Orders of the Day — Telecommunications Bill

Part of the debate – in the House of Commons at 7:50 pm on 18 July 1983.

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Photo of Richard Shepherd Richard Shepherd , Aldridge-Brownhills 7:50, 18 July 1983

The director general's purpose is not to construct the licence. I want him to be responsible for implementing strict regulatory controls over the monopoly industry.

I cited the incident of the licence because what it contains or omits will be the proof of the Government's competitive stance. The British Telecom licence is only one-half of the story. In that, we would see the Government's intention. It is not evident in clause 3, which contains a series of general assertions through which most competent corporate lawyers would probably find a way when arguing why someone could not perform duties because they were not, for example, practicable or for some other reason.

Why has the Mercury licence not been made available? I am curious about that document because we are talking about moving from monopoly, through duopoly, to a competitive environment, and the arrangement with a third party such as Mercury are of crucial importance in ascertaining where the Government stand. We are not talking about a commercially confidential document in the sense that it involves outside parties operating in a free and open market. We are discussing the Government as the sole issuer of licences. The private arrangements that they have entered into, covertly, with a private consortium is therefore important. We are not aware of the terms and conditions.

For all that I know, the document might give rise to the gravest anxieties. Perhaps it gives such rights and powers and possibilities to a company that we would judge it to be against the spirit of competition. I say that because I am extremely concerned about the Minister's undertaking to the hon. Member for Newcastle-under-Lyme (Mr. Golding) that he does not intend to license any further companies in the foreseeable future. That is an anticompetitive stance.

Whatever the Government say, the Minister responsible for competition in telecommunications has told the House that he does not propose to extend competition for the foreseeable future. We are left with the most dangerous of situations. There is to be virtually a private monopoly with a shadow duopoly company, the powers, duties and obligations of which are set out in the only licence in existence, which we have not seen.

I want to examine the Government's competitive stance because they always allude to Mercury as if it were a real addition to competitiveness in telecommunications. Because it is the only competition allowed, it limits the Minister's argument. Mercury has no customers at present and therefore cannot provide effective competition for BT. For some fortunate large businesses in certain urban areas Mercury may provide a service, and hence a threat to BT, and so urge it to improve its service. For most of our constituents, however, Mercury is not an alternative.

My consequential argument is that the Bill should be amended to include a clause under which a qualified applicant will receive a licence unless there is a valid reason why it should not. Of course, all entrants should bear a fair share of the burden of supporting loss-making services. We hear arguments about excessive competition and duplication of facilities. I argue, as a reasonable Conservative party stance, that we should let the market place decide how many facilities are necessary and how many competitors it should support. When we fail to do that we always invite trouble. When the Civil Aviation Authority regulates fares across the Atlantic, or the airlines that operate those routes, a mess of a policy is created. The best way to determine what will succeed, if one believes in competition—the Minister says that he does—is to let the market work itself out. The Bill should enable qualified applicants to enter the market.

If we limit competition to a single alternative firm, which is able to service only a selected group of customers, we shall deprive most of our constituents of the benefit of competition. Indeed, as BT lowers its prices to compete for the contested customers it will probably increase the charges to those who have no alternative. That is the flow of water in economic life. BT will make up for what it has lost elsewhere.

I will be alarmed if the Government's conclusion is that they must allow Mercury alone to enter the profitable overseas field. All that that will do is divide what amounts to the high monopoly profits of British Telecom in the international market. They will be divided and there will be a consequential loss to British Telecom revenues elsewhere. That involves favouring one company at the expense of all consumers and possible entrants to the market. It is dangerous to try to prop up Mercury—if that is what the Government intend—by giving it access to international telecommunications. The consequences of such a duopolistic approach is that we shall suffer the worst of all worlds. British Telecom will experience loss of profit—that does not worry me particularly—but to make up its revenues elsewhere it will raise prices for those who have no alternative source of telephone services.

The Bill should put an end to British Telecom's anticompetitive practice of refusing to serve customers who attempt to sell or share their excess capacity. That should be in the Bill, not the licence. That issue was not discussed much in Committee. I should like to hear the Government's view on resale. Why has the issue not formed a more central part of the Government's competitive policy and figured in their arguments about why competition is of benefit?

Resellers who buy in bulk from BT and then sell to smaller users make available the benefits of competition to small business men and residential users. That is of benefit to us all. Resellers make discrimination against the small user impracticable. That is vital and it is why we should argue in favour of necessary resale. It also provides a market for the transmission facilities of BT and Mercury. They are retailers.

