Examination of witnesses (Questions 100
- 119)
TUESDAY 14 NOVEMBER 2000
MR DAVID
EDMONDS, MS
ANNE LAMBERT
and MR JIM
NIBLETT
100. As I understand it, you are reviewing competitiveness
in the mobile sector.
(Mr Edmonds) Yes, we are.
101. What is preventing the mobile market from
being fully competitive?
(Mr Edmonds) That is a very interesting question and
I think that is exactly what is at the heart of that particular
piece of analysis. We have four players. One of the suggestions
again, Chairman, I think that was made, is the UK has slipped
down various European league tables. If you look at the UK, the
largest mobile operator share we have now got is 31 per cent,
the four companies share the market place much more equally than
anywhere else in our competitor countries in the EC. What we want
to look at, therefore, in this particular piece of work is how
far will competition continue to develop? What will market shares
eventually be? Is there real price competition? It is those kinds
of issues which increasingly, in the work of Oftel, we are doing
in a considered way before events hit us. Market analysis and
market review, as I said before, is a very fundamental part of
our work.
102. When do you expect that review to be completed?
(Mr Edmonds) Middle part of next year?
(Ms Lambert) Yes. We issued in September what we call
our kick-off document where we outline what we are going to be
looking at and seeking views. We hope to get a consultation document
out before the end of the year. Then we will allow a process of
consultation, three months of consultation, and then we will be
looking at what the appropriate regulatory remedy might be. If
I can just expand a bit. The mobile market is quite complex. I
am not sure that there is just one single mobile market. As you
yourself said, Mr Berry, looking at roaming issues, that might
be one particular sub-segment that we need to look at more closely
working with the European Commission. There are some complex areas
but we are pursuing it as swiftly as we can because our aim at
the end is a Regulation that is appropriate to the extent of competition.
Mr Butterfill
103. Can I just return to the question of price
transparency.
(Mr Edmonds) Yes.
104. As you may have gathered, I was a little
disappointed in your response on ADSL. In the case of mobiles,
it is impossible. Several of the high street chains who sell mobile
phones and then offer you a tariff say that their experts can
determine which is the tariff which best suits you. On the other
hand, one of the IT magazines said that the complexity of the
tariff structures was such that even if the salesman in the high
street shop was equipped with the best current PC it would take
him a year to work out which tariff was most suitable for individual
customers. Clearly it is not possible for the public to understand
what they are taking on. Do you not, therefore, think there may
be a duty for the regulator here?
(Mr Edmonds) Yes.
105. For example, in financial services the
regulator has said there has got to be transparency and, therefore,
we are going to impose rules on the way these products are marketed.
I am not saying this is a purchase by the public on the same scale
as financial services but, nevertheless, surely it must be possible
for people to be able to make reasonable comparisons.
(Mr Edmonds) I think the answer to that must be yes.
Whether it is a duty I am not sure, it is a responsibility. It
is a responsibility I accept. We are working with the mobile companies
in order to persuade them to produce price comparison material
in a way which I hope will be more helpful than that which exists
as the moment.
Chairman
106. Forgive us for maybe being a wee bit impatient
but if you have the powers why do you not damn well use them?
You are telling us you are not sure whether it is a duty or a
responsibility and people are getting ripped off week after week,
buying mobiles they do not require with schemes that they cannot
afford with price structures they do not understand. This is going
on. The fact that caveat emptor applies, and that there
is competition, there is only competition as far as we can see
in which one is the most successful in creating an obfuscatory
price network that nobody can understand. That is the problem
that we have as Members of Parliament getting complaints from
constituents, not necessarily written ones because sometimes they
are not capable of putting on paper the extent to which they are
getting ripped off but in conversations with constituents we are
increasingly finding, and even in our own families, we get people
telling us two different tariffs, two different systems, different
phones, which by and large they get for nothing and then find
they are paying for in other ways. Do you not realise this is
a matter of rather more urgency than your leisurely process of
consulting and chatting with the people requires?
(Mr Edmonds) I totally take the point you make, Chairman.
I think I would have to argue, to some extent, that in a competitive
market place, which this truly is—
107. I am sorry, our point is that the character
of the market place is fundamentally flawed because all of the
players have a vested interest in confusing the public because
they all play the same game.
(Mr Edmonds) It is not for me to put the question
back but in terms of any other market place do you know where
there has been a 20 per cent real terms price reduction over the
last year, which is what has happened in the mobile market place?
How do you correlate your view of this? I agree, I think the prices
are very confusing, they are very difficult. The consumer is doing
something right because the consumer is getting a very good deal.
The consumer is getting his or her mobile phone for 20 per cent
less, if you have a pre-paid you are getting your mobile for 39
per cent less.
Mr Butterfill
108. How do you calculate that 20 per cent?
(Mr Edmonds) It is based on a basket of calls and
Oftel has been running a price index looking at a particular pattern
of calls within the particular sector.
Chairman
109. There has been a lot of pressure put on
the other utilities offering energy services and supplies. Gas
and electricity have been whipped into line in a way that you
have not been prepared to take on. You say there is competition,
there are four players in the main and there are the also rans.
