Examination of Witnesses (Questions 300
- 310)
TUESDAY 5 FEBRUARY 2002
MS KAREN
THOMSON, CLARE
GILBERT AND
MR SIMON
HAMPTON
300. Should the Government insist that every
computer arrives with five or six ISPs?
(Ms Thomson) I think that would be somewhat draconian.
Consumers want choice and also manufacturers should be free to
choose the services that they wish to promote on their machines
to provide good choice to their ultimate end users.
(Ms Gilbert) I think there has been a concern about
the position of certain retailers in terms of deciding which ISPs
were heavily promoted by computers sold through outlets, but I
think Karen has answered it by saying there is competition in
terms of what channels are available through which ISPs can market
their services to potential customers. In our case we find it
is the non-PC ones that bring us more customers. You only really
need government intervention where there is not a competitive
market and it is affecting consumer choice. I do not think we
are in that situation currently. I think that we might have been
in danger of getting there in the past but that moment has passed.
(Ms Thomson) In broad terms we would certainly like
to see computer manufacturers free to choose who they would like
to promote on their machines and not be constrained by the distribution
channels they then move through. I do not think it is a matter
for regulation at this stage.
301. Nobody has mentioned "always on"
yet, but it seems to me that is the main point about broadband.
I know ISDN does as well but it gives you the opportunity to be
always on and always on radically transforms the whole experience
of convergence.
(Ms Thomson) It does and it is not just "always
on" but "instant on", the ability to access particular
types of content and services at a moment's notice rather than
having to go through the dial up and the tone, etcetera. Plus
the fact that the high speed allows you to access a broader ranges
of services. Often in our industry there is a danger in differentiating
between broadband contents as though it is something that is completely
separate from the experience that consumers have just now in the
dialogue world. We see it as a stepping stone and integration
so that broadband at high speed makes some of the services that
people currently enjoy just that much more efficient, the e-mails
are faster, the downloads are faster. Some of the basic activity
that you enjoy in the narrowband world is just much better because
you can get to them more quickly and you can get services much
faster. It is a combination and bundle of services. I am not sure
that any of us have cracked what the most appealing consumer option
is and it is clearly not just high speed and it is not just always
on. If it was then even at the price we are at we would probably
have seen a higher up take.
Chairman: I think I may have mentioned last
time you came to us that on one occasion I logged on to AOL and
it took over my whole computer and could not be got rid of and
had to be exorcised.
Mr Bryant: By the Church of England?
Chairman: By AOL. We had to be guided step-by-step
through it leaving my computer having access only to AOL, but
nevertheless maybe Mr Doran has had less traumatic experiences
with you.
Mr Doran
302. I have had similar experiences but I managed
to sort it myself, Chairman! You have obviously had quite a bit
of experience of the difficulties in dealing with BT. In this
inquiry we have had various bad boys. The BBC are bad boys from
time to time. Sky is regularly a bad boy. Today it is BT. I notice
in your written submission that one of your conclusions is that
the regulatory process put in place must enable OFCOM to act in
a sufficiently timely manner. We heard earlier from Cable &
Wireless the difficulties they have had in local loop unbundling.
With your experience and past success, what sort of powers do
you see the Regulator having that would make them able to operate
much more quickly, because that is key to it?
(Ms Thomson) It really is about being able to move
in a timely way. Very often the Regulator gets it right but they
simply cannot get action—
303.—It is too late.
(Ms Thomson)—Within the time-frame. That is
really important to us and to our suppliers. We work across a
very broad vendor portfolio so we see absolutely just how difficult
it is for them trying to roll out services. Clare, would you like
to make a comment?
(Ms Gilbert) I do not know if Simon wants to say anything.
I hate to show Germany as an example of good regulation, but in
many of the German regulatory processes of the telecoms regulator
there are specific time levels within which hearings have to be
heard and decisions have to be made, and I think something like
that should definitely be considered. I keep going on about this
18 months to bring us narrowband flat rate but it was extremely
long and businesses waited for it for a long time. Businesses
had launched services in anticipation of the narrowband flat rate
tariffs coming in soon and then obviously, and very publicly,
went out of business when they failed to be delivered. I think
the prospect of imposing some sort of time limit on the Regulator
for coming to decisions would be very useful. One of the frustrations
we have experienced is a certain passivity in the way that proceedings
are dealt with by OFTEL. There is very much a paper-focused, passive
approach to information. There is not much proactive investigation.
Any possibility for more proactive investigation into market situations
that can be seen on the face of it, for example, saying, "More
people appear to be going to BT to buy flat rate interconnection
than anywhere else. Why is this? What is the problem in the market?"
If OFCOM could more spontaneously take on these sorts of investigations—
304. How can they do that? For example, would
you welcome OFCOM sitting in your office watching your operations
and maybe looking for things to investigate?
(Ms Gilbert) Greater, more informal contact and evidence
collection could be very interesting and beneficial for the industry.
