Examination of Witnesses (Questions 220
- 227)
TUESDAY 6 MAY 2003
OFFICE OF
TELECOMMUNICATIONS
Q220 Mr Curry: There does seem to
be a good old British muddle over this though. Almost all of our
witnesses have said that there is a problem with state aid, so
we cannot do these things. Other people have said that it does
not seem to be stopping the French or anybody else doing it. You
have said that you are not quite sure or you do not think so and
we will probably ask a government minister who will probably not
be sure either. At some stage is it not possible actually to give
an answer to this because it does seem to be the sort of Banquo's
ghost, as it were, in all these discussions to actually do what
we cannot do? We are now in the ludicrous position at the moment,
just out of interest, to change the subject, where we have a European
rule in existence over the burial of sheep on farms, but no national
regulation has yet been passed to enable it. It looks as though
we are getting into a similar sort of position with nobody quite
knowing what we can do and what we cannot do. Whose responsibility
is it to give us a very clear ruling and get on with it and wait
for someone to challenge you if it is wrong?
Mr Edmonds: Well, I am delighted
to say that responsibility is that of the Department of Trade
and Industry and not the regulator. I do not think we are in a
muddle though or I do not think I am in a muddle. I may appear
to be in a muddle, but I do not think I am. My job as a regulator
is actually to ensure that BT behaves according to its licence.
My job as a regulator is to enforce the competition law, and providing
the Government, if it is getting involved in this process, does
not encourage BT to breach its licence or does not encourage BT
to act in a way which would be counter to the competition laws
in place in this country, I am perfectly at ease and so far in
this area I have no evidence that either of those potential breaches
is going to happen.
Q221 Mr Curry: So given that statements
you make before a Select Committee or statements made in Parliament
do have a certain force of law, as it were, and people do refer
to them, then you are quite happy to state, as far as you are
aware, and given those conditions you have just set down which
relate to the relationship with government and BT, that nobody
should feel inhibited in pursuing the course of action they envisaged
by European competition law because you think that is a false
concern at the moment?
Mr Edmonds: No, I do not think
it is a false concern. What I am saying is—
Q222 Mr Curry: But you think it does
not apply and they are not in breach at the moment?
Mr Edmonds: People should act
and obviously always government should act in conformity with
European competition law just as UK companies should act in conformity
with European competition law. What I am saying is that, as far
as I am concerned, my responsibility is to ensure that there are
no breaches of licence or of competition law. I have no evidence
so far that any of the schemes that we are talking about now,
which are aggregating demand, are going down a route because government
are going down a procurement route which is competitive or are
going down a route that should get anybody into difficulty.
Q223 Mr Curry: And there is no doubt
in your mind at all as to what the competition rules actually
say from the European Union side?
Mr Edmonds: In terms of competition
law, I am quite clear, yes. In terms of state aid, no, because,
as I said in answer to the earlier part of your question, I am
not talking about state aid.
Q224 Mr Curry: Everybody is raising
this and it just sort of hovers around.
Mr Kenny: I think there are two
issues to differentiate. The first is whether the Government at
the moment are doing anything which might hit up against the state
aid rules. Now, as the Director General said, we have no reason
to believe that they are. The European Commission, which is the
policeman in this area rather than us, has not raised any issues
and there is a regular dialogue between the RDAs, the devolved
administrations, the Broadband Task Force within DTI and the experts
on state aid within DTI who help to keep all activity on the straight
and narrow. Now, I think that is one question, whether there is
a compliance issue, and at the moment there does not seem to be.
The second issue is the rather broader one which is whether the
state should actually be giving aid in this area, which is one
of the focuses of your inquiry as a whole and that is a rather
bigger issue about whether market failure will occur, at what
level it will occur and so on, and again that is something you
have been exploring with all witnesses and will no doubt talk
to Mr Timms and the DTI about further.
Q225 Mr Curry: But, as far as you
are aware, any differential performance between the UK and other
European Union countries is because of the different approach
we have taken rather than a different way of dealing with the
European rules?
Mr Kenny: As far as we are aware,
the markets in each Member State are very different both in terms
of historical legacy of market structure, how far there has been
a well-developed narrowband market in the first place before broadband
and at the moment all of those seem to us to be much more determining
of where countries are on the broadband ladder as opposed to any
individual initiative by regulators or by government.
Mr Edmonds: If I could supplement
that, I think this is a very interesting question because you
move from state aid to regulation. I think, as Chris Kenny says,
the regulatory regimes across Europe are very different and I
think the UK regulatory regime is much tougher. I think we have
been tougher on the incumbent, we have been at it for longer and
I think, as a result, we have got more competition. If you look
at the German or the French situation, the incumbents there still
have very, very high shares of the domestic market flows. We have
got BT's share down to 80% and falling and on business lines,
business telecommunications, it is below 50%. In some other areas
BT has only got a 20% market share, and I think the regulatory
regime in the UK is different from other European countries. Now,
to what extent that has impacted on the roll-out of broadband
in the last two or three years, I think it is impossible to correlate.
Q226 Mr Curry: And as far as businesses
are concerned, have you any information as to the costs to Continental
businesses and the equivalent costs to British businesses?
Mr Edmonds: No is the answer to
that question. No, I am sorry, is the question the cost of broadband?
Q227 Mr Curry: I am sorry, I asked
the wrong question. The thing which stimulated my question was
the realisation that in vast areas the UK is a very high-cost
country compared to most Continental countries for almost anything
you wish to buy. Have you any evidence that this is true also
of access to technology?
Mr Edmonds: I have evidence absolutely
to the contrary for both the UK consumer—sorry, I misunderstood
your first question. For the UK consumer, our prices, taking a
basket of products, are as low as almost anywhere in Europe. For
broadband, Oftel benchmarking shows that for consumers our prices
are as low as other countries in Europe with the exception of
Sweden and prices are similar in the USA, so the UK consumer,
UK small business and UK large business are actually getting a
very good deal for broadband.
Chairman: Thank you again, Mr Edmonds,
for coming along this afternoon with your team. It has been a
very useful session indeed. If there are any further points which
come to mind once you have left us and you want us to be aware
of, please drop us a note and if we have got any further questions
which come to our minds, we will write to you, if that is okay,
before we complete our report. Again, thank you very much indeed.
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