Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 300 - 310)



  300. Should the Government insist that every computer arrives with five or six ISPs?
  (Ms Thomson) I think that would be somewhat draconian. Consumers want choice and also manufacturers should be free to choose the services that they wish to promote on their machines to provide good choice to their ultimate end users.
  (Ms Gilbert) I think there has been a concern about the position of certain retailers in terms of deciding which ISPs were heavily promoted by computers sold through outlets, but I think Karen has answered it by saying there is competition in terms of what channels are available through which ISPs can market their services to potential customers. In our case we find it is the non-PC ones that bring us more customers. You only really need government intervention where there is not a competitive market and it is affecting consumer choice. I do not think we are in that situation currently. I think that we might have been in danger of getting there in the past but that moment has passed.
  (Ms Thomson) In broad terms we would certainly like to see computer manufacturers free to choose who they would like to promote on their machines and not be constrained by the distribution channels they then move through. I do not think it is a matter for regulation at this stage.

  301. Nobody has mentioned "always on" yet, but it seems to me that is the main point about broadband. I know ISDN does as well but it gives you the opportunity to be always on and always on radically transforms the whole experience of convergence.
  (Ms Thomson) It does and it is not just "always on" but "instant on", the ability to access particular types of content and services at a moment's notice rather than having to go through the dial up and the tone, etcetera. Plus the fact that the high speed allows you to access a broader ranges of services. Often in our industry there is a danger in differentiating between broadband contents as though it is something that is completely separate from the experience that consumers have just now in the dialogue world. We see it as a stepping stone and integration so that broadband at high speed makes some of the services that people currently enjoy just that much more efficient, the e-mails are faster, the downloads are faster. Some of the basic activity that you enjoy in the narrowband world is just much better because you can get to them more quickly and you can get services much faster. It is a combination and bundle of services. I am not sure that any of us have cracked what the most appealing consumer option is and it is clearly not just high speed and it is not just always on. If it was then even at the price we are at we would probably have seen a higher up take.

  Chairman: I think I may have mentioned last time you came to us that on one occasion I logged on to AOL and it took over my whole computer and could not be got rid of and had to be exorcised.

  Mr Bryant: By the Church of England?

  Chairman: By AOL. We had to be guided step-by-step through it leaving my computer having access only to AOL, but nevertheless maybe Mr Doran has had less traumatic experiences with you.

Mr Doran

  302. I have had similar experiences but I managed to sort it myself, Chairman! You have obviously had quite a bit of experience of the difficulties in dealing with BT. In this inquiry we have had various bad boys. The BBC are bad boys from time to time. Sky is regularly a bad boy. Today it is BT. I notice in your written submission that one of your conclusions is that the regulatory process put in place must enable OFCOM to act in a sufficiently timely manner. We heard earlier from Cable & Wireless the difficulties they have had in local loop unbundling. With your experience and past success, what sort of powers do you see the Regulator having that would make them able to operate much more quickly, because that is key to it?
  (Ms Thomson) It really is about being able to move in a timely way. Very often the Regulator gets it right but they simply cannot get action—

  303.—It is too late.
  (Ms Thomson)—Within the time-frame. That is really important to us and to our suppliers. We work across a very broad vendor portfolio so we see absolutely just how difficult it is for them trying to roll out services. Clare, would you like to make a comment?
  (Ms Gilbert) I do not know if Simon wants to say anything. I hate to show Germany as an example of good regulation, but in many of the German regulatory processes of the telecoms regulator there are specific time levels within which hearings have to be heard and decisions have to be made, and I think something like that should definitely be considered. I keep going on about this 18 months to bring us narrowband flat rate but it was extremely long and businesses waited for it for a long time. Businesses had launched services in anticipation of the narrowband flat rate tariffs coming in soon and then obviously, and very publicly, went out of business when they failed to be delivered. I think the prospect of imposing some sort of time limit on the Regulator for coming to decisions would be very useful. One of the frustrations we have experienced is a certain passivity in the way that proceedings are dealt with by OFTEL. There is very much a paper-focused, passive approach to information. There is not much proactive investigation. Any possibility for more proactive investigation into market situations that can be seen on the face of it, for example, saying, "More people appear to be going to BT to buy flat rate interconnection than anywhere else. Why is this? What is the problem in the market?" If OFCOM could more spontaneously take on these sorts of investigations—

  304. How can they do that? For example, would you welcome OFCOM sitting in your office watching your operations and maybe looking for things to investigate?
  (Ms Gilbert) Greater, more informal contact and evidence collection could be very interesting and beneficial for the industry. I also think getting more staff who have had previous industry experience would also be very helpful because they come with a different perspective from the pure Civil Service perspective. Getting a combination of the right skill base, people with industry experience and people with a Civil Service background and people with the relevant technical knowledge, but also a process that enables enquiring minds to do some investigation would be useful.

