Optical Fibres (Hansard, 26 February 1991)

§ Mr. George Howarth (Knowsley, North)

In this Adjournment debate, I represent only my constituents, the town of Prescot in which I live and the work force of and all those dependent on the BICC works there, which is of vital significance to the town. I do not speak for BICC when I say that, nor for British Telecom, Mercury, or any of the other commercial concerns which obviously have an interest in this matter.

The BICC company has been vital to the town of Prescot for the past 100 years. In the past few years, the company has shrunk as an employer, from employing about 10,000 people at its peak to under 2,000 now. Several weeks ago, the closure of the copper refinery in Prescot was announced—its timing is still open to discussion—and a further 230 jobs were lost.

I make those few introductory remarks about BICC because there is a problem. The development of optical fibre cable and the development and implementation of the broad band system offer considerable potential to the company. It is estimated that, if such developments were allowed to go ahead pretty quickly in this country, about 800 jobs could be created within the borough of Knowsley, part of which I have the honour to represent in the House. When one considers that my borough is in the top 10 constituencies for unemployment, which is not a statistic that I am boasting about, but a fact of life, those 800 jobs would certainly be most valuable.

Similarly, in the north-west of England, where the cold wind of recession is blowing and scarcely a day goes by without the loss of manufacturing capacity and jobs, it is estimated that about 4,000 jobs could be created as a result of such developments.

Naturally, the estimate which is most commonly used by commerical interests is that, taking into account the multiplier effect provided by any manufacturing industry—jobs rippling through into other parts of the economy—there is potential for about 30,000 jobs. That potential, nationally, in the north-west and within my constituency is all too plain and welcome in the context of an economy which has been shrinking drastically during the past few years.

However, there are constraints upon that development. The Minister is considering the duopoly review, commissioned by the Government to study all these matters. If they accept the duopoly review's recommendations, it will prevent the development of the broad band system in the United Kingdom, in particular by preventing British Telecom and Mercury—the two operators capable of producing a system of that kind—from carrying entertainment for between seven and 10 years. That is the profitable part of the operation, which would act as a spur to the development of home computers, video phones and so forth, so that would prevent the industry from taking off.

I do not decry the Japanese Government, Japan's industry or its people—far from it—but by contrast, in Japan, through the Nippon Telegraph and Telephone Company, decisions have already been taken to invest £12 billion to create a broad band national network, which will put the company in a strong position to take 954 advantage of any developments that are then allowed, in seven to 10 years, as a result of the delays caused by the duopoly review.

I simply wish to urge the Government to consider the prospects involved in allowing British Telecom and Mercury to develop a broad band system, and, in particular, allowing them to carry out entertainment operations. It is possible that an industry in which we already have a technological leading edge, and in which we are now a world leader, will simply slip through our fingers, and the potential jobs in my constituency and in the nation as a whole will be lost.

In the 1988 Mountbatten memorial lecture, Sir William Barlow, the distinguished chairman of the BICC group of companies, said: In so many scientific and technological enterprises, Britain has frequently led the world as inventors or in research and development—only to lose the final race in terms of commercial application and market exploitation. We are on the threshold of a revolution in communications and we should grasp the opportunity to be a world leader. That potential already exists—the potential for this country to move heavily and dramatically into the technological revolution. It is a matter of developing a formidable, highly technical communications network, and of Britain's getting back into the driving seat to deal with the technology and manufacturing of the 21st century. The opportunity must not be constrained for the next seven to 10 years: we must grasp it fervently now. Even if questions are posed about competition, let the existing companies get on with the job; and let us hope that, in seven to 10 years' time, the opportunity has not slipped through our fingers. It should be a matter of British national pride that we were there first, and that we are doing it.

§ The Minister for Corporate Affairs (Mr. John Redwood)

I congratulate the hon. Member for Knowsley, North (Mr. Howarth) on raising such an important subject. I was sorry to hear of the recent job losses at BICC; I hope that the plans that I hear are being discussed for development on an alternative site can bring some extra jobs and prosperity to his part of the world—assuming that the planning authorities consider them satisfactory.

I agree with the hon. Gentleman: over the next few years, the development of broad band networks and opto-electronic technologies will be important, and I hope that his constituency will benefit from that as the demand comes through: I million km of fibre highway are already in place for trunk calls, and more will be sold as needed. There will also be new opportunities for the suppliers. The use of fibre allows more signals to be sent along a given route. Broad band systems allowing television programmes to be sent by cable require either fibre optic capacity or thicker copper cables in the home.

The Government are keen to promote the right environment for those developments, so that British companies across all industries can benefit from them and gain an international competitive advantage. I think that Opposition Members and I can agree on that.

The hon. Gentleman asked me about the duopoly review. I am sure that he will understand that I cannot predict the results of the Secretary of State's deliberations tonight; however, we stated in the document that British Telecom was already allowed to convey entertainment 955 services to the home as the agent of a cable company. BT has also been free to apply for cable franchises through a subsidiary, in its own right, on the same basis as any other applicant. BT is, however, now disposing of all its cable interests. Those matters will be covered when we present the findings of the review. We have been delighted by the range and quality of the representations received on those and other issues.

