Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 220 - 237)



  220. You responded to Mr Keen on the issue of content. I was on the Opposition Front Bench in those days, so my memory goes back to it, and I remember when Mrs Thatcher was the Prime Minister that Mr Kenneth Baker was the Minister in charge of these matters. The view then by the Government was that technological development would be entertainment led and they took the view that the country would be cabled up because entertainment would be the way of getting people to do it and that is where the profits were. While obviously entertainment is in many ways a key, the fact is that the country has never been cabled up in that way, in the way that the Government anticipated at that time. I do not attribute any failings in that; it was just difficult for them to foresee it.
  (Sir Christopher Bland) I think that is right. Insofar as the cabling up of Britain was led by anything, it was actually led by telephony, not by entertainment. It was led by telephone companies and that is what drove the change.

  221. You may recollect—there is no reason why you should—that for a period when I was Chairman of the National Heritage Committee in particular I strongly advocated that the partnership between BT and the BBC, in which BT would provide the access and the BBC would provide the content, was a very good way of moving forward and would assist in universal access, since that basically is what BT provides. That did not happen. My guess is now that it is no longer relevant.
  (Sir Christopher Bland) Chairman, I remember it vividly. You wrote a piece in The Mail saying that BT should take over the BBC. Indeed, for four months, when I had both jobs, I encapsulated that vision of yours! I think in practice BT is likely to enter into arrangements with broadcasters and that would include the BBC, but I think that falls short of and is no longer likely to be a driver of major mergers on those fronts. But it is always hard to forecast.

  222. It seems you have a better memory of my journalism than I have, Sir Christopher. I am not going to obtrude into this discussion my view on the BBC—you are only too well aware of that—but do you think that a partnership of equals between the BBC and BT is no longer on the cards? If it ever was.
  (Sir Christopher Bland) No, I do not. I think that would be to rule out too much. I think partnerships with the BBC, with BSkyB, with ITV Digital are perfectly possible for BT and, indeed, for other suppliers. Kingston Communication, for example, right now in Hull are doing an extensive trial in combination with the BBC, and that sort of partnership is not off limits to BT either.

John Thurso

  223.  I would like to come back to the provision of broadband and the roll out. Before I do, can I make one plea—and I am not sure you can do anything about it. I think probably the biggest frustration and irritant with modern life is being stuck in telephone queues and being asked to press buttons for numbers, failing to have a human being to respond to. I have been trying to buy a new telephone line for my constituency office for four months and seem to end up in all sorts of queues all over the place. Anything you can do to return human beings to the chain will be gratefully received. I was very interested by your comment regarding the fact that content would drive the roll out. Constituencies like mine, which is in the rural north of Scotland, have in fact benefited from access to broadband in certain areas. We see the effect it has on allowing modern businesses to come into the area when they otherwise do not, so there is a social and economic dimension that is very important to us. If we look at places like Korea, we see that the government has invested heavily in that roll out. Indeed, many people in the Highlands would say that is the model that we should be following. There is clearly a kind of chicken and egg situation, which is that you do not get people creating content unless they have something to put it on. Equally, people do not provide something unless there is content to be put out. My core question is: do you believe that in order to make this happen there is a need for Government to become involved in priming the pump in some way, or can this be left entirely to private enterprise to create the infrastructure on which so much economic prosperity in rural areas will depend in the years ahead?
  (Sir Christopher Bland) I think in general terms we would expect the main drivers to be private enterprise. This is a commercial market with quite a lot of players and it obeys normal economic drivers, but there is plainly a role in constituencies like yours, in parts of the United Kingdom, and they are large pieces of geography, sparsely inhabited, where broadband roll out will not be achievable in economic terms at least within 10 and possibly 20 years. Technology is changing—and I will ask Chris in a moment to indicate both in terms of geography and technology what is being done—but I think in those places, without some form of government or EU or combined support, broadband roll out will be pretty slow.
  (Mr Earnshaw) Just on the general point, we do see Government itself as a major potential user of broadband services representing a significant part of the UK's GDP, so its own adoption will have a significant input on the market, not only within its own confines but into their extended supply chains. That was something, I think, that came out very strongly in the report from the Broadband Stakeholders Group published just before Christmas. We are looking at how we can deploy particularly radio-based technologies in the remote regions, but also it is a question, I think, of getting the right commercial partnerships combined with these technologies. As you may be aware, we have launched a number of innovative commercial arrangements—one in Cornwall, where we have brought together the RDA, the education authorities, the business community, and a whole number of artists who actually create and stimulate the use of broadband services, particularly by business—and we would like to see more of those initiatives, and we think the RDAs have a major role to play in working with us and other providers to make that happen.

