§ 4.5 p.m.
§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)
My Lords, with the leave of the House, I will now repeat a Statement made by my right honourable friend the Secretary of State for Industry this afternoon in another place on the telecommunications monopoly. The Statement runs:
"The present rapid growth of telecommunications and of information technology provides immense opportunities for the industries connected with telecommunications. Over the coming years the majority of British households will be affected. Whole new industries and sub-industries and many new jobs will be created.
"These developments have been under way for a longer time in the United States and have gathered more momentum there than here. I am sure that one of the reasons for America's greater success has been the freedom available there to entrepreneurs to develop new services and a wide range of equipment associated with telecommunications. The opportunities and the market are too great to be encompassed by a single organisation, however skilled and however great its resources.
"For these reasons I announced last September that the Government would be reviewing British Telecommunications' present monopolies over the supply of terminal equipment attached to the telecommunications network and over the provision of services to third parties using British Telecommunications circuits. Following widespread consultation with interested parties, the Government have reached the following conclusions.
"First, we are going to make it very much easier for equipment supplied by the private sector, including all private branch exchanges, to be attached to the network. Subject to a transitional period of about three years, there will be freedom to attach and maintain independently approved equipment which meets the necessary technical standards. The only exceptions will be 34 the supply, installation and maintenance of the first telephone and associated wiring connected directly to the main network, and the maintenance of private branch exchanges and associated wiring, for which British Telecommunications will remain responsible. This substantial change will give the business and domestic customer a wider range of equipment from which to choose and should remove many of the bottlenecks resulting from the Post Office's present exclusive privilege of supplying such equipment.
"Secondly, we are going to allow people more freedom to use British telecommunications' circuits to offer services to third parties which are not currently provided by British Telecommunications, for example in the data processing field. I expect this change to lead to a significant growth in information, data transmission, educational and entertainment services provided over telephone circuits and to the emergence of new businesses. I have also decided to commission an independent economic assessment of the implications of allowing complete liberalisation for what are commonly referred to as value added network services.
"Thirdly, I am exploring the scope for allowing the private sector to provide telecommunications transmission services such as satellite business systems.
"Legislation will be introduced next Session which will make provision for relaxing the monopoly. British Telecommunications will be free to compete with the private sector but to ensure fair competition the Government intend to take powers to require it, where appropriate, to create a separately accounting subsidiary or subsidiaries where it is in competition with the private sector. We shall welcome partnerships with private capital in these subsidiaries.
"I hope that the first fruits of these changes will be manifest within a year or so from now and that they can be fully phased in over the next three years. I look forward to seeing at an early stage approved extension telephones on sale in the shops, as well as greater com- 35 petition in the installation and wiring of currently approved apparatus on business premises. The changes will bring new opportunities and challenges both for British Telecommunications and the telecommunications industry and I hope both will respond positively to this greater freedom. They will have the opportunity to expand their range of products to compete successfully both at home and in world markets, and I look forward to the associated development of new enterprises and industries.
"I have today placed in the Libraries of both Houses a memorandum giving fuller details of these proposed changes."
My Lords, that concludes the Statement. In fact the Memorandum to which I have just referred is in the Printed Paper Office.
§ 4.10 p.m.
§ Lord PONSONBY of SHULBREDE
My Lords, may I thank the noble Lord for repeating the Statement made in another place by the Secretary of State. I think it is true that the success of British Telecommunications will depend to a large extent on its ability to invest a considerable amount in itself, and, of course, for some time now this investment has been limited to the profits which it has been able to generate internally.
It is certainly true at the present time that France and Germany are investing roughly twice as much as the United Kingdom in the internal telecommunications system. If, as the Statement envisages, one is going to cream off some of the profitable sections of the telecommunications industry, it will be that much more difficult for sufficient money to be generated to enable there to be sufficient investment.
It is, of course, true that the greater part, shall I say?, or some of the most profitable sections of the telecommunications industry are the "add on" bits which it is proposed to hive off. One might well wonder and ask how the consumer himself would benefit if it is going to become that much more difficult for British Telecommunications to generate its own investment.