I was a retailer in my previous profession. I was a small grocer. I liken the proposition here to Covent Garden insisting that every purchaser of fruit or vegetables deals directly with those who have the monopoly control over Covent Garden. That is clearly insane. I should like to hear the Government's view on resale, because American experience and my judgment lead me to believe that resellers make an important contribution to competition.

It is important to secure stricter protection from anticompetitive practices. It is a substantial charge against the Government, because the Bill does not do that adequately. Selective competition will increase, not decrease, the incentives of the dominant carrier to raise charges paid by those consumers who have no alternatives. I tried to give an instance of that in letters to Ministers. British Telecom is unable to identify its area of profit or loss—or so I was advised by the Minister in Committee. Nevertheless, when competition was introduced on its long-line system it was able to reduce prices there, not knowing whether rural services were loss-making or profitable. It reduced charges to the long-line users at the expense, possibly, of the domestic or captured user.

The statute must contain a firm mandate for the regulatory body, Oftel. That will promote competition. I have reread the Committee proceedings and the submission from the Department of Industry and I believe that it is important not to repeat the American mistake by enacting a vague statute that allows the incumbent carrier —British Telecom—to argue against new entry.

The statute must also include firm prohibitions against discrimination. British Telecom should be forced to bear the burden of proving that any apparent discrepancies in the terms offered to different customers are justified by differentials in cost. There is no such provision in the Bill or in the licence, but it is essential. Already the threat of limited competition is driving British Telecom to anticompetitive discriminatory pricing. Last year, BT announced that rural long-distance services would be charged at a higher rate than the service between major cities, including most of the areas to be served by Mercury, and this despite the Minister advising us that British Telecom has presented no evidence that rural costs are higher.

We also need to separate British Telecom's monopoly operations from its competitive operations, ensuring that they deal on an arm's length basis. Most important, we must not allow British Telecom to sell its circuits to a marketing affiliate on terms not available to the public. That would make a mockery of any claim to protection against discrimination.

We should also allow users and competitors who suffer from unlawful anti-competitive practices to sue for relief in the courts. There was a somewhat acrimonious exchange on that subject on Report when the Minister would not yield on the question of allowing companies in competition with British Telecom to sue BT for injuries or losses suffered as a consequence of BT's offending against the terms of its licence. The argument has always been that Oftel can put matters right. However, in the two, three or four weeks that it may take Oftel to move—even accepting that British Telecom apologises for the discrimination or activity that has inhibited the commercial viability of the firm that wants to come in, and claims that it was unintentional—the damage could have been done at the earliest stages. It would give a great impetus towards competition if we were to allow the injured party to sue in the courts for damages consequential on the actions taken by British Telecom that had injured it.

This House cannot stop the powerful economic forces that will inevitably reform what is, in my view, a sluggish telephone monopoly. The sluggishness of the monopoly has impeded the growth of new high technology. That has been evident in other countries too. Many years ago, when the then right hon. Member for Bristol, South-East, Mr. Benn, was attempting to defend the position of the GPO, he claimed that it was better than the Spanish industry. Those who had knowledge of Spain's telephone system in the 1960s would have considered that to be a poor level of comparison. We should be capable of being compared with the best.

This country is moving faster than most, but we must not embark on a series of half steps that will leave us without either direct control by the Government or more efficient regulation by a true competitive market place. Partial steps, taken in the name of caution and gradualism, threaten to create a powerful private monopoly over which we will be unable effectively to regain control. We must look beyond the prospective revenues for BT and the proceeds of its sale and consider the potential for real growth throughout the telecommunications industry. That potential will be thwarted if we privatise a monopoly. The system of having one overwhelmingly dominant carrier and one pace-keeping competitor has not worked. It would be even more wrong to extend the duopoly regime in the important international sector. We cannot stop the transition to a competitive market, but we can delay and impede it.

We risk being overtaken by other strategically located countries such as Belgium and Ireland that would gladly establish themselves as centres for competitive communications but which, at the moment, lack the resources to do so. Our opportunity is to make the transition to a truly competitive market place as smooth and rapid as possible. That requires a policy of open entry, encouraging all forms of competition. We also need stronger safeguards against anti-competitive practices while competitive conditions develop.

I want to press the Minister on the question of the price control mechanism as set out in Littlechild. Is it to be based on the basket of all the charges of BT, or a selected narrow range of charges? With a wide basket of charges, one could move the price mechanism within that basket and domestic prices could be doubled, trebled or quadrupled in order to enable British Telecom across the board to try to subsidise areas in which it needs to maintain competition but is unable to do so because of the limitations of its own competitive resources.