Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 340 - 359)



  340. On that final point, the co-location space, we heard this morning from Paul Markham that in the States they go in for co-mingling, as he called it, and you are holding out against co-mingling, which means putting the equipment on a wall maybe in the same area as your own equipment.
  (Sir Peter Bonfield) There are two sorts of co-mingling in the States. In the US the normal approach to local loop unbundling is to put in cages, as they call them in the States, which are essentially wired enclosures and each operator has his own wired enclosure, a bit like a great big dog place, and they put their own equipment in each one of those. In some of the sites they put in a big cage and they will share things within their cage, so that is what they call co-mingling. To my knowledge there is no co-mingling on a network which is mission critical to its incumbent. We would certainly be dead set against co-mingling if it meant actually opening up physical access to our own core network to mix equipment within the core network. This is co-mingling within the areas isolated to the other licensed operators.


  341. I get the impression that you did not really know very much about the exchanges that you had, that you never bothered keeping records of them to any great extent. One would have imagined that you would have had this file on a disk on a computer and you would be able to rattle this stuff off. It all seems to have taken rather longer than Oftel had anticipated, would that be right?
  (Sir Peter Bonfield) We clearly have data on the exchanges. The exchanges were not designed for co-location, as is pretty clear, because they were designed for a single operator. We know a lot about the exchanges, the issue was finding out clearly within each exchange how much space is available, whether it is the required height and space, it has the right ceiling height, floor loading, etc., etc., and then we had extensive discussions with the operators about whether they wanted singular cages or this hostel arrangement that we have come out with now because there are more people who want to get into some sites. I think we knew the information but, as you have probably seen in some of the exchanges, each one is an individual, each one has to be worked on in terms of planning. One-size-fits-all is a very difficult concept and it takes time. It takes a bit of time to know where the exchange is, to know where the cable routes are, to know where the power is, to know what the power requirements are, and you just need planning to do it and that is what we have been trying to work on. In terms of the timescale that we were working on from April, we had that planned out but we have now had it all brought forward. Has that caused us a lot of problems? The answer is clearly yes, but that is what we are responding to.

  342. All that I am really saying is that I find it a wee bit disturbing that in an operation as big as yours you do not really know very much about the estate that you seem to have. One would have thought that records would have been kept and perhaps they might even be on easily accessible computerised systems which would enable you to summon them up very quickly. I realise that they are no longer staffed in the way that once they were in the sense that many of your facilities are visited at not too frequent intervals by some of your staff because of the nature of the technology or the cycle itself and it is only when something goes wrong that you need to visit.
  (Sir Peter Bonfield) Yes, 90 per cent of the exchanges do not have any people in. Ten per cent of the exchanges have people in but 90 per cent do not. We have very accurate records of all the exchanges, we have to know where all the cables come, what is in the exchanges, customer contacts and everything else. What we do not have on an easily identifiable record that you can just cookie cutter around is if you allocate a certain amount of space have you got extra physical space, does it meet the height restriction, does it meet the extra power requirements? Each one of those has to be manually done. Until we have gone through the great bulk of the exchanges, the design process will be manual. What we are trying to do after that is to make sure that the allocation of lines is then done on a fully automated computerised system, which we are hoping to get up in September of next year. The actual layout of the exchanges is a pretty manual process.

Mr Morgan

  343. Some of the other operators have expressed concerns that you are making sure that certainly BT has its DSL equipment in all the key exchanges and have even said that you are managing to put that equipment in exchanges which they say are blacklisted by you. Although in your response you have said there is no such thing as a blacklisted exchange in the sense that it is off limits to other operators, can you explain how this confusion has come about? Are the other operators just crying wolf? They must have been given some indication on which they have formed that opinion surely?
  (Sir Peter Bonfield) I think it is worthwhile trying to understand what we are doing with the ADSL roll-out, which is different from local loop unbundling, because they are not synonymous. In the ADSL roll-out we are ADSL enabling the BT exchanges. We have an agreement with the DTI that we will go as quickly as we can in terms of enabling exchanges. We want to try to get 840 enabled by March of next year, which will give us about 50 per cent coverage of the fixed lines in the UK, building out to more than 1,000 in the year afterwards. We are probably the only operator that will develop essentially a broad coverage of ADSL enabled exchanges in the UK to enable us to offer ADSL on a pretty broad basis. That is the programme that we are operating to. Separately, the local loop unbundling debate has come in and that has now been brought forward six months by the EU Regulation and we are trying to respond to that. I do not think that they are overlap and I do not think we are talking about the same types of things because by and large the issue on LLU is not electronics, it is space, it is hard hats, it is whether the floor loadings are right and that sort of thing. They are slightly different issues. We are trying to go as fast as we can in terms of the ADSL commitment that we have already made to the Government as part of the broadband enabling of the United Kingdom.

