Examination of witnesses (Questions 40
THURSDAY 25 JANUARY 2001
and MR IAN
40. How does it work?
(Mr Green) There is a great deal of demand for video
services, not from BT. Then there are quite a lot of consumers
from ourselves and Freeserve, BT Open World and Freeserve and
a number of small businesses. I would think it would be probably
60 per cent consumers because the video service take-up is quite
(Mr Butler) Can I just add to that. There are three
parts to it. Firstly, because of unbundled local loop we have
talked about companies other than BT can put ADSL and such equipment
on the lines so there are a number of different companies who
can provide ADSL services. Of the services that BT provides from
its wholesale division, BT Openworld, which is the part of the
company we represent, is one of a hundred people who offer services
over those BT wholesale services. Then, in our own right, we offer
services in BT wholesale services. There are three potential ways
of doing that. It is not clear to us in our part exactly how many
competitors are offering and what their take-up has been, which
is why we are not as exact on the figures as you might expect.
We know our figures, clearly we do not know what our competitors'
figures are to any degree of accuracy.
41. The flotation of Orange is not as successful
as was anticipated. Telcom shares as a whole have taken quite
a bashing, including your own. You have a £10 billion debt
that you will be looking to find a solution to. Does BT have enough
actual reserves to make it possible to modernise the country as
fast as you would like?
(Mr Green) I do not think it is BT who is modernising
the country, I think it is the industry who is modernising the
country. It is a competitive industry with a number of players.
We have described how a number of those players play and, of course,
in the mobile sector there are four people who have bought 3G
licences who have a major part to play in all this. So, the question
is, do we have all the necessary resources to do the things we
think that consumers want and to keep the UK moving ahead? We
remain committed to being a world class organisation and providing
world class services and we are confident about that. We have
very valuable assets all around the world. We are a substantial
multi-national organisation and we have a programme in place we
are very confident of.
42. If you were in our seat would you be saying
that the way in which to enfranchise people the fastest is through
a digital television?
(Mr Green) I do not think the company has a view on
this. Personally, I would say to you that the areas which have
progressed fastest to meet consumers' real needs have been mobile
telephony, the Internet in general as a narrowband thing and the
digital television. I think we are all relaxed about people with
enough money who will take their own economic decisions. If you
examine what we might call the disadvantaged then my own experience
going out on site visits and things is if you walk into a house
which is having a telephone put in for the first time, there is
almost always a very good TV there. I think the telephone line
connected to the TV will be a very strong contender in bringing
the benefits of the information age to people on lower incomes.
43. Can you tell me why BT do not follow the
United States telephone companies in offering free local telephone
(Mr Green) The United States telephone companies run
in a very strange regulatory environment. Firstly, they have very
small local telephone areas. The local telephone area you will
get from here covers ten million people. I think normally you
would find a couple of hundred thousand in a local phone area
in the US. You have to be careful about what is free. That is
the first thing. The second thing, the whole system is based on
a subsidy which comes in from the long distance operators who
are separate from a local area. Thirdly, you pay for it, so the
rental price you pay is higher. So what we have done about that
is given customers the option. You can indeed have free local
calls across the whole ten million people from here for a modest
fee, which is competitive with the sorts of rates that are available
in the US, very competitive, and I think a million customers in
five weeks have chosen to do it, so it has been a very successful
44. Your calls are quite dear, are they not?
I am a subscriber to Sky Digital and I get 40 per cent off my
BT calls through Sky Digital while getting Sky Digital's programmes
as well. So you are charging me that much more than I am paying
otherwise so your calls are dearer, are they not?
(Mr Green) Mr Kaufman, I think it is probably very
difficult for me to legally go into comparisons of tariffs in
a forum like this. What I would say to you is that it is general
practice within the industry to compare their tariffs with our
standard tariffs that we provide for low users who want to have
a low connection rate to their telephone so that they can have
it cheaply. It is one of the things which supports universal access
and we charge them more for their calls. Customers of ours who
use the phone a lot do not generally buy that from us; they buy
something called BT Together which, indeed, also has discounts
of 40, 50, 60 per cent off our standard tariffs. We are very confident
about our tariff policies. We think they are very competitive.
45. You are almost a total monopoly in many
(Mr Green) We are clearly not because, Mr Kaufman,
you have made your economic choice for yourself. You are confronted
and bombarded with offers to buy your telephone calls. I am pleased
to see that you have taken what you believe to be the best economic
choice for you; it is clearly not a monopoly.
46. Better, I do not know about the best. The
best would be if you were to do this. I am not looking at this
from the point of view of making telephone calls, I am not getting
into a great personalised diatribe against you, capable though
I am of doing so, because I regard your telephone calls as too
expensive, though I do, it is because what we are interested in
in this inquiry is access to the Internet. Clearly free local
telephone calls, or at any rate a system whereby you do not pay
throughout the call on the tariff, would massively expand the
potential of access to the Internet and therefore deal, amongst
other things, which is a matter of great concern personally to
me, with social exclusion.
(Mr Green) We agree with you entirely. I am very proud
that I, as BT Openworld, have more customers not paying for Internet
access on a pay-as-you-go basis but on an unmetered basis than
anybody else in the UK. We have three tariffs which I think meet
the market need very well. We have a 24 by seven tariff, which
I think I cannot talk about because I do not think it is announced
until tomorrow, which allows you all-day access unmetered, all
night, if you want to, unmetered, at a reasonable rate. We then
have a £9.99 tariff for the evenings and weekends unmetered
access, so that for £9.99 a month you are on the net and
you do not have to worry about charging. When we are talking about
social exclusion, very often what people want to be able to do
is try the net out, therefore I am very pleased also to have a
penny a minute tariff which means that if you are only using the
Internet for, say, three hours a week, that is costing you £6,
you do not have to pay £9.99, you can pay £6.
