more interested in them, are more wedded to them, and, I think, are more committed to them.

  124. Most of the witnesses that come before us from the commercial world seem to be antagonistic to the BBC. How would you see the BBC fitting in, as your five-year plan rolls out?
  (Mr Carter) We are not antagonistic to the BBC. The BBC, in our view, is a substantial provider of quality content, and, to my colleague's earlier point, that is an attraction for the customers whom we have, who wish to buy television services from us. Our view is that untrammelled expansion in the digital world, with the attendant "must carry" obligations that go along with that, would give them an unfair advantage.

  125. I should have qualified it by saying that the commercial companies seem antagonistic towards the BBC commercially, the fear of the BBC affecting their commercial prospects, but they all compliment it on the provision of programmes. How do you think the BBC should develop, do you think they should be restricted on their Internet provision; I know it is not your word?
  (Mr Carter) Cleverer and wiser people than I have been posed that question and answered it. My own view, and I think our view, would be that artificially to restrict the BBC would be, in essence, to undercut its ability to continue to provide quality content in the world we are going to; so I think the BBC has to be given some freedom. I think the freedom has to be a freedom that comes with attendant responsibilities; so if the BBC wishes to extent into the digital age beyond those areas where the market clearly is failing, and wishes to use its own brand and its own resources and its own public profile and connection, the accounting procedure should reflect that. Free access to the brand and its value in the market, I suspect, without some form of restriction, would be an unreasonable competitive advantage.

  126. Mr Wyatt asked just now about the provision of free set-top boxes, to involve the whole of the population in receiving digital TV; he did not mention the fact that we have been told that the spectrum currently used by the analogue channels will be very valuable, if we can sweep analogue out of the way, and would that change your answer?
  (Mr Kirby) There have been different pointers, over the last year or so, about what the true value of the radio spectrum is. There was a fantastically lucrative auction of spectrum for mobile frequencies, and then the auction of spectrum for wide-band, local loop, about 28 gigahertz, which was not so successful. So I think the answer to the question is, yes, they are worth something, but we may not know until we get closer to the time when they might be available. And I think that spectrum planners would say that some considerable proportion of the spectrum now used for analogue channels would probably be needed to be allocated to digital terrestrial, in order to extend the availability of what we have today. But you may be aware that the availability of the digital terrestrial multiplexes, geographically, is not yet at the level of availability of analogue channels. So, yes, there is some value there, and, yes, it should be recovered, but we do not believe that any citizens should be forced into a position of taking up services they do not wish to. From the political point of view, clearly, there may be some stragglers, as it were, and they will need to be helped; the key priority, in the meantime, is to find ways of making sure people want to make that transition. And I think the plethora of services, which Stephen referred to earlier, is the route we think that will happen; each person may find a different reason why they want to switch to digital, and that is fine, because, overall, that switch will then happen.

Chairman

  127. Gentlemen, thank you very much indeed both for the quality of your memorandum, which has already been commented on, and also for the quality of your answers, frank, knowledgeable, helpful, and an object lesson to certain previous witnesses. Thank you.
  (Mr Carter) Thank you very much for your time, Chairman.





 
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