Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 378-399)




  Gentlemen, I am very sorry indeed for having kept you waiting; we had some private business which took rather longer than we expected. I will ask Derek Wyatt to start the questioning.


  378. Good morning. I wonder if you could just tell us exactly what you achieved in the Broadband Stakeholder Group?
  (Mr Taylor) I will start with that one, Derek; you have obviously read the report fairly well. I think we achieved quite a lot, at the end of the day. We presented the Government with 15 recommendations, 14 of which they accepted, there was one that was put to one side. But what it has developed into is a group that is perpetuating the work, it is taking up the responsibility for pushing forward those recommendations, and, in agreement with Government, we have appointed an independent chairman of that group, we have split it up into five working groups that are looking at the specific areas, and, in essence, we want to keep the pressure on.

  379. In the course of those meetings, did you present financial modelling to the Government as to how much broadband would cost, especially in rural areas?
  (Mr Taylor) There was some modelling that was undertaken, as part of the original Broadband Stakeholder Group activity, by Analysys, and by others, on behalf of the Office of the e-Envoy, certain members of that particular group started some provisional work, analysing what options might be, and, in fact, we are proposing to take that work forward in the second stage of the Stakeholder Group activity. And we have had some discussions with the Treasury, but, at the end of the day, the econometric modelling and the impact on GDP is a fairly complex thing, so we are looking at work that the Office of the e-Envoy is doing in the context of developing a model, and wanting to do some independent work ourselves.

  380. Would it be fair to say that, and Malcolm does not have to be the only one who answers this, at the end of all your expertise and meetings, and what have you, the Treasury feels the case has still to be made for broadband, and that that really is the issue now?
  (Mr Taylor) I do agree.

  381. Therefore, can I move on. I was fortunate to be asked to go to Sweden, last week, to talk about this area, with various members of different Government groups, and non-Government groups; there, in the poorest and in the most difficult terrains, in the north, where the Arctic Circle is, which makes up 28 per cent of the Swedish territory but only 3 per cent of the population, the regional government has laid broadband, and it is now the fastest-growing economic area in the whole of Europe. Well, I am confused here; why does not the Treasury get this?
  (Mr Taylor) Perhaps it has other priorities at this particular point in time; perhaps the GDP impact modelling has got some more sophistication to be built into it. I think that we have got to continue to work down that particular track. Because, again, similar to yourself, I have been involved in some of the initiatives outside of the boundaries of the UK, and if I look at the situation in France, for example, where the French Government has mandated a bank, called CDC, to help them achieve their universal broadband objective by 2005; so there has been intervention in other areas. I think that there is more work to be done on the GDP impacts of it, but that is very much the focus of the next stage of the Stakeholder Group work.

  382. So do you feel frustrated, as a company, in that you want to roll out broadband as fast as you can, but are you frustrated either by BT's arrogance, or indifference, or pricing, or are you just frustrated with us?
  (Mr Singer) Thank you. I think that helps. First of all, I think there is a lack of emphasis on broadband and there is a confusion within the Government. You actually have a situation where people are worrying about the totally trivial issue of switching analogue to digital, to release spectrum of little value, and the real issue is how do you actually push broadband. Currently, just for your information, Telewest passes five million homes; 4½ million of those homes in our franchise area we can supply broadband to immediately. We have already over 100,000 broadband customers; it is growing very rapidly indeed. And one of the issues is, there is a lack of definition of what broadband is. You go to Government and you say, "Well, what do you mean by broadband, do you mean 128k, do you mean 512k, 1 megabit?", and they say, "Oh, we need broadband." And it becomes one of those rhetoric words, devoid of meaning. And one of the things that would be really useful would be if Government actually set a minimum standard and actually said, "Well, by `broadband', we mean a minimum of 512 or 1 megabit;" anything less than 512 is just a racing Zimmer-frame, in the kind of broadband world. But we need that kind of direction from Government.


  383. Could I intervene, before you go on, Derek. Do you think that there is sufficient understanding within Government of the implications of broadband?
  (Mr Singer) I think one of the problems that we face is that all the people, by and large, looking at this have a tendency to come out of a television background, and one has a tendency to look at broadband as kind of the web on steroids and an extension of traditional television experience, in one form or another. Broadband is not about that at all, it is far more than that; it is about, as you know, as well as I do, how you can finally take x-rays to doctors instead of doctors to x-rays, it means that finally you can provide, as currently we are doing, a health service to 50,000 households through a digital set-top box, where they can pull down 22,000 pages of National Health Service information, and, using their set-top box remote control, no keyboard, no PC, they can make an appointment with their surgery. We can do that now. They do not understand the importance. They do not understand that broadband allows us, which we are doing at the moment, to provide broadband capability to small businesses, fewer than ten people, and it gives them the same IT functionality, through remote web-hosting, through remote provision of applications, e-mail, diary, that actually large companies can have, we start to level the playing-field between the small and large, and pushing this forward rapidly. There is not an understanding that actually broadband allows those original 19th century public service broadcasters, the museums, back into the game; you can suddenly digitise all those collections and let them go straight back to schools, to homes, instantly. That would be public service broadband-casting; could not a licence help on that. These are the kinds of issues we do not hear being debated; it is all seen as an extension of a traditional television history. Now when you renew the Charter of the BBC, most people under 35 will have been brought up in a video games-playing ethos; and, I am sorry, forgive me, all of us, maybe with one or two exceptions, are too old to be thinking about this too much, but the way we actually use this and use television and use broadband is completely different. Nothing illustrates it better than the kind of advisors the Government is getting, in terms of helping to advise them, because they all come out of establishment television, they have never played full-contact, digital network games. The real question for me is when does the digital czar meet digital Ekaterinburg; we do not need a digital czar, we need a digital Lenin.