Mr Bryant

  224. The bit I am worried about, which follows on from what John was just asking about, is not so much sparsely populated areas but areas, often such as the South Wales valleys—I am sorry, Chairman, I always bring them in—where there is a large population but there are some difficulties for you because these are valleys where every extra mile you go up the valley is obviously going to deliver you fewer and fewer customers. I accept that you are in there to make profits and I understand that there is a problem, but there are those who would say that BT has been rather feeble in trying to find a market or create a market out there for broadband, and, in particular, it might be possible to conglomerate or agglomerate (I am not sure which is the right word) all the public sector needs that there are out there, in the health service, local authorities and so on. Is it that the Government is being feeble or is it that you are being feeble?
  (Sir Christopher Bland) I do not think anybody is being feeble, but I do think that agglomeration or collective action by Government cannot be stimulated by BT. That has to come from Government. There are signs that Government are looking at this and deciding just how and in what way they might use their collective purchasing power to develop broadband in a particular area. As you point out, it is difficult, it is impossible today to supply those areas economically in remote valleys with small pockets of population. The only sensible way to do it is either through subsidy or through alternative technologies.
  (Mr Earnshaw) I mentioned technologies, and Wales is one of the areas where, because of its geography, again we are trialing the radio-based solutions. But I think we should also mention that our wholesale division has actively marketed with all of its service providers the availability of broadband in order to stimulate interest and, indeed, continues to offer marketing grants to service providers to help them kick-start the market. We think that it actually does require partnerships between Government, private enterprise and the service providers actually to create this market.

  225. The Government keeps on announcing bits and pieces of money, the Welsh Assembly has announced bits and pieces of money, but they never seem to end up bringing broadband to any of the people in my constituency, not to the big broadcasting businesses like the Pop Factory in Porth, let alone to individuals living on meagre incomes at the top end of one of the valleys.
  (Sir Christopher Bland) Yes, and that is going to be the situation for a number of years unless the economics change or the technology changes. On the other hand, what is true is that we do have the biggest flat rate availability. It is not broadband, but nevertheless everybody who is in the United Kingdom who has a telephone has the ability to buy flat rate internet services and we have, I think, more flat rate connections in the United Kingdom than the rest of Europe combined. That has had the effect of reducing the digital divide but it does not solve the broadband issue and it will not.

  226. I am not sure about reducing the digital divide because I think you are still going to end up with a situation with predominantly poor communities having very little opportunity to see any inward investment because the infrastructure, the IT infrastructure, as you are saying, Sir Christopher, is not going to be there now for maybe five, seven years (I do not know what you mean by several years), but in that time I think we will see the whole denuding of the South Wales valleys economically. There is a real danger of that. I suspect half of the challenge is to Government—which we will take up at a later date—but I think there is a specific challenge to you which is about the competitiveness of what you offer and the comprehensibility of it. I went to your web site last night to see whether things have changed since I last raised this issue with you about whether it is possible to understand what you are offering (ISDN, ADSLs and so on—all different packages) and it is an nightmare wandering around your portal, your web site.
  (Sir Christopher Bland) Chairman, I disagree. I visited it this morning.

  227. It must have changed overnight!
  (Sir Christopher Bland) No, it has not. It might, that is always a possibility, but I am afraid BT is not the kind of organisation that changes overnight! I think it is a good site. We have a lot of different packages and they are complicated to set out but nevertheless, short of offering one colour of telephone, black, and one form of package, we have a range of packages and it is pretty clearly set out. Perhaps I can return to your core question. I do not think that is a problem that is of BT's making or that BT can solve in remote areas. I think that can only properly be addressed, unless the technology changes much more rapidly than it is sensible to forecast, by Government.

  228. So you would need, basically, some form of State aid?
  (Sir Christopher Bland) Yes.

  229. Or, basically, Government would buy broadband for certain areas which otherwise would be termed as economically impossible for you.
  (Sir Christopher Bland) That, effectively, is what is happening in these trial areas of Cornwall, Northern Ireland, Scotland and Wales at the moment. These are the subsidised prices that BT, as a commercial organisation, cannot provide on its own.

  230. But I am sure we will be pushed by other organisations, like ICT and others, and perhaps OFTEL, to say, "Well, actually that is quite dangerous because Government is then second-guessing technology. In actual fact what the Government would be far better to do is to create a truly competitive ADSL, a broadband market, which we do not have at the moment."
  (Sir Christopher Bland) We disagree with that. We think you do have a thoroughly competitive ADSL market but in a thoroughly competitive environment, commercially more constrained than it was, so less optimistic bets will be placed today than were placed a year ago. People are not going to aim primarily at your valleys or the valleys of Caithness and Sutherland because the money is not there. It quite simply would not be an economic proposition. So, however competitive the broadband market becomes—and we have got a very competitive wholesale market in theory; we do not have enough energetic wholesale providers exploiting it—I do not think that is the source. I genuinely do not.

