Select Committee on London Local Authorities Bill Minutes of Evidence


Evidence Session (Sections 4300-4399)

DAY TEN

28 MARCH 2006

 4300. Any overall view that you can express as to how it went? Do you have any information?

(Mr Ferguson) Their current view is very similar to Orange and Vodafone's, in that they do not believe it is an effective way of resolving the problem.

 4301. Let us go to the bundle of appendices which were the Orange and Vodafone appendices. Before we go to it, do you lay any evidence before the Committee that the cost of TRAP or what NTL or Telewest have done has been prohibitively expensive for you or them?

(Mr Ferguson) I have currently two full-time staff working on the TRAP process in Maidstone. If we received every card that was out there, we could not do it with just two, and there is a considerable backlog of cards as they work through, but that is the resource we have at the moment. That equates to about £70,000 in pay bill alone, let alone any other activities we do. It is not prohibitive for us but it is yet another cost that Pay Phones has to bear in its overall costs.

 4302. Descending to the more narrow exercise of call-barring for BT, is that prohibitively expensive?

(Mr Ferguson) It is the same people that invoke that process. It is electronic and there is no additional cost for actually doing that part of the process.

 4303. Is it - I think it is in engineering terms or is it in electronic terms - quite simple?

(Mr Ferguson) Yes, these days it is just a few key strokes.

 4304. Could we go to Tab 7 of that bundle, which is a letter from the DTI and the Department of Transport, but this is a DTI point we are looking at. "Clause 7, thank you for your confirmation that the promoters wish to proceed with the clause, and for the suggestion that BT might provide some indicative costs of the scheme. As you know, the Government remains of the view that the clause will not solve the problem it sets out to prevent, a view which in our meeting on 8 November you accepted might be true, stating in mitigation that the promoters wanted to do everything they can. To take action in the knowledge that it is unlikely to have an effect beyond loading costs on industry (which the promoters to date seem to have made no effort to calculate) represents extremely poor regulatory practice, and our concerns remain as before." Is that right, that you are not saying the costs are prohibitive?

(Mr Ferguson) At the moment, we operate the system utilising contracts who are already out there, and taking voluntary contributions as such from the Met Police, from the city guardians, from council workers.

 4305. BARONESS O'CATHAIN: But not from other telephone operators?

(Mr Ferguson) No. As I explained earlier, to make that a comprehensive collection process will be extremely expensive and we are already suffering a degree of costs in slowing cleaners down, for example, to fill envelopes, write out documentation and send it back to us, whereas they could be in and out of the phone box much quicker if they only had to throw the cards in a local bin. So there is an additional cost in that. One of our concerns about clause 7, and it has not been clarified at all, is who would operate the system in totality if it went through? Would BT be expected to operate it for everybody else? I do not think that would be an acceptable situation.

 4306. MR CLARKSON: Who says?

(Mr Ferguson) No one, because it is not clarified.

 4307. It is where a local council finds an advertisement, is it not, or the council becomes aware of an advertisement? So it is no extra burden to you. As you say, it is a few key strokes to bar?

(Mr Ferguson) To bar, yes.

 4308. Then staying with the DTI and the letter, over the page they make the VoIP point, which is a point you make and that has been addressed, the internet is not included in the laws?

(Mr Ferguson) That is right.

 4309. Forgive me with this question, I may have misheard or misunderstood, the barring, when do your keystrokes that bar, does that bar, did you say, incoming calls and not outgoing calls?

(Mr Ferguson) That is correct, call-barring only bars incoming calls. You will hear the expression "suspension of service", that also, in this instance only, means barring incoming calls. The customer can still make all outgoing calls and emergency calls.

 4310. When it comes to, if it be relevant I do not know, any human rights issue, the customer always has the use of a telephone for outcalls, correct?

(Mr Ferguson) That is right.

 4311. And is not prevented from having a telephone line?

(Mr Ferguson) Yes, not prevented at all from further service with us either, so it can apply for service straight away. There is no denial of service overall.

 4312. Yes. Looking at the product of your TRAP work, there is a huge number of cards you have collected over a period of time, correct?

(Mr Ferguson) Yes, probably millions.

 4313. When it comes down to it, in comparative terms there are quite a few numbers that are being used, is that right?

(Mr Ferguson) You mean in total numbers?

 4314. Yes.

(Mr Ferguson) Yes, I think our year survey showed 3,700-odd numbers in a year.

