Private Telecommunications Circuits (Hansard, 20 July 1984)

§ Mr. Kenneth Baker

The Government have decided, first, in the light of the specific duties placed upon the Secretary of State by section 3 of the Telecommunications Act 1984, to reaffirm their view that "simple resale" should not he licensed in the period before July 1989. The licences granted to British Telecom and Kingston upon Hull city council contain provisions prohibiting those operators from allowing their systems to be used to provide "simple resale" services in the period prior to July 1989. A similar prohibition will be included in the draft Mercury licence which will be published for consultation purposes shortly.

We have decided further that, in view of these section 3 obligations, greater liberalisation in the third party use of private circuits would be appropriate. Although British Telecom has itself recently introduced several liberalisation measures in the use of the private circuits it provides, we consider that further liberalisation measures are desirable.

These arrangements will be introduced as part of the proposed general licence for branch systems which will come into effect on 5 August, the day when the new licensing arrangements under part II of the Telecommunications Act enter into force. The general licence will supplement all existing licences which continue in force after 5 August and will authorise the running on private premises of telecommunication systems which are connected to the public telecommunication systems run by British Telecom, Hull and Mercury and therefore form "branches" of those systems. In addition to conditions regulating the connection and maintenance of apparatus comprised in such branch systems and imposing 368W fair competition requirements on persons running branch systems on multi-occupied premises, the branch systems general licence will establish a new regime for the connection to branch systems of private circuits leased from public telecommunications operators.

As at present there will be no limit on the number of private circuits that may be connected in tandem by means of branch systems run by the same company or group of companies, provided that messages conveyed by such circuits are not also conveyed by the public switched networks. However, from 5 August there will be no limit on the number of branch systems run by different companies that may be connected by means of private circuits connected to a branch system but only if messages sent by means of such bilateral private circuits take no more than one "step". This means that such messages may not also be conveyed by a public switched system nor may they be conveyed from a branch system run by one company via a branch system run by a second company to a third branch system. Thus a manufacturer may be linked individually to each of his suppliers and dealers, or a retailer could be so linked to each of his suppliers. But in such cases messages could not be sent from one supplier to another via the manufacturer or retailer except under the arrangements I shall describe next.

In addition to these arrangements the general licence will permit any company or member of a group of companies to use private circuits not connected to the public switched networks to connect a network run by it to the networks run by up to three other companies which are not members of the same group of companies. There will be no limit on the number of individual circuits on each of these permitted links provided they are not connected to a public switched system but messages which are conveyed over such circuits may make only two "steps". This means that messages sent from a terminal connected to a branch system run by one company may be conveyed by a private circuit connecting it individually to a branch system run by a second company which is not part of the same group of companies and then via a second private circuit to a terminal connected to a second branch system forming part of the network run by that second company. This means that, for example, a message could be sent by a private circuit from a company in Manchester to a second company also in Manchester and then by a second private circuit to the second company's offices or group headquarters in London.

Different arrangements will apply in respect of those specially engineered circuits which may convey messages which are also conveyed by the public switched networks. As now, there will be no limit to the number of these specially engineered circuits which may connect branch systems run by the same company or members of the same group but messages conveyed by such circuits may take only one "step" before or after being conveyed by means of a public switched network. From 5 August a company or a group of companies will be able to use up to three such specially engineered circuits to connect its network to branch systems run by companies which are not members of the same group. Messages conveyed over such specially engineered circuits between members of different groups of companies may take only "one step" if they are also conveyed by means of the public switched networks, or two "steps" where the messages are not conveyed by means of the public switched networks.

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Where a company or group of companies uses a specially engineered circuit to connect its network to branch systems run by companies in other groups that circuit will count against the maximum of three permitted private circuits connected to other groups of companies which I have previously mentioned. Similarly any private circuit connecting one company to another group of companies will count against the maximum of three permitted specially engineered circuits connecting that company to other groups.

I should make it clear that each network run by a company or group of companies will be able to take advantage—separately—of each of the arrangements I have outlined.

These arrangements will provide a distinctly more liberal regime for users. But the Government believe that further steps can be taken now which will, on the one hand, stimulate the greater availability and improved use of telecommunication services and which will, on the other, not present the financial threat to public telecommunication operators which could arise from the early introduction of "simple resale" of capacity on private circuits.

The Secretary of State will accordingly be prepared to grant licences to individual applicants whose proposals for the use of private circuits significantly enhance the economic performance or the mutual business interests of a defined but closed group of users. The number of connections between different legal groups of companies might well exceed those allowed under the general licence arrangements. The Government will also be prepared to grant individual licences in respect of proposals which provide significant facilities which are not normally available from, or which complement the facilities provided by, public telecommunication operators in the United Kingdom.

When appraising individual applications for individual licences, the Secretary of State will seek the advice of the Director General of Telecommunications. The Secretary of State will want to assess the likely impact of each proposal on the ability of the public switched systems to provide the universal telephone service, services in rural areas, and so on. It will be his intention not to grant individual licences in respect of applications whose purpose, or whose main predictable effect, would appear to be the diversion of traffic revenue from operators who provide such services. The terms and conditions under which private circuits are connected to the public switched systems will in the first instance be a matter for negotiation between the licensee and the operators concerned subject to the provisions of their respective licences.

Applications for individual licences under these arrangements will be considered as soon as practicable after the licensing provisions in the Telecommunications Act enter into force. The Secretary of State will be asking the Director General of Telecommunications to give continuing attention to developments in this area, and to advise him, if necessary, when specific changes in his approach are desirable — whether in the interests of suppliers, users or public telecommunication operators. The Director General will also keep under review the need to modify the conditions of the general licence including the possibility of greater liberalisation.

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The Government's policy in respect of the resale and shared use of international private leased circuits is that the arrangements contained in CCITT recommendations should continue to apply.

I wish also to announce the outcome of the Government's consideration of the scope for allowing BT, Hull and Mercury to bring into public use within their networks spare capacity on privately-owned circuits. We have concluded that BT, Hull and Mercury should be allowed to take advantage of opportunities to lease facilities run by others but leasing arrangements will have to be covered by an individual licence in each case. The Government's present intention is that licences would impose conditions requiring that the leasing arrangements last for a minimum of 12 months; that the beneficial owners of all the individual circuits covered by arrangements should be content for BT, Hull or Mercury to be thus involved; that BT, Hull or Mercury should control the switches connected by privately-owned circuits; and that BT, Hull and Mercury should undertake to meet, in respect of facilities that they were so leasing, their own licence obligations including observance of the relevant CCITT standards.