Examination of witnesses (Questions 340
TUESDAY 19 DECEMBER (AFTERNOON) 2001
and MR IAN
340. On that final point, the co-location space,
we heard this morning from Paul Markham that in the States they
go in for co-mingling, as he called it, and you are holding out
against co-mingling, which means putting the equipment on a wall
maybe in the same area as your own equipment.
(Sir Peter Bonfield) There are two sorts of co-mingling
in the States. In the US the normal approach to local loop unbundling
is to put in cages, as they call them in the States, which are
essentially wired enclosures and each operator has his own wired
enclosure, a bit like a great big dog place, and they put their
own equipment in each one of those. In some of the sites they
put in a big cage and they will share things within their cage,
so that is what they call co-mingling. To my knowledge there is
no co-mingling on a network which is mission critical to its incumbent.
We would certainly be dead set against co-mingling if it meant
actually opening up physical access to our own core network to
mix equipment within the core network. This is co-mingling within
the areas isolated to the other licensed operators.
341. I get the impression that you did not really
know very much about the exchanges that you had, that you never
bothered keeping records of them to any great extent. One would
have imagined that you would have had this file on a disk on a
computer and you would be able to rattle this stuff off. It all
seems to have taken rather longer than Oftel had anticipated,
would that be right?
(Sir Peter Bonfield) We clearly have data on the exchanges.
The exchanges were not designed for co-location, as is pretty
clear, because they were designed for a single operator. We know
a lot about the exchanges, the issue was finding out clearly within
each exchange how much space is available, whether it is the required
height and space, it has the right ceiling height, floor loading,
etc., etc., and then we had extensive discussions with the operators
about whether they wanted singular cages or this hostel arrangement
that we have come out with now because there are more people who
want to get into some sites. I think we knew the information but,
as you have probably seen in some of the exchanges, each one is
an individual, each one has to be worked on in terms of planning.
One-size-fits-all is a very difficult concept and it takes time.
It takes a bit of time to know where the exchange is, to know
where the cable routes are, to know where the power is, to know
what the power requirements are, and you just need planning to
do it and that is what we have been trying to work on. In terms
of the timescale that we were working on from April, we had that
planned out but we have now had it all brought forward. Has that
caused us a lot of problems? The answer is clearly yes, but that
is what we are responding to.
342. All that I am really saying is that I find
it a wee bit disturbing that in an operation as big as yours you
do not really know very much about the estate that you seem to
have. One would have thought that records would have been kept
and perhaps they might even be on easily accessible computerised
systems which would enable you to summon them up very quickly.
I realise that they are no longer staffed in the way that once
they were in the sense that many of your facilities are visited
at not too frequent intervals by some of your staff because of
the nature of the technology or the cycle itself and it is only
when something goes wrong that you need to visit.
(Sir Peter Bonfield) Yes, 90 per cent of the exchanges
do not have any people in. Ten per cent of the exchanges have
people in but 90 per cent do not. We have very accurate records
of all the exchanges, we have to know where all the cables come,
what is in the exchanges, customer contacts and everything else.
What we do not have on an easily identifiable record that you
can just cookie cutter around is if you allocate a certain amount
of space have you got extra physical space, does it meet the height
restriction, does it meet the extra power requirements? Each one
of those has to be manually done. Until we have gone through the
great bulk of the exchanges, the design process will be manual.
What we are trying to do after that is to make sure that the allocation
of lines is then done on a fully automated computerised system,
which we are hoping to get up in September of next year. The actual
layout of the exchanges is a pretty manual process.
343. Some of the other operators have expressed
concerns that you are making sure that certainly BT has its DSL
equipment in all the key exchanges and have even said that you
are managing to put that equipment in exchanges which they say
are blacklisted by you. Although in your response you have said
there is no such thing as a blacklisted exchange in the sense
that it is off limits to other operators, can you explain how
this confusion has come about? Are the other operators just crying
wolf? They must have been given some indication on which they
have formed that opinion surely?
(Sir Peter Bonfield) I think it is worthwhile trying
to understand what we are doing with the ADSL roll-out, which
is different from local loop unbundling, because they are not
synonymous. In the ADSL roll-out we are ADSL enabling the BT exchanges.
We have an agreement with the DTI that we will go as quickly as
we can in terms of enabling exchanges. We want to try to get 840
enabled by March of next year, which will give us about 50 per
cent coverage of the fixed lines in the UK, building out to more
than 1,000 in the year afterwards. We are probably the only operator
that will develop essentially a broad coverage of ADSL enabled
exchanges in the UK to enable us to offer ADSL on a pretty broad
basis. That is the programme that we are operating to. Separately,
the local loop unbundling debate has come in and that has now
been brought forward six months by the EU Regulation and we are
trying to respond to that. I do not think that they are overlap
and I do not think we are talking about the same types of things
because by and large the issue on LLU is not electronics, it is
space, it is hard hats, it is whether the floor loadings are right
and that sort of thing. They are slightly different issues. We
are trying to go as fast as we can in terms of the ADSL commitment
that we have already made to the Government as part of the broadband
enabling of the United Kingdom.
