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Mr. Colman: I would like my hon. Friend to take up the points that I made--I realise that he has only just heard them--and raise them at the Commonwealth conference in Durban this autumn. In particular, will he take up the essence of the Harare declaration, which is relevant in this situation?
Mr. Hoon: My hon. Friend anticipated my next sentence. I made a detailed note of the thoughtful suggestions in his excellent speech. I shall write to him in detail on each point. I hope that he would prefer a detailed exposition of the Government's response to my perhaps ad hoc observations.
Telecommunications
1 pm
Mr. Steve Webb (Northavon): I begin with a confession: recently, I have been spending rather a lot of time in the company of Mr. Bill Gates. Not literally, I hasten to add; I suppose that "virtually" would be the way to put it. I have recently acquired two of his books--one of which was free, although I bought the other. The book that has had a great effect on me is "Business at the Speed of Thought". At the end of about 300 pages of Mr. Gates enthusing about the growth in the internet and what he calls "the web life style"--with a name like mine, I am also very enthusiastic about the Webb life style--it is difficult to avoid the sense that, although one suspects that Mr. Gates has his own agenda on the issue, even if only part of what he describes comes true, there is a tremendous opportunity for British business, education and consumers. It is important that we do not miss that opportunity.
My contention, therefore, is that we must get telecommunications regulation right. It is not unfair to say that the present regulation was largely not framed with the internet in mind. I am well aware that the regulation is under urgent review and I hope that we shall hear more about the direction of the thinking on that matter during the debate. I argue that there is a problem and will cite some statistics in evidence. Obviously, there are different statistics showing how far behind Europe is compared with the United States. A report from Jupiter Communications suggests that only 18 per cent. of United Kingdom households are on-line, compared with 44 per cent. in the US. The report notes that, although that gap will close, and in four years' time, the UK figure may have risen to 41 per cent., by that time, the US figure will be 63 per cent. I am sure that the figures will vary according to definitions, but there is clear evidence of a gap and of a problem that needs to be addressed.
Some other problems are tied in with telecommunications regulation issues--for example, telephone communication charging structures and their implication for the structure and location of British business. Once this debate became common knowledge, I received several e-mails, including one from a young man aged 20, who lives in Bradley Stoke in my constituency. He described himself as an internet entrepreneur. I am delighted that such people live in my patch, and look forward to meeting that young man. He tells me that, in his business, the huge cost of local calls--running into thousands of pounds--or the cost of dedicated lines means that he has had to locate and register his business in the United States.
My constituency is home to many high-tech companies--Orange, TeleWest, Hewlett Packard and so on--so it should be a natural home for internet entrepreneurs, even those aged 20. Clearly, if my constituent is being forced to relocate in the US, something somewhere must be wrong.
Mr. Richard Allan (Sheffield, Hallam):
Does my hon. Friend agree that there is also a problem in that a business in the US can service European customers throughout Europe more cheaply than a business based in a European country? Does he agree that regulation is necessary to try to get rid of the cost of telecoms crossing national
Mr. Webb:
I am grateful to my hon. Friend for making those points. As chairman of the Select Committee on Information, he is most knowledgable on such matters. His points tie in with what I was saying. If telecommunications regulation is causing British entrepreneurs to site their businesses--either physically or virtually--in the US or elsewhere, there is clearly a problem to be addressed.
Before considering some possible solutions, I want to consider the problem of whether telecom giants--for want of a better word--are stifling the potential for expansion in this area. For example, I was told, by e-mail, about cable modems; that might be one way of facilitating greater access. Henry Jaremko of QE Data Ltd.--someone I had not met before--told me that he had tried for two years to get BT to sort out a cable modem for him. He was told that the company was considering the matter and researching it. He stated:
Mr. Webb:
I hope that the hon. Gentleman is right. I am sure that the Minister for Small Firms, Trade and Industry will be aware of the latest developments and will be able to brief us on them.
I do not know how new cable modems are, but Mr. Jaremko says that other European companies seem to have managed to take up that new technology. Is BT a slumbering giant? Is that why the company has not moved as fast as it might have done to take up that technology? I have also been briefed about digital subscriber loops. That is a new world to me, but it seems to be another form of technology that would provide a means for extensive internet access. However, again there seems to be a problem with an incumbent supplier, who is perhaps not as innovative as possible.
We have a series of problems. What could be the cause? One obvious candidate--although it is not the sole problem--is the cost of local calls. In the US, local calls
are free in many circumstances, whereas in the UK,local calls are metered with a 5p minimum charge. That 5p charge may be relevant when one is going on-line, receiving e-mails and coming off-line, and it may discourage people from doing that regularly. However, my key concern is the metering of local calls and its implications. In terms of e-commerce, I draw an analogy with being charged for window shopping in the high street. Retailers would be appalled if that were the case, yet we make people pay by the minute for window shopping on the internet.
Some people might respond that Freeserve has come in and everyone is on-line so the problem is solved. However, we are talking not only about people being on-line, but about using the internet as part of their "life style"--as a servant in business, education and leisure. Being on-line and having access is only part of the battle, we then have to use the thing. There is evidence that usage increases when metered charges are abolished and replaced with fees. When America OnLine moved from one structure to the other in 1996, monthly use went up from an average of 14 minutes to 33 minutes over three months. The average figure is now an hour a day for that company. Of course, there are limits, but, if the internet is to be a servant and is to be part of our lives, we must remove the marginal cost to a greater or a lesser extent.
