Select Committee on European Union Minutes of Evidence


Examination of Witnesses (Questions 640 - 659)

WEDNESDAY 19 APRIL 2000

MR TONY YOUNG AND MR ROGER DARLINGTON

Lord Woolmer of Leeds

  640. A couple of matters, it is not meant to be a loaded question, although it obviously is, I fear, in part. What proportion of your membership work for BT and where do the others work?
  (Mr Young) The two main employers are British Telecom and the Post Office, although we are represented in other telecommunications companies. We also have just over 3,000 members in the Alliance & Leicester Giro Bank. The proportion is something like two thirds Post Office and one third British Telecom, that is how it breaks down. We have something like nearly 100,000 members from British Telecom.

  641. I asked that because I thought your comments on the Local Loop did seem to rather smack of a company union, if I may say so, and if somebody else does not come back to it I will come back to it. Can I talk about universal access? Tony Young, you gave me a very stimulating resume of developments in the future when we were at Wilton Park. What you convinced me of was that there is going to be a multiple range of points of access, methods of access. If that is the case, does this not pose a problem if any Government wanted to say that everybody should have access to whatever it is what is? What is the means of access that they should home-in on or, perhaps, should Government be very wary about free access, and so on, to equipment? After all, we did not give everyone the telephone for free when the telephone came in.
  (Mr Young) They did not give everyone a telephone for free but they did adopt a principle of universal services and uniform tariffs, both in post and telecom. That has been important. Although, it is true to say that you could not deny that during the advent of competition we have seen increased telephone penetration. We do not favour, particularly, any means of delivery because, first of all, there are, as we say in our evidence, a variety of methods of delivery of Internet access. Are we too biased in favour of British Telecom? I think that is a legitimate question. Obviously, with a significant number of our members involved in it, we would not pretend we did not have an interest in the future of the company. I do not think we would be frightened to argue a different line, and we have done sometimes, when we felt they were too bound up, if you like, with the company and their relationship with one set of stakeholders, namely the shareholders, and they were not taking into account sufficiently, in our view, the national interests. On our reservations on Local Loop Unbundling the preferred route would be to regulate. What we are seeking to develop is the reservations that we have put in our evidence.

  642. With the speeding-up of the introduction of a digital age and digital television, and so on, do you think that digital television is going to play a role in access and, if so, what do you think of the timetable of events? Is there anything that ought to be looked at in that area?
  (Mr Young) The answer is almost certainly it will do. We believe there is going to be access through a variety of means, it will not just be a PC, it could be a games console, it could be interactive television. You can already access via On-digital and you can access via Sky. We certainly see a variety of methods of access. We are pragmatic about it. Our view is that if you want to develop universal access then a variety of methods is one way of achieving it. The Government approach to it is to encourage different methods of access. If we are serious about a universal approach, then we have to encourage them.
  (Mr Darlington) I would like to pick up on Lord Woolmer's analogy with the telecom service, where you said that Government did not require everyone to be given a telephone. That is certainly true. They did require the Post Office, as it then was, to provide a nationwide public telephone booth system, public telephone kiosks. Since privatisation it is a requirement of BT Plc's licence to provide such telephone kiosks. If the information society develops the way we are discussing in this room, especially if government-to-citizen services are going to develop, the inability to access easily and cheaply the Internet is going to disenfranchise people very severely. We would like to see a very wide range of public access points to the Internet. Two years ago I visited Malaysia and before I left Kuala Lumpur Airport I had already seen public access points to the Internet provided by Telecom Malaysia. The British Post Office should have provided public Internet access in every post office years ago. They will eventually, I am sure. BT will, and should very quickly, make sure that every public telephone kiosk provides Internet access. The places where you go to have a passport photograph, the photo booth, will provide Internet access. Internet access should be ubiquitous, because if you have access at home you will want to be able to access it anywhere, any time. We will not all have UMTS telephones. There is a role for Government here in creating an environment in which a very wide range of organisations provide a great many forms of access to the Internet, including its own services.

