Examination of Witnesses (Questions 240-259)
Wednesday 21 May 2003
RT HON
ALUN MICHAEL
MP, MR STEPHEN
TIMMS MP AND
DR MICHAEL
DUGGAN
Q240 Ms Atherton: The impression
was that it was 79 per cent and that is just not the situation.
Alun Michael: No, the figure was
that it encompasses 68% of Cornish businesses soon to grow to
79%, but the figure which I also gave of sign-ups is 1,650 businesses
that are connected to broadband through ActNow, which is 14% of
reachable businesses in one year.
Q241 Ms Atherton: Yes, but this is
specific, it is because we had Objective One and it has come together
with a partnership of people trying to make it happen in the county
and it is great, but it is not going to be the answer across the
rest of the country and it is actually not going to solve all
the problems in the county of Cornwall. What the Government have
been doing are these broadband fund pilot projects and we have
had some criticisms within the Committee of these projects. Do
you think that the money has been effectively allocated or, in
retrospect, do you think that it might have been better to have
some more strategic guidance as to how that money was used?
Alun Michael: Firstly, I said
that I hoped to be able to pass on the information that was shown
to me on the map of the villages that were being reached and that
map also shows the areas beyond that where connectivity was not
possible but where wireless links were being experimented with.
So, we are not just talking about connections in towns and that
was the point I was making. As far as lessons for the rest of
the country are concerned, I made the point from the beginning
that the Objective One money is allowing things to happen in Cornwall
which perhaps might be more difficult elsewhere, but I think some
of the lessons that are coming out . . . Particularly the one
you have just mentioned of partnership, if you look on the ActNow
presentation that I think the Members of the Committee have, at
the bottom you have the range of organisations that are involved
in that partnership and I think that makes a very powerful point.
I think that through RDAs and local government in other parts
of the country, the message is, get the act together and get the
confidence and, rather than people saying, "It's too difficult",
to ask the question, "What would it involve for us to have
connectivity here?" I believe that organisations like parish
councils in many cases may have a role to play in getting the
answer to that question and then looking in the local community
and that was the sort of lesson that came out from some of the
villages that are connected in Cornwall. As to whether investment
has been done in the right way, it is always the case when you
are grappling with something new that it takes a little time for
expertise to build up. I certainly feel that, within Defra a year
ago, we were aware of broadband as an issue and that is why we
put a team together to look at the implications and the importance
of broadband in rural areas and started to seek to work in an
effective way with colleagues at DTI. If we had the knowledge
a year ago that we have now, we might have been able to accelerate
that but of course this is a learning process to develop. As far
as specific investment, I think we are certainly getting to a
point where I feel that this is now an opportunity to encourage
people to grasp rather than something that is a little bit too
far away to be understood and got on with but, on the actual investment—
Q242 Ms Atherton: We have had these
projects and they have been distributed through the RDAs.
Alun Michael: Stephen might want
to comment on the actual evaluation.
Mr Timms: May I first of all agree
with the point Alun made in that what I think is interesting about
ActNow is the partnership model which you mentioned as having
been very effective and I think that is a model that can be taken
up right around the country. The Objective One money will not
be available elsewhere but the partnership approach which does
seem to have been so effective in generating a higher level of
demand for broadband than would otherwise have been the case has
worked very well and can be replicated elsewhere and indeed we
have seen it being replicated elsewhere. There are now several
hundred community-based initiatives that are building demand for
broadband and therefore making it more likely that thresholds
will be reached and service will be provided. On the £30
million broadband fund however, on which I know you specifically
wanted me to comment, I think it is important to understand what
the aim of this was. It was a pump-priming fund aimed at running
some pilot projects and my assessment is that it has been successful
in doing that. There have been a number of very interesting initiatives
including actually the powerline initiative in Crieff about which
we were talking a few minutes ago. Others are encouraging the
use of wireless for broadband, for example, at Buckfastleigh and
there has been a range of them which I think have been very useful
in just exploring a variety of approaches and helping people to
understand what the most promising solutions for providing broadband
are likely to be.
Q243 Ms Atherton: Have you reached
some conclusions and, where there have been successes, is that
best practice and what works and is how communities can get connected
being shared or is it sitting on a desk in the individual RDAs?
Mr Timms: No, I think it is being
shared. If one looks, for example, at the remote area broadband
inclusion trial, RABBIT, that has been—
Q244 Ms Atherton: Keep on running,
keep on running!
Mr Timms: Indeed.
Q245 Mr Curry: But does it breed?
Mr Timms: There are five RDAs
that have taken that one up. It started with a smaller number
and others saw that it was working, so they decided to take part
as well and there are well over 1,000 small companies now that
have accessed broadband as a result of that initiative. So, we
are spreading the benefits of the experience from these initiatives
around the country and the projects are still going and there
will no doubt be more to learn. My impression is that it has been
a very valuable initiative.
