Examination of witnesses (Questions 1
- 19)
WEDNESDAY 13 DECEMBER 2000
MS PATRICIA
HEWITT, MR
ANDREW PINDER
and MR CHRIS
PARKER
Chairman
1. Good morning, ladies and gentlemen, Minister.
I think you know the areas we want to cover. We had hoped to meet
some time ago but owing to the departure of Mr Allan that did
not happen. I would like to welcome Mr Pinder and Mr Parker. We
can begin and actually talk about the whole question of the replacement
of Mr Allan. The original appointment was conceived some time
ago and obviously, in a fast moving world, things do change. Have
you had any thoughts as to the change in terms of reference of
the job?
(Ms Hewitt) We are making very good progress with
the appointment of the E-Envoy. As you know, it has been openly
advertised and we are proceeding towards that appointment. In
terms of the job description, I think what has changed is that
originally it was envisaged that quite a significant part of the
E-Envoy's time would be spent, as it were, promoting e-commerce
to business. That of course has proved much less necessary than
it looked to be at the time when the Prime Minister originally
thought of the appointment and the focus is now much more upon
delivering on-line government, which is one of the biggest challenges
we face, so there has been something of a shift of emphasis. There
has also been the addition of new responsibilities and the corresponding
increase in size of the E-Envoy's office. You will remember that
Andrew Smith and I led a cross-cutting review on the knowledge
economy during the Spending Review 2000. The upshot of that was
a very substantial increase in the investment that is being made
in on-line government and an increase in the responsibilities
of the E-Envoy's office, to ensure that the e-government strategies
in each department and agency are properly thought through and
are being properly implemented. We have the good fortune of having
Andrew Pinder in a temporary capacity, following Alex Allan's
sad departure. Andrew, would you like to add to that?
(Mr Pinder) I think the agenda we have is more of
an emphasis issue rather than a fundamental change in terms of
reference. There is a lot of work on the e-government side to
be done, and we are putting a lot of effort into that, but there
also are other things around—universal access, for example,
with which the E-Envoy's office will be involved—across
the whole agenda.
2. My understanding is that someone has already
turned down the job. Is that correct?
(Ms Hewitt) I saw the Permanent Secretary to the Cabinet
Office just a few days ago and she certainly made no reference
to that at all. The panel that is responsible for the appointment
in line with Civil Service Rules has been working with ... What
do you call them? An executive search agency.
3. Headhunters.
(Ms Hewitt) Headhunters. They have been looking at
the applications and the possible candidates who might be headhunted.
They are in the process of drawing up a long list and then a short
list and will proceed to interviews in January.
4. Do you think that the Post Office is going
to be disturbed by the number of letters that your office will
get in pursuit of this job? Really what I am saying is that we
understand the circumstances in which Mr Allan left, very difficult
personal ones, but is it a job as attractive as once it was? Are
they queuing up for application forms. Is it like a job in Tesco
in my constituency or something like that?
(Ms Hewitt) It is a very demanding job. It is also
a hugely exciting job. For somebody who has commercial experience,
experience of developing and delivering an e-commerce strategy,
ideally someone who has also had experience of working within
the Public Sector, it is a wonderful opportunity to work at the
highest level within Whitehall and to drive through an enormously
ambitious On-Line government strategy. It is a very exciting job
but it is also a very demanding one. We have had a large number
of applicants, certainly over 100—I do not, I am afraid,
have the exact figure—and that is very satisfying.
5. I wanted to clear up the post, now may we
look at the office and the structure in which it operates. I hear
what you are saying about the promotion of e-commerce. I understand
there is also the new office for government commerce. What is
the relationship between the two?
(Ms Hewitt) They have different functions but work
together very closely. The Office of Government Commerce has the
specific responsibility of modernising government procurement,
so they are completely focused on that. Peter Gershon, as the
new chief executive, is looking at how we can drive forward electronic
procurement right across government, working with a number of
different government departments on e-procurement pilot projects.
So that is a very specific remit. The E-Envoy's remit and the
office of the E-Envoy's remit goes much wider. It is, if you like,
the officialcounterpart to my role as the co-ordinating minister,
putting in place and overseeing the implementation of a strategy
for all our Information Age activities. As far as on-line government
is concerned, the E-Envoy has a specific responsibility to ensure
that we deliver on the target the Prime Minister set of ensuring
that all government services are available on-line by 2005. That
of course is much, much wider than the narrower remit of e-procurement,
which falls within the Office of Government Commerce.
