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With permission, Mr. Speaker, I should like to make a statement on the Government's telecommunications policy for the 1990s.
On 13 November I presented to Parliament a consultative document setting out the proposals of the Government and the Director General of Telecommunications for liberalising the United Kingdom telecommunications market. We wanted to see greater competition and to let private enterprise flourish. We wanted lower prices. We wanted people to have a wider choice of service and of who provides the service. In short, we wanted a better deal for the customer. I am now glad to tell the House that we have achieved all those aims.
Those who responded to the consultative document strongly supported the Government's goals. We have therefore decided to implement our key proposals, and because of the strong support we can now achieve even more than promised in the consultative document.
In order to promote competition, the Government have decided to bring the duopoly policy to an end. Until now, only British Telecom and Mercury have been licensed to carry telephony services over fixed links. In future, the Government will consider all licence applications on their merits; and we will grant licences unless there are specific reasons to the contrary.
We said that we wanted to see lower prices. We are now going to have lower prices. British Telecom has agreed to reduce its prices by 6¼ per cent. per annum in real terms. International calls will also be included within this new limit. British Telecom intends to start by cutting the price of international calls by 10 per cent. in cash terms as soon as possible.
A new scheme is to be put in place to help the 2 million or so residential customers who are low users of the telephone. Low users will pay only half the standard rental and they will get 30 free call units every quarter. This scheme will be of particular benefit to those such as the elderly and infirm who rely on the telephone as a lifeline.
Virtually everyone will now benefit from cheaper telephone calls. Since privatisation in 1984, call charges and rentals have come down by over 20 per cent. in real terms. My announcement today means they will have fallen by over a third when the price cap is renewed in mid-1993.
Business costs will also be reduced by these changes. All firms will benefit from the tighter price cap and lower prices for international calls. Those businesses that use the telephone most can expect to benefit from the volume discounts that BT will offer in the future. Although BT will be allowed to raise rental and connection charges for businesses slightly faster than previously, this will apply only to those firms with more than one line. Moreover, BT must use the extra rental income to reduce call charges even more rapidly.
We said that we wanted customers to have a wider choice both of service and of who provides the service. They will now have this wider choice. The cable television companies are well placed to provide telephone services to the home to compete with BT's local network. They are proposing to invest over £3 billion in new networks during the next five years and to cover two thirds of the country.
To help the cable companies realise their full potential, we have decided to let them provide telephony services in their own right rather than as an agent of BT or Mercury. They will now be able to provide a complete package of entertainment and telephony services to the customer.
BT and Mercury have, of course, been allowed to apply for cable television franchises through associate companies. We do not think they should be able to bypass these arrangements since this would be unfair to the cable companies which had to compete for their franchises. We have therefore decided that telephone companies should not be granted a national broadcasting licence for at least 10 years. Their associate companies will, however, continue to be able to apply for individual franchises. In addition, BT will be able to apply directly to provide TV services in any or all unfranchised areas from April 1994. Mobile operators will be allowed to offer new services over their radio networks.
Our policies of encouraging competition have given Britain the world's most dynamic mobile communications market and the two largest cellular networks in the world. My announcement today will give our companies still further opportunities.
A further important means of providing customers with more choice is equal access. We want to make it as easy as possible for customers to choose the cheaper or better long distance phone service. They should not have to buy a special phone or use an identification code or dial extra numbers to access BT's competitors. We received strong support for that proposal. We have decided that equal access should be introduced as soon as possible. It will start to be introduced in the next year or two, and I expect it to be available to the majority of telephone users within the next five years.
The Government and the director general have also taken steps to make it easier for new companies to enter the market and to offer additional services to customers. The director general will streamline and strengthen the arrangements under which companies interconnect so that customers on different networks can communicate with each other. He will become directly responsible for allocating numbers to different operators. The director general will be able to introduce number portability so that people can move from one network to another without changing their telephone number.
The policies are set out in a White Paper, "Competition and Choice: Telecommunications Policy for the 1990s", copies of which are available in the Vote Office and will be placed in the Libraries of both Houses.
