Examination of Witnesses (Questions 640
WEDNESDAY 19 APRIL 2000
Lord Woolmer of Leeds
640. A couple of matters, it is not meant to
be a loaded question, although it obviously is, I fear, in part.
What proportion of your membership work for BT and where do the
(Mr Young) The two main employers are British Telecom
and the Post Office, although we are represented in other telecommunications
companies. We also have just over 3,000 members in the Alliance
& Leicester Giro Bank. The proportion is something like two
thirds Post Office and one third British Telecom, that is how
it breaks down. We have something like nearly 100,000 members
from British Telecom.
641. I asked that because I thought your comments
on the Local Loop did seem to rather smack of a company union,
if I may say so, and if somebody else does not come back to it
I will come back to it. Can I talk about universal access? Tony
Young, you gave me a very stimulating resume of developments in
the future when we were at Wilton Park. What you convinced me
of was that there is going to be a multiple range of points of
access, methods of access. If that is the case, does this not
pose a problem if any Government wanted to say that everybody
should have access to whatever it is what is? What is the means
of access that they should home-in on or, perhaps, should Government
be very wary about free access, and so on, to equipment? After
all, we did not give everyone the telephone for free when the
telephone came in.
(Mr Young) They did not give everyone a telephone
for free but they did adopt a principle of universal services
and uniform tariffs, both in post and telecom. That has been important.
Although, it is true to say that you could not deny that during
the advent of competition we have seen increased telephone penetration.
We do not favour, particularly, any means of delivery because,
first of all, there are, as we say in our evidence, a variety
of methods of delivery of Internet access. Are we too biased in
favour of British Telecom? I think that is a legitimate question.
Obviously, with a significant number of our members involved in
it, we would not pretend we did not have an interest in the future
of the company. I do not think we would be frightened to argue
a different line, and we have done sometimes, when we felt they
were too bound up, if you like, with the company and their relationship
with one set of stakeholders, namely the shareholders, and they
were not taking into account sufficiently, in our view, the national
interests. On our reservations on Local Loop Unbundling the preferred
route would be to regulate. What we are seeking to develop is
the reservations that we have put in our evidence.
642. With the speeding-up of the introduction
of a digital age and digital television, and so on, do you think
that digital television is going to play a role in access and,
if so, what do you think of the timetable of events? Is there
anything that ought to be looked at in that area?
(Mr Young) The answer is almost certainly it will
do. We believe there is going to be access through a variety of
means, it will not just be a PC, it could be a games console,
it could be interactive television. You can already access via
On-digital and you can access via Sky. We certainly see a variety
of methods of access. We are pragmatic about it. Our view is that
if you want to develop universal access then a variety of methods
is one way of achieving it. The Government approach to it is to
encourage different methods of access. If we are serious about
a universal approach, then we have to encourage them.
(Mr Darlington) I would like to pick up on Lord Woolmer's
analogy with the telecom service, where you said that Government
did not require everyone to be given a telephone. That is certainly
true. They did require the Post Office, as it then was, to provide
a nationwide public telephone booth system, public telephone kiosks.
Since privatisation it is a requirement of BT Plc's licence to
provide such telephone kiosks. If the information society develops
the way we are discussing in this room, especially if government-to-citizen
services are going to develop, the inability to access easily
and cheaply the Internet is going to disenfranchise people very
severely. We would like to see a very wide range of public access
points to the Internet. Two years ago I visited Malaysia and before
I left Kuala Lumpur Airport I had already seen public access points
to the Internet provided by Telecom Malaysia. The British Post
Office should have provided public Internet access in every post
office years ago. They will eventually, I am sure. BT will, and
should very quickly, make sure that every public telephone kiosk
provides Internet access. The places where you go to have a passport
photograph, the photo booth, will provide Internet access. Internet
access should be ubiquitous, because if you have access at home
you will want to be able to access it anywhere, any time. We will
not all have UMTS telephones. There is a role for Government here
in creating an environment in which a very wide range of organisations
provide a great many forms of access to the Internet, including
its own services.
643. I was interested in your follow-up, the
point in your paper, where you said, "In three years time
you could expect the breakdown of e-commerce business-to-business
70 per cent, business-to-consumer 20 per cent and government-to-consumer
10 per cent. If it is only 20 per cent business-to-consumer in
that area, why do we want universal access? What I am trying to
get you to say is that we need a lot more than 20 per cent.
(Mr Darlington) Can I just emphasise, those are percentages,
they are not absolute figures. The absolute figure for each of
those three components is going to be vastly greater than now.
