Examination of Witnesses (Questions 60-79)
OFCOM
2 MAY 2006
Q60 Chairman: Before I bring in Michael
Clapham and broadband I have one last regulatory question. When
you are doing a regulatory impact assessment ahead of a deregulation—and
when you do significant issues are involved—you can deregulate
without doing a regulatory impact assessment; that is correct,
is it not?
Mr Carter: We could.
Q61 Chairman: Do you?
Mr Carter: I would not like to
say we never have because I have a sneaking suspicion you might
have a bit of paper in your hand that says, "Ah ha!"
Q62 Chairman: No, I am asking that
question because I do not know the answer!
Mr Carter: I would hope we have
not, I think is the appropriate answer.
Q63 Chairman: So you think the norm
should be that you do one?
Lord Currie: Any significant deregulatory
change should have a regulatory impact assessment, yes.
Q64 Mr Clapham: Turning to broadband
services they are particularly important, particularly in rural
areas in relation to diversification which is taking place in
the economy, of course. I note that there has been an increase
in take-up of broadband but we still have significant numbers
in rural areas that do not have access. What are you doing to
ensure that people who do not yet have access are going to have
access in the near future? For example, what discussions have
you had with BT regarding this and what kind of responses have
you had from them?
Lord Currie: BT have enabled the
vast majority of exchanges around the country, even in rural areas,
so the extension of broadband is very widespread and of course
there have been initiatives by the Scottish Parliament, the Welsh
Assembly and in Northern Ireland to extend the coverage to those
areas where it is generally uneconomic to have an exchange enabled
for broadband. So we are very nearly at the point where the vast
part of the country can get broadband at a reasonable speed. Of
course, they may not get the speeds that are possible in urban
centres where the competition is much more intense but over time
one could expect to see technology and other changes bringing
those speeds in in a much more widespread way. So I think the
picture is a very different one now from what it was three or
four years ago when there was concern that Britain was way behind
on take-up and in the availability of broadband around the country.
Q65 Mr Clapham: I suppose the upgrading
of the exchanges and the removal of the distance limits have certainly
helped. My brief says that 99.6% of access but of course the 0.4%
that do not have access are quite significant and, as I say, they
tend to be in rural areas. Rural areas at this present time are
under a great deal of pressure to diversify in order to be able
to ensure sustainability, so it is important that they do have
access. In terms of the alternatives, has wireless access been
discussed with BT and, if so, what is their response to providing
that kind of access to and from rural communities?
Mr Carter: You would have to ask
BT that specific question but on wireless generally, in answer
to your question what are we doing about the un-served or the
underserved, one of the things we are trying to do is to get as
much spectrum as possible out to the market for alternative providers
to provide services to the un-served and the underserved, which
rather goes back to our conversation about what do you do with
the release spectrum and many others. We had our first auction
last week for some spectrum that had previously been allocated
for cordless telephones, digital cordless telephones that are
no longer needed. Over the next 18 months, two years we will probably
hold auctions for about 300 megahertz of spectrum. Is there a
likelihood that you will see increasing wireless services? Absolutely
there is. The mobile operators are increasingly delivering their
3G licence obligations; and you will have mobile broadband services.
As we were saying, we are holding BT firmly to account on the
access services division and the cost of wholesale access to the
local loop and we would hope to see local loop unbundling going
to maybe 1000, 1200 exchanges in effective competition. That will
not give you 100% coverage but it will give you north of 70% coverage.
I think the combination of all of those things will get us to
a position of multiple broadband service providers offering multiple
speeds. Will there be small residual pockets of the population,
largely rural that will be completely un-served? It is possible.
It is possible and I do not think we could sit here today and
say no, that would not be the case; but I think what we would
say is that the ingredients for minimising that are looking a
hell of a lot rosier today than they have for quite some time.
Q66 Mr Clapham: Coming back to your
responsibilities and some of the things you said earlier about
having the responsibility for the economic implications, in terms
of broadband there are clearly important economic implications.
Mr Carter: Indeed.
Q67 Mr Clapham: Does that impact
on to your responsibilities at all? Do you see it as impacting
on to your responsibilities?
Mr Carter: I would say that we
have put broadband provision and broadband take-up at the centre
of what we have done pretty much from the very beginning. Why
have we done that? Again, it goes back to your comments and the
Chairman's opening comments—connectivity at speed and ease
of use is central to a services-based economy; if you do not have
high-speed, reliable and resilient connected networks you do not
have an economy—you do not have it industrially and you
do not have it domestically. Whilst debates about spectrum allocation
for broadcasters are an important base they are a subsidiary question
to the quality of industrial connectivity for the country—they
absolutely are. We have always taken the view—and I believe
we are right in this—that you do not reach for a single
provider straight away because often in these debates you are
trading coverage and competition and I do not think we are competition-obsessed
but we believe that effective competition does ultimately provide
the better outcomes for customers. But there are also coverage
questions and you are constantly trying to get that balance right
and I think in broadband we are pretty much there. Broadband coverage,
as you rightly say, is 99.6%; that is 1.2% higher than you will
get to with digital terrestrial television or with analogue television.
That does not mean that there are not some people who are un-served
but it is a substantial place to be.
Q68 Mr Clapham: But in terms of some
of the discussions you have had, has it all been considered about
extending the universal obligation of BT?
Mr Carter: To Broadband?
Q69 Mr Clapham: Yes.
Mr Carter: There is much debate
about that; we have not taken a view on that yet. As you know,
there is a universal service on traditional telephone services
and therefore on dial-up by definition. We have not taken the
view that to impose a universal service obligation on broadband
is the right thing to do, we believe the market is too nascent.
