Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 80 - 99)



  80. That is one of your fundamental roles.
  (Mr Edmonds) Indeed.

  81. Do you never, outside of these carefully considered consultative documents, give a private thought as to how the system should go in order to ensure the competition is there? Do you never feed into the thinking of the players how things might develop?
  (Mr Edmonds) Yes, I do. I think one of my major discussions with BT in the last six months has been to do with the whole culture of serving the consumer. It has been to do with the whole culture of an organisation which has found it very difficult to respond to the challenges of local loop unbundling and the way in which its network may be used in the future and actually ramming home to the top management of the companies I expect to see -and this sounds very presumptuous—a change in the culture. I think that change in the culture may well be better articulated in the context of Netco because it will have a framework, it will be much more clear, much more separate, much more transparent. Whether those discussions about culture, about serving the competitors in a different kind of way, have had any impact on that decision BT can say to you.

Helen Southworth

  82. Can I take you on to issues around leased lines.
  (Mr Edmonds) Yes.

  83. In November 1999 you announced that you were launching a review of the state of competition in the market for national leased lines. In August you published a consultation document presenting its conclusions. Why has the UK fallen behind in the competitiveness of leased lines in the last few years? How much higher are costs for leased lines in the UK compared with other countries?
  (Mr Edmonds) The UK has fallen behind in leased lines because its prices have not dropped anything like as significantly as those of other countries. Can I answer your last question with one or two figures. If you take a 64 kilobyte 50 kilometre leased line, the BT cost is 5,692 euros as against an average price in the countries that we surveyed of 5,000 euros as against the third cheapest of 3,100 euros. If you take a two megabyte 50 kilometre leased line—these are figures from the consultation document we produced but it does give you an order—you see that BT's price was 23,000, the average was 28,000, but the third cheapest was 15,000. The price for these leased lines has remained very high. The Committee raised with me the issue before as to what we were going to do. The statement that we produced in August said that BT prices were significantly above the cheapest—as I have just demonstrated with that answer—but although BT prices were however broadly in line with the EC average that was not good enough because they were still significantly below those of the United States. We further concluded, therefore, and I think this is the straight forward answer to your question, that the market for retail leased lines was not competitive. I think that is why prices have remained as high as they are. That is particularly true for what is known in the trade as the wholesale terminating segment—the bit between the consumer and the operator. We argued in the course of that document that until there was competition in that area we would not get down to the prices that we should. What we are now taking final decisions on, I hope by around the end of the year, and what Oftel is consulting on, is the proposition that Oftel will specify the price for those wholesale terminating sectors at all band widths, that we will consider a price control, that we will set prices thereafter and that we will, therefore, bring in by, if you like, traditional regulatory actions competition to this market place that did not exist before. As I say, that is a consultation we are out on at the moment so I cannot say that we have finally decided to go down that route, but we gave a clear indication in the August document that was the central proposition on which we would be consulting. Sorry, it is a long answer but it is a very major step forward since I last appeared before this Committee.

  84. The Communications Management Association say that they have been providing evidence on the lack of competition to Oftel on leased lines for three years. Is there any reason why it has taken so long to initiate action two years after the study had been completed?
  (Mr Edmonds) The reason is that we found it difficult initially to do the analysis. I could give you all sorts of reasons about complex discount schemes in different parts of the world. The truth is until about a year ago we had not driven forward this exercise. If I could, I would take some credit for the fact that a year ago we did. We have now driven it forward and we produced a set of conclusions on which we are now consulting. We could have done this a year before, yes.

  85. I think we all appreciate the complexity of the issues but, as I mentioned before in terms of mobile lines, if issues are so complex that customers cannot work them out then they have to depend on regulators to take that action on their behalf.
  (Mr Edmonds) The regulator is now taking that action and I probably accept, Mr Hoyle said I did not accept criticism, I do, in this case I probably accept, or I accept, that we should probably have acted a year before.

  86. When are we going to see a speedier conclusion of this issue?
  (Mr Edmonds) I hope by the turn of the year.

  87. The CMA also say that ". . . for 74 per cent of user organisations there is no competition in the last mile for leased lines".
  (Mr Edmonds) Yes.

