Examination of witnesses (Questions 240
TUESDAY 19 DECEMBER (MORNING) 2000
SAUNDERS and MR
240. I am talking about the next door building,
renting a bit of space.
(Ms Gilthorpe) Yes. Scarcity of space is a problem.
The space might be there but there are costs associated with renting
that space and whether or not it is indeed available. If we are,
for instance, talking about a 500 metre perimeter, that is a very
difficult thing to achieve in city areas.
Mr Butterfill: It might be cheaper than negotiating
with BT at the end of the day and a lot quicker.
241. Maybe you should declare an interest. This
man is a chartered surveyor.
(Mr Allan) I understand the point you are making.
The operators are looking at this, clearly, but you still need
to get access from your building to the BT building to put a cable
in there. It is something we are looking at, in short.
242. Can I put it round the other way? BT might
turn round and say, "We do not want these guys coming in
fiddling with our equipment, getting in the road. We have security
considerations as well". There are other sides to this argument
as well. I am not suggesting this is an argument for keeping you
out, but are you confident that the people who you will be placing
in these exchanges as and when they need to go in will be sufficiently
well trained and be instructed in such a way as to not interfere
with the other people's kit?
(Mr Allan) I am quite relaxed about this. The last
thing I want to do is to run out and have to recruit a pile of
new engineers to maintain this kit. If BT were happy to maintain
that equipment for us I would be very pleased and I would be happy
to pay a service charge to them for doing so. I have no wish to
have to find additional people to run out and maintain all this
equipment in these exchanges. There are other ways to do this
(Mr Saunders) The other way of looking at it is that
a large number of the vendors who would be interested in our equipment
are the same vendors who supply BT. In practice an awful lot of
the people who would be going into those BT buildings are already
going in to supply services to BT.
(Mr Allan) BT is currently offering a DSL service
for me which is branded as ? but BT offer the service and maintain
it. The only thing I want is a service level guarantee so that
I can give promises to my customers in terms of the quality of
service and deliver it so that I can make sure they get what they
are paying for.
243. Can I ask about shared access because that
is going to be required by the EU regulation on local loop unbundling?
Are you all happy with the proposals for shared access?
(Ms Machin) Yes. We have responded to the Oftel consultative
document on that and given our views. Our concern about this is
that we understand BT's response is that it will be round about
nine months before it will be implemented which we think is an
unreasonably long timescale, so we would like to see that timescale
addressed but yes, we are happy with the proposals.
244. Does that go for everybody?
(Ms Gilthorpe) I have only one comment which is to
make sure that BT has the responsibility practically of splitting
the copper out rather than other operators so they take responsibility
for creating that shared facility.
245. Can I ask you whether youall of
youintend to offer telephony services as well as broadband
(Mr Allan) We already do.
246. You all do?
(Mr Allan) Kingston does in his area. Cable and Wireless
I am not sure.
(Ms Gilthorpe) Yes, but not to residential customers.
We target the business market. Yes, absolutely, that would be
our intention, to provide a package to our customers. That is
certainly what is being demanded.
(Mr Saunders) Certainly shared access would play a
role in that. One of the concerns is that where space is limited
it may not be feasible in the short term to adopt conventional
telephony solutions and there may well be a role for BT continuing
to supply telephony in the short term while other technologies
become cost effective, for instance voice over DSL and voice over
IP. I think everybody's perspective is that certainly most of
the customers that access DSL technology will want to buy both
narrowband and broadband services in a bundle. The question is
how do you put that bundle together and what is the most cost
effective way of doing it.
247. Cable and Wireless have a major cable network.
Are you going to be running out your own cable modem products
in direct competition with BT's own residential products?
(Ms Gilthorpe) Cable modem is something that a number
of the cable operators do provide cable TV through and telephony
packages are looking at and have started to offer. Certainly it
is something that when Cable and Wireless owned the residential
cable business within the United Kingdom we were looking at but
for the small to medium enterprise market and upwards through
to multinationals it is not a technology that is particularly
useful in that market segment. More sophisticated services are
required for that market place. Cable modems are very good at
the residential end but less so throughout the market segment
that we target.
248. Does that mean you are not doing it or
that there is not a take-up or you are not sure there is a market?
(Ms Gilthorpe) We do not target the market for which
it would be an appropriate solution. The residential market is
not within our portfolio.
249. What progress has been made towards the
unbundling of Kingston's local loops?
(Mr Saunders) The position on that is that Oftel investigated
the situation in respect of Kingston as well as BT at the time
of the original consultation on broadband access. Access to band
width was the name of the consultation exercise. The conclusion
at that stage was that there was no demonstrable demand for the
unbundling of the Kingston local loop which in policy terms remains
the position. Having said that, the EU position now is rather
more clear cut in that they, as you know, have implemented a recommendation
which was agreed by the Telecoms Council on the 5 December, which
imposes obligations in respect to local loop unbundling on all
operators designated to have it as having significant market power
under other EU directives. We are currently in dialogue with Oftel
as to what that means in terms of KC. I must say at this stage
that it is our intention to deliver our own DSL based services
and to make sure that other operators have cost based access to
inter-connect products on that DSL platform which may well mean
that in practice there is no demand for local loop unbundling
250. So you are following the same process as
(Mr Saunders) Rather more constructively.
251. Everyone says that.
(Mr Saunders) We have indicated to industry over a
long period that we are quite happy to support other operator
services in a flexible way on our DSL platform and indeed we have
had dialogue with a couple of operators who have been interested
in doing that. We have got at the moment trial tariffs which will
be formalised within the next few weeks which are rather more
attractive than BT's.
252. So what demand are you getting or expecting?
(Mr Saunders) Getting, zero; expecting, significant
253. Are you able to expand a little on that
or is it confidential?
(Mr Saunders) We simply at this stage do not have
a concrete dialogue in place with any other operators either about
wholesale access or indeed local loop unbundling. From our own
retail perspective I will say that we have got 8,000 residential
customers signed up from a base of 120,000 for DSL based services
and we intend to continue to roll those out. It might well be
that other operators may not regard Kingston as a particularly
attractive commercial proposition because of our own success.
254. Have you got space to accommodate them
in your exchanges or is your success such that you have crowded
(Mr Saunders) We will obviously look at it in a very
flexible way but I will say that we have got an awful lot of equipment
that is delivering our own services.
255. So you do not have very much space. It
seems to be a problem. Hostels are rather limited at this time
of the year.
(Mr Saunders) But property in Hull is very cheap.
256. What percentage of your customers subscribe
to the broadband area?
(Mr Saunders) The percentage at the moment is probably
(giving a figure off the top of my head) round about 8,000 out
of 120,000 homes. What is that?
Chairman: Six per cent.
257. And your target?
(Mr Saunders) Rather more than that. Certainly we
would anticipate that 20 per cent penetration into that residential
environment is not unrealistic but that is based upon a broad
bundle of services which includes everything from broadcast TV
to video on demand to fast internet access to telephony.
258. And you reckon you can achieve that by
(Mr Saunders) Pricing in what context?
259. How are you going to be competitive?
(Mr Saunders) We will have a competitive proposition
with the other service options that are available.