Examination of Witnesses (Questions 220
- 237)
TUESDAY 5 FEBRUARY 2002
SIR CHRISTOPHER
BLAND, MR
CHRIS EARNSHAW
AND MR
IAN MORFETT
220. You responded to Mr Keen on the issue of
content. I was on the Opposition Front Bench in those days, so
my memory goes back to it, and I remember when Mrs Thatcher was
the Prime Minister that Mr Kenneth Baker was the Minister in charge
of these matters. The view then by the Government was that technological
development would be entertainment led and they took the view
that the country would be cabled up because entertainment would
be the way of getting people to do it and that is where the profits
were. While obviously entertainment is in many ways a key, the
fact is that the country has never been cabled up in that way,
in the way that the Government anticipated at that time. I do
not attribute any failings in that; it was just difficult for
them to foresee it.
(Sir Christopher Bland) I think that is right. Insofar
as the cabling up of Britain was led by anything, it was actually
led by telephony, not by entertainment. It was led by telephone
companies and that is what drove the change.
221. You may recollect—there is no reason
why you should—that for a period when I was Chairman of
the National Heritage Committee in particular I strongly advocated
that the partnership between BT and the BBC, in which BT would
provide the access and the BBC would provide the content, was
a very good way of moving forward and would assist in universal
access, since that basically is what BT provides. That did not
happen. My guess is now that it is no longer relevant.
(Sir Christopher Bland) Chairman, I remember it vividly.
You wrote a piece in The Mail saying that BT should take
over the BBC. Indeed, for four months, when I had both jobs, I
encapsulated that vision of yours! I think in practice BT is likely
to enter into arrangements with broadcasters and that would include
the BBC, but I think that falls short of and is no longer likely
to be a driver of major mergers on those fronts. But it is always
hard to forecast.
222. It seems you have a better memory of my
journalism than I have, Sir Christopher. I am not going to obtrude
into this discussion my view on the BBC—you are only too
well aware of that—but do you think that a partnership of
equals between the BBC and BT is no longer on the cards? If it
ever was.
(Sir Christopher Bland) No, I do not. I think that
would be to rule out too much. I think partnerships with the BBC,
with BSkyB, with ITV Digital are perfectly possible for BT and,
indeed, for other suppliers. Kingston Communication, for example,
right now in Hull are doing an extensive trial in combination
with the BBC, and that sort of partnership is not off limits to
BT either.
John Thurso
223. I would like to come back to the provision
of broadband and the roll out. Before I do, can I make one plea—and
I am not sure you can do anything about it. I think probably the
biggest frustration and irritant with modern life is being stuck
in telephone queues and being asked to press buttons for numbers,
failing to have a human being to respond to. I have been trying
to buy a new telephone line for my constituency office for four
months and seem to end up in all sorts of queues all over the
place. Anything you can do to return human beings to the chain
will be gratefully received. I was very interested by your comment
regarding the fact that content would drive the roll out. Constituencies
like mine, which is in the rural north of Scotland, have in fact
benefited from access to broadband in certain areas. We see the
effect it has on allowing modern businesses to come into the area
when they otherwise do not, so there is a social and economic
dimension that is very important to us. If we look at places like
Korea, we see that the government has invested heavily in that
roll out. Indeed, many people in the Highlands would say that
is the model that we should be following. There is clearly a kind
of chicken and egg situation, which is that you do not get people
creating content unless they have something to put it on. Equally,
people do not provide something unless there is content to be
put out. My core question is: do you believe that in order to
make this happen there is a need for Government to become involved
in priming the pump in some way, or can this be left entirely
to private enterprise to create the infrastructure on which so
much economic prosperity in rural areas will depend in the years
ahead?
(Sir Christopher Bland) I think in general terms we
would expect the main drivers to be private enterprise. This is
a commercial market with quite a lot of players and it obeys normal
economic drivers, but there is plainly a role in constituencies
like yours, in parts of the United Kingdom, and they are large
pieces of geography, sparsely inhabited, where broadband roll
out will not be achievable in economic terms at least within 10
and possibly 20 years. Technology is changing—and I will
ask Chris in a moment to indicate both in terms of geography and
technology what is being done—but I think in those places,
without some form of government or EU or combined support, broadband
roll out will be pretty slow.
(Mr Earnshaw) Just on the general point, we do see
Government itself as a major potential user of broadband services
representing a significant part of the UK's GDP, so its own adoption
will have a significant input on the market, not only within its
own confines but into their extended supply chains. That was something,
I think, that came out very strongly in the report from the Broadband
Stakeholders Group published just before Christmas. We are looking
at how we can deploy particularly radio-based technologies in
the remote regions, but also it is a question, I think, of getting
the right commercial partnerships combined with these technologies.
As you may be aware, we have launched a number of innovative commercial
arrangements—one in Cornwall, where we have brought together
the RDA, the education authorities, the business community, and
a whole number of artists who actually create and stimulate the
use of broadband services, particularly by business—and
we would like to see more of those initiatives, and we think the
RDAs have a major role to play in working with us and other providers
to make that happen.