The present breakdown globally is about 80 per cent business-to-business
and about 20 per cent business-to-consumer. The proportion of
business-to-consumer is lower in Europe because we have not developed
that as effectively as the United States. The government-to-citizen
is negligible. We think that the proportions are going to change
but, of course, in volume terms the growth is going to be enormous.
I think the figure I most easily recollect is that Fletcher Research
have said that business-to-consumer sales in the United Kingdom
last year were about 6240 million and in 2003 they will be three
billion, that is the rate of growth. Perhaps we should concentrate
on the absolute figures that are there rather than the percentages.
644. Or, indeed, the percentage of total sales.
At the moment it is 0.6 per cent in the last quarter. Getting
back to this Local Loop Unbundling issue. In paragraph 14 in your
paper you said, "We recognise that competition has an important
role in bringing down tariffs and stimulating new services."
You go on to say, "Local Loop Unbundling has a role to play
in that." I have to say, that looks like special pleading.
"Serious operational implications for BT and its staff cannot
be rolled out without addressing such issues as safety and security."
We have just come back from a visit to Washington, where people
are more advanced in terms of the Internet, and practically everybody
is suggesting that really one of the blocks to progress is this
problem about the Local Loop Bundling or the lack of it. You have
a dilemma, do you not?
(Mr Young) The regulator has taken a decision, in
any event, and we are pragmatic about it. If you have a variety
of people entering telephone exchanges and installing equipment,
there is a problem there. We have had similar examples where we
have had contractors operating in the external environment and
we have had real problems with safety. There is a problem there.
645. Can you just explain the problem of safety?
I do not quite understand.
(Mr Young) If you are fitting equipment in this environment,
there will be electrical power that attaches to this equipment.
What we are saying is, when it is a BT controlled environment,
that is one thing, but when you have a variety of different companies
using that same environment we are not so confident about being
able to guarantee the safety and security of the situation, in
terms of the whether you can guarantee all of the employees that
they might use. If you are putting people in telephone exchanges,
you are giving them an opportunity to do something in that environment.
There are risks there. There are risks in terms of physical safety,
that they will not wire up something in the correct way. You are
also giving somebody a means of access. We do not want to over-emphasise
it, but what we are saying is there are ways you can still achieve
Local Loop Unbundling. There were four or five options that the
regulator looked at. What you said was that you want competition
in the Local Loop. We are not arguing against competition in the
Local Loop; its time has come. We are saying there are a number
of different methods. What we would say to you is this, what this
country needs is a broadband infrastructure, not constantly trying
to stretch a somewhat dated copper network. As long ago as 1989
we had policy of wiring up the whole of the United Kingdom with
fiber-optics. We could never persuade the company to embark on
the investment. We probably were ahead of the times. The concept
was right. We could not foresee ADSL and the development of compression
techniques. Certainly there are other technologies that have given
them an opportunity, if you like, to sweat the assets for longer.
We have not entered an opposition to competition in the Local
Loop but our concern about the methods chosen by the regulator.
646. Could you expand your view, that it is
important that regulators, both nationally and at a European level,
ensure there is no monopoly on any platform for accessing the
Internet and conducting e-commerce?
(Mr Young) Our concern is that whatever the platform,
whoever owns that platform, they should not be able to prevent,
whether it is BT or Murdoch with access via satellite, competition
in that area. There has been concerns expressed about that.
647. I am still slightly confused, because I
think you adopt a free market approach in one area, ie no monopoly
on any technical platform, and on the other areas, as least I
have inferred from what you implied, you do not really want people
to go in on BT's patch.
(Mr Young) As I said, we are in favour of and we recognise
the need for competition. I would go further, I would say that
we do support it. We are not adopting any narrow or any luddite
attitude towards this. There is going to be competition in the
Local Loop. We want it to take place in a safe environment. In
relation to any other platform of access, what we are saying is
that neither BT nor Sky nor anybody else should have a monopoly
on these platforms. There should be free and open access to it.
(Mr Darlington) I was going to point out, there is
no inconsistencies, far from it. BT does not operate a monopoly
on a technical platform, it has spent 100 years, and several tens
of billions of pounds, building a physical infrastructure. It
is now being asked to open that infrastructure to its competitors,
which it is willing to do, but at a price, which has not yet been
determined and is subject to some operational requirements which
protect the security of a vital national infrastructure. There
is nothing to stop somebody building an alternative infrastructure.
Baroness O'Cathain: Please, we have enough holes
in the road.
648. Staying on regulation, I think you are
the first organisation that has come and proposed, to use your
phrase, an Ofcom, which is a merger of the regulators. Would you
like to the expand on why you believe this should happen? Do you
think it should happen on a European-wide basis?
