Letter from Lord Tordoff, Chairman of the Committee,
to Ian Taylor, MBE, MP, Parliamentary Under-Secretary of State
for Science and Technology, Department of Trade and Industry
11442/96 - Proposal for a Directive on the application
of Open Network Provision (ONP) to voice telephony and on universal
service for telecommunications in a competitive environment
The above proposal has been the subject of recent scrutiny by
Sub-Committee B. Mr Julian Farrell of your Department and Mr
Andrew Tarrant of OFTEL attended the Sub-Committee's meeting on
30 January to brief the Sub-Committee on the proposal and offer
a response to some of the points made by British Telecommunications
plc in a memorandum it had submitted, and we are grateful to them
for the assistance they provided.
According to BT, it was essential that regulatory processes
and structures were reformed and streamlined at Community level
with only limited national variations. Further fragmentation into
national markets, they claimed, would be to the detriment of
customers and UK industry. BT was also concerned that the regulations
applicable after 1998 to operators deemed to have "significant
market power" were not sufficiently different from those
applied at an earlier stage of liberalisation to operators with
special or exclusive rights. In a competitive market such as
the UK's, BT claimed, specific regulation should be required only
exceptionally and should, contrary to the view expressed in your
EM of 11 December, apply to all operators and not just to some.
The Sub-Committee was not, however, convinced by these arguments.
It agreed with your Department that large and powerful operators
such as BT should continue to be subject to a substantial degree
of regulation to prevent abuses of their dominant position. The
extension of such regulation to all operators, however, would
be unnecessary and would represent a considerable barrier to
entry to the market. As a prospective new entrant to other Member
State markets, BT itself has an interest in ensuring that barriers
to entry are not too high.
For these reasons, the Sub-Committee endorsed the position
set out in your EM and agreed to lift the scrutiny reserve on
this document. I would be grateful if you would let me know in
due course the outcome of negotiations on this proposal.
10 February 1997
Letter from John W Butler, Director Regulatory Affairs,
BT, to Lord Tordoff, Chairman of the Committee
Thank you for copying your letter addressed to Ian Taylor
of 10 February 1997 to BT. We are grateful to the Sub-Committee
for considering our written comments and note that both the DTI
and OFTEL were asked to comment on our paper during the meeting
on 30 January. I would like to offer a few further thoughts in
the light of the Committee's conclusions following that meeting,
since there appears to have been some misunderstanding about
BT's position.
BT starts from a belief, which we understand is shared by
both the DTI and OFTEL, that the UK telecommunications market
is now not only arguably the most open in the world but it is
also highly competitive. We believe there is a shared objective
to remove unnecessary regulation and to use the extent to which
competitive pressures exist in particular markets as the yardstick
for deciding when the rules can be relaxed.
Given this background we are surprised that the Committee
concluded that "It agreed with your Department [the DTI]
that . . . BT should continue to be subject to a substantial degree
of regulation to prevent abuse of their dominant position".
We would be surprised if this was indeed the view of either the
DTI or OFTEL, since their policy is one of deregulation.
As noted in our paper, the UK is moving towards using normal
competition law principles rather than sector-specific regulation
in recognition of the competitive nature of UK markets. It is
the extent and maturity of competition that distinguishes the
UK market from markets in other European countries.
There may also have been some confusion about what it was
that BT was advocating. We were not suggesting that a substantial
degree of regulation should be applied to all operators. Moreover,
we also agree that more regulation to ensure fair competition
should be applied to those operators with significant market power
than to others. However, we do believe that this should be reduced
as competition develops. We believe that competition is delivering
huge benefits to all customers already, sufficient to allow the
level and complexity of regulation in the UK to be reduced. However,
much of the Voice Telephony Directive is concerned not with competition
issues but with general rules relating to matters such as the
publication of price and service details, quality of service,
lead times for connection and fault repair and so on. We do not
consider that such requirements are needed at all in a competitive
market, but if they are to be applied then it must be in the interests
of customers for them to apply to all operators.
Of course, the Sub-Committee is right to say that as a prospective
new entrant in other Member State markets, BT has an interest
in ensuring that barriers to entry are not too high. However,
we do not believe that customer protection measures such as these
would constitute a barrier to entry to the market. We would certainly
expect to have to achieve high quality of service levels wherever
we operate.
I hope you will find these few comments useful and would
be delighted to provide additional explanation of our views if
that would be helpful.
10 March 1997
Letter from Ian Taylor, MBE, MP, Parliamentary Under
Secretary of State for Science and Technology, Department of
Trade and Industry, to Lord Tordoff, Chairman of the Committee
The proposal for a Directive on the application of ONP to
voice telephony in a competitive environment was the subject
of Explanatory Memoranda (11442/96), submitted on 11 December
1996. Your Committee referred it to Sub-Committee B which subsequently
cleared it by letter dated 10 February 1997. The Commons Committee
considered it to be politically important, but not for debate
(9th Report, Session 1996-97).
In your letter of 10 February, you asked to be informed of
the outcome of negotiations on the proposal. I am writing now
to inform you that political agreement to adoption of a Common
Position was reached at the 6 March Telecommunications Council.
In my Explanatory Memorandum of 11 December 1996, I expressed
some concern that some of the provisions in the Directive were
over-regulatory. The text on which political agreement to a common
position was reached is now considerably improved in comparison
with the Commission's original proposal in this respect. In particular,
the more detailed provisions concerning Connection of terminal
equipment and use of the network (Article 9), Contracts (Article
10); Conditions of access and use and essential requirements
(Article 13) have been slimmed down. There is also some scope
for National Regulatory Authorities (NRAs) to disapply certain
provisions of the Directive once competition is delivering equivalent
results concerning tariff principles (Article 17) and itemised
billing, tone dialling and selective call barring (Article 14).
The more onerous provisions in the rest of the Directive apply
only to operators with significant market power (at least 25
per cent of the relevant market).
18 March 1997
