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Lord Avebury: As the noble Lord implies, there is a trade-off between competition and take-up. We see that exemplified in figures which have been issued by the European Competitive Telecommunications Association. They demonstrate that in Germany there has been a high take-up. That is at the expense of monopolistic conditions because Deutsche Telekom has the total share of 100 per cent of the market. According to those figures, in Britain only a 51 per cent share of the market is held by BT. That is the lowest share of a major provider of any of the countries in Europe, apart from Germany which I have already mentioned. In France, it is 71 per cent; in Italy, 73 per cent; and in Spain, 77 per cent. According to those figures, the UK is about the most competitive country in Europe.
Before I come to the question of competition, perhaps I may disrupt the harmony that has pervaded the amendment of the noble Earl. I hope that the Government will not accept the writing into the Bill of a definition of broadband. It is a rapidly moving technology. If we write such a figure into the Bill, it may shortly be out of date. One can see that when considering the report of Oftel published yesterday on the review of the wholesale broadband access market. Among other things, it reviews the previous definition of broadband. For the time being, the working definition is, first, that broadband provides higher speeds in excess of 256K downstream capacity; secondly, that it is an always-on service, or at least has the ability to establish rapidly a connection to the Internet; thirdly, it allows the use of the exchange lines for voice telephony and Internet access at the same time; and, fourthly, it allows content delivery which is not practical on narrowband Internet access such as realtime video content.
The noble Lord may say that 256K is inadequate for some of the services that people demand. In particular, it is inadequate for video on demand. But the consumer is offered the choice. One can have a lower quality, 256K service, and one pays less for it; or one can have a
512K service and pay more for it. The market is sufficiently broad to allow for that customer choice to be exercised and for people to pick the service that suits their pocket and requirement. Some people may be perfectly happy to access news services on the Internet and to use it for sending and receiving e-mails in which case a 256K service is perfectly adequate for their requirements. Others may want something more sophisticated or to play games on the Internet, for example, and will want a high speed service. It is right that there should be that element of choice and as the services which are offered start at 256K, that is a useful working definition that Oftel should use, but it is not one that I feel would be appropriate to write into the Bill. In a year's time, or certainly within the lifetime of the Bill, things will be enormously different. If one considers the life span of any telecommunications Bill, we would expect it still to be working after 15 years. To put in a speed such as 384K would look quaint and old-fashioned by the end of that period.The noble Lord's amendment provides a useful opportunity for discussing the state of the broadband market, and usefully coincided with the report which I have just mentioned by Oftel on the subject. The Oftel report reviews the latest developments, which show very healthy rates of growth in broadband take-up with the number of subscribers reaching 1.15 million in February this year. It shows also that BT has been gaining market share since the beginning of 2001, as the noble Lord points out. It now has 57 per cent of the market compared with 28 per cent for NTL and 24 per cent for Telewest. However, perhaps even more striking is that BT is winning something like 70 to 80 per cent of the new subscribers. That arises from the last price drops which BT offered the public in 2002 amounting to as much as 50 per cent. Those prices are due to be reduced again on 1st May from £14.75 wholesale to £13.00 per end user per month, with further discounts for volume which will enable BT Openworld to buy IPStream services at £12.74.
I declare an interest as a user of BT Openworld and I look forward to the further reductions in price which no doubt I shall be offered after 1st May as it gets the benefit of these lower wholesale prices. But during the same period there has been no equivalent reduction in Datastream charges, which cover the traffic from the exchange to the subscriber for the operator who wants to provide services over his own network. That is to say, this operator is providing services from the exchange backwards and not to the consumer from the exchange. Those users continue to pay £9.25 per end user per month. They say that in effect that difference is not enough to cover the cost of their network.
One such operator, Tiscali, complained formally to Oftel and pointed out that although BT had agreed to align the terms for IPStream and Datastream by the end of March this year, product enhancements that are available on the first are not available on the second and that there is a three-month minimum sign-up commitment on the first compared with 12 months on the second. There are other complaints such as the migration path between IPStream and Datastream, which BT says it can provide only after September
2003 at a cost of £30, whereas Tiscali says it could be offered now and that an appropriate price would be £5.These competitive issues in the provision of broadband services are causing enormous arguments between the companies in the industry. However, the Bill allows for those matters to be considered by Ofcom and I hope it will take a robust attitude to the development of competition in the industry. We want all those services to be provided at a cost that users can afford.
It is not for the Committee, however great the technical knowledge of the noble Earl, Lord Northesk, to dictate to Oftel or Ofcom how it will exercise the powers that will be given to it. All we can say is that we want a fully competitive market. We do not believe that it exists at the moment because there is a significant market power in the hands of one company. However, we believe that the powers that are given to Ofcom in the Bill will enable it to solve the problems of the kind I have outlined. I should sooner leave the Bill as it stands and rely upon the forces of Ofcom to deal with the problems of market penetration and competition that we know exist.