(Mr Pinder) If I may just add to that. Peter Gershon,
the head of the Office of Government Commerce, and I worked very
closely together on a number of areas, including the modernising
IT agenda, making sure that government IT projects are delivered
properly. We recently drew up a piece of paper which defines in
this sort of area who does what. If that would be helpful, we
would be happy to send that to you. It defines the two roles.
6. That would be useful.
(Mr Pinder) It does not define my role completely;
it just defines the interface between the two roles.
7. The cost of this. Has the scale and scope
of the job and the changes in it been reflected in the funding
you are getting? Or are you at the end of the day going to be
at the behest of the Treasury? I mean, you are at the end of the
day anyway—and, as a former Treasury Minister, you would
know better than all of us!—but in this particular area,
people will be looking at it. We see already in the field of regulation
that in recent months there has been a lot of criticism of regulators—not
because of what we do so much as because of what we are spending.
Do you think a new office in an interesting area like this is
going to have the resource to get on with the job, given what
you have said about the experience you had with Andrew Smith on
this?
(Ms Hewitt) The Treasury is matching the goals that
the Government is setting with the resources needed to deliver
them. One of the outcomes of the cross-cutting Spending Review
was an additional investment of £1 billion in on-line government,
simply in delivering on the on-line government objectives. That
of course is on top of what government departments were already
investing in IT programs. The Office of the E-Envoy is increasing
its staffing, and therefore its budget, in order to meet the additional
responsibilities that we are giving it. They currently have about
75 civil servants, 75 officials; that figure will rise to about
175 by the end of March next year and is planned to go to about
200 by the end of March 2002. On top of that there are some short-term
contractors and consultants. The current expenditure allocation
for this financial year is just over £12 million. We have
not finalised the allocations for next year but they are likely
to be around £23 million in 2001/2002 and will then fall
somewhat in subsequent years. A significant increase but it is
still a very small budget by comparison with total government
expenditure.
8. What about the promotional role of the E-Envoy
in pushing e-commerce in the United Kingdom and, in some ways,
more especially overseas? Is this an agenda setting role or is
it one which just chases progress? What is the nature of that
responsibility, the promotional role of the E-Envoy?
(Ms Hewitt) The way I see it is that we have a strategy
that we set across government for which I have a responsibility
as lead minister and the E-Envoy has responsibility as lead official.
That includes being pro-active, both about how we promote the
United Kingdom in the rest of the world as a very good place in
which to do e-business but also about how we promote the right
global environment for electronic commerce. Of course that is
pursued both within the European Union and within international
bodies, including the OECD.
9. You say you are the lead minister, how does
the E-Envoy relate to you as the lead minister in terms of policy
development? We know that the ambassador is a mouthpiece, but
one was hoping that in this case the E-Envoy would be more than
a mouthpiece. Is that a reasonable view?
(Ms Hewitt) Absolutely. What I found with Alex Allan
and now with Andrew is that we have worked very closely together
developing the overall strategy for making the United Kingdom
the best place in the world for e-commerce. The way it works in
practice is that at the ministerial level, as I say, I have a
coordinating role. I chair the regular meeting of Information
Age ministers to which we now also invite the information age
champions (the senior officials within government departments
responsible for E matters). We then have Ian McCartney with the
day-to-day responsibility for On-Line government and Michael Wills
with the day-to-day responsibility for driving through and coordinating
the community access programmes which are a very important feature
of the overall strategy. At the official level we have Andrew
and the E-Envoy's office who support both Ian McCartney on e-government
and me in my coordinating role, and then of course we have departmental
officials who support Michael Wills over at the Department of
Education and myself at DTI for my DTI responsibilities. Both
at the official level and at the ministerial level and between
ministers and officials we are working very, very closely together,
and focus is provided for that by the fact that in September we
published our first UK On-Line Annual Report (a joint Report to
the Prime Minister by the E-Envoy and myself) and we publish monthly
reports (again reports from the E-Envoy and myself to the Prime
Minister) which are also published on our web site. So there is
a very open process there and that means there is a dialogue between
myself and the E-Envoy as we develop the strategy and put it in
and ensure that it is implemented.
10. The other two ministers of whom you have
spoken, do they follow the lead or do they develop policies themselves?
I mean, it has all the makings of a dog's breakfast this, does
it not?
(Ms Hewitt) Not at all. This is a huge undertaking.
It is very complex and it requires a great deal of attention from
a number of different ministers. My day-to-day responsibilities,
if you like, are specifically for the business side of e-commerce,
for telecommunications and for the information and communications
technology industry. In that role I am supported by DTI officials.