  384. Could I then, before returning the questioning to Derek, ask you a couple more questions. Do you think that the problems are affected by the division of responsibility between two Government Departments, the fact that, for the first time ever, we are going to have two Secretaries of State coming to see us, fairly soon?
  (Mr Singer) From where we sit, I think the honest answer is, it is not helped, I think the clear answer from us, to be candid; because we have found DTI to be very supportive, we find that DCMS do not get it, frankly.

  385. Tell us another. Could I ask you also, because you have been coming to see us on a number of occasions, Mr Singer, do you recollect the days, in the early part of the last Parliament, when Mr David Clark was in charge of these matters at the Cabinet Office, and when certainly there seemed, to this Committee, to be a centralised focus on the harnessing of these technologies for the very kinds of purposes that you mention, not simply entertainment but things like the NHS, etc?
  (Mr Singer) Yes. We believe passionately in this. And I think one of the things where we need to see more cohesion, we need some leadership from Government, we need Government to stop worrying about whether ITV is going to live or ITV is not going to live, it is one of the things that you cannot legislate for. What we need is the technology. And it lowers barriers of entry, and it actually starts to allow local television, local services, which we have not had before; and there is no real integration, in fact, the split between the two causes confusion.

Derek Wyatt

  386. It seems to me that the real issue is, just to comment before I get to the question, that the Treasury has not yet had a case put to it to say that, "If you do this, the cost of public services will go down and they will be modernised at the same time;" and that is actually the issue. That is an aside, in a way. I want to come to the regulator, the new OFCOM. In what way do you think that the new regulator, I know we have only got the Paving Bill, but the Bill is with us shortly, to what extent will the new Chief Executive actually be able to drive broadband?
  (Mr Singer) To me, the real benefit of a single regulator is the major economic power that that regulator will have to deal with, it is the nature of the telecom networks, which are much bigger businesses than television. Consequently, there will be a culture created, whereby everybody will start to look at all these issues as an interconnect issue, "How do we get signal from cable onto satellite, how do we get channels from satellite onto terrestrial?" Everything becomes a variation on an interconnect theme. And, actually, that starts to create an economic telco culture for analysing all of this, which starts to integrate it all. Soon you see everything as an interconnect issue. Nothing illustrates it better than the former Director General of OFTEL, Don Cruickshank, when he wrote the paper on bank telling machines, it was actually all about interconnection, he wrote the whole paper from a telecom perspective. And once you start bringing that kind of telco perspective you will start getting the integration, which, Mr Chairman, you were mentioning earlier, in your previous comment.

  387. So is it your view, in a sense, that we have had public service television and what we need now is public service broadband, paid for through some Government medium?
  (Mr Singer) I think there is an argument for saying where is the remit for broadband-casting, and that we do, actually, as I said, I mentioned museums would be a great example, National Health, providing health information, so that people did not need to go to their doctor as often, or actually took the stress off the National Health Service, would be beneficial. All the things that I have mentioned are things Government can actually do without dictating necessarily how the market works, but these are good things, something that could be provided for everybody, in one form or another.

Mr Doran

  388. In the absence of any Government support for broadband, you make it clear in your paper that the market approach is the only approach, and so far the market seems to be a little bit variable. And we had NTL, one of your main competitors, in here recently, discussing exactly that same thing, and we are reading a little bit in the press about the difficulties that they are facing. Can you say a little about the consumer side of things; for example, what does it cost the consumer to take your broadband service?
  (Mr Singer) One small point, we do not compete with NTL.

  389. No, I appreciate that; geographically, you are quite separate?
  (Mr Singer) We are fellow travellers. But the answer to your question is, if you take broadband from us at the moment, it is £25 for 512k; that is if you take that along with our telephone service, if you take it as a stand-alone service it is £33. We have consistently kept our prices significantly lower than BT's.

