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Mr. Chris Bryant (Rhondda): The hon. Gentleman makes important points about ensuring that competition is robustly regulated so that consumers and, importantly, retailers get a better deal. However, does he see any read-across from the BT situation to that of Sky? Sky also operates a platform. It sells conditional access to retailers—broadcasters. Yesterday, the Office of Fair Trading failed to find against Sky on exactly the same charges. The Chairman: Order. The hon. Member for Maldon and East Chelmsford should not pursue that line. We are talking about leased lines, not Sky. Mr. Whittingdale: The hon. Member for Rhondda (Mr. Bryant) is very keen to have his debate, because that is the second time that he has raised the issue—he intervened on me in the first sitting. I promise that we will have the debate when we reach the relevant part of the Bill, as you have said, Mr. Atkinson. However, the hon. Gentleman said that the ''OFT failed to find'', which suggests that he knows better that the OFT. Mr. Bryant: Too right. Mr. Whittingdale: Given the choice, I would probably go with the OFT in this instance. I return to our interesting question about the ownership of the network by BT and the ability to introduce competing providers of retail services. Obviously, that must be subject to regulation, which is a major part of the clause. For understandable reasons, the Minister was unable to attend the first few sittings of the Committee when we debated the early parts of the Bill. At that point, I said that there are some who believe that the BT supplier will always be in an advantageous position, regardless of the strength of the conditions in the Bill that are intended to ensure that there is a level playing field and open access. Regardless of how much one tries to ensure that there are Chinese walls and separation of accounting systems and so forth, a competitive market will not be achieved while the main service provider also owns the infrastructure. I was interested in the comments on that of Lord Currie, the incoming chairman of Ofcom: as the Minister knows, he has argued in the past that the only way of achieving real competition in the long term is to separate the ownership of the infrastructure from the service provision. The Minister for Tourism, Film and Broadcasting replied to the debate when Lord Currie's remarks were discussed, and I asked him whether he saw any faults in the argument of the incoming chairman of Ofcom; sadly, he resisted my invitation to comment. Can this Minister be drawn out a little on whether he sees any strength in that argument, or is he confident that the Bill will make it absolutely certain that we can achieve proper separation, so that the main service provider—BT Openworld—will be competing on an entirely equal basis with the other service providers that are leasing lines from BT? That is a very important matter, and it must be addressed satisfactorily if we are to have the competitive market that we all want. Column Number: 014 I acknowledge that the regulator is now making good progress on that, although there is further to go. This matter also affects normal telephony services—the old narrow band services. Brian White: Since BT was privatised in 1984, there have been several opportunities to split the company into different parts. Can the hon. Gentleman explain why the Government that he supported did not take any of those opportunities, in particular that which arose in the early 1990s? Mr. Whittingdale: That is a very interesting point. BT was the first privatisation. In the early 1980s, the privatisation of a major utility was regarded as a pretty revolutionary idea, so the combination of a privatisation and a complete change in structure to achieve greater competition was probably considered to be a step too far. The same arguments then applied to the gas industry. It was transferred en bloc into the private sector, but a competitive market was achieved later on when the supply was separated from the ownership of the transmission network. The hon. Gentleman is right that there is a valid argument that that should happen to BT, and perhaps that argument should have been had earlier—certainly, the idea has been floating around. I have discussed this matter with BT, which says that it is technically impossible. It argues that telecommunications is not like gas and because of the nature of the telecommunications business one cannot separate service provision from ownership of the infrastructure. I am not wholly convinced about that, and I would be interested to hear the Minister's view. Mr. Hoban: As several venture capital companies have put together bids for BT's lines, is it not clear that commercial interests believe that it is possible to separate the infrastructure from the provision of services? Mr. Whittingdale: That is right. A bid—or an expression of interest, at least—was recently made, which the BT board firmly rejected. On this matter, there is both a technical debate as to whether it is possible and a debate about whether it is desirable. I do not expect the Minister suddenly to announce a dramatic Government policy on this during this sitting. However, I would be interested in his reaction to the technical arguments about the theoretical possibility, and whether he is absolutely confident that the provisions of this clause will have the same effect in achieving a genuinely competitive market, which the rather more drastic action of separation would be designed to achieve. That is important for narrowband access, where the regulator has recently stepped in to ensure that wholesale charges are reduced, which has helped to reduce the charges that, for instance, ISPs charge for narrowband access to the internet—the service where one pays a flat rate for being constantly logged on. Such a market is also important if we are to achieve take-up of broadband. The other day, my hon. Friend the Member for Ryedale said that he still regarded the cost of broadband as prohibitive for many people, and I am sure that he is correct. Of course, there has been Column Number: 015 considerable progress in reducing that cost. To some extent, that is due to pressure from the regulator. It is a matter of national interest. If we are to achieve the take-up of broadband, which all agree is in the national interest, achieving greater competition that will bring down prices to the consumer will play an important part.Brian White: In Germany, the expansion of broadband was brought about by a lack of competition. The