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Q&A: E-commerce minister on BT, Wi-Fi and competition
Part II: The analogue signal will be turned off by 2010, 3G will succeed, and BT won't be allowed to dominate Wi-Fi, says the e-commerce minister
Q: A couple of weeks ago the DTI announced changes to the rules on Wi-Fi that will allow public high-speed wireless networks in coffee shops and airports. Is that something that you're quite interested in?
A: Yes, it is. Wi-Fi is a competing platform for broadband services. Looking forward, BT seems to be the only big company to have come out and set clear targets for what they hope to do with Wi-Fi, and it has already teamed up with some high-street firms. Is there a danger that it might be only one or two companies, or even just BT, that dominates this new market?
I would hope not. Competition is absolutely vital, and I think that's why broadband is quite exciting -- because there is now real competition. Ever since we've had competing networks, with the arrival of cable, the idea always was that competition would drive the growth of the market. And I think that with broadband we're actually seeing that happening now. We've had a long wait for it, but I think it is now, finally, happening. So, competition is important. Now, I would certainly be disappointed if there was one dominant player in Wi-Fi, but I don't see any risk of that at the moment. The competition concern is one that we need to keep an eye on. You also mentioned 3G. Since the auction process two years ago there's been a lot of pessimism expressed about the future of 3G, and repeated rumours that operators have been lobbying the DTI to get some money returned or licence conditions changed. Is that something that might happen?
If you look at the share prices of the companies that won licences relative to those that lost in the first few days after the auction, it is the case that the winners took a huge hit, relative to the other companies that competed in the auction. But that lasted for literally a small number of days. Beyond that the convergence between them, the relative share prices, came back to where they were before the auction results were announced. And if you look several months out after the auction process, the same is true. So, I think it's important to bear that market assessment of the decisions that the operators took in mind in evaluating what's happened. I think the reality is that we see a strong market with a big incentive to roll these services out quickly and recoup the investment they've made in the licences. Would you be concerned if 3G wasn't as successful as is hoped? Some analysts have claimed that the European mobile market is going to see big consolidation. What if there were only two or three companies offering competing 3G services in the UK, rather than five?
I would certainly be concerned if the competitiveness that has been a major hallmark in the success of mobile in the UK came under threat but I don't think that's going to happen. There have been claims that the ITV Digital collapse is a threat to the government's plans of turning off the analogue broadcasting signal by 2010, but with six companies now showing an interest, how do you see it panning out from here?
Well, I think this shows that we have a viable technology. ITV Digital was the failure of a company, not of a technology, and there continues to be a very clear and commercial interest in the digital terrestrial television licences. As you know, Chris Smith said three years ago that we hoped to achieve the digital switchover between 2006 and 2010. We've been looking at that in the last few weeks and we see no reason to change our assessment. It remains valid. Last Monday, at a hearing of the Joint Committee for the Communications Bill, several broadcasters were objecting to the Radio Spectrum Management Review, which has recommended the imposition of spectrum charges. Their argument is that making broadcasters pay for the spectrum they use will take away money that could have been used to develop compelling digital content to drive the take-up of digital TV. You must have read the review, so do you think that spectrum charging is the right thing to do?
Well, we're studying the review at the moment. It is an independent report commissioned by us, and we will respond to it soon. I think the principle that is being advanced is absolutely right. If you want to ensure that the spectrum is being used in a way that maximises the benefit to the UK then you have to look at spectrum charging as one way of doing that. Now, deciding how that will work, which parts of the spectrum charges would be applied for, and how various organisations would be affected by this, well these are all matters that require careful examination. But I do think that using spectrum efficiently is in everyone's interest, and we need to come up with a way forward to achieve this. It seems that achieving the switch-off by 2010 is such a tricky target already that, by imposing spectrum charges on broadcasters, the government risks alienating people whose help you really need if you are to achieve that target
We certainly do need to work closely with the broadcasters and others, but as I say we haven't yet published our response to the radio spectrum management review. BT often seem to dominate these kind of interviews -- are there any other companies that you think have a particularly important contribution to make in the months ahead?
Well, there are loads. BT is very important, although if you look at digital telephone traffic in the City then BT is actually a relatively small player in the overall market, but clearly they're big. In terms of delivering broadband in competition to BT, ntl and Telewest are going to be very important -- they're getting great broadband take-up too, which I welcome. There's a really good balance between the cable companies and the ISPs that are offering DSL. I'm going be watching the mobile operators with great interest. Hutchison 3G is expected to launch later this year, so it's clearly going to be a key player What targets are you setting yourself to achieve in the coming year?