Mr Bryant
224. The bit I am worried about, which follows
on from what John was just asking about, is not so much sparsely
populated areas but areas, often such as the South Wales valleys—I
am sorry, Chairman, I always bring them in—where there is
a large population but there are some difficulties for you because
these are valleys where every extra mile you go up the valley
is obviously going to deliver you fewer and fewer customers. I
accept that you are in there to make profits and I understand
that there is a problem, but there are those who would say that
BT has been rather feeble in trying to find a market or create
a market out there for broadband, and, in particular, it might
be possible to conglomerate or agglomerate (I am not sure which
is the right word) all the public sector needs that there are
out there, in the health service, local authorities and so on.
Is it that the Government is being feeble or is it that you are
being feeble?
(Sir Christopher Bland) I do not think anybody is
being feeble, but I do think that agglomeration or collective
action by Government cannot be stimulated by BT. That has to come
from Government. There are signs that Government are looking at
this and deciding just how and in what way they might use their
collective purchasing power to develop broadband in a particular
area. As you point out, it is difficult, it is impossible today
to supply those areas economically in remote valleys with small
pockets of population. The only sensible way to do it is either
through subsidy or through alternative technologies.
(Mr Earnshaw) I mentioned technologies, and Wales
is one of the areas where, because of its geography, again we
are trialing the radio-based solutions. But I think we should
also mention that our wholesale division has actively marketed
with all of its service providers the availability of broadband
in order to stimulate interest and, indeed, continues to offer
marketing grants to service providers to help them kick-start
the market. We think that it actually does require partnerships
between Government, private enterprise and the service providers
actually to create this market.
225. The Government keeps on announcing bits
and pieces of money, the Welsh Assembly has announced bits and
pieces of money, but they never seem to end up bringing broadband
to any of the people in my constituency, not to the big broadcasting
businesses like the Pop Factory in Porth, let alone to individuals
living on meagre incomes at the top end of one of the valleys.
(Sir Christopher Bland) Yes, and that is going to
be the situation for a number of years unless the economics change
or the technology changes. On the other hand, what is true is
that we do have the biggest flat rate availability. It is not
broadband, but nevertheless everybody who is in the United Kingdom
who has a telephone has the ability to buy flat rate internet
services and we have, I think, more flat rate connections in the
United Kingdom than the rest of Europe combined. That has had
the effect of reducing the digital divide but it does not solve
the broadband issue and it will not.
226. I am not sure about reducing the digital
divide because I think you are still going to end up with a situation
with predominantly poor communities having very little opportunity
to see any inward investment because the infrastructure, the IT
infrastructure, as you are saying, Sir Christopher, is not going
to be there now for maybe five, seven years (I do not know what
you mean by several years), but in that time I think we will see
the whole denuding of the South Wales valleys economically. There
is a real danger of that. I suspect half of the challenge is to
Government—which we will take up at a later date—but
I think there is a specific challenge to you which is about the
competitiveness of what you offer and the comprehensibility of
it. I went to your web site last night to see whether things have
changed since I last raised this issue with you about whether
it is possible to understand what you are offering (ISDN, ADSLs
and so on—all different packages) and it is an nightmare
wandering around your portal, your web site.
(Sir Christopher Bland) Chairman, I disagree. I visited
it this morning.
227. It must have changed overnight!
(Sir Christopher Bland) No, it has not. It might,
that is always a possibility, but I am afraid BT is not the kind
of organisation that changes overnight! I think it is a good site.
We have a lot of different packages and they are complicated to
set out but nevertheless, short of offering one colour of telephone,
black, and one form of package, we have a range of packages and
it is pretty clearly set out. Perhaps I can return to your core
question. I do not think that is a problem that is of BT's making
or that BT can solve in remote areas. I think that can only properly
be addressed, unless the technology changes much more rapidly
than it is sensible to forecast, by Government.
228. So you would need, basically, some form
of State aid?
(Sir Christopher Bland) Yes.
229. Or, basically, Government would buy broadband
for certain areas which otherwise would be termed as economically
impossible for you.
(Sir Christopher Bland) That, effectively, is what
is happening in these trial areas of Cornwall, Northern Ireland,
Scotland and Wales at the moment. These are the subsidised prices
that BT, as a commercial organisation, cannot provide on its own.
230. But I am sure we will be pushed by other
organisations, like ICT and others, and perhaps OFTEL, to say,
"Well, actually that is quite dangerous because Government
is then second-guessing technology. In actual fact what the Government
would be far better to do is to create a truly competitive ADSL,
a broadband market, which we do not have at the moment."