 4315. What does that say about the pattern of operation? Do you agree with the way
Mrs Cunningham put it?

(Mr Ferguson) Yes, it is controlled. It is controlled mainly by the brothels, they are organised into criminal gangs and organisations who have control of a group of numbers and they virtually run call centres to distribute the calls to the nearest brothel from where you are ringing. It is a very organised business.

 4316. Now you say only four per cent of those are BT numbers, is that right?

(Mr Ferguson) That is correct, yes.

 4317. Are Orange and Vodafone some of the other numbers?

(Mr Ferguson) They are, yes.

 4318. The point was made yesterday about the SMS inclusion in the exclusion of 7(b). I do not know whether the genesis of that was you, Mr Ferguson, or somebody else. If it is excluded from that, the mischief of using an SMS text message number for ordinary calls would be avoided, would it not?

(Mr Ferguson) Just to clarify the point, are we saying that if we excluded it from the clause, we would avoid it in the same way as we are avoiding VoIP at the moment?

 4319. Simply, yes, I believe that is right. I will tell you why: there are two negatives here.

(Mr Ferguson) The intention would be to exclude it at the moment for the same reasons as the new technology argument.

 4320. No, the other way around. Let us look at it, can we? Have you got the clause to hand?

(Mr Ferguson) No.

 4321. I will read it out to you: "In this section 77, references to a telephone number, shall not include references to any number which is used as a internet domain name, et cetera or SMS", so that is now taken out. I shall invite the Committee so to do, so the effect is where there is an SMS, it comes within the definition of "telephone". All right?

(Mr Ferguson) Yes, I understand that.

 4322. Next, please. The Ofcom letter, that is in your appendices.

(Mr Ferguson) Yes. F, I believe.

 4323. The last one in the bundle. Mr Asprey asked you about the third paragraph down from the letter of 1 February 2006: "Even if regulation could be introduced, a combination of other factors might be that communications regulation itself would not be effective. We have not ruled out any possible options at the moment for dealing with the issue of carding". Now, is that a meaningless incantation or is it directed, do you understand, to something specific?

(Mr Ferguson) My understanding, and obviously the work we have done with Ofcom, is that they understand the issue around call-barring and would like to seek a technologically robust solution to it. The company pays for the changes in the industry, but they are not at that position yet and therefore it would be difficult to go forward with Clause 7 without having that in place.

 4324. I want to return to a question that Lord Faulkner asked you, that if the clause was enacted, would the position be better or worse. Now let us take it in stages. First, in the context of what is in the telephone box or on the wall of the telephone box, if cards are reduced as a result of this clause, would it be better or worse?

(Mr Ferguson) That is assuming that the clause was workable to an end current conclusion and you could call-bar effectively to the end of the process and identify the end-operating company, et cetera. Then I believe it would have a disruptive effect on carding, we would hope to see a reduction in cards, but we will not obviously know until it gets to that point.

 4325. To be fair, it is an agreed position, I thought you said so, you agreed with Westminster that call-barring is a tool and it is one of many?

(Mr Ferguson) Yes.

 4326. Clause 7 creates another tool, not perfect perhaps, but it would be one of many that could help you with the telephone boxes, do you agree?

(Mr Ferguson) If it was workable to correctly identify the operator and the end-using customer.

 4327. Yes, so what you are looking for is some process by which it be the borough council that receives information as to who is providing it and then a notice will be served. That is what you are looking for, is it?

(Mr Ferguson) The borough council might be the collecting body for the cards because they are in a position to that. Where those cards need to go next in a pan-industry process, I think is something that is not clear from the clause as it currently stands.

 4328. Have a look at it. Clause 7(3) where the borough council becomes aware of "an advertisement to which this section applies in their area and the advertisement invites, either expressly or by implication, persons to make a call or otherwise transmit an electronic communication to a [normal] telephone number, the council may require in writing the relevant electronic communications service provider to take action to prevent calls being able to be received" et cetera.

 4329. BARONESS O'CATHAIN: Excuse me, may I ask a question, Mr Clarkson. What is a "normal telephone number"?

 4330. MR CLARKSON: Yes, it is defined in the Telecommunications Act, Mr Lewis has told me. It is a term, Lady O'Cathain. I am not sure it is in the clause itself, but it is defined elsewhere.

 4331. BARONESS O'CATHAIN: I see it, it is in fact in the last paragraph before section 7.

 4332. MR CLARKSON: Can I check that for you and give you chapter and verse. Just looking at that, the burden is on the council, is it not, not on British Telecom, on BT?