Baroness O'Cathain

  643. I was interested in your follow-up, the point in your paper, where you said, "In three years time you could expect the breakdown of e-commerce business-to-business 70 per cent, business-to-consumer 20 per cent and government-to-consumer 10 per cent. If it is only 20 per cent business-to-consumer in that area, why do we want universal access? What I am trying to get you to say is that we need a lot more than 20 per cent.
  (Mr Darlington) Can I just emphasise, those are percentages, they are not absolute figures. The absolute figure for each of those three components is going to be vastly greater than now. The present breakdown globally is about 80 per cent business-to-business and about 20 per cent business-to-consumer. The proportion of business-to-consumer is lower in Europe because we have not developed that as effectively as the United States. The government-to-citizen is negligible. We think that the proportions are going to change but, of course, in volume terms the growth is going to be enormous. I think the figure I most easily recollect is that Fletcher Research have said that business-to-consumer sales in the United Kingdom last year were about 6240 million and in 2003 they will be three billion, that is the rate of growth. Perhaps we should concentrate on the absolute figures that are there rather than the percentages.

  644. Or, indeed, the percentage of total sales. At the moment it is 0.6 per cent in the last quarter. Getting back to this Local Loop Unbundling issue. In paragraph 14 in your paper you said, "We recognise that competition has an important role in bringing down tariffs and stimulating new services." You go on to say, "Local Loop Unbundling has a role to play in that." I have to say, that looks like special pleading. "Serious operational implications for BT and its staff cannot be rolled out without addressing such issues as safety and security." We have just come back from a visit to Washington, where people are more advanced in terms of the Internet, and practically everybody is suggesting that really one of the blocks to progress is this problem about the Local Loop Bundling or the lack of it. You have a dilemma, do you not?
  (Mr Young) The regulator has taken a decision, in any event, and we are pragmatic about it. If you have a variety of people entering telephone exchanges and installing equipment, there is a problem there. We have had similar examples where we have had contractors operating in the external environment and we have had real problems with safety. There is a problem there.

  645. Can you just explain the problem of safety? I do not quite understand.
  (Mr Young) If you are fitting equipment in this environment, there will be electrical power that attaches to this equipment. What we are saying is, when it is a BT controlled environment, that is one thing, but when you have a variety of different companies using that same environment we are not so confident about being able to guarantee the safety and security of the situation, in terms of the whether you can guarantee all of the employees that they might use. If you are putting people in telephone exchanges, you are giving them an opportunity to do something in that environment. There are risks there. There are risks in terms of physical safety, that they will not wire up something in the correct way. You are also giving somebody a means of access. We do not want to over-emphasise it, but what we are saying is there are ways you can still achieve Local Loop Unbundling. There were four or five options that the regulator looked at. What you said was that you want competition in the Local Loop. We are not arguing against competition in the Local Loop; its time has come. We are saying there are a number of different methods. What we would say to you is this, what this country needs is a broadband infrastructure, not constantly trying to stretch a somewhat dated copper network. As long ago as 1989 we had policy of wiring up the whole of the United Kingdom with fiber-optics. We could never persuade the company to embark on the investment. We probably were ahead of the times. The concept was right. We could not foresee ADSL and the development of compression techniques. Certainly there are other technologies that have given them an opportunity, if you like, to sweat the assets for longer. We have not entered an opposition to competition in the Local Loop but our concern about the methods chosen by the regulator.

  646. Could you expand your view, that it is important that regulators, both nationally and at a European level, ensure there is no monopoly on any platform for accessing the Internet and conducting e-commerce?
  (Mr Young) Our concern is that whatever the platform, whoever owns that platform, they should not be able to prevent, whether it is BT or Murdoch with access via satellite, competition in that area. There has been concerns expressed about that.

  647. I am still slightly confused, because I think you adopt a free market approach in one area, ie no monopoly on any technical platform, and on the other areas, as least I have inferred from what you implied, you do not really want people to go in on BT's patch.
  (Mr Young) As I said, we are in favour of and we recognise the need for competition. I would go further, I would say that we do support it. We are not adopting any narrow or any luddite attitude towards this. There is going to be competition in the Local Loop. We want it to take place in a safe environment. In relation to any other platform of access, what we are saying is that neither BT nor Sky nor anybody else should have a monopoly on these platforms. There should be free and open access to it.
  (Mr Darlington) I was going to point out, there is no inconsistencies, far from it. BT does not operate a monopoly on a technical platform, it has spent 100 years, and several tens of billions of pounds, building a physical infrastructure. It is now being asked to open that infrastructure to its competitors, which it is willing to do, but at a price, which has not yet been determined and is subject to some operational requirements which protect the security of a vital national infrastructure. There is nothing to stop somebody building an alternative infrastructure.

  Baroness O'Cathain: Please, we have enough holes in the road.