Although the hon. Gentleman and I can agree on the importance of cable networks, I do not think that I have always found myself in agreement with Opposition Members about the best ways to achieve that. Labour wants the Government to make BT install a national broad band grid.

The Labour party's document "Meet the Challenge—Make the Change" stated: BT must be empowered and directed to undertake this major investment programme. That seemed to be reaffirmed in Labour's latest industry document, published this week. But who should pay the taxpayer or BT's customers? Moreover, why should cable be laid before there is a need for it? What possible advantages are there in returning to a monopoly provider? The Labour party's plans have been costed at an additional £20,000 million—a very considerable sum.

We say that as people demand cable TV or video conferencing, so more fibre will be used to link trunk routes—eventually into homes or businesses. Informed estimates suggest that, under our policies, the United Kingdom will spend more than £60,000 million on the technology as demand builds up. It will be a huge and important investment. By adopting our approach, the United Kingdom has already become one of the most intensive users of optical fibre for communications in the world. We use more fibre for trunk communication than France or Germany—both considerably larger countries.

Cable television companies are using fibre increasingly for trunk circuits. It is also being installed in the premises of major users of telecommunications, such as those in the City and other business centres. In the centre of London, more than 1,300 buildings are directly connected by Mercury alone, and BT accounts for more. There are also local fibre networks in Manchester, Birmingham, Bristol, Leeds, Reading, Edinburgh and Glasgow.

It does not yet pay to install fibre for smaller and residential customers, because the opto-electronic components needed to convert from optical to electronic signals are still expensive. The price of the components will doubtless come down, and as they come down, fibre to the home can become a reality if people want the sort of new services that fibre links can provide.

British Telecom has undertaken extensive research and development into fibre optics and opto-electronics—much of it in collaboration with leading United Kingdom companies. Last autumn, BT, GPT, and BICC started a two-year "field trial" of new fibre technologies in Bishop's Stortford, in which telephone calls, television pictures, text and data all travel over a single optical fibre cable. The trials are both technological and commercial. Their results will help decide when and if it will be commercial to offer such a service more widely.

The Government's role in encouraging such developments is threefold. First, we help to fund research, both in 956 the United Kingdom and on a European basis. There is the £800 million EC RACE programme, which I expect to be followed up shortly by RACE II.

Domestically, research is also supported under the LINK programme: in opto-electronics and in advanced semiconductor materials, vital for the components in any fibre network. That involves an additional £27 million of public money over a period of five years.

Secondly, the United Kingdom played a leading role in the establishment of the European Telecommunications Standards Institute, which now undertakes most of the work in establishing standards in Europe, which can stimulate marketplace activity.

Thirdly, the United Kingdom's approach to new services in the market provides a great incentive. The success of the United Kingdom's liberal regime towards service provision has led many of our European partners to copy it. By allowing anyone with a service to test it in the market, we have enabled the United Kingdom to become the leading provider of value added network services of all types in Europe. As broad band technology develops, we shall be in a strong position to exploit what it can offer.

British Telecom and Mercury are not the only players. Cable operators already bring broad band network to the home and they do not offer television alone. They represent one of the best chances for effective competition to BT for residential phone links as well.

Some 135 cable franchises were awarded by the Cable Authority before its functions were incorporated into the ITC at the beginning of the year. It is still early days for most of the operators, but 30 of them are offering service to their customers, and many more have started to install their networks. Successful operations already provide services to more than one in five of the households they can reach. In the United States—a more mature market—penetration reaches one in two.

The next two or three years will be critical for the broad band cable industry. Cable operators make very heavy investments at the beginning of their lives, and they need to penetrate the market rapidly to get payback. If the operators stick to their plans, they will reach half of Britain's homes by the mid-1990s, and two thirds by the end of the century. They have the opportunity to bring advanced telecommunications to their customers on the back of the cable television market. Data transfer services are already being widely used by businesses, and there are niche markets for services such as video conferencing. There are plenty of other uses yet to be thought of.

The United Kingdom has the leading position in both the technology and the use of fibre optics and broad band services, and undoubtedly will be amongst the pioneers of those new uses. British Telecom and Mercury have already switched to fibre for almost all their trunk cable network. Many individual large customers now have fibre to their premises. It may well be only a question of time before it will be economic for British Telecom, Mercury and their competitors, such as the cable companies, to supply all customers.

But it must be an economic decision—not a Government command. Only in that way will customers get in service a broad band system they want, rather than a speculative white elephant at someone else's expense. In 957 they way, Britain is likely to be in the lead and is likely to provide a good market for fibre optics and cable technology.

I agree with the hon. Member for Knowsley, North, who has raised this vital issue, that the development of 958 these services is necessary. I believe that the Government are pursuing policies that will definitely have that effect, and that we are in the lead in western Europe.