Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 320 - 339)



Mr Butterfill

  320. Sir Peter, on a purely practical note, there are quite a lot of works that need to be done to facilitate LLU within a lot of these sites, are there not? There is improvement to the ventilation, new security arrangements and all that sort of thing, perhaps putting up divisions between what you are going to have and what somebody else is going to occupy. What sorts of steps have you taken to achieve this? Have you tried to facilitate it?
  (Sir Peter Bonfield) Yes. The best way to think of this is primarily logistics around a building site. It is making sure that the space is available, making sure that the design is what our customers want, and there was some extensive discussion during the summer on whether they wanted their own sites, whether they would share sites, how much space would be available and that sort of thing. We have been increasing the number of people we have in our planning operations. We think we will have to hire an additional 600 people in the early part of next year and maybe up to 2000 during the balance of next year. So this is a huge logistic operation for us which we geared up essentially through the previous timescale, which we agreed with Oftel in April, and now we are responding to the new requirement to bring it all forward six months, which means that we have got to accelerate some of that hiring, so we have doubled the number of planners over the last four months.

  321. There have been suggestions from some of the other operators that you have been deliberately difficult about this and put in requirements that are not entirely necessary and the other suggestion they have made is that to some extent you have been gilding the lily, in other words you have said you will need new security systems where you did not have any before, and really you are trying to use their participation to upgrade your own buildings. Is that right?
  (Sir Peter Bonfield) I do not think it is. If we look at the overall situation, as the Chairman said, were we initially gung-ho to embrace LLU until it was a licence condition change? I think the answer was probably not because we thought the previous approach was better because there would be infrastructure competition. However, having agreed that at board level, we then went ahead to implement it in a professional way, and right in the middle of that it has been brought forward six months which is a big logistics exercise. Have we got everything perfectly right in all exchanges? I would not, hand on heart, say so. Are our people working as professionally as they can now to say these are the issues case-by-case exchange-by-exchange? I think, by and large, they are, but it is complicated. If there are particular concerns on each exchange we are open to working with the industry, as Ian has said. We have got consultations set up with them to ask what are the issues. By and large, I think the key understanding of it is that these are relatively straightforward logistic issues. This is not a big technical problem and I do not think we are being obstructive. We are trying to make sure that it does work in a professional way.

  322. Some of the evidence we had this morning has been reported and some operators say at the present rate of progress it is going to take them 30 years to achieve your rate of rolling out.
  (Sir Peter Bonfield) I do not think that would be the case. The programme that we have got agreed with Oftel and the DTI would essentially set up 190 co-location exchanges by mid next year with another 410 distant co-locations. That is 600 exchanges and it is a very, very fast roll out and the expectation is then it might go up to 1,000 exchanges within the next six to nine months depending on the demand.

  323. So are you confident that you have got the resources in place to meet the new timetable?
  (Sir Peter Bonfield) I am not confident we have got all the resources in place. I am confident that we have got the plans in place but we will need the resource to be able to do it. This will need a big hiring programme from BT, but we must work in tandem with the industry. It is not something we can do by ourselves. We have to work together, because certainly some of these situations, particularly in distant co-location, do need the other operators to work in conjunction with us to get the optimum result.

  324. Why would you need to hire people? You would not want all these people in-house permanently. Is this not something you can contract out?
  (Sir Peter Bonfield) We need to hire planners on a pretty long-term basis because this is not going to go away. Some of the people will be on temporary contracts. Some of the people we will have to hire because our expectation is that some of our customers will not want to employ people themselves, they will want us to do it for them, in which case we will have to hire the staff.

  325. I would have thought you would have out-sourced because this is largely a one-off operation. This is not going to be on-going indefinitely.
  (Sir Peter Bonfield) It is not something you can out-source very easily. Each of the exchanges is different, as the Chairman has seen. We do need planning people in and people in to do it. Some of it will be contracted on a short-term basis, but not all of it.

Mr Morgan

  326. You mentioned a figure of 2,000 jobs. Are people with the requisite skills available? That is presumably a substantial number.
  (Sir Peter Bonfield) This is a substantial programme. We should not under-estimate the scale of the commitment that we are making. We have got to make sure the planning is right, the installation is right, and that we set these things up correctly. Some of the customers will want us to put in the equipment and some of the customers will want us to maintain the equipment and then we have got to re-set the lines as they grow. It then depends on the take-up of the offer.

  327. Where are these 2,000 people with the requisite skills now? Are they hanging around waiting to be phoned by you?
  (Sir Peter Bonfield) We do have a large catchment area of people in this country and we can skill some of them ourselves. We are hiring continually a lot of people because our attrition rate is relatively high; we are a large business. We are used to taking people on at that level but it will not be easy. We are going to do a lot of in-house training. We are working with our union colleagues at the moment to make sure we are doing it in an optimum way between full-time people, agency people and some other contract people.