  344. Oftel looking at, I think it was, eight sites where you said there was no space available have concluded that in one or two of those sites there was no space. Can you explain why we have this different definition of "space"? I understand why it is difficult to say because you have got to look at floor loadings, etc., etc. Have you reached a position where you have an agreed criteria between yourself, Oftel and the other operators so that you can all go and look at one exchange and say "yes, we are agreed that there is space" or "there is no space"?
  (Sir Peter Bonfield) Most of the trouble with that has been sorted out. It is the definition of what is adequate space. Certainly in some instances we went back to there was not enough space because the floor loading was below the minimum requirement and the ceiling height was a little bit lower than the standard requirement. We have now gone back and said "if you put in slightly reduced height equipment and you can spread it out over the floor plate then there is technically space". It is those sorts of issues that we are now trying to get sorted. We have now alerted our planners to look a little more laterally at how it can be brought in rather than the strict definition of what would be the requirement if we put normal equipment in.

  345. It is obviously in your commercial interests to interpret these requirements as rigorously as possible. Does the same thing apply to those operators complaining that they feel they are being forced into solutions which require expensive solutions, separate rooms, separate wall requirements? That is certainly the impression they were giving us; that the requirements were the most costly they could be for them.
  (Sir Peter Bonfield) I do not think so. What we have agreed with Oftel on is that we provide essentially serviced space. So it has power, it has cooling—we do not have chilled cooling in our exchanges, as you know, we have air cooling—and we have got security to make sure that they are secure. We could not agree with the industry in terms of the caged approach that was taken in the United States because it essentially reduces the available space because where the wall is you have to have a corridor either side, so the hostel arrangement is a response to the number of people who wanted to get into a single exchange, which is up to nine or ten people in some instances. We try to do that and make it as standard as possible in terms of the number of racks and the heat discharging from each of the racks. If we were not working under such a tight timescale, could we have done things slightly differently? Maybe. I think we have responded in a professional way. We have a design that can be replicated and is agreed by the industry.

  346. The operators, who for some reason or another decide they cannot get into your exchanges, are not covered by the bow-wave process. How is that process handled? How many requests have you had for distant location?
  (Sir Peter Bonfield) The same process applies. I am not sure how many requests we have had.
  (Mr Morfett) We have had 63 requests so far but we think now we have brought it to the operators' attention we will see a lot more coming through. They are dealt with in the first bow-wave in exactly the same way as the rooms. In the second bow-wave Oftel has said it is first come first served and we are very happy with that arrangement, we are happy to deal with them. The other point is that we have given a service level agreement for a particular period to build a room of 80 days and it is only 20 days for an operator that takes distant location. For operators that want to very quickly get into exchanges and get access to customers this is a good solution.

  347. So the incentives are very much there for them to opt for distant location at the moment?
  (Sir Peter Bonfield) If you want to get into the market place really quickly, if that is the prerequisite, then we offer a wholesale product which obviously a number of people have taken. Distant co-location is one area. Of course, you can use the broad band wireless technology as well. There are different ways of doing it in terms of how critical you think the market conditions are.

Mr Hoyle

  348. Sir Peter, it seems to me that Oftel are a little dissatisfied with you to say the least. In fact so much so they have now published terms and conditions for the local loop unbundling because they thought the contract you put together was unreasonable in a number of areas so much and they have proposed that BT should be contractually bound to meet timescales and pay compensation if service levels are not met. Are you happy with that and are you happy with the terms and conditions of the LLU?
  (Sir Peter Bonfield) Yes, we are happy with that. We tried to get an agreement with the industry earlier on and could not reach agreement and so we have reached agreement with Oftel. Paying compensation was BT's idea and we are happy with that.

  349. You were not really dragged screaming into this new contract; it was the others rather than yourselves?
  (Sir Peter Bonfield) In all these things we would prefer to have reached an agreement with the industry, but I think it is pretty clear that the industry is coming at some of these things not in a unified front because they are looking at different parts of the market to address. We could not get a uniform agreement with the industry but we have got a uniform agreement now with Oftel, which we are happy to accept.