  390. Until today; you will have seen today's announcement from BT. How is that going to affect your approach to the issue?
  (Mr Singer) In a number of ways. One is that they announced a reduction in their wholesale price; we will wait to see what the retail price is. Two, we have been very aggressive in pushing broadband; it is nice to see BT turn up at last and provide some help. Because, actually, it is quite hard, pushing a product just by yourselves. Fiat always claimed that the Fiat 500 never sold because they were the only people selling that kind of car, in the fifties; it is the same issue, if you are doing it by yourself. So we are pleased to see them turn up; it will create national consciousness. Clearly, no longer will we be quite the monopoly supplier in our franchise area, and, being a good capitalist, I quite like that, but, nonetheless, competition will be good for us and will drive that forward. So I do not think that is bad at all; and, all in all, we welcome this. I would say that there are some interesting questions about BT's pricing. One is, how will other people be able to get onto their networks and provide competition, which was always the thought; and I do find it interesting that their prices have now come down today. Last year, 18 months ago, when it was easy to raise capital to compete with BT, they would not let you onto the networks, or, at least, not easily; now, I am willing to bet you, they will welcome competition like crazy, but nobody can raise the capital to compete. So it will be interesting to see how that goes forward.

  391. So the market-place is going to continue to be interesting?
  (Mr Singer) Yes; and your point about the market is patchy is absolutely right. But, I would say, we have created, off our own bat, in exactly the same way that the radio manufacturers created a signal, back in the early 1920s, to create the British Broadcasting Company, we have created a public service signal, in the guise of Living Health, from various other products, to help drive that forward. And we have actually already given the first £8 billion to create a network which can provide broadband service to 4½ million homes.

  392. At £25, is your service profitable?
  (Mr Singer) Yes, it is, it is highly profitable; it is profitable because, of course, most of the infrastructure has already gone on providing the telecom network and the television network. And the way, I suspect, you will see us competing, going forward, is not through price but through speed.

  393. BT mentioned, in their press release this morning, that, at their new price of £14.75, they think it will take three years per customer for payback, but, from what you are saying, you have had a much shorter period?
  (Mr Watson) Yes; around 18 months' payback at £25.
  (Mr Singer) And we do need to see what their retail price is. I have to stress, that is a wholesale price, this morning.

Mr Bryant

  394. The idea of a digital Lenin is a great idea, but the danger is, of course, that he is then going to be lying in frozen dead-boy for 80 years thereafter. I make a serious point, which is that, clearly, when Governments second-guess technology, there is a danger that they put something they buy, with lots of money, that is not properly market-tested, a whole load of technology, which then sits there and is unused. How do you meet that?
  (Mr Singer) Frankly, I stole the x-ray idea from you, actually. But the reason we are not asking Government to guess on what the winning technology is because we are supplying the technology; we are asking Government to provide services, which they would be doing anyway, for citizens, utilising that technology, and actually to forget about traditional forms of distribution and actually understand this is available, and actually understand, as you start to have local area wireless networks, it becomes cheaper and cheaper to deploy within Government's offices. So we are not asking Government to dictate technology, we are just asking Government to spend the money that normally it spends on things.

  395. So you are not asking Government to say, "Right, we've worked out that there will be market failure, the market will be unable to deliver broadband to the following areas in the next three years, therefore, Government is going to pay you to do it;" you are not asking Government to say that?
  (Mr Singer) No, we are not asking for that at all. What I am asking for is Government to use the networks so there is a greater need for the networks.

  396. So it is about conglutinating, conglomerating, public sector demand, so that there is actually a product that will end up being laid out?
  (Mr Singer) Yes. The museums was a good example; health is a good example, which is available to everybody, which Government does anyway.

  397. Do you think competition regulation in this country is robust enough, or fast enough, to be able to deliver a competitive broadband market?
  (Mr Taylor) Probably not, at the moment, no. I think we have the issue of who applies the competition law, in any case, and, I think, traditionally, we look to the regulator to have concurrent powers to provide competition law support. But I am not sure that necessarily it is strong enough or fast enough, is probably the issue, the pace at which you can actually get through potential concern over abuse of a dominant position.

  398. So do you think we have a competitive broadband market, as BT said that we have?
  (Mr Taylor) I think it is rather hard, at the moment, it is premature, I think, to get to that particular point. One other point about aggregation though is, just coming back to your previous question, it was one of the key themes of the Broadband Stakeholder Group recommendations, it is a key theme of the Stakeholder Group work going forward, to look to work with Government, to try to make the case. And, in fact, taking Living Health as an example, to try to build on the economics of that, as we understand it, into the bigger picture of how it could be applied on a nationwide basis, and it could benefit the funding of the Health Service.

  399. To turn to the thorniest issue, I suppose, between you and Government, that of `must carry' status; what channels do you think should have `must carry' status in the future, on cable? You are not allowed to say "None".
  (Mr Singer) Channels which are actually supported by public money, specifically the licence, on the BBC, we are happy to give `must carry' status to; statement one. Statement two: the BBC is breeding channels like no tomorrow, and when they finally get to BBC Porn I do not actually wish to give that `must carry' status, because clearly that is a competitive situation. So I have no problem about `must carry', but I would suggest there ought to be some kind of definition about the number of channels that can be created, classic, linear, TV channels; in broadband, we have no issue at all, as many as you like, but on linear television there should be some limit to the number there should be, and some question about the focusing of resources.

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