Examination of witnesses (Questions 260
TUESDAY 19 DECEMBER (MORNING) 2000
SAUNDERS and MR
260. Not by excluding other
(Mr Saunders) No. We operate on a two-tier basis.
The network services that that service package uses at the retail
level will be available to any third party. We believe we can
make money both at the wholesale and at the retail level.
261. Oftel are very much going to be the ringmaster
in all of this and I understand that they have published proposals
that BT should be contractually bound to meet timescales and pay
compensation if service levels are not met. I appreciate that
time has moved on since you submitted your evidence to the Committee.
What do you now think about Oftel's proposals for the terms and
conditions for local loop unbundling? Are you happy with what
Oftel is putting forward? Does anyone wish to acknowledge not
being happy with the regulator?
(Ms Machin) No, I do not think we wish to acknowledge
that. We have put in our response to the determination on the
terms and conditions under the contract. There are still concerns
about the service level agreements that we have been offered by
BT. Generally speaking the determination is a significant improvement
on where we started from. Yes, Oftel have certainly made some
steps forward in that area.
(Mr Allan) We think that is fair. Oftel is doing its
best in difficult circumstances and we have certainly made a lot
of progress in the last couple of months.
(Ms Gilthorpe) We agree.
262. Can I ask you for your first impressions
on the Communications White Paper?
(Ms Gilthorpe) Certainly from Cable and Wireless's
perspective it is very broadcasting focused. There is a lack of
any detail relating to the telecommunications side of things which
is a little bit disappointing. Certainly there was scope for a
little bit more detail, for instance, on the appropriate level
of regulation for incumbent operators, but obviously we will work
with Government and with the sector regulators to try and evolve
the founding principles that they have laid down and try and get
a bit more focus on the telecoms side of things.
263. Anybody else?
(Mr Saunders) Generally I concur with Emma's viewpoint.
There are a number of issues from the telecommunications perspective
that we think need greater focus within the proposals for primary
legislation but we recognise that there are significant issues
in the broadcasting environment which are of interest to us as
well and which have been addressed in this context and certainly
we look forward to working with DCMS and DTI on turning what is
a quite greenish White Paper into proposals which are more viable.
264. What about Energist?
(Ms Machin) What we are looking for at the end of
the day is effective and appropriate regulation and I agree with
the Cable and Wireless position in terms of the fact that it does
seem broadcast based. We welcome developments in that field and
we will work together to ensure that the telecommunications side
of it is properly addressed. What we are looking for at the end
of the day is effective and appropriate regulation to address
some of the issues that we have experienced over the last few
years particularly on this.
265. So do we take it from that that you support
the principle of a universal service fund so that all telecoms
operators will contribute to the universal service obligation
which you currently say is performed by British Telecoms and to
an extent by Kingston? What do you think about the statement in
the White Paper that the market alone will not deliver affordable
high speed connections to all rural areas or to lower income urban
(Ms Gilthorpe) I will answer on the universal service
point. Quite a bit of analysis has been done on the universal
service quite recentlythere has been a recent review undertaken
by Oftellooking at the costs and benefits associated certainly
with BT's universal service obligation. It has once again been
found that the costs are largely equal to the benefits. If it
is found that there are significant costs associated with universal
provision of services to customers then certainly Cable and Wireless
would like the option to be able if you like to make a commercial
decision about whether we would like to pay someone else to deliver
that or play ourselves in that market place. First of all we have
to determine that there is a cost associated with that and that
has not been proven to date.
(Mr Saunders) I concur with that viewpoint. At the
moment the position in policy terms on the White Paper is no different
from where we are at the moment. As a result of the directive
and the current licensing regime that we have got in the United
Kingdom the ability to set up such a universal service fund already
exists and Oftel has concluded at the moment, at least as far
as BT is concerned, that that is not appropriate. It is something
that needs to be reviewed perhaps as the universal service develops
in the future both in terms of its potential cost and indeed in
terms of its scope. That takes us on to the second issue, whether
or not there is a role for public sector intervention in terms
of encouraging the broader deployment of advance services into
remote rural areas or indeed into sectors of the community which
are more socially deprived. As far as the former is concerned
the e-Minister last week instigated some consideration of that.
There was a meeting that took place last week which I think has
been publicly discussed which is trying to address some of those
issues and certainly we as an operator are interested in looking
at some of those issues. As far as social deprivation is concerned,
I am not sure that necessarily this is a universal service issue
that is particularly relevant to telecommunications operators
only. I understand that there are issues of social inclusion,
there is the problem of the digital divide, but perhaps this is
something that Government should consider in the broader context
of subsidy and indeed perhaps with the support of general taxation
rather than looking to the operators themselves to perhaps support
beyond the scope of the conventional USO.
266. Do you think the new regulator is going
to be just as quick on his feet as the existing one?
(Mr Allan) If I can make one comment on the paper,
the paper refers to a light touch of regulation going forward.
There are some proposals for example perhaps to separate BT's
network operations from the rest of the business. If such a thing
were to happen it would naturally be referred to regulation. I
am not suggesting there should be heavy handed regulation but
it may have to be more proactive regulation.
267. We will doubtless return to this at some
later stage when we look at cherry picking and things like that.
I am not sure how many of you operate outwith the United Kingdom
in the unbundling context. What has been your experience of our
European partners' approach to unbundling? Has it been as open,
transparent, liberal, as it has in the United Kingdom or has it
been restrictive, dense, obdurate, obfuscatory?
(Ms Gilthorpe) Certainly Cable and Wireless's experience
is that the incumbents have been consistent in their lack of constructive
approach to unbundling. Germany is often cited by some as being
in the virtuous state of having unbundling on tap ready for people
to walk in and take advantage of. The reality is far from that
and we have some direct experience. Deutsche Telekom I would say
is equal to BT in its tactical obfuscation of the issue and their
PR is extremely good in their portraying to the outside world
that they have achieved certain things in unbundling.
268. Better than BT?
(Ms Gilthorpe) Much better than BT. Everybody knows
BT is not doing a very good job whereas people believe that Deutsche
Telekom is. There is no doubting that this is a complicated issue
but there are certainly things that can be done both through more
proactive and clearer regulatory powers for Oftel and also a more
forceful hand with BT. With certain rules in place that they were
obliged to comply with I think we would have seen more progress
sooner in this issue but we welcome the speeding up of that progress
in the last couple of months.
269. Do you think that was attributable to the
EU directive or some kind of waking up process within Government
(Ms Gilthorpe) You mean in terms of the speeding up
(Ms Gilthorpe) No. I think that it was primarily due
to the fact that the operators complained bitterly at the highest
levels. There was an accusation at some point that the operators
had not been very aligned or co-ordinated in their concerns being
put to the regulator. I think there is some truth in that. However,
one has to acknowledge that we all have very different commercial
strategies. We are not a homogeneous mass with BT on one side
and the rest of the industry on the other. In order for us to
come together and align to present a coherent position to Oftel
it actually involves quite a lot of compromise and discussion
on our part. The reason we have now had progress is to my mind
that this has been escalated to an appropriate level within Oftel
and indeed within Government so that it has been realisedand
we welcome you shining some attention on the issue as wellthat
if you want to e-enable Britain you need to have a level playing
field in the market place to be able to do that.
(Mr Allan) I think that is very well put.
Chairman: On that note of near unanimity we
will thank you very much for your evidence. There will be some
points of detail we will want to come back to you on.