344. Oftel looking at, I think it was, eight
sites where you said there was no space available have concluded
that in one or two of those sites there was no space. Can you
explain why we have this different definition of "space"?
I understand why it is difficult to say because you have got to
look at floor loadings, etc., etc. Have you reached a position
where you have an agreed criteria between yourself, Oftel and
the other operators so that you can all go and look at one exchange
and say "yes, we are agreed that there is space" or
"there is no space"?
(Sir Peter Bonfield) Most of the trouble with that
has been sorted out. It is the definition of what is adequate
space. Certainly in some instances we went back to there was not
enough space because the floor loading was below the minimum requirement
and the ceiling height was a little bit lower than the standard
requirement. We have now gone back and said "if you put in
slightly reduced height equipment and you can spread it out over
the floor plate then there is technically space". It is those
sorts of issues that we are now trying to get sorted. We have
now alerted our planners to look a little more laterally at how
it can be brought in rather than the strict definition of what
would be the requirement if we put normal equipment in.
345. It is obviously in your commercial interests
to interpret these requirements as rigorously as possible. Does
the same thing apply to those operators complaining that they
feel they are being forced into solutions which require expensive
solutions, separate rooms, separate wall requirements? That is
certainly the impression they were giving us; that the requirements
were the most costly they could be for them.
(Sir Peter Bonfield) I do not think so. What we have
agreed with Oftel on is that we provide essentially serviced space.
So it has power, it has coolingwe do not have chilled cooling
in our exchanges, as you know, we have air coolingand we
have got security to make sure that they are secure. We could
not agree with the industry in terms of the caged approach that
was taken in the United States because it essentially reduces
the available space because where the wall is you have to have
a corridor either side, so the hostel arrangement is a response
to the number of people who wanted to get into a single exchange,
which is up to nine or ten people in some instances. We try to
do that and make it as standard as possible in terms of the number
of racks and the heat discharging from each of the racks. If we
were not working under such a tight timescale, could we have done
things slightly differently? Maybe. I think we have responded
in a professional way. We have a design that can be replicated
and is agreed by the industry.
346. The operators, who for some reason or another
decide they cannot get into your exchanges, are not covered by
the bow-wave process. How is that process handled? How many requests
have you had for distant location?
(Sir Peter Bonfield) The same process applies. I am
not sure how many requests we have had.
(Mr Morfett) We have had 63 requests so far but we
think now we have brought it to the operators' attention we will
see a lot more coming through. They are dealt with in the first
bow-wave in exactly the same way as the rooms. In the second bow-wave
Oftel has said it is first come first served and we are very happy
with that arrangement, we are happy to deal with them. The other
point is that we have given a service level agreement for a particular
period to build a room of 80 days and it is only 20 days for an
operator that takes distant location. For operators that want
to very quickly get into exchanges and get access to customers
this is a good solution.
347. So the incentives are very much there for
them to opt for distant location at the moment?
(Sir Peter Bonfield) If you want to get into the market
place really quickly, if that is the prerequisite, then we offer
a wholesale product which obviously a number of people have taken.
Distant co-location is one area. Of course, you can use the broad
band wireless technology as well. There are different ways of
doing it in terms of how critical you think the market conditions
348. Sir Peter, it seems to me that Oftel are
a little dissatisfied with you to say the least. In fact so much
so they have now published terms and conditions for the local
loop unbundling because they thought the contract you put together
was unreasonable in a number of areas so much and they have proposed
that BT should be contractually bound to meet timescales and pay
compensation if service levels are not met. Are you happy with
that and are you happy with the terms and conditions of the LLU?
(Sir Peter Bonfield) Yes, we are happy with that.
We tried to get an agreement with the industry earlier on and
could not reach agreement and so we have reached agreement with
Oftel. Paying compensation was BT's idea and we are happy with
349. You were not really dragged screaming into
this new contract; it was the others rather than yourselves?
(Sir Peter Bonfield) In all these things we would
prefer to have reached an agreement with the industry, but I think
it is pretty clear that the industry is coming at some of these
things not in a unified front because they are looking at different
parts of the market to address. We could not get a uniform agreement
with the industry but we have got a uniform agreement now with
Oftel, which we are happy to accept.
