Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 852 - 859)




  852. Good afternoon, gentlemen. My apologies for the delay in starting. I would like to thank you very much indeed, particularly for the written evidence you sent to us, which generated some interest, and the letters following inviting you to come to give oral evidence today. I understand that today was not a particularly convenient date for your colleagues.

  (Mr Sayer) Not at all!

  853. But we are very pleased to have you with us. This session will not be unduly long because we are seeking to accommodate the Minister, Patricia Hewitt, who is coming to see us, so I hope you will bear with us if we do have to close down a little bit faster than we would like and certainly faster than you would like. If I may, I would like to turn to your paper in the first question. You gave us an indication, in the paper you put to us, that you are concerned that the United Kingdom's competitive position was, to use your phrase, "continuing to decline". I am wondering if you could spell this out a little bit more. What is the evidence you have that our position is starting to decline? Linked to that, you suggested that OFTEL is "not following an energetic timetable". Perhaps, again, you would care to comment. What would you like to see OFTEL to be seen to be doing?
  (Mr Sayer) First, my Lord Chairman, thank you very much for the opportunity to present our evidence. You will see that I have produced a pack of charts. If I could refer you to the third page, where we analyse some of the key prices for users accessing the Internet. The three charts I am referring to are the "Monthly rental dial-up line charge for a business user"; "Connection charge for the ISDN basic access"; "Monthly rental charge for basic ISDN"; and on the bottom of the following page, the "Monthly cost for national private 64 kilobits circuits". You will see that in each of those the United Kingdom cost is the highest in Europe. These are lists of tariffs. The comparison is published by Phillips Tarifica and although the information was published at the end of 1999, we have been in contact with that organisation this week and are assured that, if anything, the situation has deteriorated against the United Kingdom since then. So that is our basic evidence. That for a number of key costs relating to e-commerce, which is accessing the Internet, that the United Kingdom's position is currently not favourable compared with Europe. Also, at the top of the following page, we show the "Monthly cost for [a] national private 2 megabit circuit" for the United Kingdom, which is slightly worse than the European average. The reason we mention these costs is because the costs of maintaining an Internet service provider infrastructure, one of the major costs is the cost of the leased line connecting those together. Again, the costs of operating Internet infrastructure, the United Kingdom is not in a good position in Europe. So that is the current position.
  (Mr Wilson) Just to add something to what was said at the beginning of our short written note, which we have presented to you as well. The data communication costs are the key driver behind driving e-commerce. If the United Kingdom has the ambition of becoming the most competitive environment for e-commerce in the world, then a global competitive data communications environment has got to be a prerequisite.

  854. Last week we had BT with us and they were insistent that the position was changing very rapidly indeed. They were praying in aid very much indeed as to what will happen after Surf comes online on 1 June. Do your figures take that into account? They freely conceded that in the past, perhaps the allegations might have made some sense to them, but they quoted OECD figures and particularly drew attention to the Surf coming online.
  (Mr Sayer) Before I answer that question, perhaps I could refer you to some later charts, which demonstrate the deterioration of the United Kingdom's position over the last eight years. If we put that question to bed: you will see at the back of the pack that there is a section starting "Price Trends", and a number of charts on calls to adjacent countries in the USA and then some charts on leased line costs. The basic position on the first two, the calls to adjacent countries and the USA, in 1992 the United Kingdom was amongst the most competitive and now it has become the most expensive. The countries have reduced price much more rapidly than the United Kingdom. The block diagrams refer to leased lines, where the evidence is that United Kingdom prices have hardly moved at all in eight years, whereas in other countries they have dropped rapidly.
  (Mr Wilson) These are the charts Index 4a), 4b), 4c).
  (Mr Sayer) So the position has gone from the situation where the United Kingdom was, in many cases, by far away the cheapest to a situation where it is the most expensive. That is the relative decline in the United Kingdom's competitiveness. You asked a question about Surftime. It is too early to reach conclusions as to the impact of Surftime on Internet access in the United Kingdom. The international comparisons do suggest that BT pricing is approximately in line with the European average, so things may well improve. We are reporting the situation as we see it today.

Baroness O'Cathain

  855. We do know the costs of Surf. They were quoting costs to us. Therefore, if you know the costs and what is going on in the European Union countries and America, surely you would be able to make a judgment? The fact is that we were told a completely different story from what you are saying, only last week. That is the point.
  (Mr Sayer) I must apologise. I have not got the comparative study on Surftime.

  Chairman: I do not think it will be needed because we were quite harsh on BT last week.

Baroness O'Cathain

  856. Very harsh.
  (Mr Sayer) We would be delighted to work with Tarifica and other members of the industry to have a look at that. Surftime is one of the key ways of providing effectively fixed cost access to the Internet. The other one is ADSL, who have unbundled local loops, where again the situation the United Kingdom finds itself in is that we will be the last major country in Europe to unbundle the local loop. Effectively, what that has done is that it has given BT a year's head start to develop and cherry-pick the market to the detriment of potential competitors. BT will roll-out its ADSL in the major cities in the United Kingdom, and some of their major competitors will conclude that it is not worth trying to compete. Even when they have rolled out local loop unbundling, the evidence is that we may have presented BT with a near monopoly of the market. Monopolists generally do not offer the lowest prices they can.


  857. But we have a regulator whose job it is to deal with incumbents and monopolies. What do you suggest?
  (Mr Sayer) Our concerns about the regulator are listed in the slides we have recorded.

  858. I am sorry that we have not able to give you the facilities to take us through them.
  (Mr Sayer) Just to look at the summary, the three areas that we are concerned about are, firstly, the timetable for consultations and complaint resolution. I am Chairman of the United Kingdom Service Provider Interest Group, and our members have stated that no complaint has ever been satisfactorily resolved, in their opinion. We have a particular case at the moment on unfair subsidy in mobile, which 14 months on and three case officers on we have no resolution. OFTEL has now called for further data. The evidence seems to be that mobile service providers are going out of business while they wait for OFTEL to resolve some of these problems.

  859. Is there evidence of that?
  (Mr Sayer) There is evidence of that, yes.

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2000