Telecommunications Services (Hansard, 25 February 1987)

§ Mr. Butcher

The Government have now concluded its extensive consultation with industry and users on the proposed telecommunication licences for the running of branch systems and for the provision of value added and data services. Our aim has been to ensure that the liberalisation of telecommunications continues to develop294W in a way which increases the choices available to users and the opportunities for the fast growing telecommunications sector, consistent with the policy announced in November 1983 that the Government do not intend to licence anyone other than BT or Mercury to run national public telecommunications networks until November 1990 at the earliest.

The Branch Systems General Licence

When the original branch systems general licence was issued in 1984, the Government made it clear that its operation would be reviewed in the light of experience.

The Director General of Telecommunicatons has conduted this review over the last year. My right hen. Friend the Secretary of State for Trade and Industry has accepted his advice that further relaxations are justified and is therefore revoking the existing branch systems general licence and replacing it with a more liberal licence. The new licence comes into force today. The main changes are:

(i) Companies will in future be allowed to carry public switched network traffic over leased lines anywhere within their own group. In order to ensure that the technical quality of telephone signals remains consistent with minimum international standards, companies wishing to take advantage of this relaxation will have to comply with the networking code of practice which has been developed by OFTEL in conjunction with the public telecommunicatons operators, industry and user organisations.
(ii) The present limit of 50 metres within which companies may use their own wiring to connect systems in different buildings is being increased to 200 metres. This will give companies greater freedom to make the commercial decision whether to install their own wiring or to lease a short private circuit from one of the public telecommunications operators.
(iii) Rules clarifying the permitted use of international leased lines. The original licence did not deal with this.
(iv) Single line apparatus will no longer be classified as call routing apparatus. This relaxation will relieve users of such apparatus from rules requiring hardwired connections, pre-connection inspection and maintenance. This will increase user choice and enable United Kingdom manufacturers to take advantage of a promising opportunity in home and export markets.

Opinion has been divided among suppliers and users about the notice period in contracts with designated maintainers. My right hon. Friend does not therefore propose to make any change in this area.

The standard and technical provisions of the old branch systems licence, which are now familar to businesses who have run branch systems since 1984, have been incorporated in a separate document. They will apply consistently to virtually all licences issued in future. This should provide greater certainty for users and suppliers of telecommunications apparatus and widen the adoption of good technical practice which has evolved since 1984.

The above changes take account of those operational needs of industry and commerce on which OFTEL has received most o representations since 1984. They are designed to assist companies to improve the efficient arid economic use of their corporate networks. It is also open 295W to operators licensed under the branch systems licence to provide value added services over their systems. When they do so, however, under the authority of the branch systems licence, they will remain subject to the limitations on resale contained in that licence. For operators who wish to take full advantage of the liberalisation on the resale of value added and data services, a class licence for value added and data services has now been finalised.

The Value Added and Data Services Class Licence

The consultations with industry and users on the class licence for value added and data services, issued in draft in July, have produced a number of helpful comments, which have been taken into account in the final version of the licence referred to below. Against this background the director general has today published parallel amendments to the licences of British Telecommunications plc, Mercury Communications Limited and Kingston upon Hull city council. These amendments, which have been agreed by those public telecommunications operators, are designed to place those PTOs on an equal competitive footing with other competitors in this newly liberalised market.

Although the provision of data services is being opened to full competition, it remains important that all forms of basic telecommunication services should continue to be made available by the PTOs on a nationwide basis and in a way which gives subscribers a choice of public networks. At present the PTOs have an obligation under their licences to provide basic telecommunication services. This obligation is not being amended and so basic data conveyance, including basic packet switched services will remain subject to the obligations to provide service and Interconnect contained in the PTOs' licences. I welcome the responsible approach that the PTOs have adopted in agreeing that this should remain the position.

The Telecommunications Act 1984 requires the director to give 28 days notice for representations before making the amendments to the PTO licences. My right hon. Friend intends, therefore, formally to issue the new value added and data services class licence at the end of that period unless the director has advised him that further changes need to be made to the PTOs' licences as a result of representations received during the consultation period. In the meantime, the Government have decided to make available the final text of the class licence, to assist the industry to prepare to introduce the new services.

Two significant changes from the July draft have been made in the final version of the class licence, in the light of industry comments. First, companies will be permitted to charge within their group for the conveyance of basic voice or basic telex traffic. This relaxation permits companies to make full use of corporate networks both to offer value added and data services, and to convey voice and telex traffic for ordinary business purposes. Where companies choose to convey basic voice or basic telex traffic they will of course remain subject to the limitations on resale contained in the branch systems general licence. This reflects stated Government policy that the extent of resale of voice and telex will be limited until at least July 1989.

Secondly, the Government recognise that companies will wish to offer a mix of charged services and services for the mutual business efficiency of non-telecommunication activities in an industrial sector but for which no charge is levied. The Government are concerned to promote the 296W widest use of value added and data services, since these can improve the competitiveness of a wide range of industries. In these circumstances, the Government have decided to exempt such uncharged services from the conditions on fair trading and OSI standards contained in the class licence.

Some commentators have proposed that major providers of value added and data services should be obliged to interconnect with, and provide services to, any other operator. The Government have considered this carefully against the balance of views expressed during the consultation process and has concluded that the arrangements should remain as those set out in the statement made on 11 March by my right hon. Friend the Minister for Information Technology. Interconnection between different service providers should at this stage be for the market to decide. The Government will continue to play a catalytic role in encouraging such interconnections and the emergence of co-operative ventures within the industry, through the £1.25 million VANGUARD project which the Government launched in October.

The class licence will not be available to the PTOs, their groups or associates. The PTOs will be able to provide value added and data services under their main licences which are being comprehensively amended by the director to ensure that in terms of fair trading and OSI obligations, they provide value added and data services on an even competitive basis with other operators in the market. The Government has concluded that it would be unduly onerous, at this stage of the market's development, to require other members of PTO groups or PTO joint ventures with other operators, all to be licensed individually. My right hon. Friend will, therefore, be issuing a separate class licence for PTO associates. This will in most respects mirror exactly the provisions of the new value added and data services class licence and will come into force at the same time. It will, however, contain provisions which empower the Government to review and, if necessary, to revoke the PTO class licence from any joint venture arrangement where the PTO's partner has at the outset a worldwide turnover in computing or telecommunications in excess of £1 billion a year, or which subsequently exceeds that figure as a result of merger or acquisition.

The Government believe that the PTOs have a full and constructive role to play in the United Kingdom value added and data services market, both in their own right and through cooperative ventures with other operators. But it is equally important that there should be adequate safeguards to prevent the emergence of dominant ventures which could distort the market. The Government believe that users will best be served by a wide range of competing operators and therefore intends to exercise this power to review in line with its declared pro-competitive policy which has been pursued consistently during and since the decision on the JOVE proposal.

The Government have asked the director to keep a careful watch on developments once the licences are issued. It is of course open to him to propose licence modifications if experience showed that to be necessary.

The arrangements that I have outlined today should greatly increase the scope for the economic use of networks to improve business competitiveness, bring benefits to users of telecommunications and increase the 297W opportunities for service providers in a rapidly expanding sector of the economy. I am placing copies of the new licences in the Library of the House.