47. It is quite a lot for a pensioner with no
(Mr Green) The provision of Internet services is not
a free good. It is a very expensive technically convoluted process
which takes a significant amount of investment. Right the way
across the world you can see that the economic price is roughly
$22; that is what people are paying. They are paying roughly that
sort of price everywhere for an unmetered access package. On a
world benchmark basis we have our ordinary calls for voice and
our Internet calls for voice coming out in all the studies throughout
this year as one of the most competitive nations, as well as being
one of the things that the Government has pushed for. We can see
clearly the move up the league tables over this period. I think
we are now in a position where people have the opportunity to
buy at highly competitive rates. Of course things are expensive
for people, and it is expensive to do all sorts of things in life,
but I believe we have world class costs and world class prices
available and I think you can see that with the penetration of
the Internet which outside the USA is one of the strongest in
the world. You can see that with the take-up of these unmetered
services which are very strong.
48. You have to make an exception from the United
States. In the United States they have free local calls.
(Mr Green) In the United States it is not possible
to access the Internet any cheaper than it is here. These £9.99
tariffs are much cheaper than the cost for accessing the Internet
in the US.
49. Tell me about something else which is not
universal throughout the United States but certainly exists in
certain localities, namely free connection by the telephone company
to those who cannot afford to pay for connection, which is another
very good way of dealing with social exclusion. There are not
all that many people in this country who will be affected by that.
BT is not exactly an impoverished organisation. Why do you not
(Mr Green) We already have, I think, a fantastic array
of services for consumers. We have something called the Light
User Scheme, can you remind me what the tariff is on that at the
(Mr Butler) No.
(Mr Green) You do not remember it?
(Mr Butler) No.
(Mr Green) It is a very low monthly fee indeed. We
have a whole range of opportunities. We have enormously high penetration
of the telephone around and that, of course, brings with it Internet
access. I am not convinced, I would love to hear if the Government
feels it is something that is important to move forward.
50. We are not the Government. We have nothing
to do with the Government. Some of us may be members of the Government
(Mr Green) From a Committee point of view. Penetration
of telephone lines in the UK is very high indeed. I am not aware
that there are significant issues with people being unable to
afford to be on the telephone. Many of the people who are not
on the telephone are because they have been on the telephone and
found they could not pay their bills or would not pay their bills.
I am just not aware that it is a major issue for the UK at the
moment, people being unable to be on the telephone.
51. You used earlier on, Mr Green, the adjectives
"vibrant" and "creative". Would you like to
give us an example or two of the way BT is being "vibrant"
and "creative" in this new age?
(Mr Green) As I have said, we have embraced and led
on the unmetered access to the Internet. We have in Genie, our
mobile Internet service provider, clearly the European leader,
in fact outside Japan the world leader in terms of the access
to the Internet via mobile phones. Great exciting services. We
have by far the best DSL both small and medium enterprise, small
business and residential portals. We have partnered with those
with over a hundred organisations, including many small start
up companies who have had specific interests in being able to
demonstrate the future of the broadband world. I would love to
invite you along to our next exhibitionwe had one recently,
where everybody who came to it, I think, was impressed by the
whole network of people, creative people, we pulled together around
beginning to demonstrate what the broadband world was doing. I
am really very confident that we are on top of that whole set
52. Why do you not want to be broadcasters?
(Mr Green) Because we are a communications company.
We are very good at communications. We believe that the future
of the way the world will develop is that each individual around
this table will have different interests and they will access
content from many different people in different ways. What we
believe we can do is help them get to that content, to organise
that content for them so they can find it, so they can send it
to their friends, message their friends, so they can share the
experience, they can invest their own thoughts and processes within
it. It is very clear to me that what has driven the Internet has
not been content, it has been e-mail, it has been communications,
and that is where we feel we are very strong. We believe that
the benefit that will really come is the ability for people to
create their own content and drive forward as a communications
experience. It is not like broadcasting. It is all about people
creating their own content and sharing it with people. We think
people will create videos of their parties and share them with
others. We think all sorts of things like that will happen. This
is a communications experience.
Chairman: I do not know whether the smile
on Mr Maxton's face is because he deeply agrees or disagrees with
you but we are about to find out.
53. Not on the question of roll-out of the Internet,
certainly in its early stage it was not driven by e-mail, I am
not going to say what it was driven by either.
(Mr Green) Good point.
54. I must apologise for coming in very late
but I have been chairing a Committee just along the corridor.
I am interested in ADSL, in two particular aspects of it. One
is your roll-out programme, it may already have been answered.
I recently went into a web site of another ADSL provider who had
on their web site that they were unable to provide the service
they promised because BT were unable to provide them with the
ADSL lines. What is your comment on that?
(Mr Green) We were explaining earlier that my role
is exactly the same as that of a service provider. I sit in the
same position. We all buy, all 100 of us, from a BT company called
Ignite. As everywhere else in the world I think the team in Ignite
have been struggling with the roll-out of this. There have been
capacity problems. We have had a very significant waiting list
for periods of time, I am sure our competitors have faced the
same thing. I think the problems are being got on top of but this
is a difficult technology. It is overlaying a very new thing over
all the old systems that are needed to run a telephone company.
Therefore, it is not something you can pick off the shelf. The
fact you have cracked it in Wyoming does not necessarily mean
you can crack it in London, which is the difficulty because you
have to integrate it with all the systems. I know that has been
causing very significant problems.
Mr Maxton: It is being whispered to me
by my colleagues that you have covered this.
Chairman: Thank you very much, gentlemen.
Thank you very much for coming to see us and answering our questions.
We might take you up on visiting an exhibition.