The main targets that we set are actually more medium-term (ensuring that everyone who wants it has access to the Internet by 2005, and making all government services available electronically by 2005). With broadband connections, BT's target is one million DSL users by next summer, and arguably the second million may be a tougher job to deliver. Certainly, we're going to need the creation of some excellent broadband content to encourage people to move to broadband. But, as I say, there are clear targets in place, and I will be expected to show progress towards them in a year's time. Back to Part I: Why the government shouldn't subsidise broadband rollout
A: Yes, it is. Wi-Fi is a competing platform for broadband services. Looking forward, BT seems to be the only big company to have come out and set clear targets for what they hope to do with Wi-Fi, and it has already teamed up with some high-street firms. Is there a danger that it might be only one or two companies, or even just BT, that dominates this new market?
I would hope not. Competition is absolutely vital, and I think that's why broadband is quite exciting -- because there is now real competition. Ever since we've had competing networks, with the arrival of cable, the idea always was that competition would drive the growth of the market. And I think that with broadband we're actually seeing that happening now. We've had a long wait for it, but I think it is now, finally, happening. So, competition is important. Now, I would certainly be disappointed if there was one dominant player in Wi-Fi, but I don't see any risk of that at the moment. The competition concern is one that we need to keep an eye on. You also mentioned 3G. Since the auction process two years ago there's been a lot of pessimism expressed about the future of 3G, and repeated rumours that operators have been lobbying the DTI to get some money returned or licence conditions changed. Is that something that might happen?
If you look at the share prices of the companies that won licences relative to those that lost in the first few days after the auction, it is the case that the winners took a huge hit, relative to the other companies that competed in the auction. But that lasted for literally a small number of days. Beyond that the convergence between them, the relative share prices, came back to where they were before the auction results were announced. And if you look several months out after the auction process, the same is true. So, I think it's important to bear that market assessment of the decisions that the operators took in mind in evaluating what's happened. I think the reality is that we see a strong market with a big incentive to roll these services out quickly and recoup the investment they've made in the licences. Would you be concerned if 3G wasn't as successful as is hoped? Some analysts have claimed that the European mobile market is going to see big consolidation. What if there were only two or three companies offering competing 3G services in the UK, rather than five?
I would certainly be concerned if the competitiveness that has been a major hallmark in the success of mobile in the UK came under threat but I don't think that's going to happen. There have been claims that the ITV Digital collapse is a threat to the government's plans of turning off the analogue broadcasting signal by 2010, but with six companies now showing an interest, how do you see it panning out from here?
Well, I think this shows that we have a viable technology. ITV Digital was the failure of a company, not of a technology, and there continues to be a very clear and commercial interest in the digital terrestrial television licences. As you know, Chris Smith said three years ago that we hoped to achieve the digital switchover between 2006 and 2010. We've been looking at that in the last few weeks and we see no reason to change our assessment. It remains valid. Last Monday, at a hearing of the Joint Committee for the Communications Bill, several broadcasters were objecting to the Radio Spectrum Management Review, which has recommended the imposition of spectrum charges. Their argument is that making broadcasters pay for the spectrum they use will take away money that could have been used to develop compelling digital content to drive the take-up of digital TV. You must have read the review, so do you think that spectrum charging is the right thing to do?
Well, we're studying the review at the moment. It is an independent report commissioned by us, and we will respond to it soon. I think the principle that is being advanced is absolutely right. If you want to ensure that the spectrum is being used in a way that maximises the benefit to the UK then you have to look at spectrum charging as one way of doing that. Now, deciding how that will work, which parts of the spectrum charges would be applied for, and how various organisations would be affected by this, well these are all matters that require careful examination. But I do think that using spectrum efficiently is in everyone's interest, and we need to come up with a way forward to achieve this. It seems that achieving the switch-off by 2010 is such a tricky target already that, by imposing spectrum charges on broadcasters, the government risks alienating people whose help you really need if you are to achieve that target
We certainly do need to work closely with the broadcasters and others, but as I say we haven't yet published our response to the radio spectrum management review. BT often seem to dominate these kind of interviews -- are there any other companies that you think have a particularly important contribution to make in the months ahead?
Well, there are loads. BT is very important, although if you look at digital telephone traffic in the City then BT is actually a relatively small player in the overall market, but clearly they're big. In terms of delivering broadband in competition to BT, ntl and Telewest are going to be very important -- they're getting great broadband take-up too, which I welcome. There's a really good balance between the cable companies and the ISPs that are offering DSL. I'm going be watching the mobile operators with great interest. Hutchison 3G is expected to launch later this year, so it's clearly going to be a key player What targets are you setting yourself to achieve in the coming year?
The main targets that we set are actually more medium-term (ensuring that everyone who wants it has access to the Internet by 2005, and making all government services available electronically by 2005). With broadband connections, BT's target is one million DSL users by next summer, and arguably the second million may be a tougher job to deliver. Certainly, we're going to need the creation of some excellent broadband content to encourage people to move to broadband. But, as I say, there are clear targets in place, and I will be expected to show progress towards them in a year's time. Back to Part I: Why the government shouldn't subsidise broadband rollout
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