Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 260 - 270)



  260. Not by excluding other—
  (Mr Saunders) No. We operate on a two-tier basis. The network services that that service package uses at the retail level will be available to any third party. We believe we can make money both at the wholesale and at the retail level.

Mr Baldry

  261. Oftel are very much going to be the ringmaster in all of this and I understand that they have published proposals that BT should be contractually bound to meet timescales and pay compensation if service levels are not met. I appreciate that time has moved on since you submitted your evidence to the Committee. What do you now think about Oftel's proposals for the terms and conditions for local loop unbundling? Are you happy with what Oftel is putting forward? Does anyone wish to acknowledge not being happy with the regulator?
  (Ms Machin) No, I do not think we wish to acknowledge that. We have put in our response to the determination on the terms and conditions under the contract. There are still concerns about the service level agreements that we have been offered by BT. Generally speaking the determination is a significant improvement on where we started from. Yes, Oftel have certainly made some steps forward in that area.
  (Mr Allan) We think that is fair. Oftel is doing its best in difficult circumstances and we have certainly made a lot of progress in the last couple of months.
  (Ms Gilthorpe) We agree.

Mr Chope

  262. Can I ask you for your first impressions on the Communications White Paper?
  (Ms Gilthorpe) Certainly from Cable and Wireless's perspective it is very broadcasting focused. There is a lack of any detail relating to the telecommunications side of things which is a little bit disappointing. Certainly there was scope for a little bit more detail, for instance, on the appropriate level of regulation for incumbent operators, but obviously we will work with Government and with the sector regulators to try and evolve the founding principles that they have laid down and try and get a bit more focus on the telecoms side of things.

  263. Anybody else?
  (Mr Saunders) Generally I concur with Emma's viewpoint. There are a number of issues from the telecommunications perspective that we think need greater focus within the proposals for primary legislation but we recognise that there are significant issues in the broadcasting environment which are of interest to us as well and which have been addressed in this context and certainly we look forward to working with DCMS and DTI on turning what is a quite greenish White Paper into proposals which are more viable.

  264. What about Energist?
  (Ms Machin) What we are looking for at the end of the day is effective and appropriate regulation and I agree with the Cable and Wireless position in terms of the fact that it does seem broadcast based. We welcome developments in that field and we will work together to ensure that the telecommunications side of it is properly addressed. What we are looking for at the end of the day is effective and appropriate regulation to address some of the issues that we have experienced over the last few years particularly on this.

  265. So do we take it from that that you support the principle of a universal service fund so that all telecoms operators will contribute to the universal service obligation which you currently say is performed by British Telecoms and to an extent by Kingston? What do you think about the statement in the White Paper that the market alone will not deliver affordable high speed connections to all rural areas or to lower income urban communities?
  (Ms Gilthorpe) I will answer on the universal service point. Quite a bit of analysis has been done on the universal service quite recently—there has been a recent review undertaken by Oftel—looking at the costs and benefits associated certainly with BT's universal service obligation. It has once again been found that the costs are largely equal to the benefits. If it is found that there are significant costs associated with universal provision of services to customers then certainly Cable and Wireless would like the option to be able if you like to make a commercial decision about whether we would like to pay someone else to deliver that or play ourselves in that market place. First of all we have to determine that there is a cost associated with that and that has not been proven to date.
  (Mr Saunders) I concur with that viewpoint. At the moment the position in policy terms on the White Paper is no different from where we are at the moment. As a result of the directive and the current licensing regime that we have got in the United Kingdom the ability to set up such a universal service fund already exists and Oftel has concluded at the moment, at least as far as BT is concerned, that that is not appropriate. It is something that needs to be reviewed perhaps as the universal service develops in the future both in terms of its potential cost and indeed in terms of its scope. That takes us on to the second issue, whether or not there is a role for public sector intervention in terms of encouraging the broader deployment of advance services into remote rural areas or indeed into sectors of the community which are more socially deprived. As far as the former is concerned the e-Minister last week instigated some consideration of that. There was a meeting that took place last week which I think has been publicly discussed which is trying to address some of those issues and certainly we as an operator are interested in looking at some of those issues. As far as social deprivation is concerned, I am not sure that necessarily this is a universal service issue that is particularly relevant to telecommunications operators only. I understand that there are issues of social inclusion, there is the problem of the digital divide, but perhaps this is something that Government should consider in the broader context of subsidy and indeed perhaps with the support of general taxation rather than looking to the operators themselves to perhaps support beyond the scope of the conventional USO.

  266. Do you think the new regulator is going to be just as quick on his feet as the existing one?
  (Mr Allan) If I can make one comment on the paper, the paper refers to a light touch of regulation going forward. There are some proposals for example perhaps to separate BT's network operations from the rest of the business. If such a thing were to happen it would naturally be referred to regulation. I am not suggesting there should be heavy handed regulation but it may have to be more proactive regulation.


  267. We will doubtless return to this at some later stage when we look at cherry picking and things like that. I am not sure how many of you operate outwith the United Kingdom in the unbundling context. What has been your experience of our European partners' approach to unbundling? Has it been as open, transparent, liberal, as it has in the United Kingdom or has it been restrictive, dense, obdurate, obfuscatory?
  (Ms Gilthorpe) Certainly Cable and Wireless's experience is that the incumbents have been consistent in their lack of constructive approach to unbundling. Germany is often cited by some as being in the virtuous state of having unbundling on tap ready for people to walk in and take advantage of. The reality is far from that and we have some direct experience. Deutsche Telekom I would say is equal to BT in its tactical obfuscation of the issue and their PR is extremely good in their portraying to the outside world that they have achieved certain things in unbundling.

  268. Better than BT?
  (Ms Gilthorpe) Much better than BT. Everybody knows BT is not doing a very good job whereas people believe that Deutsche Telekom is. There is no doubting that this is a complicated issue but there are certainly things that can be done both through more proactive and clearer regulatory powers for Oftel and also a more forceful hand with BT. With certain rules in place that they were obliged to comply with I think we would have seen more progress sooner in this issue but we welcome the speeding up of that progress in the last couple of months.

  269. Do you think that was attributable to the EU directive or some kind of waking up process within Government and Oftel?
  (Ms Gilthorpe) You mean in terms of the speeding up latterly?

  270. Yes.
  (Ms Gilthorpe) No. I think that it was primarily due to the fact that the operators complained bitterly at the highest levels. There was an accusation at some point that the operators had not been very aligned or co-ordinated in their concerns being put to the regulator. I think there is some truth in that. However, one has to acknowledge that we all have very different commercial strategies. We are not a homogeneous mass with BT on one side and the rest of the industry on the other. In order for us to come together and align to present a coherent position to Oftel it actually involves quite a lot of compromise and discussion on our part. The reason we have now had progress is to my mind that this has been escalated to an appropriate level within Oftel and indeed within Government so that it has been realised—and we welcome you shining some attention on the issue as well—that if you want to e-enable Britain you need to have a level playing field in the market place to be able to do that.
  (Mr Allan) I think that is very well put.

  Chairman: On that note of near unanimity we will thank you very much for your evidence. There will be some points of detail we will want to come back to you on.

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