Chairman

  648. Staying on regulation, I think you are the first organisation that has come and proposed, to use your phrase, an Ofcom, which is a merger of the regulators. Would you like to the expand on why you believe this should happen? Do you think it should happen on a European-wide basis?
  (Mr Young) In one word, convergence. That is why it needs to happen. It is nonsense. When we talk about Ofcom, we are talking about the infrastructure. We tend to deal with content separately. We are talking about infrastructure. At the moment you have the Department of Trade and Industry and the DCMS vying with each other in these areas. I think we are beginning to win the battle of ideas. A few years ago, when we tested the water, there was a definite view of what we have we hold. Now that convergence has moved us down the road, with the advent of cable television what are you getting over the network? You are getting a full range of broadcast services, you are getting Internet access, or you soon will do, and you are getting a telephone connection more or less thrown in. We believe technological convergence demonstrates the need for combining those infrastructure regulators.

  649. Are you impressing this on the Government?
  (Mr Young) Very much so. We met with Patricia Hewitt a couple of months ago and we agreed that we will have some contact with the team that are working between the DTI and DCMS on this. We will be conveying that message strongly and constructively.

  Chairman: We came back from the States, where they have a uniform approach and we were wondering why we do not have it here?

Lord Faulkner of Worcester

  650. Can I ask you about the paragraphs you include in your evidence on cash, credit cards and smart cards. You quite rightly point out there is customer concern that privacy and, indeed, money itself can go missing or there is a belief that it can go missing by the use of a credit card transaction over the web. How do you see this problem being solved? How can you see customer confidence being built up from that?
  (Mr Darlington) The first point I would make is that probably e-commerce is not as risky a proposition as most people think. I personally buy books from Amazon.com and I do it with one click, because they have all my credit card details. Frankly, I am as confident in that as when I telephone the Royal Festival Hall and give my credit card details over the telephone. In part, it is a perception problem. In part, there is an obligation on anybody conducting e-commerce to use the latest possible technology to encrypt data of this kind and to make that information available on the website. Most reputable e-commerce retailers do have a section where you can see what their privacy policy is. We may move towards new forms of payment. We may develop forms of smart card. We may develop forms of e-cash. You are probably familiar with a form of e-cash called beanz, which are units of currency given by some retailers and accepted by other retailers. Somebody is going to make a fortune out of this.

  651. It is called barter.
  (Mr Darlington) Beanz do not exist, they are just bits of digital data. We are going to see a range of different ways by which people can pay for goods and services. Unless people have confidence that there is not going to be fraud or a lack of privacy e-commerce will not take off.

Lord Chadlington

  652. I think the mood is changing very, very quickly. I entirely agree with what you just said. I was very interested in the reference you make to one-stop shop. Could you talk about that for a little bit? In particular, you put up a number of options for the way this might be established. When you were drafting it you must have had a preferred idea in your mind about what you would like to have seen. Could you just tell us what that is?
  (Mr Darlington) I do not want to be too prescriptive. We are governed a little bit by the fact I have a different hat. I am Chair of the Internet Watch Foundation, which for three years has operated a hotline in respect of one particular part of Internet content, which is criminal content, overwhelmingly child pornography and also some forms of adult pornography. We have also been asked to extend our remit recently to racial hatred. We are already getting some references which fall outside of our remit. I suspect that, if e-commerce takes off the way people in this room expect it to and want it to, we will have a whole range of problems, some will be credit card scams, some will be poor customer service, some will be copyright issues, some will be defamatory libel, a very topical issue. I am not sure that customers will be able to make these fine distinctions between what is a criminal offence and what is a civil offence and that they have to go to one organisation for pornography, another one for financial services and another one for programming. We are exploring with people like yourselves whether there would be an advantage in having one point, which is well publicised, where everybody who has a problem with on-line content, whatever the delivery mechanism, whether it is a PC or a television set or a mobile telephone, whatever the nature of the problem they can go to this point and this point will have the resources and the training to say: this is a problem of child pornography and it should go to the Internet Watch Foundation; this is a problem of fraud and it should go to the Financial Services Authority, if that is the appropriate one. They themselves would not actually process and investigate all of the complaints, but they would have enough knowledge and enough resource to be able to log the complaint and give an initial response to the complainant and say, "This has been referred to what we believe to be the competent authority and they will investigate it." I do not want to be too prescriptive but it may be that the Government would want to set up such a body itself. The Government would obviously be able to underline the confidence and give a lot of trust to such a body. They may decide they do not want to get involved in that way, it is better if it is an industry-led initiative. It may be that you create a new body for that or it may be that you go to an existing body, like the IWF, and say, "You are already operating in this field, you already have mechanisms. If we give you enough resource, in terms of money, to employ the staff and do the training, would you do it for us?" We would be interested to see whether this is an idea which commands popular support.