(Mr Young) In one word, convergence. That is why it
needs to happen. It is nonsense. When we talk about Ofcom, we
are talking about the infrastructure. We tend to deal with content
separately. We are talking about infrastructure. At the moment
you have the Department of Trade and Industry and the DCMS vying
with each other in these areas. I think we are beginning to win
the battle of ideas. A few years ago, when we tested the water,
there was a definite view of what we have we hold. Now that convergence
has moved us down the road, with the advent of cable television
what are you getting over the network? You are getting a full
range of broadcast services, you are getting Internet access,
or you soon will do, and you are getting a telephone connection
more or less thrown in. We believe technological convergence demonstrates
the need for combining those infrastructure regulators.
649. Are you impressing this on the Government?
(Mr Young) Very much so. We met with Patricia Hewitt
a couple of months ago and we agreed that we will have some contact
with the team that are working between the DTI and DCMS on this.
We will be conveying that message strongly and constructively.
Chairman: We came back from the States, where
they have a uniform approach and we were wondering why we do not
have it here?
Lord Faulkner of Worcester
650. Can I ask you about the paragraphs you
include in your evidence on cash, credit cards and smart cards.
You quite rightly point out there is customer concern that privacy
and, indeed, money itself can go missing or there is a belief
that it can go missing by the use of a credit card transaction
over the web. How do you see this problem being solved? How can
you see customer confidence being built up from that?
(Mr Darlington) The first point I would make is that
probably e-commerce is not as risky a proposition as most people
think. I personally buy books from Amazon.com and I do it with
one click, because they have all my credit card details. Frankly,
I am as confident in that as when I telephone the Royal Festival
Hall and give my credit card details over the telephone. In part,
it is a perception problem. In part, there is an obligation on
anybody conducting e-commerce to use the latest possible technology
to encrypt data of this kind and to make that information available
on the website. Most reputable e-commerce retailers do have a
move towards new forms of payment. We may develop forms of smart
card. We may develop forms of e-cash. You are probably familiar
with a form of e-cash called beanz, which are units of currency
given by some retailers and accepted by other retailers. Somebody
is going to make a fortune out of this.
651. It is called barter.
(Mr Darlington) Beanz do not exist, they are just
bits of digital data. We are going to see a range of different
ways by which people can pay for goods and services. Unless people
have confidence that there is not going to be fraud or a lack
of privacy e-commerce will not take off.
652. I think the mood is changing very, very
quickly. I entirely agree with what you just said. I was very
interested in the reference you make to one-stop shop. Could you
talk about that for a little bit? In particular, you put up a
number of options for the way this might be established. When
you were drafting it you must have had a preferred idea in your
mind about what you would like to have seen. Could you just tell
us what that is?
(Mr Darlington) I do not want to be too prescriptive.
We are governed a little bit by the fact I have a different hat.
I am Chair of the Internet Watch Foundation, which for three years
has operated a hotline in respect of one particular part of Internet
content, which is criminal content, overwhelmingly child pornography
and also some forms of adult pornography. We have also been asked
to extend our remit recently to racial hatred. We are already
getting some references which fall outside of our remit. I suspect
that, if e-commerce takes off the way people in this room expect
it to and want it to, we will have a whole range of problems,
some will be credit card scams, some will be poor customer service,
some will be copyright issues, some will be defamatory libel,
a very topical issue. I am not sure that customers will be able
to make these fine distinctions between what is a criminal offence
and what is a civil offence and that they have to go to one organisation
for pornography, another one for financial services and another
one for programming. We are exploring with people like yourselves
whether there would be an advantage in having one point, which
is well publicised, where everybody who has a problem with on-line
content, whatever the delivery mechanism, whether it is a PC or
a television set or a mobile telephone, whatever the nature of
the problem they can go to this point and this point will have
the resources and the training to say: this is a problem of child
pornography and it should go to the Internet Watch Foundation;
this is a problem of fraud and it should go to the Financial Services
Authority, if that is the appropriate one. They themselves would
not actually process and investigate all of the complaints, but
they would have enough knowledge and enough resource to be able
to log the complaint and give an initial response to the complainant
and say, "This has been referred to what we believe to be
the competent authority and they will investigate it." I
do not want to be too prescriptive but it may be that the Government
would want to set up such a body itself. The Government would
obviously be able to underline the confidence and give a lot of
trust to such a body. They may decide they do not want to get
involved in that way, it is better if it is an industry-led initiative.
It may be that you create a new body for that or it may be that
you go to an existing body, like the IWF, and say, "You are
already operating in this field, you already have mechanisms.