36 My Lords, the policy of the Post Office for many years has been to buy British, and what is envisaged in this Statement is that there should be much greater competition, which would let in a substantial amount of foreign competition. This could have severe effects on parts of the British telecommunications manufacturing industry. One could envisage a situation in which there might be redundancies and closures. But, my Lords, I was gratified to read in the Memorandum which the Minister stated was in the Printed Paper Office, that in fact it is proposed that this will be phased over a period of three years and that the Government will be seeking the provision of reciprocal trading opportunities for British manufacturers overseas. One would hope that the implication of that clause—and perhaps the Minister will be able to clarify this—would be that if in fact Japanese instruments are to be allowed into this country to be installed as the second and subsequent instruments, this will only happen if there is a reciprocal agreement so that we are in as favourable a position for exporting such equipment overseas.
When the legislation is brought before it in the new Session, I think the House will want to look very carefully at these proposals. Certainly there is a very great amount of detail in them, particularly the detail in the Memorandum here, and this will have to be scrutinised very carefully.
§ 4.13 p.m.
§ Baroness SEEAR
My Lords, I should like to thank the Minister for repeating the Statement which has been made in another place, and to ask him to confirm what I take to be the fact from the Statement, that the monopoly in the provision of the network will be maintained intact. That seems to me an essential requirement. With that proviso, however, we would very much welcome the opportunity for private sector initiatives in the provision of equipment. The monopoly on equipment has without doubt slowed down the development of what should be a rapidly expanding industry. Those of us who have attempted, for example, to get an Ansaphone and have been told that the Post Office's charge would be £8 a week for what is a glorified tape recorder, must be very glad to hear that there is to 37 be private enterprise introduced sector.
I should like especially to underline how important it is that this move should give an impetus to a new developing electronics industry, the kind of industry in which jobs in the future are to be found. As the Minister said in the Statement, this should create new jobs and new businesses. This must be so. It is vitally important that we should get into this business now and not wait, as was suggested by the noble Lord, Lord Ponsonby, behind a tariff wall to develop our new equipment, but get into it now so that our industry can compete effectively with the Japanese industry in the provision of these parts.
I should like also to add that this seems to me to offer opportunities for new jobs of a rather different order. That is to say, with the widespread use of equipment of this kind, far more people will he able, in their own homes, to undertake work which depends on telecommunications equipment of one sort and another. This facility already exists but it could be expanded very considerably with more equipment available. There are already many people, particularly women, who are using these devices to earn money in their own homes, and this is a good line which could he extended very considerably when this equipment becomes more readily and cheaply available.
§ Viscount TRENCHARD
My Lords, if I may take first the very helpful Statement by the noble Baroness, Lady Seear, she has done my job for me. It is for the reason which she explained so clearly that we have introduced this policy and believe in it very strongly indeed. I can confirm to her nevertheless that it is our intention to keep the integrity of the Post Office basic network intact, as it is, and that goes through to the first telephone and it goes through to the approval and in some cases the installation of complicated wiring with exchanges. I think this once again shows that after taking evidence from all parties we have introduced a sensible, practical and moderate approach to this problem.
My Lords, so far as the three years is concerned—and the noble Baroness encouraged me to speed it—an industry that has not been free to compete and to 38 supply the many forms of gadgetry which we intend to free up, is not immediately ready to supply where some other countries are ready. The three-year phasing programme is essential, in our view, to give British industry an opportunity to prepare for this.
Yes, I would say to the noble Lord, Lord Ponsonby, by "reciprocity" we mean exactly what he has described; that is our objective. He will know, as I do, that there are complicated international arrangements. We are not fully master of some of them, but our clear intention is to ensure that if we liberalise our market others will be asked to do the same.
The noble Lord, Lord Ponsonby, mentioned our lack of investment. I was not sure whether he was talking of private investment or Government investment. On private investment, to invest when there is a monopoly situation in your home market, and it is difficult to supply, is obviously a discouragement. So far as Government investment is concerned, this is something that I have looked at over and over again, and it is not so clear that in this area we are not by one means and another helping our technology to be pulled forward; the schemes that are available are considerable and will be there to encourage investment over the future period.
I would say to the noble Lord that we do not believe we are in danger of allowing a creaming off of the most profitable parts of the telecommunications network; indeed, the basic network stands. It is true that profits currently are greater on the long distance telephone calls than on the local ones. But both of those will stand as they are at present.