350. Would you put the blame down to yourselves?
(Sir Peter Bonfield) I am not sure there is blame
on either side here. We do have to understand that the United
Kingdom is the most competitive market place certainly in Europe
and I think internationally as well. I think the White Paper indicates
that as well. We have got infrastructure competition in the United
Kingdom. Cable, which is the biggest local loop unbundling in
the world, passes half of the houses. In my definition, half the
houses could be unbundled tomorrow on the Cable infrastructure,
and I think that is a great plus in the United Kingdom. So rather
than being apologetic I think we have a competitive situation.
We have now moved to even more competition for LLU. In April we
changed our licence conditions, which is not an easy decision
by the board, I must admit, to do it by July and then four months
afterwards we have pulled that forward six months. Is that a significant
change of approach? Has it caused us some concerns and problems?
Certainly. But I think it is all part and parcel of the Government's
push now to make sure that the country continues to be competitive.
I think it is a big plus.
351. That is good. The other thing I wonder
is if there was a fault on the line, whose responsibility will
it be to sort it out, BT's or the operator providing the service?
(Sir Peter Bonfield) If the fault is the physical
connection of the line, then it will be up to BT. If it is a service
level fault on the wrap-around it will be the service provider.
352. Do you believe there will be arguments?
God help anybody who does have a problem because my worry will
be they will say, "It is not us; it is them", and the
others will say, "It is them", and we could end up with
somebody who cannot get the fault sorted out. How will you do
that because at the end of the day the customer ought to be king?
(Sir Peter Bonfield) We are all approaching it from
the point of view that in the end we must protect the customer.
I think that is true. We are trying to learn from experience elsewhere
as well as from the trials here. One thing we were looking at
in the original July date of next year to kick it off was to do
the trial systems and recovery systems so that we would not get
into an issue. If we and the industry work well together we can
minimise disruption to customers. It will be one of those things
we will have to work on. It will not go away but we can resolve
353. Do you think you can improve the service
if it is your fault?
(Sir Peter Bonfield) We can make sure the definition
of where the service fault is is correct. In the end the consumer
just wants someone to fix it.
354. You are not the greatest at coming out
and fixing repairsthat is my personal beliefand
obviously if we can see improvements everybody will warmly welcome
(Sir Peter Bonfield) Yes.
355. The evidence that you have submitted notes
that it is necessary to ensure that a good automated "back
office" system is set up early with manual ordering procedures
kept to a minimum. How far have you succeeded in setting up automated
back office systems?
(Sir Peter Bonfield) It will be one of the gating
items for mass roll out. The programme we are working on is to
get the computerised systems up by September of next year. Because
we have brought the physical installations forward, we have diverted
people working on those sorts of systems into the manual stuff.
We are up against quite a tight timescale but that is the plan
at the moment, by September next year.
356. You have had to divert people to doing
(Sir Peter Bonfield) We originally tried to get the
timescale up between July and September of next year. As we have
pulled the programme forward some of the people working on that
are now having to do the manual process for the six month pull
forward. We are trying to minimise that but it has caused some
disruption. We are hard at work to meet the September timescale
and we will not be able to roll out very large scale deployment
of lines until we get that system in. It makes no difference to
the enabling of the floor space of the exchanges; it is just the
allocation and switching of the lines.
357. Part of the deal the EU Regulation allows
for is shared access. What is your attitude towards that? Are
you happy with the proposals for shared access?
(Sir Peter Bonfield) Would I be happy with it? I think
it is one of those things that is now in the Regulation so we
have to respond to it. It is relatively difficult in terms of
making sure the technology is available to do it. You need some
new splitters. We still need to work out from a regulatory point
of view how it will work in practice and how the cost allocation
will occur. I think it is one of those things where if somebody
asked me whether I am happy about regulation, I am always relatively
unhappy about regulation but it is a case in point that we have
to do it, so we will do it. It is one of those things that I think
will take maybe nine months to a year to deploy because the technology
is not exactly available in bulk, nor the regulation to deploy
it yet in the UK.
358. Do you think there will be a danger of
disruption by the implementation of shared access?
(Sir Peter Bonfield) Yes. It is one of those things
that we need to be very concerned about now, where the shared
access point is, where the splitter is, who owns the splitter,
and essentially the technology of the splitter.
359. Do you think you will lose customers as
a consequence of it?
(Sir Peter Bonfield) I suppose in all competition
we are going to lose customers. The key thing is to make sure
we do not lose them by faults on the system. The issue is whether
there is a shared split between broadband and voice and some of
those complications. It is an area where we are working with Oftel
now. Is consultation going on now?
(Mr Morfett) Yes, it is. We will be making a reference
offer within the period, so we will be complying with the EU Regulation.
(Sir Peter Bonfield) We just need to make sure that
we understand how the technology works. There is a slightly different
system in each Member State.