Select Committee on Trade and Industry Minutes of Evidence



Examination of witnesses (Questions 271 - 279)

TUESDAY 19 DECEMBER (MORNING) 2000

MR PAUL MARKHAM, MR MARK DAECHE, MS NATASHA HOBDAY and MR PAUL WORMS

Chairman

  271. You have seen how we operate, Mr Markham. Would you introduce your colleagues?
  (Mr Markham) Thank you very much for the opportunity to present our evidence. We are a combined group of both new entrants to the United Kingdom and existing telecommunications operators in the United Kingdom and probably represent a diverse set of business plans ranging from internet service provision to regional operators of telecommunications through to new DSL start-up companies. I am Paul Markham. I am the Commercial Director of one of those new start-up companies called OnCue Telecommunications. I am joined by my colleagues from Atlantic Telecom, Mark Daeche and Natasha Hobday, and by Phil Worms from IOMart which is a regional operator working in Scotland. Our submission to the Committee was also supported by other operators which are named in the paper, those being Versapoint, who represent a combination of a new operator to the United Kingdom with some international experience in the USA and throughout Europe as well as Easynet who are also a very large internet service provider operating successfully within the United Kingdom.

  272. It is interesting that you have come together as a group from a diverse range of backgrounds. One of the things which we were conscious of is that we have got a diverse industry, BT and Oftel, and there has been a failure to agree terms of reference almost. Would it be right to say that there were faults on all sides, that perhaps there were too many voices shouting at different levels in different directions, but that perhaps now a consensus is beginning to emerge? What do you think was the reason for the disagreements that took place at the beginning? We are not trying to apportion blame but there have been a lot of allegations made and we are trying to get a handle on that.
  (Mr Markham) The right thing to do is to understand some of the context in terms of how the process has taken place to date. The operators clearly got together as a group at their request and Oftel's request at the end of 1999 to form some various representative bodies to begin the process of negotiating how this would take place with BT. The first premise we have to understand is that this was based upon an environment within which a group of operators who, as you rightly state, were going to have differences would negotiate with British Telecom with probably a very slim and slender set of policy frameworks set up at that time. Therefore the whole period of the year 2000 has been taken up in the early part of that with beginning to put some structure in place whereby those operators come together and share opinions; secondly, where Oftel in probably, it is fair to say, three-quarters of the first half of 2000 participated in a low key way within those groups as advisers, observers, that kind of environment. Earlier on we talked about the environment within which what has actually caused the change within the last few months and our opinion clearly is that that has been brought about because of the enforcement of the EU directive, whereas up until the year 2000 there was some potential major disagreement between BT and the operators in that while BT was marching to a July 2001 time frame for the start of this project the operators were seeking to bring that forward by a substantial period of six months to maybe January 2001. You will probably understand that with the scale of this project and the resources and the issues associated in getting access to the exchanges, some of which have been talked about earlier, you really have to start that very early and it is probably fair to say that a lot of the period of 2000 was spent in trying to get some of the basics agreed with BT in an environment where it was exceedingly difficult to get them to agree to those basics, such as, what space is available on exchanges? These are the target exchanges that the operators want to go to, and there were substantial forecasting processes we put together to submit to BT in January 2000, June 2000, September 2000, before we had any indication whatsoever of BT's willingness to support going out and surveying sites and finding space.

  273. Do you think that Oftel are cracking the whip with BT sufficiently hard?
  (Mr Markham) It has improved and one thing that has to be said to put the record straight is that from September this year the operators put to Oftel the proposal in August that Oftel should take a proactive chairmanship role on these interested groups. Up until that date that had not been done and I think Oftel were slightly reluctant to do that prior to a situation where the condition of entry was in place and there was a likelihood of which direction the new regulation would go in to give them potentially the ability to use more mettle and stern powers to progress some of the issues which frankly took weeks and months to negotiate. We know because various of us at this table have been heavily represented in those groups and indeed today, whilst I am not representing that group formally, I do chair the commercial group that has been in the heart of that discussion in negotiation since the early summer, and so I am very well versed in the process that has taken place to get us where we are today.

