Broadband - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Question Numbers 240-252)


24 NOVEMBER 2009

  Q240  Chairman: I said you were a nice man!

  Mr Timms: As I understand what has happened with the BT rates bill, the valuation, which was very carefully and meticulously carried out, has reduced partly because of local loop unbundling and partly because of the kind of issue you have raised—exchanges being disposed of, and so on. But it is all done on an objective basis and the same rule is applied everywhere and that is an important strength of the system.

  Chairman: Valuation has always been an art form and is not objective, as well you know—it is an art form. Mark Oaten?

  Q241  Mr Oaten: Just on this point of rating, did the DTI not have a report recommending that there should be a de-rating of fibre in the past? Have government departments actually not recommended that?

  Mr Timms: I do not know whether government departments have. I have seen suggestions of it from time to time, not from government departments but from those outside. My case is that introducing anomalies into the rating system would not be a good idea. I do not think it would be a sustainable way of supporting what all of us want to see.

  Q242  Mr Oaten: You are not aware of a Government-commissioned study which has recommended de-rating?

  Mr Timms: I do not think I am familiar with any study to which you might be alluding.

  Q243  Chairman: I have to say that I am becoming uncharitable now. I think that you are defending the status quo and the Valuation Office rather than defending the roll-out of Digital Britain, and I think that is quite serious. I really think that the Valuation Office over the years has been Neanderthal, Luddite in its attitude to telecommunications and I think you have to challenge them very hard. Another anomaly, for example—and this comes from the Guardian, February of this year—"Dark days for fibre start-ups". This is not a quote; it is a summary of what it says. "The current rating system does not differentiate between how fibre is used. A prominent example is Sohonet, whose network services the film industry and has run projects between Sydney and Los Angeles out of London. Sohonet's fibres are exclusively for this and consequently spend large portions of time inactive, unlike telecommunication companies whose networks are always busy. Therefore, the network, while essential, is not as profitable as the same cable owned by a telecommunications company, but nevertheless is rated the same." So there is another anomaly in the rating system affecting Digital Britain.

  Mr Timms: You are putting me in a slightly difficult position. Again, this is a case with which I am not familiar. All I can say is that I do think there is an important strength in the rating system in the UK and that it is based on pretty objective criteria. It may be in some instances that the criteria used are incorrect and then they can be challenged, and there have been challenges in court over this and the courts have upheld the view of the VOA. But if there are errors in how things are done then they certainly should be looked at.

  Q244  Chairman: There are lots of anomalies here and I think that big changes are needed in the rating system. I think that it discriminates against innovators; I think it favours the incumbent; I think it will choke Digital Britain unless you are very careful. Can I ask one thing? BT rates bill is down—why? If you cannot tell me now I would be grateful for a note afterwards as to why BT's bill has fallen.

  Mr Timms: My understanding is that it is primarily due to the value of BT's assets falling; that is in consequence of greater use of local loop unbundling. You made a point which may well also be correct, that some exchanges have been disposed of and so on.

  Chairman: It does seem though to be quite a large reduction while their competitors face quite large increases. I think we will leave it there. I have serious reservations on this aspect of the Government's policy towards digital Britain.

  Lembit O­pik: It seems fairly obvious to me that the problem here is that the rating system is about solid bricks and mortar and stuff like that, and we are living in a virtual world today and trying to rate a virtual world on the stuff that carries it just does not make sense.

  Chairman: And satellite providers of course will not be paying business rates on their link—up links and down links, I imagine. That is another thought.

  Q245  Lembit O­pik: Smart metering obviously is very important and it ties in with feed-in tariffs and everything that goes with it. Given the potential synergies here, has there been any consideration as to how smart metering and Digital Britain projects might work together?

  Mr Timms: I think this is an important point and there has been some reflection on this. I think that there could well be some synergies to be taken advantage of. Smart metering roll-out is going to be a huge project—a difficult one, a challenging one; so will the roll-out of next generation broadband and we are looking in the Department at how those two initiatives could complement each other and be mutually supportive to each other's objectives.

  Q246  Lembit O­pik: Wireless technology is obviously a natural consideration, not least because you do not really need to have a very high speed connection to do what they need to do with this. It is also being considered, as we have discussed before, for providing broadband in places where wireless is too expensive. Could the two programmes be merged so that if you can do the smart metering with the smallest modifications, you can also do so with broadband?

  Mr Timms: I think that the objectives of the two are rather different and so I would not favour merging them, but I do think that there is scope for them to work quite closely together and to benefit from each other.