I also think getting more staff who have had previous industry
experience would also be very helpful because they come with a
different perspective from the pure Civil Service perspective.
Getting a combination of the right skill base, people with industry
experience and people with a Civil Service background and people
with the relevant technical knowledge, but also a process that
enables enquiring minds to do some investigation would be useful.
305. With your background and experience you
sound as if you would be an ideal person, but they probably do
not pay the same rate, that is the problem.
(Ms Gilbert) I am not going to answer that question.
306. Do you see any difficulty in the future
shape? All of your past experience has been with OFTEL. In the
future OFCOM is going to cover a much wider area of interest,
television, radio. They are much more glamorous than mere communications
and telephone lines. Do you see yourself being side-lined slightly?
(Ms Thomson) I think the answer is yes. Simon?
(Mr Hampton) The answer is probably yes, but there
is also an opportunity in all of this. One of the frustrations
that we have experienced is that we felt OFTEL sees itself as
merely a dispute resolver between telecoms companies, as though
resolving disputes between telecoms companies in itself was what
it should be doing, whereas in practice this is what convergence
is all about. It is just that telecoms is the infrastructure upon
which this whole new digital economy is delivered. That OFCOM
will have this wider view of the whole convergence industry is
a potential advantage that we seek, contrasting that to the previous
speakers, who wanted to see a clear separation, the cross fertilisation,
an understanding of the economic impact of the decision in the
telecoms industry (which is the main bottle neck in the convergence
world and a lot of the questions before appeared to be trying
to look for other bottlenecks but they do not really exist except
in the telecoms industry) being able to bring in that wider view
of the overall economic impact of the regulated telecoms sector
is one of the potential pluses from the process.
307. That would require the much more proactive
approach that your colleague was talking about. Do you think there
is the potential for that without government pushing?
(Mr Hampton) To a certain extent it is the way that
is being provided for by the new legislation. Some parts of the
new Bill are predetermined by the way that the debate has happened
in Europe, and I was following that. There is a need in a certain
sense to be watching the markets there. There is a pretty fundamental
decision that regulators can take. They can basically react and
start rather complicated and lengthy procedures (which include
appeals at every step) and that could lead to regulation, or they
apply the new legislation which is much more flexible but they
are ready to apply it in advance and to seek out the bottle necks.
Today the legislation is relatively clear. It says, "X, Y
and Z are areas where you have to look very carefully and on the
whole we expect you to do certain things and certain regulations
will apply to incumbents", but in future it is entirely discretionary.
The new framework that is being created gives the Regulator discretion
and they have got the choice between being essentially passive
(which will mean they will always be running after events) or
active, at which point these new powers in their hands could be
extremely well used to deliberate on the digital market.
308. That seems to be a slightly different approach
from what we are hearing from everybody else. You are talking
about a much more hands-on, know the industry better on a daily
basis approach, so you can see ahead and perhaps be involved in
the planning of this convergence that everyone talks about. But
everyone else is talking about a much lighter touch which is a
quite different approach to the one that you are taking.
(Mr Hampton) We all want the lightest touch as soon
as possible, which is why Cable & Wireless' proposal of complete
separation is a nuclear option, but it has its attractions because
it might get you to the lighter touch quicker because you do need
to be thinking in fairly radical terms. At the moment we have
had a longer experience of telecoms liberalisation here than in
other countries but we are in exactly the same situation as other
European countries who maybe started later. It has not taken Britain
much further forward than countries that only started in 1998.
Given how telecoms is part of a much bigger game where the UK
needs to prevail, that is the reason why there is a potential
need for something much more radical now.
Chairman
309. One final question emerging from Mr Hampton's
return to the issue of convergence and also the questioning of
Mr Bryant about the wider interests of AOL, including cinemas
films. When we were conducting an inquiry into these matters early
in the last Parliament and we went to the West Coast of the United
States we had explained to us, not at Warner Brothers but at Sony,
Silicon Valley, that we could expect, before long, cinema films
to be distributed not in cans of celluloid but by being beamed
over the internet. Indeed, George Lucas's most recent Star
Wars had its premie"res in a number of places in that
way. What has happened to that technology? It does not seem visibly
or overtly to be moving forward?
(Ms Thomson) It is so developed I really could not
answer that from any position of knowledge. Simon, do you know?
(Mr Hampton) I do not know. I know that my nephew
is beginning to be involved in the digital transmission of movies,
but I do not think it is quite the one that Sony were talking
to you about.
Mr Bryant
310. Legally?
(Ms Gilbert) It is one of those questions that is
really dependent on speed. You cannot consider activating videos
over your narrowband telephone line, it is not going to work,
and I think we will start to see these sorts of services develop
once we have the mass market coming to broadband, which brings
us back to the access issue.
Chairman: Thank you very much indeed.
Another excellent session and we are grateful to you.
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