regulator and Deutsche Telekom operated together to introduce broadband. That completely contradicts the hon. Gentleman's argument. Mr. Whittingdale: I am aware of that argument. It is the case that some have argued—principally BT—that if prices are to be cut to stimulate demand, suppliers will be in danger of being accused of indulging in anti-competitive practices. The hon. Gentleman has raised a point. There will always be a balance between the desirability of achieving greater competitive markets and the rolling out of broadband at lower prices in order to obtain greater take-up. The clause raises several important issues, and has provided an opportunity for the Minister to respond to some of the concerns. Mr. Timms: We have had a wide-ranging discussion—wider than I thought when I saw that the title of the clause was ''Conditions about leased lines''. Let me address some of the points raised by the hon. Member for Maldon and East Chelmsford, which are important and interesting. He talked about local loop unbundling and the roll-out of broadband. I hope that local loop unbundling will take place in the UK on a significant scale. We now have the regulatory framework to allow that to happen. The reason that the take-up of local loop unbundling has been rather slow is more to do with the general shortage of investment into the sector than any remaining problems in the regulatory arrangements, or any blockage on BT's part. We have an arrangement that will work well, and some businesses are being built on the basis of unbundling local loops and using them to provide cost-effective broadband services to customers. We will see more of that in future. I was in Japan recently, and it is certainly the case there that local loop unbundling has been the key to delivering extensive broadband availability, a high level of broadband take-up and low broadband charges. That is an interesting example of the effectiveness of competition in delivering the objectives that we all share. The hon. Gentleman asked me to comment on the possible break-up of BT. I agree with the principles to which he referred relating to securing a fully competitive telecommunications market. I agree that we have made some good progress in that direction in recent months. Oftel and the director general have made some important announcements—for example, about the single bill for people who have telephone services from providers other than BT. I believe that Column Number: 016 the powers in the Bill and the arrangements that we are establishing with Ofcom will allow us to deliver the competitive market that we want.On the specific issue of a break-up of BT, Ofcom will be able to exercise powers in the Enterprise Act 2002—which was mentioned by my hon. Friend the Member for Milton Keynes, North-East (Brian White)—including the power to make market investigation references to the Competition Commission. That opportunity will be available to Ofcom, should it wish to take it. I am aware that there has been a good deal of interest in the matter of late, with many people calling for a break-up of BT.
10 amI do not think that that is a matter for Ministers—indeed, under the Bill, it will be for Ofcom to consider—but I should say that those who call for the break-up of BT find it difficult to say exactly where the split should be made between the lines and the rest of the network. For example, are we talking about the local exchanges as well as the local network? Some tricky definitional points must be clarified before any such proposal could be seriously addressed. Is it technically impossible? I am sure that the answer is no, but it is certainly very complex, not least in terms of defining precisely where the split should be made. Because it would be such a complex process, it would inevitably be extremely time-consuming and would absorb an enormous amount of energy and effort from everybody in the industry, almost certainly for some years. That would have to be taken into account in deciding whether it was a fruitful road to embark upon. As I said, it will be a matter not for Ministers, but for Ofcom, especially under the powers in the Enterprise Act. The clause deals with the conditions regarding the availability of leased lines. It enables Ofcom to set SMP conditions where a party has been found to have dominance in the market for leased lines, but the market in question will be limited to such leased lines as are identified by the European Commission in the list of standards published in the Official Journal of the European Communities, which we have not yet seen. Ofcom will need to go through a procedure whereby it identifies a market for review, conducts the market review, sets conditions to combat dominance, and decides in the light of the analysis what those conditions should be. Annexe 7 to the directive, which is headed, ''Non-discrimination, cost orientation and transparency'', sets out some of the areas in which those conditions can be envisaged and gives details of precisely what they might address. Let me conclude this interesting discussion by reaffirming that it is very important in this part of the telecommunications market, and in the market as a whole, that competition is not unfairly blocked by any provider with significant market power. The hon. Member for Maldon and East Chelmsford said, I believe, that BT has about 50 per cent. of the broadband market. Let me clarify that. BT Openworld has about 50 per cent. of the ADSL market, but more than half the broadband connections in the United Kingdom are from the cable television operators NTL and Telewest. Those Column Number: 017 are not ADSL connections. Therefore, looking at all broadband provision, BT Openworld has only about 20 per cent. of the retail broadband market, which is a much smaller proportion than in most comparable markets.The hon. Gentleman rightly made the point that we have recently seen good progress on competition. We have seen in the broadband market—in some ways, for the first time—the real benefits of infrastructure competition. It was the sale of cable modems by the cable operators before BT was serious about broadband that put pressure on BT to reduce prices, which has led to the substantial growth in the broadband market of recent weeks—we passed the 1 million mark in October, and 28,000 connections a week are now being sold. That is rapid progress. We need to go much further, but there has been a lot of movement in the right direction.
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| ©Parliamentary copyright 2002 | Prepared 19 December 2002 |