If we give you enough resource, in terms of money, to employ the
staff and do the training, would you do it for us?" We would
be interested to see whether this is an idea which commands popular
653. I think this is a very, very important
area and extremely interesting. It is very difficult to know where
to go when you think something is wrong. This is really a sign-posting
operation. Can I press you a little bit further on your preferred
source? The advantage of the Government situation is that it would
make you feel confident, that would certainly be true. It would
have certain other overtones which may not be altogether right.
Would you have a preference for seeing IWF developed in this way,
bearing in mind the work you have done.
(Mr Darlington) This Government, and rightly so, would
prefer if it can to operate through a voluntary industry supported
scheme. That is what it has done with criminal content through
the IWF; that is not a Government body but the Government supports
it. That is what it has done with a body like Trust UK, which
is an industry supported initiative which has the full support
of Government. I suspect that this Government, and indeed industry,
would prefer it to come from the industry. It would probably be
better not to start from scratch but to start from an organisation
that has some sort of track record and some sort of reputation.
As Chairman of the IWF, it is not something that I have discussed
with our Board yet. We have given evidence as an IWF but that
evidence does not cover this particular point. I think that there
would be great value in taking an existing body, giving it a wider
remit and giving it funding, because that body would have a certain
track record, it would have a certain profile.
654. Do you see a role for the EU in coordinating
similar bodies to yourself in other countries?
(Mr Darlington) Definitely. If you take the issue
of child pornography, which is a global problem, there are five
or six hotlines in Europe now and the EU is actually funding a
project to develop those hotlines, and the IWF and the United
Kingdom is part of that. If we are going to have genuine global
e-commerce, one of the things you will find is that United Kingdom
consumers will complain about problems of Internet content which
originate from outside the United Kingdom. This one-stop shop
could say, "I am sorry, this company is actually hosted in
Seattle and the problem is going to have to be referred to the
Federal Communications Commission or the US Securities Commission."
You cannot expect ordinary men and women on-line to know all about
these things. That one-stop shop, as well as making a judgment
as to the type of problem, in terms the regulatory body it should
go to, could, where it was non-United Kingdom, refer it to the
appropriate body in another European country or anywhere in the
world and they would have those connections or expertise.
655. We are running short on time. Could I pick
up two or three other topics, very quickly. You mentioned Horizon
earlier, this is back to smart cards, why are we being so singularly
unsuccessful with our attempts at smart cards in this country?
(Mr Young) There have been a number of trials, I suspect
some of them may be ahead of their time. I think if you look at
the Horizon Project, one of the lessons you could draw from that
is, if you were going to embark on it, you would probably not
have done it in the way they did it, stretched, as it was, across
three government departments, with nobody clearly in control.
I think that was probably an accident waiting to happen.
656. Is joined-up Government needed again?
(Mr Young) We do not believe it should be abandoned.
We think that the European initiative is one that ought to be
encouraged and we see it as a logical development.
657. Do you see any particular successes on
the continent that we might use? We have heard about some in Belgium.
(Mr Darlington) The Horizon Project was actually modelled
on a similar scheme in the Republic of Ireland. The principal
contractor, ICL, put in the Irish system. The problem arose in
scaling-up the project to a much larger country and the multiplicity
of Government departments with very different agendas.
658. You employ a lot of people in the letter
business, how do you anticipate their employment prospects changing
in those industries over the next five or ten years?
(Mr Young) We have already seen significant changes.
We have seen a greater use of agency and contract people. We have
seen more flexible forms of working part-time, short-term contracts.
We have seen significant developments of tele-working. We see
the opportunities for employment creation. Inevitably in the kind
of industry we are talking about we are going to see much more
flexible forms of working. We can see advantages and disadvantages
for our members, but it is inevitably going to come. Our concern
is where do we focus our attention. We are encouraging employers
to think imaginatively, so they are not just focusing on down-sizing
the work force but on growing employment opportunities. We are
encouraging the employers to think more flexibly about the kind
of training and career structures that they offer. At the moment
we have very hierarchal, narrowly defined career structures, people
are defined in terms of engineer, clerical or operator. We are
trying to create new flexible grading structures with much more
flexible forms of training. On a wider scale, our interest in
these topics is that we think it is essential, not that other
traditional forms of industry should be neglected, but for Britain
and Europe to ensure that they gain the maximum employment opportunity
and benefits in society. We believe that e-commerce is part of
659. Is it employment generating?
(Mr Young) It is definitely employment generating.
We have lost jobs but we have also seen many new job opportunities
created. The mobile telephone industry did not exist a few years
ago, that is one of many examples.