Alun Michael: I think that spread
of knowledge and cross-fertilisation of ideas is very important.
Last week when I was talking to a number of people about broadband,
one of the BT people who was there is undertaking a secondment
with one of the RDAs. At the moment, we have the leader of our
team in Defra spending three days a week with Yorkshire &
Humberside RDA specifically relating to broadband distribution
and I think it is that way of DTI and ourselves linking the expertise
at regional local level and across departments that is actually
quite difficult to achieve but I think that it is one of the most
exciting developments that we are seeing take place.
Q246 Ms Atherton: From these pilots
and from other trials and the experience that is being seen around
the country, from a rural perspective, do you think that there
is a real danger that businesses will move away from the really
isolated areas serving the villages, communities, hamlets or maybe
just an individual property with a one-person business at the
end of the lane of the end of a lane which cannot get connected
up and will be economically cut off from the digital world and
that therefore those businesses will suffer? Is it not going to
be that rural areas and towns, just as I talked about earlier,
will eventually get connected up because they have the mass of
population that will make it happen but that these really isolated
communities will not access it in the long term and that we will
end up with a two-tier community with a small part of very isolated
rural people who are unable to access this critical new technology?
Mr Timms: I think that is a risk
and it is a risk that we need to address and that is why we are
doing all the work that Alun and I have been talking about. I
would actually turn it round slightly and say that, when I came
to Cornwall, one of the businesses that I met was a company called
Neutralise, which is a web marketing company, which had moved
from London to Cornwall precisely because they knew that broadband
would be available in Cornwall and they told me that they were
a six-person business and that they would not be that large if
they had stayed in London. So, I think that there is a risk for
businesses that are not served equally but there is an opportunity
for rural areas by facilitating the roll-out of broadband to attract
in businesses that would not have been there before. In the end,
that is why this is such a high priority for DTI because there
is a big impact on UK competitiveness from getting this right.
Alun Michael: I think it is very
important on the one hand not to be over-optimistic and not to
promise what cannot be delivered—and of course that is right—but
on the other hand not to be too pessimistic. I think there are
some organisations that have said, "It is difficult; it is
going to be a long time before there is going to be access in
rural areas" and so on and that is what I think is so important
at the moment. As far as I am concerned, DTI is not looking to
meet its targets by getting percentages of connections in towns,
it is also engaging with getting access to rural areas and creating
the sort of opportunities for businesses in rural areas or businesses
moving to rural areas that Stephen has just talked about. I think
it is a question of rather than saying that the glass is half
empty, that the glass is half full and asking how we increase
the amount of water in the glass.
Q247 Mr Wiggin: With all due respect,
minister, the glass is not even a quarter full. It has a little
dribble in the bottom and it is pathetic to pretend that it is
otherwise.
Alun Michael: Dear, dear!
Q248 Mr Wiggin: I know that you are
well intentioned, but this broadband for Cornwall ActNow is funded
by the European Union, it is an Objective One area and it is not
typical of what is going on across the rest of the country. There
are enormous steps that the Government could take if they wanted
to release the bandwidth necessary for radio broadband to be delivered
across the country but at the moment that is restricted. The Government
are even putting through the Communications Bill and that would
have allowed certain frequencies to have been made available which
I think at the moment are being occupied by our spy network.
Mr Timms: Of course, as we have
acknowledged, what is happening in Cornwall is funded by European
Union Objective One funding but it is not the case that nothing
is happening elsewhere. I, for example, was in Oakham recently.
I believe that, as of today, there is no broadband service in
Oakham but, over the next three or four months, there will be
three. There is a company that is unbundling the local exchange
to run its own service, a company called Independent Networks;
BT is then going to upgrade the local exchange for ADSL; and a
little organisation called Rutland Online is setting up a wireless
broadband service in the area. So, actually, there is a lot going
on around the country. On wireless, we are in the process at the
moment of an auction of 3.4GHz spectrum which we do expect to
be used for fixed wireless access and I think that auction will
take place at the end of this month and we are looking at extending
access to other parts of the spectrum which technically could
be used for this purpose as well, so it is not the case that nothing
is happening because actually there is a great deal that is happening.
Alun Michael: And I do not think
that it actually helps to talk in that way because talking about
a dribble in the bottom of a glass ignores the fact that if you
learn the lessons from Cornwall . . . It is not just the fact
that it is Objective One money. The Objective One money has rightly
succeeded in accelerating development in an area which was one
of the poorest in the country. That is what Objective One money
is for. The lessons that can be learned about what can be achieved
by that sort of partnership is a lesson that is relevant to all
sorts of rural areas and of course it is relevant to the work
of RDAs in other regions as well as in the south west.