It ought not to be beyond the bounds of imagination to be able
to put together clear and indicative points that people can judge
this by. If one goes into one of the stores, Link or Carphone
Warehouse, they give you what their offers are but even then you
have to sit down with a calculator to work out which is the best
option for you at the price they are prepared to offer. It has
to be said that a lot of consumers have neither the time nor,
frankly, the mental agility to do that. They may be ripped off
a wee bit less this year than they were last year but the fact
is the volumes increase, therefore the amount of money the companies
make, by a process of simple multiplication tends to suggest they
are not doing badly out of it or they would not be chasing it
the way that they are.
(Mr Edmonds) Chairman, I think you are a bit hard
in chiding me for duty as against responsibility. Duty I take
in the sense of a statutory duty placed on me. Responsibility
I take as something I need to do in terms of my obligation to
protect the consumer. In terms of protecting the consumer and
providing information to the consumer I am working very hard with
the mobile companies, or part of my team is, on producing price
data. Powers, I do not have the powers to compel companies to
produce price data, however I do make the point that rip off in
the context of what is happening in the market place is a rather
strong suggestion. This league table—
110. I think it is very polite, it might be
strong but it is very polite.
(Mr Edmonds) Our mobile prices are half the price
of those in France, they are 37 per cent less than Germany, they
are 49 per cent less than Italy, they are 13 per cent less than
Sweden. We are the world leaders in terms of prices that the consumer
pay for his or her mobile calls. There is a contradiction, I would
suggest, between your basic hypothesis that the UK consumer is
being ripped off by the mobiles and the hard data that they are
paying. That is the point I am trying to make.
111. I think we may have to disagree on this.
My contention is that the obfuscatory character of the way in
which the pricing arrangements are presented is such that while
it does not deter new mobile owners coming into the market, it
does nevertheless suggest that they are still paying more than
they probably appreciate they should be paying.
(Mr Edmonds) I agree with you—as I said to you
before—about the obfuscatory prices. I agreed with you about
the obfuscatory prices in the fixed world and that was why we
moved with the industry, securing from them the phonebills.org
website which has actually worked very well. I would like to see
that kind of principle developed for the mobile world. We have
been working on it, maybe by your standards the pace is leisurely.
112. Glacial is maybe the word I would use.
It does seem to move very, very slowly and there is a sense of
impatience. When the Government wants to consult about White Papers,
very often at the end of July when everyone is going on holiday,
they demand a reply within four weeks. The three months that you
give these companies is at times a wee bit more generous than
perhaps your arm's length colleagues in the Department of Trade
and Industry give when they are consulting on sometimes rather
more important issues than this.
(Mr Edmonds) Again, Sir, with greatest respect, I
think a new set of Government guidelines on consultation stipulates
three months or even four months.
113. When they need to, they move rather more
quickly.
(Mr Edmonds) So do we.
Mr Hoyle
114. Obviously you must be quite pleased about
the announcement by BT on internet prices. Are you surprised by
the announcement and are you shocked by the way and the timing
of that announcement before today's inquiry?
(Mr Edmonds) It was not a BT announcement, it was
an Oftel announcement. It was an Oftel announcement that we have
been working towards since August of this year. No, I am not shocked
at all. I think yesterday's announcement was another very significant
step in the process of getting unmetered access in a competitive
market place into the UK, something this Committee has asked me
to do.
115. What about the timing, is it purely coincidence
it was prior to today?
(Mr Edmonds) I was chided by the Chairman on the last
occasion because BT did make an announcement. The timing was almost
purely coincidence. If I could have done it last week I would
have done it last week. We have been working our cotton socks
off to get a new way of providing internet access on an unmetered
basis for competitors to BT. We had a formal complaint and we
decided in August when we produced FRIACO—the Flat Rate
Internet Access Product—there were some problems with that.
We have had a group of external consultants working with us who
produced an interesting report. My team and I in Oftel for the
last eight weeks have been working on the announcement that we
produced yesterday. It was not timed for your Committee, Sir,
I promise you.
Chairman
116. There is more rejoicing in heaven than
one sinner repenting. We should be thankful for small mercies.
(Mr Edmonds) Remember, Socrates in his condemned cell
learnt to play the lyre.
Chairman: Can we move on to a considerably less
controversial matter, telephone numbering, Ms Perham.
Ms Perham: I think the Chairman was being ironic
there. As someone who has lived in London for over 50 years—
Chairman: Surely not.
Mr Hoyle: Never.
Mr Laxton: 20 at most.
Ms Perham
117. I should have known those comments were
coming. I have just worked out there have been about seven changes
of code in that time. It does not sound very much but it has accelerated
over the years.
(Mr Edmonds) Yes.
118. Each time I think we have been told "This
is it. We will not have to change again".
(Mr Edmonds) Yes.
119. Would you accept there has been a serial
miscalculation over a number of years about the demand for lines
and numbers?
(Mr Edmonds) Yes.
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