The added value services depend upon a leased wire whether they are for computers to communicate with computers or with other organisations. The rentals for the leasing of those wires must clearly be set for the Post Office and its new subsidiaries and for private enterprise at a reasonable level. So, at present, we see no risk of any substantial creaming off. We believe that British Telecommunications should he able to continue to develop the efficiency of its essential network.
§ Lord GISBOROUGH
My Lords, the users will be very pleased to hear that statement. If one asks for a telephone in the United States one gets it the next day However, in Oxford, it takes about 18 months. Meanwhile, if one wants a telex installed in London, at present it can take up to 18 months, during which time the business in question is not in proper communication. Can my noble friend say whether a business which is waiting for a new telex and which has been told that it will take about 18 months, can now expect to have the telex in a much shorter time, or are we to expect the complete sorting out of this problem to take perhaps three years?
§ Viscount TRENCHARD
My Lords, it is between the two. The legislation which this Statement heralds will be introduced early in the next Session and thus large parts of it, including all the supplying of instruments and extensions, will start to be able to be put into operation in about a year from now.
§ Lord HARMAR-NICHOLLS
My Lords, is my noble friend aware that although his Statement will be generally welcomed it must still be recognised that it is a very tentative and rather nervous step? Even as regards the first installation of the first telephone, why should the monopoly exist? There is the question of electricity: private enterprise, with the central board, could put in the lines which are needed. There is the same situation with water and other public services. Why should the telephone be kept under restrictive monopoly, which will keep down the enterprise which will bring about what my noble friend wants—that is, the extra business and the extra energy? It is a first step, and let us hope that it is only a first step and that this is not the end of the road.
§ Viscount TRENCHARD
My Lords, my noble friend wishes us to go further. Most countries retain a monopoly situation as regards their basic network. The United States did go as far as liberalising the first instrument but it has run into a certain number of quite serious problems as a result. For example, it is difficult for a householder to know whether it is, in fact, the first instrument that has failed which has been put in by a private supplier and is due to be maintained by him, or 40 whether it is the network that has failed. No such problem will arise in the British situation. It will be clear to the householder either that the network has failed —in which case he can ring British Telecommunications—or that the instrument on the extension is not working, because the prime instrument will still be working. So I think that we have steered a middle road.
As regards added value services, the Statement made clear that my right honourable friend is prepared to consider going further than the first steps announced.
§ Lord AIREDALE
My Lords, can we be assured that the fair competition between the public and the private sector will also extend to advertising practices?— because BT will be in the position that the electricity boards are in at present; namely, of sending out bills four times a year to all their subscribers. There will be temptation to yield to what some of the electricity boards are doing now—that is, to include leaflets with their bills advertising equipment which they have for sale. That is very unfair competition because at present postage rates it would cost the private sector a fortune to indulge in direct mail advertising on this scale. I hope that this point will be borne in mind when the proposed Bill is prepared.
§ Viscount TRENCHARD
My Lords, we shall bear the noble Lord's point in mind in the discussions which will be taking place with all parties.
Lord BRUCE of DONINGTON
My Lords, we sincerely hope that the noble Viscount will be able to give us some assurance in regard to the effect that these new peripherals, these new value-added services, will have on the central network itself. Quite clearly, if there is to be an extensive use of these items—and that, of course, is what the Government's statement envisages—then there will be some extra load on the central circuit system itself and also upon its equipment. We would like to have some assurance that that has been taken into account. because, if there are additional modifications and alterations that have to be made in the central system, particularly in its carrier system, it will need a considerable amount of money. We should like to be assured that adequate investment or 41 permission to invest will be given to the ordinary telecom system.
As regards frequency transmisson, will the noble Viscount give us an assurance that the implication of the existing wave allocation system has been taken fully into account?
§ Lord UNDERHILL
My Lords, in the Statement kindly read by the noble Viscount the Minister, he referred to the privilege of the Post Office telecommunications in supplying its own equipment. Am I correct in saying that the telecommunication side of the Post Office does not manufacture its own equipment and that it supplies equipment on design and safety provisions that it lays down? In view of the new outlook for private companies, do I take it that the telecommunications side will now be enabled to manufacture its own equipment, which it has requested over very many years?
§ Viscount TRENCHARD
My Lords, I am not entirely clear about the answer to that point. However, I undertake to write to the noble Lord on the matter.