Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 80-83)

1 MARCH 2005

Ms Karen Thomson, Mr David Carr, Mr Eric Abensur, and Mr Simon Persoff

  Q80 Mr Clapham: That is good to hear. So your concerns, really, come down to the discrimination in the market and the feeling that Ofcom have got to be positive in dealing with that?

  Mr Persoff: Yes. Ofcom is a national competition authority as well as a national regulatory authority. In its Strategic Review it has recognised the fact that competition law has not acted as a constraint on BT's behaviour up till now. We are part of an international company, which has its historic operator in France; it is our position that where competition law acts as a competitive constraint on the incumbent to the extent that they are not engaged in unlawful activity, then such structural measures as are being suggested (and may even go further, according to some of our competitors) may not be necessarily appropriate. However, to the extent that there is clear evidence that BT is not constrained by its competition law obligations then equivalence is appropriate.

  Q81 Chairman: How do you view BT's proposals to reform themselves? Some people have welcomed them, some people have said "We'll have to wait and see how far they actually go", and other people have been telling us that they are a bit thin on the detail; that they have the bones but not much flesh. Are you in any way concerned about this restructuring of BT or is it not something that is a great source of anxiety to you?

  Ms Thomson: I am quite a practical person and while I think good intentions are wonderful things, you do not get many points for that. I have been in the industry a very long time and I have heard lots of good intentions from BT about how they are going to operate as a wholesale provider, and on the matter of equivalence that is a very good intention but what I want to see is them operating like the best wholesale type of companies that we work with in other sectors. The intentions and what they are saying are very good, but it is really about the practical details, it is about saying "If you are going to launch certain types of products then what are the required services, what are the support systems that go into that? What can we (AOL) as customers, expect?" If the equivalence agenda works then we will essentially have that which mimics structural separation; it will be a true wholesale market for our (BT's) customers who do have the kind of input that we have in other commercial situations. I have heard BT say a lot of those things, I still have not seen an overwhelming drive from the company to operate like that. David is the person in our business who operates with BT on a day-to-day basis, so do you want to add anything to that, David, in terms of the practicalities?

  Mr Carr: Coming back to the way that Ofcom is looking at the regulation, they are talking about a light-touch regulatory strategy, and that seems to us sometimes to support BT's infrastructure investments rather than rolling out the LLU process and really driving competition. We are keen to see Ofcom actually get its hands dirty on some of this stuff and drive down into the detail. It is great that they have set themselves a strategic framework, but I think now what we really need to do is to see them start delivering on some of the practical stuff, and that includes to force BT to put some more detail of what they are talking about in terms of equivalence and actually to see it working and operating and driving results.

  Q82 Chairman: Just one last question to you, on the impact of Next Generation Networks. How do you view this in relation to the products you will be providing?

  Mr Abensur: If we are—and we want and we must be—to be thinking always about the consumer, if we talk about giving much more high speed, if we talk about developing a new form of communication in services, to provide entertainment and communication services to the world through broadband and through DSL technology, Local Loop Unbundling, obviously, as we can observe that across Europe, is a very good route to do that. If we were talking three or four years ago about developing 15 megabit speed over DSL, I think few people would have believed it was achievable, and today we talk about 20-25 meg. It is not only about having the DSL technology enhanced every time; we talk about compression, we talk about new application and services that can be provided to the customer much easier. Do we need to talk about New Generation Network when we have today a copper wire which is available that can improve and enhance and provide all sorts of services? We are talking today about providing home watching through DSL technology with a WiFi connection; we are talking about mobile and fixed conversions through DSL, GSM, 3G network. We have all this technology available today. Make them work. Once again, we talk about Local Loop Unbundling, that is three letters, and as we mentioned earlier it is just at the beginning, so let us try to use this extraordinary network available to this country successfully and be available as much as possible to everyone.

  Ms Thomson: I would add to that there is an implicit assumption that innovation will come from BT's roll-out of new network technology, whereas I think we would agree with what Eric just said, which is that we have a network available, let us get out there and get our customers on to it. We both come from companies that have a history of innovation and bringing new products and services to market; what we need is access to the infrastructure and the actual certainty in terms of getting out there to enable us to move on to different services and platforms. That should not be uniquely delivered by BT; BT will make certain decisions about reducing its operating costs and opening up new networks that allow it to do that, but the innovation agenda is something that I think the whole industry can actually contribute to. I think there is a distortion; an assumption that BT will bring products to the market and then we will necessarily buy them; what we want is to get out there to have access to the infrastructure and then I think competition will deliver a whole range of services that are really only starting to be thought of at the moment. The question is how fast can we get there, to get that competitive environment operating as broadly and as deeply in the network as possible?

  Q83 Chairman: What sort of requirements are there of the regulator in relation to NGN? Is it to have these what seem like endless consultation processes, where everybody gets first, second, third and last words, as it were, or do you have to move more quickly?

  Ms Thomson: First of all, there is one thing we could do, which is to bring IP Stream back into the regulatory framework. If you bring that in there is more certainty and, therefore, the business cases start to be built in a different environment. That is the first thing we could do. The second thing, really, is about setting very strong service standards around the delivery of LLU. I think the adjudicator is doing a good job on that, and we need to push further and faster, because the big customer bases have not migrated yet; as I referenced earlier, the thought of moving in excess of two million customers is a really significant move. These are two things that would support the next stage.

  Mr Abensur: I do not have anything to add specific to that. Stability: let us get delivery of Local Loop Unbundling in this country. It is a formidable opportunity we have; we have key players willing to invest in that—Tiscali, AOL and Wanadoo—that have already got 40, 50 or 60% of the market. We are willing to get there, we are wiling to bring those new services to our customers; it is a formidable opportunity to invest money in this country, and we want to do that.

  Chairman: Thank you very much. It is very often in these inquiries that, when we have had a lot of other witnesses, the last witnesses seem to get a shorter time, but I think in some respects the clarity and precision of your responses have been such that we have not taken very long, but please do not think that is in any way a lower consideration of your evidence, because it was helpful. If there is anything else you want to let us know about then please get in touch. We may well get back to you on one or two points once we have crawled over what you have said. Thank you very much.





 
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