Q249 Mr Wiggin: I think that one
of the problems people have in trying to work with the Government
is that, when we are celebrating two million users connecting
to broadband, we really are missing the point that something like
60% of houses in the UK already use the Internet. We are not talking
about technology that people do not understand and it is quite
important not to mislead the public. There are significant parts
of this country that cannot get broadband not because they do
not want to be in partnership, they desperately do, but there
are not enough people in each location for them to provide an
effective partnership and the whole problem with the Government's
approach is that it has been essential for it to be demand led
when in fact nearly all these technologies rely on being supply
driven and that is why there is a fundamental problem with take-up
of broadband. I am not actually keen to criticise the intentions
of the Government because I think that we all share the same desire,
that is to see broadband spread across the country. What we have
a problem with—
Mr Timms: If I could comment on
that. It is certainly the case that over a quarter of the households
in the country are not within reach of an affordable broadband
service today. That is about the same proportion as in the United
States. I think we need to recognise that this is not by any means
just a UK issue, it is an issue that is being faced particularly
in rural areas right around the world. What would be an interesting
discussion is what, in economic terms, the right way to address
this challenge is and, if you look at the history of development
of telecommunications, what you find is that the best approach
is a market-led approach and that where there have been attempts
made to provide large Government subsidies to encourage the roll-out
of new telecommunications, by and large that has not been very
successful. There is a short-term gain but what you end up with
is technology that actually people do not want and, as the technology
moves on, the fact that there has been a market distortion introduced
by large amounts of public subsidy proves to be a disadvantage
in the long term. Take, for example, mobile services. I can remember
the time—I used to work in the telecommunications industry—when
there were calls for subsidies to be provided to extend mobile
services into rural parts of the country. What actually happened
was that because of the competition between the different mobile
providers, that has driven availability of mobile services much
more effectively than any amount of Government handout would have
done.
Ms Atherton: Minister, have you used
your mobile in Cornwall recently?
Q250 Mr Wiggin: There is a fundamental
difference which I am sure you know because first of all the infrastructure
is owned by BT and of course, with the mobile revolution, that
was not the case.
Mr Timms: We have talked this
morning already about four different platforms for broadband.
The ADSL platform, BT's, the cable television platform, wireless
and powerline and, number five, satellite. So, it is not the case
that BT owns all the infrastructure for this.
Q251 Mr Wiggin: In rural areas, it
nearly always is.
Mr Timms: In the case of wireless,
again—
Q252 Mr Wiggin: Can I get my question
in, please. When you find the results of your auction for the
3.4GHz, will you let the Committee know what the take-up of that
was. The other issue that I think is very important is the issue
of state aid because there is no point in us bickering as to who
owns what when actually the Government have maybe more opportunities
to fund the five different platforms as you have rightly pointed
out, but there is a problem which is the Government's interpretation
of the European State Aid rules. Could you say a little about
that because would it help if broadband were designated a service
of general economic interest?
Mr Timms: For the reasons that
I have set out, we do not think that large amounts of public subsidy
are the right general approach to delivering broadband across
the country in rural areas and others. My view is that effective
competition between different providers of service, as we have
seen in the case of telecommunication service in the past, is
going to be the most effective way to get the broadband services
that people actually want to every part of the country. I turn
the question back and ask, is there a particular case where you
think there is a requirement for state aids or public subsidy
where it is not possible at the moment and, if there is, then
of course we would look at it?
Q253 Mr Wiggin: If we take those
five platforms that you touched on, actually, in rural areas,
satellite is not a possibility because it is simply too expensive
and cable is not available generally in the roads, so that leaves
ADSL and radio as the two real possibilities. Radio is not going
to necessarily work particularly on the current frequencies in
hilly areas—and the Welsh Affairs Select Committee on which
I also sit looked into this—but, in some places, radio would
be probably the most appropriate and, in others, it simply will
not work, but that is the one, certainly in my constituency, which
would seem to be the most logical but again the right frequencies
have not been available up until perhaps this auction that you
mentioned. ADSL is available because nearly everybody has a telephone
and certainly people who are planning on running a business will
have a telephone and would expect to use ADSL. The problem with
ADSL is the cost of enabling an exchange and BT tell me that the
cost is somewhere in the region of £250,000. That means that
there is really only one way of getting broadband and that is
through the telephone line and nearly every exchange will be owned
by British Telecom and that is a monopoly situation. So, when
you ask, "What can the Government do?" the Government
can look at the way that BT have to compete as a company and look
at the way that they have to meet that £250,000 bill for
enabling those particular exchanges. The problem is that, at the
moment, that funding from the Government goes to the regional
bodies and I think that Advantage West Midlands has something
like £2.6 million from the Government to encourage broadband.