Mr Butterfill

  328. If you look at other large organisations which have a bigger stake portfolio dotted around the country, most of the national multiple retailers are in a similar position to you, and they out-source it all. They would not dream of having people on their staff.
  (Sir Peter Bonfield) We are responsible for this; we cannot out-source it. Are we going to bring all those 2,000 people onto our direct payroll? Probably not.

  329. I am relieved to hear it for your shareholders.
  (Sir Peter Bonfield) At any one time we have at least 3,000 contractors working in BT.


  330. Do you think some of the people you paid off might get back on the payroll?
  (Sir Peter Bonfield) I do not think they will come back on the payroll but they might be there in terms of some added skills.

Mr Chope

  331. Can I ask you a bit more about the numbers. You referred to the possibility of 1,000 being done in a year and the figure of 190 and 410 making a total of 600 being done within six months. We are a bit confused because Oftel announced that there were 360 sites selected in the second round of bidding in their latest press notice and that is in addition to the sites in the first. We make that to be a total which is rather different from yours.
  (Sir Peter Bonfield) What I am saying is that there are 600 exchanges which will be available in terms of distant co-location and physical co-location by July of next year. That includes some of the second bow-wave type of exchanges. My estimate is that it might go up to 1,000 exchanges within the back end of next year early part of the 2002. That includes the first bow-wave, which is 380, and then the 360 in the second bow-wave, but they will overlap with each other.

  332. There will be some more beyond that?
  (Sir Peter Bonfield) I am not sure. In July the industry said they wanted potentially 1,000 exchanges, in September they said it wanted 2,000 exchanges, now it is December, and I am not quite sure what it will end up with. It appears to be somewhere around 1,000 exchanges probably.

  333. We understand that around 120 surveys have taken place in you exchanges where you expect high demand. Are these the top 120 from the Electoral Reform Society list?
  (Sir Peter Bonfield) The first bow-wave process is conducted by Oftel. We are not involved in the allocation, but we thought we would look at the top 120 that came from that list and do a pre-look at availability of space planning, and that is what we have taken on essentially on our behalf and that is what we are now working with the industry on, driven by Ian and his people.

  334. So you have made quick progress on those. You have surveyed them, they are obviously popular; what is holding up the unbundling?
  (Sir Peter Bonfield) The process of bow-wave one and bow-wave two is being conducted by Oftel. So they allocate the sites, they allocate who is going to go into those sites, and we discharge against that allocation. The allocation is not done by BT.

  335. Have you got the impression that there is not such great demand for some of these sites?
  (Sir Peter Bonfield) In all of these things, as we have said before, there will be large demand for some city sites and less demand for other sites and that is the process Oftel is working on. We tried to work with the industry during the summer to work out a co-ordinated approach. To be quite honest, the industry found it difficult to come to a consensus among themselves so the process was taken over by Oftel.

  336. How many exchange sites have had surveys done at the request of the operators?
  (Mr Morfett) Of the first bow-wave which Oftel set for 380, 78 per cent of those were available with enough space for the operators that wanted to go in and we received 178 requests for surveys and we have done those and moved forward on the vast majority of them to design rooms, the design of 25 of which have been completed and been passed to the operators. The rest will be coming over the next two to three months.

  337. So those 178 are in addition to the 120?
  (Mr Morfett) Yes, the 178 are part of the 361 that Oftel started with, and I have to say are probably not the highest priority in the way that their system operated. We thought, given that the operators were crying out for some other exchanges, for those that they thought were more important to them we would take the top 120 off the priority list and do a survey. We have not taken them all the way to the design of a room, we have simply had a look at the exchanges and said "yes, there is room in these exchanges for this number of operators, these others will need some looking at". Again, the news is good. Of that 120, 64 per cent have enough room for as many operators as want to go in and the next is 24 per cent need a little bit of jiggling but you could still get a lot of operators into them once you have had a look at them.
  (Sir Peter Bonfield) But there will still be a need for allocation.

  338. When will the operators actually have to put their money where their mouth is?
  (Mr Morfett) They have been asked in bow-wave two to put their money where their mouth is and they are thinking about that at the moment.
  (Sir Peter Bonfield) By and large it will be in the early part of next year that they will have the sites available. The trial sites are available now and they will have the 190 building out into next year in terms of the physical co-location and the distant co-location. To meet the timescale they have said the industry must have pre-committed the equipment or they will not meet the timescale.

  339. Sandy Walkington very kindly took me down to BT's exchange in Christchurch on Friday and that is in the first bow-wave and certainly we were told there were six expressions of interest there and no physical problem on the site. How soon will those six potential operators have to decide whether or not they wish to go ahead at Christchurch?
  (Sir Peter Bonfield) I think they have got to really decide over the next month or two at the maximum. In fact, they probably should have decided already because the biggest issue is lead time on equipment once this ball gets rolling, not even on the physical layout of the co-location space.

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