Examination of Witnesses (Questions 60-79)
LORD CARTER
OF BARNES
CBE
10 MARCH 2009
Q60 Mr Binley: Having said that,
are you saying that the width of the band is much more limited
with regard to satellite as we see technology at this moment?
Or are you saying that is not a problem?
Lord Carter of Barnes: It depends,
is the answer. I do not think that is the main issue.
Q61 Mr Binley: That is not an issue.
Lord Carter of Barnes: No.
Q62 Chairman: In terms of 3G mobile
networks in rural areas, are you looking at a universal service
obligation in that area as well?
Lord Carter of Barnes: We have
said that as part of our desire to try to resolve the spectrum
imbalance, if we could find a way of getting resolution, we would
want to look at what contribution the mobile operators could make
to universal service, through shared coverage obligations to extend
3G. At the moment the licences only require it to go to 80%, whereas
if you remember on 2G mobile it was a universal coverage obligation.
The difference, of course, is that with 2G mobile they did not
pay for the spectrum, they just got given it in return for a coverage
obligation, whereas in the 3G spectrum they both bid for it and
had a coverage obligation but the coverage obligation only went
to 80% on the grounds that the next 20% is very economically expensive
to cover and it may be that satellite has a role in some of those
areas.
Chairman: In terms of particularly business
access to mobile and broadband services, we have to be very, very
wary of these rural issues indeed, because some very important
businesses although small businesses operate in rural areas.
Q63 Mr Binley: I am concerned about
the size of the market, the value of the market, and whether there
is a real conflict between the cost and the value of the market.
It seems to me that most people do not want all the whistles and
bells, and many people are simply happy with a simple machine
that does a simple job. I am just wondering if the market at the
level we are talking will not narrow down to the point where the
return is not worth the investment. Do you see a problem there?
Lord Carter of Barnes: Could I
ask which market you are referring to.
Q64 Mr Binley: I am talking about
the mobile phone market.
Lord Carter of Barnes: I am not
sure I know enough to be able to give you an informed answer to
that. My experience in other markets is that, whilst it is definitely
true that in simple terms markets tend to divide 20:60:20—so
20% of the market are early adopters, will take everything, normally
at a very high price because they want to have it; 60% come in
when it becomes affordable/doable; and 20% want a kind of stripped
down version or in fact do not ever want to do it at all. One
of the interesting things about technology markets is that most
people end up wanting more than they would tend to initially,
and so the desire for new applications, things working faster,
that are always on, can do more things, have more channels, people
get their pretty quickly. We have seen that with digital television
and I think we are seeing that with mobiles.
Q65 Mr Binley: Therein lies my concern,
because it starts off being very, very expensive, return is there
pretty much from the beginning. Those days have gone. Technology
in almost every area has become cheap from the start. That is
my concern about the balance between the value of the market and
the cost of—
Lord Carter of Barnes: I see where
you are going. Look, if I was one of the five mobile operators
sitting here, I would tell you that the UK market is one of the
most competitive markets in the world, that the returns to an
operator in the UK are lower than virtually every other developed
market, that there is an over-supply of network capacity already,
and that, as you rightly say, prices are coming down and in some
instances are being regulated down, such as in termination rates
or in roaming, and therefore the amount of available return being
generated in the UK market to fund further investment is less
not more.
Q66 Mr Binley: That is the point.
Lord Carter of Barnes: Where would
that lead you? That would lead you to the view that you might
seek consolidation in the UK market. That is possible.
Mr Binley: That is interesting.
Chairman: I am going to change the subject
again, if I may. We will look at digital broadcast networks, radio
and some of the media issues.
Q67 Mr Hoyle: I first have one quick
question on spectrum capacity. Has there been enough left for
emergency services?
Lord Carter of Barnes: Definitely.
Some people would argue too much—but let us not go into
that one.
Q68 Mr Hoyle: That is fine. Moving
on to radio, I wonder if you can tell us what is the upside of
digital radio for UK plc but also what is the downside.
Lord Carter of Barnes: Do you
mean DAB or digital radio?
Q69 Mr Hoyle: DAB.
Lord Carter of Barnes: Let us
start with the downside because that is where the critics always
start. The downside of DAB is that it may be only one of a number
of digital technologies for radio. It requires users, listeners
to change their radios, to buy new equipment. I think that is
what the critics would say. They might also, if they are being
very technical, say that it is not particularly an efficient use
of spectrum, but in truth the spectrum allocated to DAB is a relatively
small amount and has very little commercial value.
Q70 Mr Hoyle: The other part of the
downside only reaching 90%?