  350. Would you put the blame down to yourselves?
  (Sir Peter Bonfield) I am not sure there is blame on either side here. We do have to understand that the United Kingdom is the most competitive market place certainly in Europe and I think internationally as well. I think the White Paper indicates that as well. We have got infrastructure competition in the United Kingdom. Cable, which is the biggest local loop unbundling in the world, passes half of the houses. In my definition, half the houses could be unbundled tomorrow on the Cable infrastructure, and I think that is a great plus in the United Kingdom. So rather than being apologetic I think we have a competitive situation. We have now moved to even more competition for LLU. In April we changed our licence conditions, which is not an easy decision by the board, I must admit, to do it by July and then four months afterwards we have pulled that forward six months. Is that a significant change of approach? Has it caused us some concerns and problems? Certainly. But I think it is all part and parcel of the Government's push now to make sure that the country continues to be competitive. I think it is a big plus.

  351. That is good. The other thing I wonder is if there was a fault on the line, whose responsibility will it be to sort it out, BT's or the operator providing the service?
  (Sir Peter Bonfield) If the fault is the physical connection of the line, then it will be up to BT. If it is a service level fault on the wrap-around it will be the service provider.

  352. Do you believe there will be arguments? God help anybody who does have a problem because my worry will be they will say, "It is not us; it is them", and the others will say, "It is them", and we could end up with somebody who cannot get the fault sorted out. How will you do that because at the end of the day the customer ought to be king?
  (Sir Peter Bonfield) We are all approaching it from the point of view that in the end we must protect the customer. I think that is true. We are trying to learn from experience elsewhere as well as from the trials here. One thing we were looking at in the original July date of next year to kick it off was to do the trial systems and recovery systems so that we would not get into an issue. If we and the industry work well together we can minimise disruption to customers. It will be one of those things we will have to work on. It will not go away but we can resolve it.

  353. Do you think you can improve the service if it is your fault?
  (Sir Peter Bonfield) We can make sure the definition of where the service fault is is correct. In the end the consumer just wants someone to fix it.

  354. You are not the greatest at coming out and fixing repairs—that is my personal belief—and obviously if we can see improvements everybody will warmly welcome that.
  (Sir Peter Bonfield) Yes.

Ms Perham

  355. The evidence that you have submitted notes that it is necessary to ensure that a good automated "back office" system is set up early with manual ordering procedures kept to a minimum. How far have you succeeded in setting up automated back office systems?
  (Sir Peter Bonfield) It will be one of the gating items for mass roll out. The programme we are working on is to get the computerised systems up by September of next year. Because we have brought the physical installations forward, we have diverted people working on those sorts of systems into the manual stuff. We are up against quite a tight timescale but that is the plan at the moment, by September next year.

  356. You have had to divert people to doing the manual?
  (Sir Peter Bonfield) We originally tried to get the timescale up between July and September of next year. As we have pulled the programme forward some of the people working on that are now having to do the manual process for the six month pull forward. We are trying to minimise that but it has caused some disruption. We are hard at work to meet the September timescale and we will not be able to roll out very large scale deployment of lines until we get that system in. It makes no difference to the enabling of the floor space of the exchanges; it is just the allocation and switching of the lines.


  357. Part of the deal the EU Regulation allows for is shared access. What is your attitude towards that? Are you happy with the proposals for shared access?
  (Sir Peter Bonfield) Would I be happy with it? I think it is one of those things that is now in the Regulation so we have to respond to it. It is relatively difficult in terms of making sure the technology is available to do it. You need some new splitters. We still need to work out from a regulatory point of view how it will work in practice and how the cost allocation will occur. I think it is one of those things where if somebody asked me whether I am happy about regulation, I am always relatively unhappy about regulation but it is a case in point that we have to do it, so we will do it. It is one of those things that I think will take maybe nine months to a year to deploy because the technology is not exactly available in bulk, nor the regulation to deploy it yet in the UK.

  358. Do you think there will be a danger of disruption by the implementation of shared access?
  (Sir Peter Bonfield) Yes. It is one of those things that we need to be very concerned about now, where the shared access point is, where the splitter is, who owns the splitter, and essentially the technology of the splitter.

  359. Do you think you will lose customers as a consequence of it?
  (Sir Peter Bonfield) I suppose in all competition we are going to lose customers. The key thing is to make sure we do not lose them by faults on the system. The issue is whether there is a shared split between broadband and voice and some of those complications. It is an area where we are working with Oftel now. Is consultation going on now?
  (Mr Morfett) Yes, it is. We will be making a reference offer within the period, so we will be complying with the EU Regulation.
  (Sir Peter Bonfield) We just need to make sure that we understand how the technology works. There is a slightly different system in each Member State.

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