§ Mr. Colvin
asked the Secretary of State for Industry when he expects to award contracts for a cellular telephone system.
§ Mr. Butcher
I wish to announce a major step in the Government's policy of introducing competition in212W telecommunications, the result of the competition to select the consortium to run a second cellular radiotelephone system.
On 25 June my right hon. Friend announced his provisional decision to licence two competing radiotelephone systems. Half the frequencies are to be allocated to a consortium in which British Telecom and Securicor will each have 50 per cent. of the shares. The remaining half of the frequencies were to be allocated to a private sector company selected by means of open competition. My right hon. Friend appointed SRI International as consultants to evaluate the competing bids on an equal and impartial basis.
SRI International submitted its report on 30 November and this has been considered by the Department's advisory panel on telecommunications liberalisation who offered their independent advice on 10 December. It is SRI's clear recommendation, which is unanimously supported by the advisory panel, that the bid submitted by Racal-Millicom Ltd. met all the conditions laid down in the guidelines on which the competition has been based and provided not only the greatest industrial benefits but also the best prospect for early national coverage by cellular radio.
Racal intend rto make an initial investment of £45 million by 1985 and plan total investment of up to £200 million by 1989. They intend to install 75 cells and 10 remote switch groups by 1985 and 941 cells and a total of 244 remote switches by 1989. This investment will produce wide national coverage in 1985 when seven network control switches will be installed in Edinburgh, Cardiff and Belfast as well as London, Manchester, Birmingham and Newcastle in England, but the aim is to cover 64 per cent. of the United Kingdom land mass and 90 per cent. of the population within five years, so there will be clear benefits to the United Kingdom regions. The precise number of subscribers will depend on Racal's success in marketing its system on a nationwide basis, on the success of British manufacturing industry in producing and marketing radio telephones suitable for use with cellular technology and on the early introduction of hand portable telephones.
Racal estimates that the establishment of its system will employ over 200 in Racal-Millicom alone in 1983 and over 700 people by 1989. British industry, including Racal, will employ about 1,000 by the end of 1983 in the manufacture of mobiles and capital equipment for the Racal system, rising to around 2,000 by 1989. Racal estimates that a total of 6,000 jobs may be created in British manufacturing by 1989 when the export potential is taken into account. These figures do not take account of employment in the BT Securicor system, which can be expected to provide a similar number of jobs.
Racal intends to ensure that technology will be transferred to this country both in respect of the cellular technology required for the system and for a high quality, inexpensive, portable telephone to fit handbags and briefcases capable of accommodating one-way and two-way voice, and digital communications. Racal has given categorical assurances that the hardware of the system it would prefer to install will be manufactured in this country. Racal believes that if the Government move quickly to issue licences to run its system this will provide a firm home base from which United Kingdom manufacturers could attack international markets.
We are convinced that an investment on the scale planned by Racal, coupled with the investment proposed 213W by BT and Securicor, will have major benefits for commerce, industry and transport in all parts of the country. The availability of cheap hand portable equipment will have particular benefits for small firms and the self-employed who cannot at present afford a radio telephone for business use. Hitherto only people such as senior executives have been able to afford radio telephones; the arrangements I am announcing will ensure that instant access to mobile communications will soon be within the reach of anybody who needs it, such as salesmen and service agents.
The Racal system will also provide effective competition for BT and should ensure that from 1985 onwards radio telephones will be cheaper, more available and of better quality. My right hon. Friend has therefore decided to confirm his provisional decision to licence a second national cellular radio telephone system and has authorised the Department to commence negotiations with Racal with a view to the early grant of a licence.
In these negotiations, the Department will be careful to protect the interests of existing small radio telephone companies. They will retain their existing frequencies. In addition, the licences to be issued to BT and Racal will ensure that independent service providers will be able to supply services over both the BT and Racal systems under conditions for free and fair competition. Racal has given categorical assurances that it will accommodate the aspirations of the independents and believes that it and the independents can both derive positive advantages from cooperation.