(Mr Ferguson) I think that is exactly our earlier point. If the burden is on Westminster City Council, they do not have the capability to correctly identify the correct service provider for that customer.

 4333. They can write, can they not, to you and the other service providers and say, "Is that one of your numbers?"

(Mr Ferguson) And at the moment if it is not one of our numbers or even if it is a number that we have passed to another provider, all I can say to them is "Yes, it is a BT number" or "No, it is not" and that is it.

 4334. If you say "It is a BT number", they can give you a notice pursuant to 7(3)?

(Mr Ferguson) Under the way it is written, yes.

 4335. What is the problem?

(Mr Ferguson) I think we have been saying today the problem is the correct identification of the right service provider for that number, and BT does not want to be put in a position where it is receiving lots of ineffective notices from the council. Also, we do feel it is not appropriate for the council to be the body controlling that and imposing regulation on BT or other operators. That is for the regulator to do and Ofcom should take an overview of that across the industry.

 4336. It is something much simpler than that. What is the problem of the council asking you and others whether it is one of your numbers?

(Mr Ferguson) There is no problem in that at all, and they can do that now.

 4337. How can they do it now?

(Mr Ferguson) At the moment, we do it voluntarily under the TRAP process. Their employees send us the cards and we process them.

 4338. There is power under the Regulation of Investigatory Powers Act, is there not? Do you know anything about that?

(Mr Ferguson) I do not think I can comment on that.

 4339. We will deal with it in due course. Again, if you, Orange, Vodafone and others answer that simple question, the councils are given the material by which Clause 7(3) is pursued, am I right?

(Mr Ferguson) Yes. I do not really see that the council would write to 300 operators for every telephone number asking if this was one of theirs. I do not see that as a feasible way forward. There needs to be a better process built around this in order to make it workable.

 4340. It would be one letter, would it not, to those operators; "Are these your numbers? Which ones of these are your numbers?"

(Mr Ferguson) It is absolutely possible whether that is a practical way of moving forward. I cannot believe that is the right way of tackling this issue.

 4341. LORD FAULKNER OF WORCESTER: Could it be done by a simple email that goes to all of them? One email copied however many times is necessary?

(Mr Ferguson) I am sure the communications would be worded in whatever form is required. Yes, you can make it easier with electronics and you can make the process simpler, I am sure, but it seems to be tackling it from the wrong end. In order to get a coherent way forward, the council certainly has a problem, they need to find a process of capturing those cards and collecting those numbers and an agreed way probably with Ofcom, as the owner of all numbers in the country, as the way of correctly identifying the service provider for the end customer and several people in this chain by the time you get to the end customer, so it is effective at the point you want it to be effective at.

 4342. CHAIRMAN: Mr Clarkson, I think we have the point that there is a problem here. What I think the Committee may not be clear about, and certainly I am not, is whether even if Westminster were indeed to email every single operating company and ask them to identify the numbers, would they be obliged to give that information under any current legislation or regulatory framework?

 4343. MR CLARKSON: Yes, my Lord Chairman.

 4344. CHAIRMAN: They would be obliged to do so?

 4345. MR CLARKSON: Yes.

 4346. CHAIRMAN: I see.

 4347. MR CLARKSON: Would you like to me to address it now?

 4348. CHAIRMAN: If the answer is yes, then the answer is yes.

 4349. MR ASPREY: Could we at least know the section under which it applies?

 4350. MR CLARKSON: Section 22 of the document you have had passed along earlier, Regulation and Investigatory Powers Act 2000.

 4351. CHAIRMAN: This is what you were referring to?

 4352. MR CLARKSON: Yes.

 4353. CHAIRMAN: Are you able to enlighten us?

 4354. MR CLARKSON: I can circulate the document.

 4355. CHAIRMAN: No, be more specific than that. How does this particular ability relate to the earlier point that has been made that it is not possible once the numbers have passed out of the public domain for them to be then identified? These two things do not seem to hang together.