  231. But a lot of people would dispute that we have a genuinely competitive broadband market in the UK. Why do you think that is?
  (Sir Christopher Bland) I do not think a lot of people would be able to back that up with facts and figures. All the available evidence is that we are virtually the only market in Europe that has a genuinely unbundled local loop and has the availability to—

  Mr Bryant: There is some coughing in the audience.


  232. They do not agree.
  (Sir Christopher Bland) They will have their moment or their pastilles! But let them come. I think the proof of the pudding is in the economic eating. I think if you ask them: Is there a price at which they will come to your valleys, make sure you get it in writing.

Mr Bryant

  233. Just one final question—and I may be addressing this to the wrong person, in a sense: the job losses that are being announced today, or the predicted job losses . . . I cannot remember what it is called now. Is it called H2O or O2? I forget what it is called.
  (Sir Christopher Bland) mmO2.

  234. Yes, that is the one. Were those job losses that you were predicting when you spun it off? Do you think that it is likely that in the long-term there will be a lack of capacity in the industry?
  (Sir Christopher Bland) You are addressing it to the wrong person. mmO2 is an independent organisation and we did not make predictions beyond what was known at the time. But, you know, the tendency in all telecoms' business is to look very hard at costs, of which labour is a major component, and that is a never-ending process.

Miss Kirkbride

  235. There have been a couple of special pleas for Scotland and Wales over there, but some of us represent the heavily populated English regions. As purely a matter of constituency interest, can you tell me when we are going to get ADSL in North Worcester and Bromsgrove?
  (Mr Earnshaw) I am afraid I do not have the detail at that level of detail. We are working with service providers, of which there are many, to try and assess where we will deploy DSL technology beyond that already on the ground, looking for areas, as Sir Christopher says, where it is economically viable to do so. But what we do hope, going back to my reference to satellite, is that the successful trials in Scotland and Northern Ireland will, during the course of this year, subject to satisfactory discussions with the RDAs and so on, be extended to cover England, so that nobody need be, particularly businesses, without access to broadband. I think it will take some while, as Sir Christopher says, for DSL to be anything like ... In fact, we do not expect it ever will reach 100 per cent availability. So I think it will be a gradual take up. What we do hope, though, is that in the course of the coming year one of the changes that will take place in the market is that there will be a greater range of applications and therefore a lot more stimulus of the market across the whole ICT sector. I did not address the earlier question, and I come back to the point: What will be different in a year's time? I think the difference will be that the whole of the ICT sector will be engaged in what broadband can do for business and for the consumer and we will see a much wider range of applications which will actually drive the development of this market. We should not just focus on entertainment. We believe there will be applications in health, in education and so on which will have a major effect. But it requires the whole industry to engage and that is why we and other providers are now working actively with the other stakeholders to see how the market can be stimulated in that way.

  236. It is mainly businesses from which I get the main pressure. Do you have an assessment of what kind of population density you would need to drive the next phase of this development? Is it possible to give an idea?
  (Sir Christopher Bland) I think at the moment an exchange serving less than 20,000 is not economic for us. I note that one out of six exchanges in your constituency is enabled. That serves about 18,000 or slightly below. The take up is only 160 customers. I think to have 160 out of 18,000 is a very clear indication of where we are today, not where we should be, but that is a question of price, of marketing. We can address that within that particular exchange. But to promise to go further than those exchanges anywhere in the United Kingdom, given the low level of take up within the 1,010 that are enabled, I think would be the wrong set of priorities. But once take up within the enabled exchanges starts to move then the economic model will change as well as the technology.


  237. It is a curious co-existence, is it not? On the one hand there appears to be so far insufficient public appetite in terms of market demand for broadband and on the other hand, as emerged from Mr Bryant's discussion of the Rhondda, there is not necessarily a sufficient response to demand that does exist because of the divide—of which we have heard very little in recent years. There was a time when the divide was one of the big issues with regard to the spread of this technology. Indeed, President Clinton appointed Mr Gore to deal with this and give access to/control of technology to the poor. Perhaps if Mr Gore had succeeded, people in Florida would have been able to manage the chats with the President of the United States!

  Mr Bryant: He is President of Truro Rugby Club.

  Chairman: In that case, his appetite is really satisfied in the way we have been discussing before. Sir Christopher, I would like to thank you and your colleagues very much indeed. From our point of view it has been a very fruitful session.
  (Sir Christopher Bland) Thank you.

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