Examination of Witnesses (Questions 260-262)|
MONDAY 10 JUNE 2002
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 workand the regulatory
environment is an important onereflects 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.
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.