Joint Committee on the Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 260-262)



  260. Is the climate changing? Are you still facing the kind of blow-back from the dot-com bubble bursting? One only has to read the papers to see that there is still a question mark over 3G and therefore a question mark about where you are going. Is that psychological? Is the psychology changing?
  (Mr Rumbelow) I think that this industry has been known to take risks. It took risks when the first services were set up virtually ten years ago. The risks do not amplify the service, but you will certainly find that all the five players here are committed to investing in that risk. At the moment in our own respective ways we are taking that risk and making it happen. For us as the new entrant we have the biggest investment in that risk to make because we do not have the related systems, we have to start from scratch, and therefore it is important for us that the initiative of what broadband is and the framework of regulation around it supports that investment, particularly in the early years for us where we need to establish ourselves in the market, we need to invest in networks and invest in services that are going to make it happen. From our own point of view we have made it clear that investment in that risk is worthwhile and we need to ensure the environment in which we work—and the regulatory environment is an important one—reflects that risk and does not over-burden us with regulation before we have had a real opportunity of establishing 3G services in the United Kingdom.
  (Mr Dunn) Perhaps I can capture that by saying the big risk we see is that the regulatory regime will diminish our appetite to take those risks. We have always known that 3G is a risk area for us because it is a whole new infrastructure we have to build, and no one knows what the take-up of services will be, which will be the successful ones, which will not be the successful ones. Financial markets recognise that big time; we hope the regulators realise that too and regulate accordingly.

Paul Farrelly

  261. You said at the beginning of your session here that your biggest disappointment about this Bill is that it is more of the same. To give you all a go because you have been waiting for so long, can you give us one concrete example each of where you feel Oftel has failed and where this Bill is going to make the same mistakes again in allowing it to be replicated.
  (Mr Borthwick) The key problem that we encounter when we deal with Oftel is a tendency to look at markets in a very micro sense so the end result is you risk having your activities sliced and diced where Oftel will regulate when confronted by success but will leave failure for the market to worry about. That is the key problem that we all see as an issue.
  (Mr Lijnkamp) One of the experiences we have had in Oftel's activities was in the 1998 mobile market review. In the recent mobile market review the market was considered prospectively competitive. Everybody who has read the press in the meantime is fully aware of very important competitive developments that have taken place. We feel that that clearly identifies a level of unnecessarily sticking to the sheets of the regulator and they are not taking into account fully the risks that have developed in the meantime for our sector.
  (Mr Dunn) It is fair to say that to date we have been lucky that we have not been very heavily regulated in this sector. What we see, though, is that whole environment changing as we get more customers and we get bigger. Just to give a true anecdote, when my previous CEO went to see the then Director-General of Oftel about a year ago and proudly announced that Orange (which was the fourth entrant in the market) now has 25 per cent of market share or very near that, the first reaction of the Director-General was "you might get regulated soon then". That is really what we are fighting against. That should be a success story.
  (Mr Brown) It is probably wrong to characterise what has happened in the past as a failure by Oftel. The mobile sector is very competitive indeed and we see the benefits of that. There is no poverty-led digital divide in mobile, for example. What we are worried about is we still have a regime which is based on a situation that is 20 years old and we do not want to see that perpetrated because we have changed.
  (Mr Rumbelow) Our experience as a new operator is that of observing the history of the other four operators as they have had those relationships with Oftel over the last few years. It is those experiences that lead us to believe that the continuation of the economic approach they take and the slice and dice approach is not going to be something for us as a new entrant to stand. We have to stand in the market place and be given the opportunity to do what we need to do. We feel that a continuation of that thinking which has been perpetrated over the last four or five years could have an effect on the way we are able to service our customers in the future.


  262. You have got the Bill team sitting behind you. Is there anything you want to say to them through us?
  (Mr Dunn) Only the thing we have said right from the start about the primary duty. That is our primary concern. If the Bill changes in that way and not in any other ways that we have talked about, we would be relatively happy.

  Chairman: Thank you very much. Again, sorry for the delay.

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