Michael Wills has responsibility of course for information technology
and learning and a specific role coordinating the community access
programmes. Ian McCartney has the day-to-day responsibility for
modernising government and for e-government, again supported in
that role by Cabinet Office officials and specifically the Office
of the E-Envoy. We all work very closely together .
11. The Office of Government Commerce is answerable
to Mr McCartney?
(Ms Hewitt) To the Treasury. It is answerable to Andrew
Smith. It is an ex-steps(?) agency within the purview of the Treasury.
12. What have you achieved, which you would
you say, "This is the justification for it"? I mean,
the report is pretty bland stuff. In some ways it is an understandable
rehash of what you were going to do. But, if you were to tell
us, tell us the good bits. If you were a lazy reader and you only
wanted to read the good bits, what would they be?
(Ms Hewitt) Thank you for the invitation, Chairman.
There are also challenges that we have to meet, but, if I may
summarise the good news: First of all, internet access prices—which
I think was the number one issue on my desk when I first arrived.
We are now, for off-peak access, the cheapest in Europe and one
of the cheapest in the world. That is largely a result of the
introduction of un-metered access packages, the direct consequences
of effective regulatory action, and those of course did not exist
at the point where the E-Envoy and myself were appointed. For
peak time access, we are one of only seven OECD countries to have
un-metered access in place—again very cheap packages. For
metered access during peak times—which of course is of most
interest to business—when we arrived, costs in the United
Kingdom were well above the OECD average. They have fallen very
sharply, they have fallen faster than costs across the OECD, with
the result that they are now below the OECD average. For the second
crucial benchmark, which is household use of the internet through
computers, usage is increasing very fast indeed. In fact, on the
latest Euro barometer survey, we now have about 40 per cent of
our households connected to the internet and that is very close
indeed to USA figures. On mobile telephony, we are one of the
world leaders, ahead of the United States, both in usage and with
a very strong position in industrial and academic expertise—I
certainly do not claim credit for that; it goes back 40 years,
but we are capitalising on that expertise—and we will be
the second major economy in the world, behind only Japan, to start
rolling out the third generation mobile. Digital television: again,
ahead of the United States. We now have one in five households
with digital television, and amongst families with children, interestingly,
it is one in two, so again a leading position. Business use of
the internet, where we were sadly trailing the other industrialised
nations 15 months ago, particularly amongst our very small businesses,
we have made enormous strides in the last year. We now have 80
per cent of our businesses overall on-line—that is up with
the best of the world—and we have one in three of our businesses
actually trading on-line—which I think is the most important
measure. That actually puts us ahead of the USA, Sweden, Germany,
France, Japan and Canada. Partly because of those strengths, and
for other reasons as well, we continue to be the number one destination
for foreign direct investment into Europe and high-tech sectors,
and, notably, information and communication technology are a fast-growing
proportion of that foreign direct investment. So we are making
very real progress here. On top of that I would put the progress
that is being made in on-line government, most recently of course
with the first release of the new UK on-line citizens portal.
So we are making good progress. There is still of course an awful
lot to do because everything is moving so fast in this area.
13. Given that Britain has had the first liberalised
privatised telecom system, we speak English—we are the English-speaking
European nation apart from the Republic of Ireland—are we
doing as well as we might expect to do? We have certain advantages
over other foreigners, shall we say (to put it in that rather
xenophobic way). I mean, in relation to some of these international
ratings points that you are making, if we were not doing that,
we would be justified in complaining, would we not?
(Ms Hewitt) I am certainly not complacent about any
of this, because the world in which we live is not just one where
companies face intense competitive pressures, it is also one where
countries and governments face intense competitive pressures.
I think we are doing well. I think the strengths that we have—and
you refer particularly to the English language -do account for
the fact that we remain, as I say, the number one destination
for foreign direct investment into Europe. That is hugely important
and we are determined to do everything we can to maintain that
position. We also have a very favourable business environment
and much of that is a direct result of the economic policy which
Gordon Brown has been pursuing for the last three and a half years.
That comes out very clearly, for instance, in the global benchmarking
study of the Economist Intelligence Unit. We cannot expect, I
think, to have everything in this world; clearly there are other
European countries and indeed other global players who have strengths
of their own. But where we have challenges that still have to
be addressed—and I would single out the issue of skills
and perhaps add to that the need to roll out a very effective
broadband infrastructure—we have identified those challenges
and we are taking action on them.
