Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 20 - 39)



Mr Laxton

  20. The assessment of the number of sites that you came to of 381 was based upon the requirements of the 30 companies. Did that take into account any ability for BT to be able physically to be able to accommodate some of the kit that was going in or was that done first and then, when you had reached the results of that, you went to BT and said basically, "Can you deliver? Yes or no"?
  (Mr Edmonds) It was the other way round; it was the latter. The companies establish their own priorities. They then go to BT. Oftel is there to establish the process. It was an order of priorities set by the companies.

  21. At that stage without any sort of contact while they were sorting out their priorities and as to whether BT were able to accommodate their requirements: that was a sort of second stage?
  (Mr Edmonds) Immediately the sites had been identified, the operators then put in their survey requests, yes.

  22. I asked that because of course BT claim that in some of the sites they just physically cannot accommodate the equipment. Have you done any independent assessment to verify their claims? If you have not, who has, if anybody?
  (Mr Edmonds) Yes, we have and, yes, we will. Of the sites surveyed so far, as my colleague has just said, there is a very high percentage, 83 per cent, where it is believed that there will be sufficient space. My goal, sir, is quite simple in the medium to long term. It is that every operator that wants to unbundle a local loop, who wants to get into a local main distribution frame, this piece of the BT network, should be able to do so. Therefore, I have actually had my Director of Technology go, I think so far, to eight sites and he has looked for himself at the response made by BT when they say there is no space there. What we aim to do, though, is to create a process. As you know, the regulator is all about creating process that people can use. What we aim to do then is to create a process. So that where BT come back and say, "There is no space", and in one or two cases there was no space, a different route of building elsewhere, use of the car park, whatever, is fed into the process. If BT comes back and says there is no space, we will then have a formal piece of process that will have to be gone through to determine what happens next.

  23. We are going to take the scenario where in a particular building additional space has to be created in an adjacent building; who is going to foot the bill for that? Will it be BT or the companies that want to gain access to it?
  (Mr Edmonds) The basic premise is that costs are met by the companies that unbundle the loop. That is the premise that obtains throughout unbundling in both America and in Europe.

  24. Are you setting any sort of parameters on that in terms of access to buildings, costs of surveys, et cetera?
  (Mr Edmonds) We will intervene if there is any substantiated suggestion that BT is charging more than cost. That is our job. We will get involved in the process.

  25. For the benefit of the Committee, in terms of the equipment that is going in, and BT have claimed that they have insufficient space, is it large equipment racks that are going in, separate individual racks for each operator?
  (Mr Edmonds) Yes.

  26. Presumably, in some buildings you could have 30 full-size equipment racks, one for each operator?
  (Mr Edmonds) If I hold up that piece of paper, a d-slam, a piece of kit, is a bit bigger than that, and you have three of those and they take up that amount of space, but if you have ten or more different operators wanting space, clearly there are constraints. There is also the issue of ventilation. If you put all this stuff in, it creates a lot of heat. BT have got to put the power supplies in. BT want to put all of this in a separate cage so that there is no issue of its own security being compromised. When we are perhaps criticised for pushing back into the industry some of this detail, I would ask the Committee to bear in mind that it is a very complex, technological process on the ground, as well as a rather complex economic process. What we are absolutely committed to is making sure that BT—and this is what they agreed to on Friday—have very tough deadlines; 80 days to build a room, 70 days with kit pre-ordered, 20 days where the operator provides a cable. There is a mass of detail and fact.


  27. It is just as well you started now and did not wait until the end of July, is it not?
  (Mr Edmonds) We started this process back in March of this year.

  28. All that you tell us suggests that you should have been there that much earlier. You have known the technical problems involved. You could have had the arm up BT an awful lot earlier than this, with respect.
  (Mr Edmonds) No, I am sorry, I honestly think that is unfair. We set up four working groups between the industry and BT and they have been working on this set of issues throughout the middle part of this year. As each stage has gone on, different issues have sometimes been identified and different issues have been resolved. Do not forget that I did not actually have the statutory power to enforce this until August of this year. I put your question back quite hard: how could I have done it faster? I actually think that Oftel, working with the industry, and I give great credit to many parts of the industry, has done remarkably well to get to the point where we now are; ie we will be compliant with the European Regulation. How many of the rest of the EC members will be as compliant as we are? That is a very interesting question.

Mr Butterfill

  29. Would you necessarily need to wait until you had a statutory power before you started the planning? This is not a new issue. This Committee first considered this issue in 1994 as a Committee. Clearly Parliament was thinking along these lines. Should not Oftel have been thinking along these lines and doing a bit of strategic planning in advance of statutory powers? If you were a proactive regulator, should you not have been pressing the government for earlier statutory powers?
  (Mr Edmonds) I have been a proactive regulator. I was appointed three years ago. Within seven months of my arrival, I had produced a consultation document on local loop unbundling.