  Q247  Lembit O­pik: There is also the JANET project with which you will be familiar, about connecting schools to the network. Is there a way that you could use the JANET project to also provide the communities around those schools with broadband?

  Mr Timms: As I understand it, JANET is about universities rather than schools. One of the reasons that we have done so well on the first generation of broadband has been the use of public sector demand to drive out services into areas that otherwise might not happen and schools have been very important to that, along with hospitals and doctors' surgeries. There could well be scope—and I imagine that there will indeed be the possibility of that happening in the future with next generation broadband as well. JANET, as I understand it, is an academic network for universities and so there could be circumstances in which bits of that infrastructure might help a wider purpose, but I would have thought that that would be fairly limited. I am speculating only.

  Lembit O­pik: I am not an expert on JANET and so you could well be right.

  Chairman: That is one lady he is not an expert on, then!

  Lembit O­pik: I am a specialist in other areas as well; if you want I can start asking questions about aerospace, Chairman, if you provoke me! I am not completely clear about the role within schools myself and I am not going to busk it because I do not know for sure. It does nevertheless seem in a general sense that if a provider of networks which takes information quickly from one place to another has an infrastructure that there could well be some opportunity to freeload off that.

  Chairman: We understand there is a scheduled roll-out to schools of JANET and if there is such a scheduled roll-out then it seems a good opportunity.

  Q248  Lembit O­pik: The very heavy and exciting commitment to roll all this out by 2012 will be great news for all my villages and all the individual communities and so forth. I do also observe that in 1997 the Government said that every house would be connected to the National Grid by 2000. We have talked about JANET; there are an awful lot of houses that are still using "gennies" to get their electricity. I wonder how assured the good people of Staylittle et al can be that really by 2012 we will be getting at least the capacity of 2Mbps, however remote their living conditions?

  Mr Timms: I think that they can be very confident about that and we are determined to achieve that. I think that there is quite an interesting analogy between the roll-out of mains electricity and the roll-out of next generation broadband. The roll-out of mains electricity took some decades. I think that without public support the roll-out of next generation broadband will take some decades as well. My view is that we need to move much faster than that and that is what the levy will enable us to do.

  Q249  Lembit O­pik: There is a gentleman in my constituency who said that he was involved in using the National Grid, such as it was, for radio communications in the past. However outlandish it seems, I feel obliged to reflect that what he would want me to say is that there may actually be a practical way to use the electricity network to communicate information as well, and I am sure that there will be a lot of people willing to make some compromise in terms of the line speed to have line speed at all.

  Mr Timms: There have been some projects of this kind. I visited one that Scottish and Southern Electricity was piloting and, as I understand it—and Rachel might know more about this than I do—that ran into some technical difficulties of interfering with other things and so it has not made as much progress as was hoped, but there could well be potential there in the future.

  Ms Clark: It is one of the technologies that they are considering in relation to smart metering because obviously there is a direct synergy there.

  Q250  Chairman: Can I ask you to flesh it out, about the possibility of using smart metering roll-out to deliver a low level broadband service universally because there is a relationship there.

  Ms Clark: There is certainly a dialogue between ourselves and the smart metering team. I think that there is not an ideal synchronicity of timing in that we are aiming to have reached everyone by 2012 and I think that the smart metering project deadline is 2020, and they are expecting to actually be rolling out more 2013 onwards. I am not sure what the exact timings are but I am not sure that we dovetail as nicely as one might hope.

  Q251  Lembit O­pik: I used to be very involved with energy policy. The energy companies are very, very keen on smart metering and on the feed-in tariffs. Their frustration is that the government really needs to prescribe what system you want them to use and they will use it; but what we cannot have is the same as we had when videos first came out with VHS competing with Betamax and then the industry deciding which was best to invest in and to commit to. So this is one area where the industry would be grateful for a directed steer.

  Q252  Chairman: If that practice had come in a couple of years ago of course there might have been synchronicity from the two programmes but we may be too late for that, but I understand that point. We are up against the wire in terms of time and I just observe, by the way, talking about electricity roll-out that my constituents would love to have gas in many parts of my constituency and the same energy you are showing for broadband would be very welcome on gas. But we are grateful. We have been a little provocative sometimes today and I apologise for that.

  Mr Timms: No apology required.

  Chairman: But these are important questions and what I would like to say in conclusion—this is our last evidence session in this inquiry—is that we do actually share your enthusiasm and the Digital Britain enthusiasm for next generation access and we understand its transformative power; but if sometimes we challenge and question it is to make sure that we get it right. But the principle of as wide access as possible is one that we all share in this Committee. Thank you very much indeed.

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