14. Is there anything that you are disappointed
in not being able to achieve so far? We talk of successes and
we talk of challenges. There are also failures. I realise it is
an "off message" word, but I think it is only reasonable
to ask you at this time what you really feel you are disappointed
in. When whoever comes before whatever committee next year, "You
said last year you were not happy about this and really you wanted
to turn it round," what would you hope to turn round? Apart
from the two issues you have identified, what are you really unhappy
about, which you give your staff hell over? I mean, I could not
imagine you doing that but . . .
(Ms Hewitt) I do not give my staff hell, Chairman,
but I always feel like, I think it was the Red Queen in Alice
In Wonderland who was always saying, "Faster! Faster!"
because in this world you always want or ought to be wanting everything
faster and faster. I certainly hope that at my next appearance
at this committee in four internet years time, or my successor's
appearance at this committee, we will have completed the whole
process of local loop unbundling and we will thereby have intensified
competition within the telecommunications sector and in particular
we will have delivered high speed internet access to a very much
larger number of domestic and business users. I also hope that
we will have made even more progress on business usage of the
internet. The target we set last year was to get 1 million small
businesses on-line by 2002. We have already bust that target—we
have 1.7 million small businesses on line—but the much more
challenging target that we have set is to get one million small
businesses trading on-line either with other businesses or directly
with consumers. There we have about half a million. We still have
much, much further to go in rolling out e-business and in encouraging
particularly our small businesses, particularly in the more traditional
sectors of the economy, to exploit the advantage of electronic
networks and thus to make themselves more competitive.
Chairman: Before we move on from the E-Envoy
as such, Mr Laxton has a question.
Mr Laxton
15. A number of your commitments and objectives
centre around the activities of Oftel. It has probably not escaped
you that we had what I think was a fairly robust exchange of views
with the Director General of Oftel a couple of weeks ago, on issues
such as competition for leased lines, competitive roll-out mobile
phones and so on. Are you happy yourself with the degree of urgency
that Oftel have shown with regard to their role on-e-commerce
and how they have handled the whole process of local loop unbundling.
(Ms Hewitt) Yes, I certainly have and I read with
interest the Hansard of your evidence session with David Edmonds.
Let me start by saying that I have full confidence in Oftel and
in its Director General, and the Government has recently underlined
that confidence by reappointing David Edmonds to his post as Director
General. The fact is that this country did not pursue local loop
unbundling at the time when Germany did and of course America
had already done so. The reason for that is that the policy of
the last administration and the policy of previous directors general
of Oftel was against local loop unbundling; there was no interest
in local loop unbundling whatsoever. The policy was a different
one, which was to pursue infrastructure competition through the
cable companies, so that there would be an alternative network
to the local loop rather than competition on the local loop. It
was David Edmonds, as the new Director General in 1998, who changed
that policy and who went through all the necessary consultation
and policy development and, indeed, hard negotiation to achieve
the licence amendment with BT which of course took place in August
of this year. If I may, perhaps I could quote one sentence from
the European Commission's publication on 8 December, which is
its most recent report on telecommunications' regulation right
across the European Union, in which it says in its report on the
United Kingdom that "Oftel is regarded by many other national
regulatory authorities as the benchmark for an independent, efficient,
competent and pro-active regulatory authority." I would endorse
that conclusion.
16. You said a moment ago that if you or your
successor came back in . . . Did you say four years or four internet
years?
(Ms Hewitt) Four internet years.
17. Which of course is a considerably shorter
period of time.
(Ms Hewitt) Precisely.
18. Weeks or days or whatever, you expected
the process to be completed. Do you think Oftel has sufficient
resources in terms of personnel or in terms of finance and also
the correct sort of structure to see this achieved?
(Ms Hewitt) They do. Oftel is making very tough decisions
that are needed to deliver local loop unbundling. They are dealing
almost daily with issues that are raised with them by the other
licensed operators. They have been making a whole series of determinations,
on issues, for instance, relating to the wholesale price for ADSL
interconnection; on the price for local loop unbundling; on the
nature of the contract between BT and the competitors moving into
the exchanges. They have been making a determination on the whole
issue of space allocation, where there are more operators wanting
to move into the exchange than there is space for them, and so
on and so forth, a whole series of very tough decisions. It is
hugely resource intensive. This is incredibly intrusive and detailed
regulation but it is what local loop unbundling requires. It is
fair to say that virtually every country that has embarked or
is embarking now on local loop unbundling has difficulties of
this sort but it is perhaps more complicated in the United Kingdom
because we have a more competitive communications market place.