(Sir Christopher Bland) We disagree with that. We
think you do have a thoroughly competitive ADSL market but in
a thoroughly competitive environment, commercially more constrained
than it was, so less optimistic bets will be placed today than
were placed a year ago. People are not going to aim primarily
at your valleys or the valleys of Caithness and Sutherland because
the money is not there. It quite simply would not be an economic
proposition. So, however competitive the broadband market becomes—and
we have got a very competitive wholesale market in theory; we
do not have enough energetic wholesale providers exploiting it—I
do not think that is the source. I genuinely do not.
231. But a lot of people would dispute that
we have a genuinely competitive broadband market in the UK. Why
do you think that is?
(Sir Christopher Bland) I do not think a lot of people
would be able to back that up with facts and figures. All the
available evidence is that we are virtually the only market in
Europe that has a genuinely unbundled local loop and has the availability
to—
Mr Bryant: There is some coughing in
the audience.
Chairman
232. They do not agree.
(Sir Christopher Bland) They will have their moment
or their pastilles! But let them come. I think the proof of the
pudding is in the economic eating. I think if you ask them: Is
there a price at which they will come to your valleys, make sure
you get it in writing.
Mr Bryant
233. Just one final question—and I may
be addressing this to the wrong person, in a sense: the job losses
that are being announced today, or the predicted job losses .
. . I cannot remember what it is called now. Is it called H2O
or O2? I forget what it is called.
(Sir Christopher Bland) mmO2.
234. Yes, that is the one. Were those job losses
that you were predicting when you spun it off? Do you think that
it is likely that in the long-term there will be a lack of capacity
in the industry?
(Sir Christopher Bland) You are addressing it to the
wrong person. mmO2 is an independent organisation and we did not
make predictions beyond what was known at the time. But, you know,
the tendency in all telecoms' business is to look very hard at
costs, of which labour is a major component, and that is a never-ending
process.
Miss Kirkbride
235. There have been a couple of special pleas
for Scotland and Wales over there, but some of us represent the
heavily populated English regions. As purely a matter of constituency
interest, can you tell me when we are going to get ADSL in North
Worcester and Bromsgrove?
(Mr Earnshaw) I am afraid I do not have the detail
at that level of detail. We are working with service providers,
of which there are many, to try and assess where we will deploy
DSL technology beyond that already on the ground, looking for
areas, as Sir Christopher says, where it is economically viable
to do so. But what we do hope, going back to my reference to satellite,
is that the successful trials in Scotland and Northern Ireland
will, during the course of this year, subject to satisfactory
discussions with the RDAs and so on, be extended to cover England,
so that nobody need be, particularly businesses, without access
to broadband. I think it will take some while, as Sir Christopher
says, for DSL to be anything like ... In fact, we do not expect
it ever will reach 100 per cent availability. So I think it will
be a gradual take up. What we do hope, though, is that in the
course of the coming year one of the changes that will take place
in the market is that there will be a greater range of applications
and therefore a lot more stimulus of the market across the whole
ICT sector. I did not address the earlier question, and I come
back to the point: What will be different in a year's time? I
think the difference will be that the whole of the ICT sector
will be engaged in what broadband can do for business and for
the consumer and we will see a much wider range of applications
which will actually drive the development of this market. We should
not just focus on entertainment. We believe there will be applications
in health, in education and so on which will have a major effect.
But it requires the whole industry to engage and that is why we
and other providers are now working actively with the other stakeholders
to see how the market can be stimulated in that way.
236. It is mainly businesses from which I get
the main pressure. Do you have an assessment of what kind of population
density you would need to drive the next phase of this development?
Is it possible to give an idea?
(Sir Christopher Bland) I think at the moment an exchange
serving less than 20,000 is not economic for us. I note that one
out of six exchanges in your constituency is enabled. That serves
about 18,000 or slightly below. The take up is only 160 customers.
I think to have 160 out of 18,000 is a very clear indication of
where we are today, not where we should be, but that is a question
of price, of marketing. We can address that within that particular
exchange. But to promise to go further than those exchanges anywhere
in the United Kingdom, given the low level of take up within the
1,010 that are enabled, I think would be the wrong set of priorities.
But once take up within the enabled exchanges starts to move then
the economic model will change as well as the technology.
Chairman
237. It is a curious co-existence, is it not?
On the one hand there appears to be so far insufficient public
appetite in terms of market demand for broadband and on the other
hand, as emerged from Mr Bryant's discussion of the Rhondda, there
is not necessarily a sufficient response to demand that does exist
because of the divide—of which we have heard very little
in recent years. There was a time when the divide was one of the
big issues with regard to the spread of this technology. Indeed,
President Clinton appointed Mr Gore to deal with this and give
access to/control of technology to the poor. Perhaps if Mr Gore
had succeeded, people in Florida would have been able to manage
the chats with the President of the United States!
Mr Bryant: He is President of Truro Rugby
Club.
Chairman: In that case, his appetite
is really satisfied in the way we have been discussing before.
Sir Christopher, I would like to thank you and your colleagues
very much indeed. From our point of view it has been a very fruitful
session.
(Sir Christopher Bland) Thank you.
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