Lord Carter of Barnes: That is
a current downside.
Q71 Mr Hoyle: That is going to be
upped.
Lord Carter of Barnes: Absolutely.
A current downside is that it only reaches 90%. That is an issue.
If DAB is going to be a primary distribution network for digital
radio, we have to get to FM levels of coverage. We make it very
clear in the report, I think, that that is something we wish to
see happen. Going back to an earlier question, that is an area
where we think the BBC has a key role to play. The upside of DAB?
Q72 Mr Hoyle: Yes, and digital as
well.
Lord Carter of Barnes: This is
one, if you like, not of market peculiarities but of particularities
of the UK. We like radio a lot in this country. We are big radio
listeners. It has a real purchase at a local level. It is highly
valued by listeners and users in providing entertainment but also
information, and very relevant local information, so we have a
significant history and still continued value that is placed on
radio services. The view we have taken in the interim report is
that there will be lots of ways in which radio is delivered digitally.
I suspect many colleagues around the table listen to the radio
on their television sets these days, if you have a Sky or a DTT
connection. Many people listen, not digitally, in a sense, but
on mobile handsets, although that is often with an FM chip. People
listen in their cars. Radio internet listening is growing. We
have said explicitly that we think there is a value in having
a dedicated digital broadcast transmission network for radio,
DAB. Why do we believe that? We believe that because even though
there are lots of other ways of distributing radio, much in the
same way as we said on television in this country, we have a tradition
of free-to-air television and we want to replicate that in digital,
digital terrestrial from analogue. Similarly, we want to have
a dedicated transmission network for radio, DAB.
Q73 Mr Hoyle: The report mentions
migration and the date of 2015 for migration. How likely is it?
What is the date based on?
Lord Carter of Barnes: It is 2009,
so it is six years. In the interim report we lay out some criteria.
We say that if they are met, we believe 2015 is the target date.
Since we have published that report we have had quite significant
responses from industry, and in particular, I have to say, from
the manufacturers and the retailers, saying: "If you don't
take a more determinative view of that date, you won't get there"—so
it is a kind of chicken and egg. If you say it is going to be
2015, then the retailers and the manufacturers and the car manufacturers
will say, "In the UK they have set a date, so we'd better
change our supply chain to fit it." If you do not say it,
then you will not get the date—so it is a kind of chicken
and egg.
Q74 Mr Hoyle: Which came first?
Lord Carter of Barnes: The chicken
or the egg, I do not know. One of the things we are very actively
consulting on is whether we need to take a more determinative
view on that date.
Q75 Mr Hoyle: What you are also suggesting
is another quango, another burden, another layer on industry?
Lord Carter of Barnes: Where is
the quango?
Q76 Mr Hoyle: That is the suggestion,
is it not, to have a quango?
Lord Carter of Barnes: In which
area?
Q77 Mr Hoyle: To cover year 2015
on migration, the Digital Migration Plan, the Government will
create a new quango, the Digital Radio Delivery Group?
Lord Carter of Barnes: I am not
sure that I would call it a quango. A quango, as I understand
the technical definition, is a quasi government body. I think
what we are saying there is if the industry is going to deliver
a digital migration plan for radio, they should take a leaf out
of what happened in digital television, which is they should come
together in an industry group which involves the retailers, the
manufacturers, the distributors, the transmission operators, because
unless you get all parts of the industry to collaborate, it just
does not happen. We have very live experience. It so happens that
in my current role I chair a sort of ministerial oversight of
that, but in truth what it is is an industry body.
Mr Hoyle: Is that not what quangos are
because you have also got the BBC and the commercial radio companies,
everybody is in there, and I would have thought it was a quango.
I am sure you must have a much better name; if it is not a quango,
what is it?
Q78 Chairman: A working group?
Lord Carter of Barnes: A working
group, thank you, Chairman.
Q79 Chairman: Before you move on
to other areas, can I ask one technical question on Digital Britain.
I am a bit surprised because action 9(b) is: "We will create
a plan for digital migration once the criteria are met,"
and (e) is: "We will conduct a cost/benefit analysis of digital
migration." I think the chicken and egg are the wrong way
round there certainly. The cost/benefit should be done before
the plan. How far advanced is the cost/benefit analysis?
Lord Carter of Barnes: You are
not the first person to pick me up on that, Chairman, if I may
say so. Perhaps it is slightly in the writing. What we are saying
is at the point at which the criteria are met you would have to
do a final cost/benefit analysis before you said, "And therefore
we are going to that date."
Chairman: Nicely argued.
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