The Minister will probably recall that, when I wrote to him on this subject, his response was that average telecom charges are low in the UK. However, I am concerned not only with the average, but with the margins. Once one is on-line and has paid the set-up costs, one wants the marginal costs to be low to provide an incentive. Clearly, the costs are not as low here as they are in the US.
Assuming that greater coverage and use are good, what should we do? I make one query of that assumption. I am enthusiast in all those matters--I suppose that enthusiast is a euphemism for an anorak--but internet content is also relevant. As a parent, I am aware that there is material on the internet that I do not want my children to see, just as there is material on the top shelf of the newsagent that I do not want them to see. However, rationing by price--getting people to come off the internet--has nothing to do with that problem. It is vital that the problem is addressed, but we are tackling it in a haphazard and ineffective way. I have reservations about teenagers in their bedrooms spending hours on the net unsupervised. However, the issues that we are raising in the debate are not inconsistent with tackling that problem.
What can be done? The Campaign for Unmetered Telecommunications, with which I am sure the Minister is familiar, has been energetic and effective in publicising the issue. It has an excellent website at www.unmetered.org, and I have spent many happy minutes surfing it and then getting off-line. It quotes the "father of the web", Tim Berners-Lee, who says:
America OnLine has just surveyed more than 11,000 of its customers, almost all of whom cited local call costs as the main barrier to greater internet use. I know that there is no such thing as a free lunch. We are talking not about free local calls, but about unmetered local calls coupled with some sort of subscription charge--that is, trying to get marginal costs down and so increasing use.
Some might say that that is happening anyway and that the market will produce that result because, if that is what customers want, suppliers will provide it. However, it strikes me as inherently unlikely that the commercial interests of BT in a regulated environment will coincide exactly with society's best interests. BT has a job to do: it exists to make profits within the constraints imposed on it. Why should its pricing policy be identical to that which society wants in order to maximise internet use among lower income households, students and so on? Such a coincidence is unlikely to occur.
The market has made some progress, but there is no guarantee that it will take us where we want to go. The hon. Member for South Dorset (Mr. Bruce) and others would say that we are getting there: for example, Screaming.Net--a phrase I have been dying to get into Hansard--set up a freefone access system, but there are strings attached in that the customer has to change phone company and go over to Localtel. Mysteriously, BT has been slow in getting people over to Localtel: it claims that it underestimated demand, but Localtel says that it forewarned BT of the demand and that BT has simply not coped. The idea that BT would enthusiastically commit resources to moving its customers to someone else's business is hard to swallow--it would not be surprising if it did the bare minimum.
Last weekend, without making a lot of fuss--the announcement was made on the internet, because the company did not want many people to know, which is telling--BT gave free 48-hour internet access to BT internet subscribers. The company did not publicise that service, because it was not sure that it could cope with large-scale use. Strangely enough, the service proved extremely popular, but, once again, there were strings attached: it was provided only at the weekend, customers were logged off after 20 minutes if they did not do anything, and they were restricted to a maximum of 12 hours on-line at a time.
Perhaps we are inching in the right direction, but I doubt that the cultural shift that is necessary will take place without active Government intervention. In short, we need a new approach to those issues. Tim Berners-Lee says:
"I talk to friends and colleagues in the Netherlands and in America and they are all using cable modems NOW--they pay . . . £30 to £50 a month for the service and they get speeds typically five times faster than an average modem . . . More importantly for the fee . . . they are ONLINE ALL THE TIME."
He put that last phrase in capitals, which means that he was shouting at me. He continued:
"There is no concept of dialling--their computers are permanently wired to the net from their homes or offices."
Mr. Ian Bruce (South Dorset):
As they have initiated this welcome debate, I am sure that Liberal Democrats were only too pleased to receive messages. Last night, I had dinner with representatives from several telecoms companies; they told me that, within weeks--literally--we shall receive announcements from several sources about a fixed fee, on-line all the time, to an internet provider. Perhaps, therefore, the hon. Gentleman is wrong to say that we should get the regulation right. The regulation is already in place; the market will provide the solution for the UK. Despite the fact that our telephone calls are already cheap, he is right to identify the problems on the internet side, but I think that the solution will occur soon.
"universal internet access for all in a country is very important. To be practical, internet connections must be permanent . . . The time taken to dial up over a telephone line makes many uses of the internet . . . prohibitively bothersome. Regulatory systems and charging which support the status quo in which the telephone system is used to dial every time the internet is used hobble a country's ability to use the network--it is a bit like asking a motor vehicle to be preceded by a man carrying a red flag. It is forcing the new technology to operate in the mode of the old technology."
That final observation is a telling one. We are not talking about more people having PCs with modems in the back, or more people hopping on and off-line. We are
talking about--to use the awful phrase--the web life style, in which the internet is integral to our activities, but as a servant, not a master.
"Personally, having the luxury of a permanent . . . connection at home I notice the change of role a computer plays in the home--it becomes immeasurably more friendly. One is much more inclined to order things, pay bills, and check news and weather using it when one does not have to wait and bother with dialling into a service provider."
It seems to me that British skills and temperament are well suited to taking advantage of these great technological advances and to taking a world lead in using the internet for business, education and leisure. We have a great opportunity, but we are behind in the game, and the reasons for that can be found in the regulatory structure. I hope the Minister will assure us that he is
urging the Office of Telecommunications, Oftel, to encourage, not incremental change, but a cultural shift in the way in which we perceive the internet, which will be to the benefit of all our citizens.
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