Telecommunications Operators: EC Directive (Hansard, 2 February 1993)

The Earl of Caithness
My Lords, the regulations implement an EC directive which has an exemption for procurement in relation to telecommunications services which others are free to provide in the same area and under substantially the same conditions. On the basis of legal advice, we concluded that the exemption applies to all procurement by UK operators, except for procurement by British Telecommunications plc and Kingston Communications (Hull) plc, in so far as each is dominant in its licensed area in the market for the specified services and, therefore, the exemption does not apply.

§ Lord Hacking
My Lords, although I am grateful to my noble friend for his Answer, I have some doubts about the legal advice that he is receiving. I wonder whether we can break down this problem in steps. Would my noble friend confirm that this directive is aimed at member states whose telecommunications services are provided by state monopolies? My noble friend will be aware of Recitals 11 and 12, and I think that he will find it easy to answer that question. Secondly, will he acknowledge that in the United Kingdom—differently from other member states—our telecommunications industry works in a competitive environment and will increasingly do so? If the answers to those questions are yes, which I anticipate that they will be: why are Her Majesty's Government not exercising the express powers granted to them under Article 8(1) of the procurement directive and freeing all operators in our telecommunications industry from the bureaucratic and other burdens of this directive?

The Earl of Caithness
My Lords, my noble friend is right in saying that this is entirely a legal matter. Where one has two different legal opinions, there are appropriate procedures with which to resolve the problem. In this country, 130 companies are affected by the directive but, because of the dominant position of British Telecommunications plc and Kingston Communications (Hull) plc, they have not been exempted for certain specified services.

§ Lord Ezra
My Lords, can the Minister indicate whether, in view of what appears to be a somewhat selective approach, the Commission has expressed any opinion on the way in which this directive has been applied in the United Kingdom?

The Earl of Caithness
My Lords, this was not a selective approach; it was very carefully considered. As the noble Lord will be aware, a review called the Duopoly Review looked at the whole question of telecommunications services and we then considered those that should be covered by the directive. As I understand it, the Commission has not made a firm comment on our proposals.

§ Lord Howell
My Lords, can the Minister tell us whether such discrimination is being hallowed by the Government in any other field in the public or private sector? It cannot happen in relation to water or energy, so why is it right in the field of communications, in which competition is severe at the moment, that unfair arrangements should be brought about and hallowed by the Government in this way? Discrimination should be outlawed in competitive trading, and I submit that it is the duty of the Government to bring that about.

The Earl of Caithness
My Lords, the whole point of the directive, in which I declare an interest as I was very involved in it while Paymaster General, was to avoid the discrimination that was practised previously by monopoly purchasers throughout Europe. The whole point was to create a better market. Where the market cannot act—and there are certain cases in which it cannot act—it is right that those companies with dominance in the area should be required to fulfil certain functions to create a market.

§ Lord Ewing of Kirkford
My Lords, is there any significance in the point that the two companies against which discrimination appears to be being practised were both publicly owned companies before the 1984 Telecommunications Act was introduced? British Telecom was in the public sector and the Kingston-upon-Hull company was in the local authority sector. Is there any significance in the fact that the two companies against which discrimination is being practised were formerly both in the public sector? How on earth does Kingston Communications (Hull) plc have a dominant position? It is a fairly small company, is it not?

The Earl of Caithness
My Lords, the noble Lord is wrong. The great advantage to British telecommunications has been the privatisation, with 75 per cent. now in the private sector, and a much improved service for customers. What we are talking about is the question of dominance in a specific area for specific services. It is not discrimination against those firms; it is to prevent discrimination against suppliers.

§ Lord Cocks of Hartcliffe
My Lords, do the Government think that these regulations will make it easier or more difficult to maximise the yield from the final sale of British Telecom shares?

The Earl of Caithness
My Lords, these regulations are designed to create a market for fair competition for suppliers to the telecommunications industry. That stands to benefit British industry quite enormously overseas.

§ Lord Stoddart of Swindon
My Lords, is this yet another case of the British Government applying European directives with much more rigour than is necessary, as they have done in the case of so many health regulations, resulting in the closure of half our abattoirs?

The Earl of Caithness
My Lords, no, it is not a question of that. It is a question—and rightly so—of enforcing the directive; but the purpose of the directive is to give the supplying firms greater competition. We shall ensure—and so will the supplying firms—that this is implemented throughout Europe.

§ Lord Richard
My Lords, is the Minister aware that it certainly seems illogical (to put it mildly) that two public utility companies should be subject to these regulations while all the others are not? Although that may be the legal advice that the Government have received on the construction of the directive, do they have any other proposals to impose similar conditions upon other telecommunications companies which at the moment, and on the Government's construction, arc not subject to the regulations?

The Earl of Caithness
My Lords, as British Telecom is mostly now in the private sector—thank goodness—it is an evenhanded approach that the Government have taken. What we have had to look at (through Article 8 of the directive) is the dominance of a supplier of a telecommunications service. Where there is a dominance—and there is in these two instances for certain services—it is right that the regulations should apply to those dominant suppliers.

§ Lord Richard
My Lords, I am sorry. Obviously, I did not make myself clear to the Minister, so I wonder whether the House will allow me to try again. As I understand it, two companies are now subject to these regulations and the tendering processes therefore have to take place in a certain form. Is it the Government's intention that other companies in a similar position in the market should also be subject to similar restrictions and regulations?

The Earl of Caithness
My Lords, the regulations apply to all 130 or so British firms which are affected by them. Of those 130, two are in a dominant position for certain services, and that is why they have been itemised in the way that they have. What we do—and what we shall continue to do—is to keep the situation under review. If there is more competition in the areas in which those two firms have a dominance, the regulations can be looked at again.

§ Lord Hacking
My Lords, can we can go back to the Minister's answer in which he referred to fair competition? Can my noble friend help me on this point? One aspect of this directive is the competitive disadvantage that is being imposed upon those companies that are subject to it—for example, in the periodic indicative notices in which they have to set out their future commercial plans in advance and publicly for exposure to their competitors at home and abroad.

The Earl of Caithness
My Lords, I do not agree with my noble friend that that is too discriminatory against the two companies. As my noble friend will be aware, the threshold is considerably higher than for central and local government purchases. We are looking for greater competition for the suppliers of equipment and services to the telecommunications companies.