 4356. MR CLARKSON: I can tell you, my Lord Chairman. Section 22 of the Regulation and Investigatory Powers Act 2000 says this, and I can summarise it and I will circulate the document if it is any assistance to the Committee: "This section applies where a person designated for the purposes of this chapter believes that it is necessary on grounds falling within this sub­section (2) to obtain any communications data. (2) It is necessary on grounds falling within this subsection to obtain communications data if it is necessary …", this is (b), "for the purpose of preventing or detecting crime …", I am not going to read all of that. Then sub­section (4): "Subject to sub-section (5), where it appears to the designated person that a postal or telecommunications operator is or may be in possession of, or be capable of obtaining, any communications data, the designated person may, by notice to the postal or telecommunications operator, …", that is 333, "require the operator - (a) if the operator is not already in possession of the data, to obtain the data; and (b) in any case, to disclose all of the data in his possession or subsequently obtained by him. (5) The designated person shall not grant an authorisation under sub­section (3), or give a notice under sub­section (4), unless he believes that obtaining the data in question by the conduct authorised or required by the authorisation or notice is proportionate to what is sought to be achieved by so obtaining the data. (6) It shall be the duty of the postal or telecommunications operator to comply with the requirements of any notice given to him under sub­section (4)", and is not required to do it if "it is not reasonably practicable for him to do …." and it can be enforced by injunction.

 4357. CHAIRMAN: Thank you very much, Mr Clarkson. That is extremely illuminating.

 4358. MR ASPREY: My Lord Chairman, can I just say, I do not know whether that section applies or not at this stage. I would like the opportunity ----

 4359. CHAIRMAN: I understand that. I understand this is new information, but it was in reply to a question that it came.

 4360. MR JONES: The Committee will presumably note - I do not know if you have it in front of you - the enforceability is restricted only to the Secretary of State, as I see it.

 4361. CHAIRMAN: Of course, the Committee did not know that until you told us, thank you very much.

 4362. MR JONES: The local authority has no power to enforce it, as I read it, but I have only just been handed it.

 4363. MR CLARKSON: Perhaps it is worth reading again.

 4364. MR JONES: Maybe.

 4365. CHAIRMAN: I am sorry, Mr Clarkson, please proceed.

 4366. MR CLARKSON: I think, my Lord Chairman, that deals with the matters I have for this witness. Thank you, Mr Ferguson.

 4367. CHAIRMAN: Thank you very much.

 4368. MR ASPREY: Can I just ask two questions unless you wish to ask questions?

 4369. CHAIRMAN: We will let you continue.

Re-examined by MR ASPREY

 4370. MR ASPREY: A reference was made to your terms and conditions at Clause 23, which entitles British Telecommunications to make amendments to the terms and conditions. Are you familiar with that paragraph?

(Mr Ferguson) Yes.

 4371. Can British Telecom make whatever amendments it likes, bearing in mind that it is a regulated industry?

(Mr Ferguson) No, I could not say we could just go and change terms and conditions; pricing is mentioned in here particularly. We are due to be less regulated, but at the moment it is extremely heavily regulated. I know from painful experience changing every word in this is extremely difficult and a long drawn-out process. It is not something I would say that could be done with ease.

 4372. If you could assume for a moment that Clause 7 is not enacted, do we at the present time have any idea of what amendment to Clause 19, if any, Ofcom would require in order to deal with a call­barring policy?

(Mr Ferguson) No, we do not know yet.

 4373. You do not, therefore, know what precautionary provisions might be introduced into that amendment?

(Mr Ferguson) No.

 4374. The only other question, if I may, is you were asked about the effect of Clause 7 and whether you think it would have any impact if it were enacted on the number of cards being posted in pay phones and so forth. Your answer sounded to me to be a little bit circuitous. I was not quite clear in my mind what you meant. You said something along the lines that it would have a disruptive effect if the clause was workable. Could you explain a little bit more on what you base your concession, if that is the right word, or your assumption that the number of cards might be reduced if the clause were enacted, that is to say what makes the clause workable in your mind or would make it workable or what makes it unworkable now? Could you elaborate on that?

(Mr Ferguson) I think it goes back to the previous point as well about Ofcom, the industry working with Ofcom on a robust technical solution that can correctly identify the operator for the determination of the call - so all the way through the route whether it was our number originally, whether originally it was always their number, whether a third party got involved or it was sold on again - that process to correctly identify the end-operating company, the determination of a call, if that is robust enough and agreed across the industry, can then be applied on a consistent basis, and taking in the other technologies, then you have something that would affect the individual or the individuals advertising those numbers in phone boxes which would be disruptive to them, cause them to re-print cards et cetera and even look to further routes to markets. Unless it is consistent, all you are doing is squeezing here and it is coming out somewhere else.

 4375. You are saying that it has got to be effective across the industry, and do you see Clause 9 as being effective across the industry?

(Mr Ferguson) No, I do not. At the moment Clause 7 is designed for all the operators who operate currently in the London catchment area as such, but because of the amendments that have already been suggested it only catches those traditional normal voice-type operators, the new technology operators are already slipping out of this because it is too difficult to pin them down under this clause. I do not think it adequately covers it as it currently stands.

