Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 100 - 119)



  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.


  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.


  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 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.


  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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