  88. Why is there still no competition?
  (Mr Edmonds) I read that submission. I think it is a slightly odd conclusion to reach because there are 52 per cent of homes and small businesses in the UK passed by cable. Most UK consumers, and this applies to some extent to small business, maybe not so much to large business, have got the choice of BT, 50 per cent have got the choice of cable, there is indirect access, and it is much more related to the domestic market, I accept, than the small business market.

  89. Are you saying it is not accurate?
  (Mr Edmonds) No. Sorry, the 74 per cent, I do not understand the 74 per cent when 52 per cent of homes are passed.

  90. You suggest they make direct representation to you?
  (Mr Edmonds) I read their submission and we will clearly have a further discussion with the CMA, yes.

  91. Can you give us some indication back from the discussion as to what is happening?
  (Mr Edmonds) Of course.

Mr Berry

  92. Can we turn to access to mobile networks. I understand that the European Commission has opened infringement proceedings against the UK for an excessive time delay in allowing new entrants to the existing infrastructure. Can you update the Committee on that?
  (Mr Edmonds) This particular case was—I think I assume because the paper was not circulated and I understand it was commercial in confidence—a complaint by a small service provider that Vodafone and then Cellnet were not granting indirect access to the networks. We actually found in favour of the small service provider in 1999 and have mandated indirect access for that company, indeed for others, into the BT Cellnet and the Vodafone networks on a specific price basis. Infraction proceedings, I do not recognise in this context but, again, perhaps my European expert colleague will?
  (Ms Lambert) If I can just add to that. We did get a letter in May from the European Commission asking for our observations on the length of time that it has taken to resolve this dispute. We replied to the Commission in July this year and we have heard nothing from them.

  93. You have had no reply from the Commission?
  (Mr Edmonds) No.

  94. They did write to you in May?
  (Ms Lambert) They wrote in May. We replied in July and we have heard nothing further.

  95. The substance of their complaint was that Oftel was taking too long to make decisions about allowing new entrants to have access.
  (Mr Edmonds) By that stage we had already taken the decision to allow indirect access. It is open to new entrants. It had taken a year to reach the decision because we had, again, gone through a rather elaborate market analysis. We felt we had to do that market analysis. That was why I was rather surprised when you said infraction proceedings were in place because I had not heard anything since July when we wrote in. I had hoped perhaps they had gone away.

  96. That is the interesting question. Clearly, like others, I saw the FT story in May. There was an infringement case, hence the question. You are saying you replied and said—
  (Mr Edmonds) Not guilty.

  97. —"we have done this". You must know whether there is still an infringement case pending or not.
  (Ms Lambert) We have heard nothing further and we do not believe the Commission, at the moment, is taking further progress on this.

  98. Fair enough. Okay. Could I raise a question about roaming and mobile call termination charges. The International Telecommunications User Group believes these charges are excessive and I think my colleague, Mr Butterfill, referred to the complexity of understanding mobile call charges. Certainly with roaming I still cannot understand how these prices are determined. Do you believe that roaming and mobile call termination charges are too high?
  (Mr Edmonds) I will break that into two halves. Mobile call termination charges are of course now controlled by Oftel. We produced a reference to the MMC just after I arrived, which we won. We have seen, since then, a 33 per cent decrease in the price of calls from fixed to mobile. I think that is a very significant decrease, partly through competition but primarily through the introduction of price control. In so far as roaming charges are concerned, there is currently an EU study into international roaming and in Oftel—
  (Ms Lambert) Roaming is an international issue, given by definition it is international. The European Commission are looking at it and Oftel is working very closely with the Commission, sharing information, but until the Commission has concluded their investigation we are working with them rather than taking independent action. We will keep in close touch with them.

  99. Are you pressing for speedy decisions on this matter?
  (Mr Edmonds) In the UK we do have a very good record on mobile prices. I understand totally the point about confusion but if you look at the UK's record we probably do have the lowest prices of all countries in the EC if you take a basket of mobile services. I think that is partly due to competition and I think it is partly due to the price control that we introduced two and a half years ago.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 20 March 2001