Examination of Witnesses (Questions 132
- 139)
MONDAY 9 JULY 2007
Mr Simon Grossman
Q132 Chairman: Mr Grossman,
thank you very much indeed for coming. For the record, would you
give your name and your responsibilities at Orange?
Mr Grossman: My name is Simon Grossman. I am
Head of Government Policy and Mobile Regulation at Orange.
Q133 Chairman: I understand
you would like to make a brief opening statement?
Mr Grossman: I have some brief opening remarks
that might be of assistance. I am Head of Government Policy and
Mobile Regulation for Orange in the UK. Orange UK is part of the
wider Orange Group that is owned entirely by the France Telecom
Group, one of the world's leading telecoms operators. It operates
in all five continents and has over 150 million customers. It
provides mobile, fixed telephony and broadband services. I should
stress that because my responsibilities are for the mobile business
in the UK, although I can try to assist the Committee with a flavour
of our international views and our views on fixed issues, my primary
responsibilities and expertise are in relation to mobile issues
in the UK. Orange is of course supportive of the single market.
We want to stress that it is competition that really makes the
difference. It is competition that counts. Although the single
market is obviously designed to assist that process, it is not
something that of itself would assist either Orange or, we believe,
our customers. The mobile sector is perhaps slightly different
to some of the other sectors that you have been considering. Mobile
has been competitive since its inception. There is no concept
of incumbents within the mobile sector, as there was obviously
in fixed telephony, and presumably in some other industries that
you may look at. In a sense we were already competitive before
we existed. Liberalisation in the telecoms market is very important
but it is more for the fixed sector than the mobile sector. A
key point that I want to conclude my opening remarks with is that,
although the single market is important and critical in creating
a competitive climate, what is perhaps even more important is
the way that the rules are implemented. It is the quality of the
regulator as much as anything that determines the outcome for
Orange and our customers. One can have the best framework in place
but if those who implement it and those who are responsible for
enforcing it do not do so in a correct, thorough and well analysed
way, perhaps we will not receive the best outcomes.
Q134 Chairman: Following your
comments that it is the fixed telecommunication market that is
probably more appropriate for the Commission to address in terms
of improving the single market, which particular facets of the
fixed telecommunications market do you think we should be looking
at?
Mr Grossman: It is obviously long recognised
that, within the UK, BT is dominant. I should say, sitting here
on behalf of Orange and France Telecom, France Telecom is in a
similar position in France. That of itself places me in a slightly
difficult situation because of the market in the UK. We are a
new entrant operator. Orange in the UK provides broadband services
and fixed telephony based on those broadband services. Those services
are necessarily dependent upon access provided by BT. In France,
France Telecom is the incumbent and it is in the same situation
as BT. It is important from the UK perspective to focus on opening
up BT to competitors. The Committee may be aware of the process
of functional separation which took place in the UK whereby BT
has been split into the Openreach and BT Wholesale divisions.
That was done to try and allow competitors to have equal footing
with BT. It is required to offer its competitors the same access
as it offers to the other part of itself. Broadband is the area
that has been most contentious. The UK was somewhat behind other
countries, particularly France, in terms of rolling out broadband,
in terms of competitors becoming involved in that market. That
is something that Ofcom has now addressed but perhaps addressed
a little later than it might have done, certainly a little later
than was the case in France.
Q135 Baroness Eccles of Moulton:
In the good old days before there was electronic communication
and incumbents like French Telecom and BT, where so much of the
telecommunications were hard wired, presumably then it was much
easier to maintain a monopoly. Nowadays when so much can bypass
hard wiring except for the last few inches into the home, it must
be much harder for the original monopolies to hang on to their
powers and therefore is there not a tendency for the whole fixed
telecommunications or electronic communications to be much more
competitive?
Mr Grossman: That is true apart from the point
that you identified, known as the last mile. That is what makes
the real difference. The copper line from the exchange to the
home is what BT controls. It is BT and BT alone that goes into
every home in the UK. The cable networks cover a reasonable number
of homes but not 100%. Although one may wish to have very high
speed fibre networks rolled out to all homes, the investment required
would be enormous. At the moment, BT's position is very strong
because it keeps that last mile. Therefore, if you want to provide
something to a customer in their own home, you have to do so via
the access that BT provides. You are absolutely right. With the
core network, what sits in the centre and links everything together,
makes it much easier to create a competitive state of affairs
because there is less required.
Q136 Baroness Eccles of Moulton:
Fibre is still just a modern substitute for copper, is it not?
It just happens to work a great deal faster?
Mr Grossman: Yes.
Q137 Baroness Eccles of Moulton:
You are still dependent on the owner of that bit of fibre, presumably?
Mr Grossman: Yes.
Q138 Baroness Eccles of Moulton:
Whereas if you are up in the air, depending on air waves, it is
quite different, is it not?
Mr Grossman: That is true. Obviously use of
the air waves is dependent upon spectrum and that is licensed.
One needs to have the right to use that spectrum. Potentially,
it is easy to be competitive in that environment because the spectrum
can be bought, sold and traded; whereas fibre or anything into
the home is there and exists. Wireless technologies certainly
provide a greater means of encouraging competition and that is
taking place but one should never underestimate the importance
of that last mile into the home which at the moment is in the
hands of BT.
(The Committee suspended from 5.08pm to 5.20pm
for a division in the House)
Q139 Lord St John of Bletso:
The new regulatory framework has identified a number of areas
of reform that the Commission has recommended. Do you think that
these areas of reform are the right areas of reform and can you
comment on additional areas of reform that you think Orange would
like to see?
Mr Grossman: I have taken the opportunity to
have a quick flick through some of the wide range of recommendations
and proposals which the European Commission made. I am happy to
touch on some in a little more detail. Some of them we would enthusiastically
support. Whilst others we would have slight concerns that they
have gone a little too far and they risk over-regulating. The
key point is that from Orange's perspective a lot of these proposals
and issues somewhat pass by the wayside when we are developing
real services and real products for real people. A lot of these
are things that we would have to cope with and do. There are proposals
about appeals mechanisms, the review process and how that would
work. There are proposals about the security process and service
technology neutrality principles. These are broadly things that
we would support, certainly in relation to spectrum and technology
neutrality. There are some detailed concerns that we have but
those in Orange who are actually responsible for doing things,
as opposed to people like me who are responsible for responding
to regulatory proposals, are relatively unaffected by what the
European Commission might propose. What really affects our ability
to deliver services to consumers is the amount of cash that we
have, the bottom line. That is to a large extent affected by regulation.
The key areas of regulation imposed on us at the moment with which
you may be familiar are regulation of call termination and roaming
charges. These are taking hundreds of millions of pounds from
our bottom line. That means that, in simple terms, we have fewer
people and resources to be able to implement and deliver real
services to real consumers. It would be wrong of me to say that
any specific proposal that the Commission has identified is going
to stop us or curtail our ability to offer a particular service,
because I am pleased to say that regulation does not go quite
that deep. But the broad effect of the major forms of regulation
such as roaming and call termination does have an effect in that
it takes hundreds of millions of pounds away. That means redundancies,
restructuring and reorganisation. That means that services which
would have been delivered will either be delivered later or not
at all because we simply do not have the money and people.
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