Not least, I have to say, that it is the case today that 99.9%
of households are covered with ADSL broadband and yet we only
have 60% penetration. So there are many thousands of people who
could get broadband today from multiple providers at very cheap
prices who choose not to.
Q70 Mr Clapham: I accept that point,
but as I explained in my opening remarks, I am particularly concerned
about some of the rural areas and rural areas, as I say, facing
diversification because of changes in the economy and it is important
that they do get the access.
Lord Currie: If I may say on that
point, if you were to compare the position now for the rural economy
compared with, say, 10 or 20 years ago, the connectivity of the
rural economy is much greater and that allows location of new
services in all parts of the United Kingdom in a way that would
not have been possible 10 or 20 years ago. So there is a huge
opportunity, which is why I think the penetration of broadband
is going to have quite significant implications over time, about
where people live and where business is located. I think we will
see the start of that process.
Q71 Mr Clapham: Can I turn to look
at some of our competitors? In terms of where we fit into a league
table we are about midway, I understand?
Mr Carter: On take-up?
Q72 Mr Clapham: In terms of take-up,
and although we are perhaps doing better than some of our main
competitors like Germany and Italy in Europe there are others
that are doing better: for example, the Dutch are doing better
and I understand that Korea is doing much better. Is there anything
that we can learn from those countries to help us, particularly
with, as I say, the rural section?
Mr Carter: This is such an interesting
subject we have discussed this for a long time. We are a converged
regulator and you will not find many people who are more fascinated
by broadcasting than me, but I would observe that one of the things
that I do think hampers us as a nation is that we are a bit more
interested in broadcasting than we are in broadband in connectivity.
What is interesting about some of the countries you have described
is their benefits of connectivity are greater than ours. There
are some cultural issues there as well as some hard infrastructure
questions. There are also, I think, some issues of government
policy—government policy in Korea is a different thing than
government policy in most countries—and there are questions
about what is our position as a country on some of these questions.
It does not, again, address specifically the rural access question
but it would frame the debate in a way. But I think we would say
that we are comfortably going in the right direction—we
are talking about fixed broadband—but we should not forget
mobile. We have four GSM mobile networks and 2G mobile networks;
we have five 3G networks in varying degrees of deployment, all
of whom are talking about or offering increasing broadband services.
So our network provision is not simply fixed network provision,
you are seeing alternative networks, and that is before we are
beginning to see wi-fi access services at scale begin to be deployed.
We are not in a bad place.
Q73 Mr Clapham: Finally, with regard
to your discussions with the DTI, are they happy with what we
are doing with regards to connectivity?
Mr Carter: My own view is that
you should ask the DTI; I think it would be wrong for us to speak
on their behalf.
Q74 Mr Clapham: But your indications
are that they are?
Lord Currie: I think we have had
good discussions with the DTI and they are very supportive of
what we have been doing and they are pleased at the progress achieved—which
is both the combination of technology and of course we hope effective
regulation. But as Stephen says, it is better to ask them directly
what they think; they may give you a different answer to the one
they gave us, but let us hope that is not the case.
Chairman: I think John wants to converge
on this.
Q75 Mr Whittingdale: We occasionally
seem to fall into the trap of talking about people either having
broadband or not having broadband, but you have rightly made the
point that speed is equally important.
Mr Carter: Yes.
Q76 Mr Whittingdale: We now have
providers talking about being able to provide up to eight megabytes
but the key words seem to be "up to", and one commentator
I read said that in order to get eight megabytes you would have
to be able to look out of your bedroom window and actually see
the BT vans around the exchange. Is there a concern that where
we may fall behind internationally is in the speeds that we are
able to offer, that our network actually is not going to be able
to provide the very fast speeds that modern applications are going
to need?
Lord Currie: When I took the position
of Chairman of Ofcom people told me quite definitely that engineering
prevented more than one meg. going down the copper wire. There
has been a transformation over the last three years and I do not
suppose that that transformation is going to slow down. That is
one reason why the question of where fibre-wire is installed in
the network is very much an open question. Clearly the core part
of the network, yes, but is it sensible to take it to the curb?
Is it then sensible to take it into the home? That really does
depend on what the limits are on the copper wire infrastructure
we already have, and we have seen those limits shifting all the
time. So, yes, there must be a concern, we need to be concerned
about that question about whether there are limits on what speeds
can be achieved, but all I would say is that the transformation
we have seen over the last few years is pretty dramatic. If it
slows down then we will have a basis for worrying about it and
it will be for commercial operators to decide whether fibre investment
makes sense to deliver those even higher speeds.
Chairman: Can we turn to mobile telephony
and Rob Marris?
Q77 Rob Marris: Mr Carter, I imagine
that you go to Brussels from time to time for the European Regulators'
Group and so on. Do you have a mobile phone?
Mr Carter: I do but I have it
turned off!
Q78 Rob Marris: Pleased to hear it!
Mine is on silent! If you are in Brussels how much does it cost
you to make a call to the UK with your UK mobile phone?
Mr Carter: More than it should,
I think is the answer to that question. As you know, the Commission
and indeed the European Regulators' Group are spending quite a
bit of time on exactly what is the right solution to high roaming
prices.
Q79 Rob Marris: Does it not suggest
that when you said earlier that effective competition provides
better outcomes that that is not always the case because we have
the four main operators and the five 3G operators and so on, yet
it still costs an awful lot of money when you are using a UK mobile
phone within the European Union to make a call to the UK or indeed
a local call within a country where one is sited. What is Ofcom
doing to contribute to the process of changing that?
Mr Carter: I take the point and
it is a point well made and consistently made by people. As I
am sure you know, it would equally cost you a lot if you were
on a Spanish call phoning home to Spain or if you were on an Italian
phone calling home to Italy, so it is not a uniquely UK problem.
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