  30. I am sorry, I was not referring to you personally, Mr Edmunds; I meant Oftel in general.
  (Mr Edmonds) I think that the view in Oftel, until my arrival, was that we could rely probably on infrastructure competition and that unbundling in the format that we have now gone for it was not one of the priorities that we set. As soon as we did set it as a priority, and I am sorry if I am appearing defensive, we have worked on a very fast timescale. We have been working concurrently. We did not wait until we got the licence amendment to set these working groups up. We set these working groups up back in March, as soon as we had published a draft licence amendment. You are quite right, Chairman, if we had not done all of this we would be nowhere near able to meet the 1 January deadline.

  31. But you knew that the European legislation would impose deadlines which you were unlikely to be able to comply with? Miss Lambert spent a long time with the Commission.
  (Mr Edmonds) The Regulation was published in July.
  (Ms Lambert) Yes, the Regulation was published in July 2000—it had been in draft form—by which time our process was already well advanced. The group to which David has referred was already established. I think it is also worth pointing out that the Regulation requires BT to make a reference offer from 31 December 2000. But it made a reference offer in August. In a lot of respects, we are ahead of the Regulation. We have been working very hard to keep there.

  32. Are you saying that the European requirements were unreasonable in terms of the timescale that they were envisaging?
  (Ms Lambert) Not at all. I say that we are ahead of them in certain respects.
  (Mr Edmonds) I think what we are saying is that many other European countries will find it hard to be compliant.


  33. May I ask one point about your Director of Technology's business? He sees how difficult it is and sees the amount of space. In this rather small sample, were there instances where BT had said there was no space and, lo and behold, space there was?
  (Mr Edmonds) I think the knowledge that the Director of Technology is going to be out there patrolling the space probably concentrated minds wonderfully. Generally, the feedback that I have had from him is that in one or two cases there is no space whatsoever; in one or two other cases there may be space that is utilisable. What we aim to do, as I said before to Mr Laxton, is to create the process, so that there is, if you like, a flow chart: they come back and say "no space" and you then go through a flow chart actually to determine whether that is the case. If there is a dispute, Oftel will then have the ability to intervene directly on a site-by-site basis.

  34. So you will be the ultimate arbiter. You will decide?
  (Mr Edmonds) If the competitor who wants to unbundle complains that BT is being unreasonable, that BT is not fulfilling this licence condition, which is to make local loop unbundling, yes, we will be.

  35. How do you do that? Do you fine them or lock them in jail?
  (Mr Edmonds) That is tempting! At the moment we go through this process where we have a complaint; we investigate the complaint according to all the rules of natural justice; we listen to both sides; we then make a provisional order, if we have to, asking BT to produce a remedy. If they do not, we will produce a final order. If a final order is produced, which BT do not comply with, the competitor company has the ability to go to law and get damages. That is the process. It is cumbersome. That is why I answered your previous question the way I did.

  36. How long would that take?
  (Mr Edmonds) That can take probably three months.

Mr Laxton

  37. Can I clarify one final point on accommodation arrangements. You said that BT wanted some element of security of the kit, the racks of equipment within a cage. Are they wanting to physically separate that equipment from their own equipment, so that there is a separate means of access for other telecoms operators to come in and work on the equipment?
  (Mr Edmonds) Not necessarily a separate means of access—I think that would be difficult—but certainly so that the kit is delineated in a part of the building in a way that is clearly identifiable as the operator's. They want security around that and they want fire precautions around that. As we have discovered in many other countries, it is possible for an incumbent who wants to be awkward to be very awkward in terms of the kinds of arrangements that you are describing. One of our major objectives with BT has been to tell them that their approach to these operators must be to treat them as customers whose business they want, rather than as a nasty incubus that is trying to come into the switch. We have had some almost bitter conversations with BT during all of this year. My colleague, Jim Niblett, used this analogy on one occasion: if you have this kind of debate, you hit BT with the club five times and on the sixth they finally come up with what you want. We have had almost trench warfare for much of the summer in trying and get this right. That is why when you, sir, use the word "impotent", I do find it hard to take because I think that we have been very tough indeed in a whole range of discussions with BT. Had we not been, we would not be at the point at which we now are, which is producing LLU in the UK on a timescale which I genuinely think stands comparison with anywhere else in the world. I think we are producing LLU on a timescale that beats the commitment I gave to you, Mr Laxton, in the answer I gave to you at the last meeting of this Committee.

Mr Butterfill

  38. That is not quite the impression of the Committee. We have a submission here from Alcatel, which gives a league table of who has done what and where we all are in terms of statutory conditions in place, pricing available from the incumbent, the incumbent accepting orders, delivery of co-location, delivery of copper loops and volume availability of LLU. Germany has no outstanding issues on that. They have clearly done it quicker than we have. The Netherlands are way ahead of us. Some are further behind; the French are further behind. But we have three outstanding items which will not be available until 2001 and in terms of volume availability not until July. Why is it that others within the EC, who started behind us in these matters, have been able to overtake us?
  (Mr Edmonds) The one rebuttal I make of that is that they started behind us.

  39. All the evidence that we had back in 1994 when we considered this showed they were nowhere near where we were.
  (Mr Edmonds) Indeed, I can only take responsibility from 1998, for the actions of the organisation I have led since then. Germany had primary legislation in 1997. The Netherlands had primary legislation as well.

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