So, I am not criticising what you are trying to do but because
of these state rules, it is very difficult for you perhaps to
achieve enabling of those exchanges.
Mr Timms: First of all, I think
we would all agree that it would be in the best interests of rural
areas for there to be competitive provision of broadband as elsewhere
in the country. It sounds as though you are suggesting that we
need to accept that, in rural areas, it will only be BT. I do
not think that is right. I think we can expect competitive provision
in rural areas as well and it is certainly in the interests of
rural customers that there should be. On satellite, we have seen
all the RDAs in the RABBIT project, for example, supporting business
use of satellite broadband including subsiding it. As far as I
am aware, there have not been any state aids issues with doing
that. So, I do not agree that satellite is not an option.
Q254 Mr Wiggin: Do you know what
a company would pay to be part of the RABBIT scheme?
Dr Duggan: There are a number
of different satellite suppliers signed up under the RABBIT scheme,
so it depends which satellite provider, or indeed there are some
wireless providers as well, they wish to adopt. There are subsidies
provided by the RABBIT scheme to SMEs which I think are of the
order of £700 which is most of the equipment costs for setting
up a satellite which is one of the principal barriers.
Q255 Mr Wiggin: So, the answer is
that nobody actually really knows what a company would be expected
to pay under satellite but you are at least trying to help. I
am not trying to catch you out but it is actually a crucial question.
Mr Timms: We can provide the detail
on that. The point that I wanted to make is that it is not the
case that people cannot provide subsidies for satellite broadband.
It is happening and hundreds of companies are benefiting. Secondly,
BT has come forward with the exchange activate idea using mini
DSLAMs where they are proposing that there should be some possibly
public, maybe private, financial contribution to allow them to
ADSL enable an exchange for a relatively small number of users,
around about 30, and again I do not believe that the state aids
rules are going to prevent that from happening. So, I think that
the position is actually more flexible than your questions suggest.
Q256 Mr Wiggin: I am quite glad to
hear that. So, do you envisage that you will directly fund BT
to allow these small DSLAM boxes to be put in? Is that what you
are saying?
Mr Timms: No. The proposition
is not for Government funding, I think the proposition is that,
in an area, there may well be some locally-derived funding which
could come from the public sector or could come from the private
sector which would make the enabling practical.
Alun Michael: The figures for
that sort number is something like 30,000 rather than the quarter
of a million that you mentioned for the enabling. So, if you have
a place with a number of companies, particularly where you have
perhaps one or two users who have a significant business need
of the sort that was being referred to earlier, they are not necessarily
excluded and I think it is that sort of development and the fact
that people are trying to push out things like the distance from
the exchange has increased over the last year because some of
the technical problems have been overcome and I think that is
quite important.
Q257 Mr Wiggin: BT have managed to
extend the range from five to six-and-a-half kilometres from an
enabled exchange, as I understand it.
Mr Timms: That is correct.
Q258 Mr Wiggin: The problem for the
private businesses that would offer, perhaps, local radio broadband
is that inevitably they have to connect to the big picture, if
you like, through the fibreoptic cables which they would rent
from British Telecom and there is a fundamental problem. I am
actually very keen on supporting what British Telecom have done
but they are essentially the monopoly holder. You would not normally
find a Conservative MP asking what support the Government are
going to give to these particular businesses, but this is the
problem, that we are dealing with a monopoly supplier and therefore
any private sector that links in has to get their cable through
BT and, if there are any delays or if there are any breaks in
that cable or any other problems, that company will then go out
of business and there is no choice for them. They have to get
their fibreoptic cable that way.
Mr Timms: Can I just make some
comments on that. You are absolutely right about the fact that
backhaul is the major obstacle to providing the sort of service
that you are describing. I mentioned the wireless service that
Rutland Online plans to operate in Oakham. They say that that
service will cost them £90,000 to run over two years of which
£50,000 is accounted for by the cost of the backhaul, but
that is where I think the public sector procurement exercise over
the coming months is going to make a substantial difference and
there is an interesting example in your area in the West Midlands
where Advantage West Midlands has let a contract for providing
broadband to schools and universities. I think that contract has
been won by a consortium in which Telewest is the major communications
provider. So, I do not agree that we only need to look to BT for
infrastructure and it is an explicit aim of that initiative that
it will provide infrastructure which can be used as backhaul for
exactly the kind of rural service that you are describing.
Q259 Mr Wiggin: I think you are right
except that you must not confuse the difference between what Telewest
can provide in Birmingham or in areas where there are proper cable
networks from what is actually going on out on the ground on the
Welsh marshes and there IS a significant difference between rural
and urban links.
Mr Timms: The Advantage West Midlands
initiative is across the whole region right out into Shropshire,
for example, and—
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