We have more licensed operators than in almost any other country
and we therefore have more operators wanting to move into the
exchanges, and that makes the practicalities, the technical issues,
the economics all much more complicated. On resources, I think
it is always difficult for regulators to recruit and retain the
staff they need, because the competition in the private sector
is very fierce, and of course—and this applies in any field,
not simply telecomms—the staff of the regulatory body have
very valuable expertise. Despite that—and it is an issue
I have constantly raised with the Director General—I believe
he does have the resources and the staffing needed to do the job.
19. We are taking evidence on the 19th from
other operators and from BT as well. Despite all that you have
said, are you happy with the pace at which this has been driven,
local loop unbundling? Do you think there might have been perhaps
a role for your department to get involved in, to push at it,
or are you generally happy with what Oftel are doing?
(Ms Hewitt) I was certainly not happy in September.
You will remember that at that point there was, I think it is
fair to say, a near breakdown in the relationship between BT and
several of the other operators who wanted to take advantage of
local loop unbundling. All that spilt over into the press and
we were just into a situation where the companies were attacking
each other very, very publicly and not much was happening. At
the same time, at the end of August it became clear that the industry
itself, the industry working group, had not been able to sort
out this very vexed issue of what was going to happen in the exchanges,
where there was not enough space for all of them, and they asked
Oftel to intervene. I became very concerned because it was very
clear to me that local loop unbundling on the ground will really
only work effectively if you have sensible working relationships
between the engineers and the other staff of the different operators.
You cannot have them fighting this thing out in the press. I talked
obviously with my own officials; I talked directly to the Director
General; I then talked individually, and then through a group
meeting with five or six of the key operators who were most unhappy
with the progress on local loop unbundling, and I chaired a meeting
with them at the DTI in early October. That enabled me to get
a much better handle on the problems that had arisen. Following
that meeting—and I obviously told the operators that this
was what I was planning to do—I had a meeting with Sir Peter
Bonfield and his senior colleagues at BT. I see them regularly,
but this meeting, also in October, was specifically on the issue
of local loop unbundling. What became very clear at that meeting
was that BT had not, I think, grasped quickly enough the implications
for their timetable of the European Union regulation which was
then under consideration. Because—if I may backtrack very
briefly for a minute—when the Director General negotiated
the licence amendment with BT to provide for local loop unbundling,
it was on the basis that trials would begin at the end of this
year and full local loop unbundling would begin in July of next
year. That was the timetable to which BT were working. Then in
the spring and early summer of this year the European Commission
published its proposals for the regulation on local loop unbundling,
which we strongly supported, as did Oftel. Of course that regulation
required a common legal position for local loop unbundling to
be put in place by the end of December -not a problem for us because
the Director General had already negotiated the licence agreement
but it required a speeding up of the timetable. Once BT's senior
management was focused on that, they then started to change their
own timetable. So there has been a speeding up of between four
to six months of the timetable to which BT was working and, indeed,
was still working even in the summer of this year—the pretty
aggressive roll out programme that is now in place. The other
part of my conversation with BT, partly because they were still
working to this earlier timetable, they were really only envisaging
a very small number of exchanges actually having offered space
to their competitors, even by the middle of next year. I said
that from the Government's point of view that was not acceptable,
that we wanted to see 600 exchanges or more—but certainly
no less than 600—opened up to co-location with the competitors
no later than July 2001. There was a sharp in-drawing of breath,
I think, and a feeling that perhaps that was not possible, but
BT have now committed themselves—subject obviously to getting
the necessary orders from their competitors and their customers
for local loop unbundling -to 600 exchanges by the beginning of
July next year using a mixture of competitors moving into the
exchanges, physical co-location and distant co-location. So the
timetable is now much more aggressive. I saw Sir Peter Bonfield
and Colin Green and his other colleague on Monday of this week,
to check that we were still making progress. I have also taken
the opportunity in the last week to speak to chief executives
or senior colleagues of several of the other operators with whom
I have been keeping in touch and my officials have been keeping
in touch. Their reaction is very, very different from where we
were in October: they feel that as a result both of DTI's intervention
and Oftel's action, progress is now being made. What several of
them said to me—and I reported directly to Sir Peter—is
that they now believe that there is a commitment from BT's senior
management; they like what they are hearing and they are having
those direct one-to-one meetings. The issue now is: Will it be
delivered on the ground? A final point: BT told me on Monday that
they are managing to deliver full-scale quotes for the building
work for physical co-location, in advance of their timetable,
for a large number of the exchanges where the orders have been
placed, and they have already conducted preliminary surveys on
120 exchanges where they have not yet had orders but they believe
that these will be top priorities for the other competitors in
the new bowwave allocation process. That will also help to speed
up the next part of the roll out.
|