Mr Chope

  274. Can you tell us exactly what you think your main concerns are about the Bow-wave method of allocation?
  (Mr Markham) In entering into that process the operators had no indication of which sites had space in them. There was confusion around the so-called black list which was based upon a previous product description created together with BT which had been very difficult to create. Secondly, therefore, that led to a disagreement which you have rightly pointed to earlier on, firstly, if you were to build sites with tens of operators wanting to build sites, which ones would you start first? The previous proposition suggested in the guidelines had been first come, first served, ie, at midnight at 1 September, whichever order was taken off the fax first for hundreds of exchanges got those, which was purely nonsense. The operators therefore had, through self-regulation, to come to an agreement between themselves about (a) where exchanges would be surveyed first, because up until that point in time we had no survey information, and (b), once they had been surveyed how would individual space within those exchanges get allocated to an individual operator? It was fair to say that there was a significant difference of opinion based upon different operating business plans that operators had for the type of (a) technical requirement they felt they needed in terms of space for equipment and associated power, air conditioning, and those kinds of things, to go with that, as well as (b) where that should take place and how it should be allocated. The thing that I referred to earlier about the presence of operators trying to resolve that between themselves in a self-regulation, "get together and determine this yourselves" way was put into Oftel's hands in August so that we did not delay the process. We got the sub-optimal process started whereby the non-top priority exchanges were chosen to go through the first Bow-wave round.

  275. How does that compare with other countries?
  (Mr Markham) The real issue here is that other countries, in particular we are talking to Germany at the moment, have started much earlier and therefore have not signalled to any extent that the scale of the process and the time frame within which it could be carried out would be very extensive, and so the fact that the United Kingdom is behind in the context of opening up exchanges meant that you had this bow-wave of operators wanting to get in, which is on the one hand a good thing for competition, but it spins back to the process because the country is potentially 18 to 24 months behind some other countries in starting it.
  (Mr Daeche) We had availability into essential offices from the beginning of 1998 and there are very well defined processes in Germany as to how you get into essential offices. For instance, if I identify an essential office I want to go into I submit a request to Deutsche Telekom who have 20 days to come back to me and tell me whether space is available and how much that will cost and so on through the process until you are actually handed the keys. From the time that we identify an essential office to handing over the keys to date is about 21 weeks. The point is that the process is well defined. What we need in England is a transparency to the process and to the time and to the resources that are committed to make that happen. Otherwise I cannot get a commercial business plan together to make it work.

  276. On Friday I had the privilege of visiting the exchange in Christchurch and one of the people from British Telecom who was showing me round said he had been to look at this system operating in Germany and he said that in Germany, unlike in the United Kingdom, there would not be any provision of air conditioning, there would not be any provision of back-up power in the event of power failure, and there would not be anything like the overall complete service that BT are providing in this country.
  (Mr Daeche) That service may be a little over the top because heat dissipation, power consumption and so on are all issues that are addressed within Germany. We look very carefully at the temperature requirements within our kit and the rooms and the space that are available and if equipment goes over some heat dissipation then obviously air conditioning becomes mandatory. Those issues in fact are addressed in Germany and I find it strange that you were told that.
  (Mr Markham) Indeed I would add to that that the operators with BT have during this period of 2000 discussed what is a best start point for an appropriate environment not based upon air conditioning but based upon a simple air cooling environment, and indeed without back-up power that is discussed as the basic product definition in the first hostel point, so we have been accommodating, let us say, in the sense that to understand that in order to get this process started it is correct to draw a base line in terms of what the minimum entry level is which is needed to operate within those exchanges.

  277. Mr Worms, have you any views on this?
  (Mr Worms) Not really. My understanding, certainly in France and Germany, is that there is a defined process and I think that is the point of the question. To be quite honest, from where we sit the number of fire extinguishers and first aid boxes and the number of coats of wall paint are obviously relevant but there are bigger issues to flesh out.
  (Mr Markham) A key point on that is that in the United Kingdom with regard to the actual timetables to bring the trial sites on stream through the process of (a) defining in theory what is expected in the collocation site to (b) understanding that in practice, particularly in the context of how it relates to the guidelines set by Oftel on issues to do with, for instance, recovery of rooms, issues to do with what is space that should be sought to be used for collocation, a lot of those have not been worked through until recently and it has only been in the last eight weeks that we have begun to get a process whereby there is more proactive involvement. That clearly relates also to the sense that now we are seeing a situation where the triallists were chosen in April this year and those trial sites are just beginning to be handed over during this month and the early part of 2001, and the practicalities therefore of working with BT to understand (a) the price at which one is to be a triallist in one of those sites and (b) what has gone into the engineering to create that are only just beginning.

Mr Butterfill

  278. Can you tell us what sort of kilowattage is actually required for a typical BT station at the moment and how much you are likely to add, each of you, as you go into that room in terms of power requirement?
  (Mr Daeche) Not off the top of my head but the size of the equipment power consumption is minimal compared to the equipment that will already be in the exchange, for instance, a switch. We are talking in the main of one rack of equipment and we are talking of something like ten light bulbs' worth of heat dissipation for that equipment. It is minimal.

  279. So the heat dissipation is not huge?
  (Mr Daeche) We operate in central offices across Europe without the need for air cooling.


 
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