9 p.m.
Baroness Buscombe: I rise to support my noble friend's amendments. It is necessary to stress the significance of broadband technology to our economy. It is becoming increasingly important for future growth and development. Government targets are not being met: they have failed to provide a competitive structure within which this technology can grow and flourish. An ascertainable funding framework needs to be achieved; promotion alone—words alone—are insufficient.
I take note of the comments made by the noble Lord, Lord Gordon of Strathblane, in relation to the need also to prioritise uptake. I can do no better than to use the words of my noble friend in another place, John Whittingdale, the shadow Secretary of State, who said:
- XA balance must be struck between promoting competition in the short term and encouraging investment in the short term and encouraging investment in the infrastructure in the longer term. In all such debates, the vital importance of increasing access to broadband must be a priority and Britain is lagging far behind in this respect. Although the number of households with broadband access has now passed l million, we are still way behind our competitors".—[Official Report, Commons, 3/12/02; col. 796.]
Lord Roberts of Conwy: I have a brief contribution to make in this context in relation to Wales, because I believe that it is somewhat typical of rural areas in the rest of the United Kingdom. It is calculated that about 40 per cent of homes and businesses in Wales can have broadband through ADSL technology and cable modems. This compares with a UK average of about
70 per cent. Recognising the urgency of addressing this gap, the Welsh Assembly government have launched the Broadband Wales programme, which will spend about £115 million on a balanced programme of demand-side and supply-side measures to stimulate making broadband ubiquitous throughout Wales.That level of public-sector support makes the broadband scene in Wales very different from that in other parts of the UK. It will obviously be important to ensure that Ofcom takes account of the situation. I am told that wireless systems have an important part to play in the roll-out of broadband in Wales—and, I am sure, elsewhere—which means that the licensing arrangements for suitable radio spectrum are also critical. I am told that the recent 3.4GHz spectrum licensing decision to split Wales into four parts, each linked with larger and more prosperous parts of England, was taken very much against advice in Wales. Again, that demonstrates the importance of making strong representations on behalf of Wales in future licensing rounds.
I say all this because not only is it relevant to my noble friend's amendment, but also because it is relevant to other later amendments that relate to the setting up of an Ofcom office in Wales, and its consequentials.
Lord McIntosh of Haringey: There are two quite different issues involved here. The first is the issue of government support for broadband, and the progress that is being made in the development of broadband in this country. The second issue is whether in support of that government objective it is either necessary or desirable to have in the Bill a reference to broadband of the kind proposed in these amendments.
I have not heard it denied that the Government have given very active support to broadband in this country. We have a target of achieving the most competitive and extensive broadband market in the G7 by 2005. By no means are we there yet. Last August we were assessed as being fourth for competitiveness and fifth for extensiveness. But we are pulling away from those behind us and catching up with those ahead. In particular, we are more competitive than our European neighbours, although less competitive than, for example, Canada or Japan.
Coverage and take-up of broadband are both increasing. The latest figures show that the number of broadband users now stands at over 1.75 million, and is increasing by 35,000 a week. In case the noble Earl, Lord Northesk, thinks that that is a phoney figure, only 20 per cent of those 1.75 million users are at a lower figure than 500K. So use is running at the least at 1.4 million within his definition, and certainly nothing like the 700,000 that he suggested.
Some 71 per cent of the population now has access to mass market broadband services. I acknowledge that the noble Lord, Lord Roberts, is right to point out that the percentage is far lower in Wales. That problem is being addressed by the Welsh Assembly.
Turning to the technologies, it is true that there are a number of different systems. Probably the most common is ADSL, but I have to say that it is an
intermediate technology. ADSL still uses coaxial copper cable. Within the expected lifetime of this Bill, I cannot imagine that ADSL will still be around. We have cable and fibre-optics, as well as fixed wireless access such as that provided by Firstnet. Furthermore, we have satellite provision, which is universal but, of course, more expensive. A bundle of different systems are all being called broadband.That leads me to my second point. It would be inappropriate to seek to define broadband as being one of the specific and particular objectives of Ofcom in the Bill. The technology is currently varied and continues to change all the time. As the noble Lord, Lord Avebury, pointed out, during the lifetime of the Bill, figures of 384K or 512K will be laughable. We will be talking about different technologies and totally different speeds.
We have a perfectly good provision in Clause 3(3)(a), which sets out that Ofcom must have regard to,
- Xthe desirability of promoting competition in relevant markets".
The motivation behind the amendments is admirable and we all agree with it, but this is not a technology that should be specified on the face of the Bill any more than should the other technologies. I hope that the noble Earl, Lord Northesk, will feel that, although I have to resist the amendments, this is not what the noble Lord, Lord McNally, would call a "no".
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