 4376. CHAIRMAN: Thank you. Are there any other questions for this witness from the Committee. Thank you very much.

The witness withdrew MR ALAN NUNN, Sworn Examined by MR ASPREY

 4377. MR ASPREY: I would now like to call Mr Nunn. He has an even smaller exhibit which you already have, if you could find that I would be grateful. Are your names Alan Nunn?

(Mr Nunn) Yes.

 4378. And is your work address Aquarius Building, Adastral Park, Martlesham Heath, Ipswich, Suffolk?

(Mr Nunn) Yes.

 4379. Are you employed by British Telecom?

(Mr Nunn) I am.

 4380. Are you the Chief Voice Architect within the BT group?

(Mr Nunn) I am.

 4381. Do you report to the Director of Group Strategic Analysis and Architecture Realisation?

(Mr Nunn) I do indeed.

 4382. Does that gentleman in turn report to the Chief Technology Officer?

(Mr Nunn) Yes.

 4383. Do you have a Bachelor of Science degree, First Class Honours in electrical and electronic engineering?

(Mr Nunn) I do.

 4384. Are you a member of the Institute of Electrical Engineers?

(Mr Nunn) Yes.

 4385. Are you a chartered engineer?

(Mr Nunn) Yes.

 4386. Have you worked in BT for close to 19 years?

(Mr Nunn) Yes, it will be 19 years at the beginning of April.

 4387. Have you held the post of Chief Voice Architect since March 2003?

(Mr Nunn) Yes.

 4388. During your time with BT, have you worked on various aspects of BT's voice networks and systems and do you have extensive knowledge of their design implementation and operation?

(Mr Nunn) Yes.

 4389. Have you been responsible for the end to end design of a number of significant changes to BT's network, most notably the introduction of geographic number portability in 1993 and 1995?

(Mr Nunn) Yes.

 4390. And the intelligent network platform handling 0800, 0845 and 0870 numbers from 1997 to 1999?

(Mr Nunn) Yes.

 4391. As Chief Voice Architect, are you responsible for setting the future direction for BT's voice network including the evolution of the existing public switch telephone network?

(Mr Nunn) Yes.

 4392. And for providing advice and analysis on the introduction on new voice services including services provided over broadband and wireless access technologies?

(Mr Nunn) Yes.

 4393. And you also provide technological advice for people within BT while considering the development of new services while procuring and implementing components which may help with such services?

(Mr Nunn) That is right, I do.

 4394. I will not ask you to summarise your evidence in advance at this stage of the proceedings. I think we will go straight to your paragraph eight and I would ask you to explain the internal structure of BT because that is a kind of microcosm for the industry as a whole.

(Mr Nunn) It is. BT has a number of business divisions each of which has a separate function and those are all mirrored in the broader industry, certainly in the fixed network industry. There is Openreach, BT Wholesale, BT Retail and BT Global Services.

 4395. I think you are going to describe the sort of function which they have in the BT setup, as it were, and I wonder if the Committee could have open the first page of the exhibit which is that diagram here (indicating) to which you are going to refer in this process.

(Mr Nunn) I think that will make it easier to understand if that is so.

 4396. The first one you mentioned is Openreach, tell us a little about that, please?

(Mr Nunn) Openreach run what is known as BT's access network which essentially is the part of the network that runs out from the telephone exchange, or an Access Node, out to the end user's premises. Openreach also runs the backhaul networks backing into the Core Node which is the next Node picture. Openreach is a wholesaler, we sell services to a number of downstream BT retailers which might BT Wholesale, it might include BT Retail or it might be third parties. The services are used by those retailers either directly as an end service or as inputs to other services, they get sold on to end users, for example, residential customers.

 4397. That is Openreach, the next division is BT Wholesale?

(Mr Nunn) BT Wholesale essentially looks after BT's core network which is the central part of the diagram there (indicating) that connects BT's Core Nodes and those include the telephone exchanges, connects those together and links the network to other network providers in the UK. Where we pass a call from BT to another network, that comes through wholesale and through to the other provider. Like Openreach, BT Wholesale is also a wholesaler and services both to retailers and to BT's retail.

 4398. Can other operators purchase products from Openreach and BT Wholesale?

(Mr Nunn) Yes, they can.

 4399. Are they operators in their own right, as it were?

(Mr Nunn) They are, yes.


 
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