  305. With your background and experience you sound as if you would be an ideal person, but they probably do not pay the same rate, that is the problem.
  (Ms Gilbert) I am not going to answer that question.

  306. Do you see any difficulty in the future shape? All of your past experience has been with OFTEL. In the future OFCOM is going to cover a much wider area of interest, television, radio. They are much more glamorous than mere communications and telephone lines. Do you see yourself being side-lined slightly?
  (Ms Thomson) I think the answer is yes. Simon?
  (Mr Hampton) The answer is probably yes, but there is also an opportunity in all of this. One of the frustrations that we have experienced is that we felt OFTEL sees itself as merely a dispute resolver between telecoms companies, as though resolving disputes between telecoms companies in itself was what it should be doing, whereas in practice this is what convergence is all about. It is just that telecoms is the infrastructure upon which this whole new digital economy is delivered. That OFCOM will have this wider view of the whole convergence industry is a potential advantage that we seek, contrasting that to the previous speakers, who wanted to see a clear separation, the cross fertilisation, an understanding of the economic impact of the decision in the telecoms industry (which is the main bottle neck in the convergence world and a lot of the questions before appeared to be trying to look for other bottlenecks but they do not really exist except in the telecoms industry) being able to bring in that wider view of the overall economic impact of the regulated telecoms sector is one of the potential pluses from the process.

  307. That would require the much more proactive approach that your colleague was talking about. Do you think there is the potential for that without government pushing?
  (Mr Hampton) To a certain extent it is the way that is being provided for by the new legislation. Some parts of the new Bill are predetermined by the way that the debate has happened in Europe, and I was following that. There is a need in a certain sense to be watching the markets there. There is a pretty fundamental decision that regulators can take. They can basically react and start rather complicated and lengthy procedures (which include appeals at every step) and that could lead to regulation, or they apply the new legislation which is much more flexible but they are ready to apply it in advance and to seek out the bottle necks. Today the legislation is relatively clear. It says, "X, Y and Z are areas where you have to look very carefully and on the whole we expect you to do certain things and certain regulations will apply to incumbents", but in future it is entirely discretionary. The new framework that is being created gives the Regulator discretion and they have got the choice between being essentially passive (which will mean they will always be running after events) or active, at which point these new powers in their hands could be extremely well used to deliberate on the digital market.

  308. That seems to be a slightly different approach from what we are hearing from everybody else. You are talking about a much more hands-on, know the industry better on a daily basis approach, so you can see ahead and perhaps be involved in the planning of this convergence that everyone talks about. But everyone else is talking about a much lighter touch which is a quite different approach to the one that you are taking.
  (Mr Hampton) We all want the lightest touch as soon as possible, which is why Cable & Wireless' proposal of complete separation is a nuclear option, but it has its attractions because it might get you to the lighter touch quicker because you do need to be thinking in fairly radical terms. At the moment we have had a longer experience of telecoms liberalisation here than in other countries but we are in exactly the same situation as other European countries who maybe started later. It has not taken Britain much further forward than countries that only started in 1998. Given how telecoms is part of a much bigger game where the UK needs to prevail, that is the reason why there is a potential need for something much more radical now.


  309. One final question emerging from Mr Hampton's return to the issue of convergence and also the questioning of Mr Bryant about the wider interests of AOL, including cinemas films. When we were conducting an inquiry into these matters early in the last Parliament and we went to the West Coast of the United States we had explained to us, not at Warner Brothers but at Sony, Silicon Valley, that we could expect, before long, cinema films to be distributed not in cans of celluloid but by being beamed over the internet. Indeed, George Lucas's most recent Star Wars had its premie"res in a number of places in that way. What has happened to that technology? It does not seem visibly or overtly to be moving forward?
  (Ms Thomson) It is so developed I really could not answer that from any position of knowledge. Simon, do you know?
  (Mr Hampton) I do not know. I know that my nephew is beginning to be involved in the digital transmission of movies, but I do not think it is quite the one that Sony were talking to you about.

Mr Bryant

  310. Legally?
  (Ms Gilbert) It is one of those questions that is really dependent on speed. You cannot consider activating videos over your narrowband telephone line, it is not going to work, and I think we will start to see these sorts of services develop once we have the mass market coming to broadband, which brings us back to the access issue.

  Chairman: Thank you very much indeed. Another excellent session and we are grateful to you.

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