  653. I think this is a very, very important area and extremely interesting. It is very difficult to know where to go when you think something is wrong. This is really a sign-posting operation. Can I press you a little bit further on your preferred source? The advantage of the Government situation is that it would make you feel confident, that would certainly be true. It would have certain other overtones which may not be altogether right. Would you have a preference for seeing IWF developed in this way, bearing in mind the work you have done.
  (Mr Darlington) This Government, and rightly so, would prefer if it can to operate through a voluntary industry supported scheme. That is what it has done with criminal content through the IWF; that is not a Government body but the Government supports it. That is what it has done with a body like Trust UK, which is an industry supported initiative which has the full support of Government. I suspect that this Government, and indeed industry, would prefer it to come from the industry. It would probably be better not to start from scratch but to start from an organisation that has some sort of track record and some sort of reputation. As Chairman of the IWF, it is not something that I have discussed with our Board yet. We have given evidence as an IWF but that evidence does not cover this particular point. I think that there would be great value in taking an existing body, giving it a wider remit and giving it funding, because that body would have a certain track record, it would have a certain profile.

Chairman

  654. Do you see a role for the EU in coordinating similar bodies to yourself in other countries?
  (Mr Darlington) Definitely. If you take the issue of child pornography, which is a global problem, there are five or six hotlines in Europe now and the EU is actually funding a project to develop those hotlines, and the IWF and the United Kingdom is part of that. If we are going to have genuine global e-commerce, one of the things you will find is that United Kingdom consumers will complain about problems of Internet content which originate from outside the United Kingdom. This one-stop shop could say, "I am sorry, this company is actually hosted in Seattle and the problem is going to have to be referred to the Federal Communications Commission or the US Securities Commission." You cannot expect ordinary men and women on-line to know all about these things. That one-stop shop, as well as making a judgment as to the type of problem, in terms the regulatory body it should go to, could, where it was non-United Kingdom, refer it to the appropriate body in another European country or anywhere in the world and they would have those connections or expertise.

  655. We are running short on time. Could I pick up two or three other topics, very quickly. You mentioned Horizon earlier, this is back to smart cards, why are we being so singularly unsuccessful with our attempts at smart cards in this country?
  (Mr Young) There have been a number of trials, I suspect some of them may be ahead of their time. I think if you look at the Horizon Project, one of the lessons you could draw from that is, if you were going to embark on it, you would probably not have done it in the way they did it, stretched, as it was, across three government departments, with nobody clearly in control. I think that was probably an accident waiting to happen.

  656. Is joined-up Government needed again?
  (Mr Young) We do not believe it should be abandoned. We think that the European initiative is one that ought to be encouraged and we see it as a logical development.

  657. Do you see any particular successes on the continent that we might use? We have heard about some in Belgium.
  (Mr Darlington) The Horizon Project was actually modelled on a similar scheme in the Republic of Ireland. The principal contractor, ICL, put in the Irish system. The problem arose in scaling-up the project to a much larger country and the multiplicity of Government departments with very different agendas.

Lord Bradshaw

  658. You employ a lot of people in the letter business, how do you anticipate their employment prospects changing in those industries over the next five or ten years?
  (Mr Young) We have already seen significant changes. We have seen a greater use of agency and contract people. We have seen more flexible forms of working part-time, short-term contracts. We have seen significant developments of tele-working. We see the opportunities for employment creation. Inevitably in the kind of industry we are talking about we are going to see much more flexible forms of working. We can see advantages and disadvantages for our members, but it is inevitably going to come. Our concern is where do we focus our attention. We are encouraging employers to think imaginatively, so they are not just focusing on down-sizing the work force but on growing employment opportunities. We are encouraging the employers to think more flexibly about the kind of training and career structures that they offer. At the moment we have very hierarchal, narrowly defined career structures, people are defined in terms of engineer, clerical or operator. We are trying to create new flexible grading structures with much more flexible forms of training. On a wider scale, our interest in these topics is that we think it is essential, not that other traditional forms of industry should be neglected, but for Britain and Europe to ensure that they gain the maximum employment opportunity and benefits in society. We believe that e-commerce is part of that equation.

  659. Is it employment generating?
  (Mr Young) It is definitely employment generating. We have lost jobs but we have also seen many new job opportunities created. The mobile telephone industry did not exist a few years ago, that is one of many examples.


 
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