Over the past seven years we have shown that competition works, that privatisation works and that strong independent regulation works. The decisions I am announcing today will build on this. They will stimulate competition, extend choice, cut prices, help to bring down inflation and give us the most dynamic telecommunications market in the world. I commend these decisions to the House.
Will the Secretary of State confirm that crucial decisions designed to determine the future of the telecommunications industry for an entire generation are being made after only two short months of hurried consultation—[Interruption.] — after only a few rushed weeks of study of the consultation? Will he now tell us which other country in western Europe would publish a statement entitled "Telecommunications Policy for the 1990s" without saying anything about research, development and investment in the new technology or about improved regulation and accountability for the consumer? Is he not making decisions about restructuring telecommunications for the long term without even concluding a long-term agreement on prices for the ordinary consumer beyond the middle of 1993?
Does the Secretary of State agree that the pricing formula will be the retail prices index minus 6·25 per cent. because the basket now includes international calls as well as domestic calls, and when that is taken into account domestic callers will be no better off? Will he confirm that, despite all he says, British Telecom can this year still raise the typical domestic phone bill by 6 per cent. on top of last year's 9 per cent., that rental and installation charges can be pushed up by 8 per cent. on top of last year's 11 per cent. and that the effect of the new formula is that, in return for a possible 80p a year reduction in international call charges, for the typical domestic household there is still the prospect of an £8 rise in its phone bill?
Is it not the case that, although telephone bills should be falling when BT is making £3 billion a year in profit, bills will still be rising in the coming year and installation and rental charges will be rising even faster than inflation?
Will the Secretary of State confirm that installation charges are £21 in France and £24 in Germany, but up to £129 in Britain, and that there is not one proposal in his review to bring them down? Does he agree that rental charges are £40 in France and £45 in Italy, but £68 in Britain, and not only is there not one proposal to bring them down, but the main long-term effect on ordinary customer's bills will be a sustained increase in the basic rental charge—in effect, a flat rate levy on 19 million households, even when telephone standing charges are already twice those of gas and almost twice those of electricity?
Can the Secretary of State now justify to the public the prospect of even higher rental charges in the coming years when BT made £2·8 billion profit last year and this year is making more than £10 million a day? Is it not an irony that the main long-term result of this policy, which is intended to increase competition, is the prospect of remorseless increases in the universal levy for almost every household?
Is it not a disgrace that the Secretary of State's document clearly concedes that his rental proposal—[Interruption.] Conservative Members should listen to what the document says—[Interruption.]
Is it not a disgrace that the document says that the rental proposals
may prevent some people from having a telephone, particularly those such as the elderly or disabled who need the telephone as a lifeline."?
Is it not the case that the proposals that the Secretary of State puts forward to remedy that mean that even the poorest and the most disadvantaged pensioner will still pay £34 a year standing charge and, in return, will be entitled to only one three-minute local call every 10 days? That is a shabby travesty of any proper scheme for pensioners and the disabled.
The Opposition support an extension of competition when it is in the public interest, but when cable companies can send telephone and television pictures on an integrated network while British Telecom is to be restricted, when foreign companies can enter the British market unconditionally and unilaterally, while British companies are still prevented from entering many foreign markets, when the universal service obligation applies to BT but not to anyone else, far from pursuing a consistent policy of extending competition in the public interest to the benefit of us all, the policy that the right hon. Gentleman has announced today is selective and inconsistent and will serve to benefit the interests of mainly foreign cable companies moving into Britain.
Will the right hon. Gentleman confirm that the difference between us is that, while he supports competition with reduced regulation, we believe that the real issue is that competition should be accompanied by proper regulation in the interests of the whole public? Will the Secretary of State now discharge his duties, first, to establish clear performance targets for telephone companies; secondly, to improve investment in research and development; and, thirdly, to increase telephone connections so that by the year 2000 Britain can at least reach the levels achieved by comparable societies? By so doing, will he ensure that telecommunications benefit not just a few competing companies but the country as a whole?
I can reassure the House that the hon. Gentleman is wrong on almost every point. Far from holding only two months' consultation, we held four months' consultation, preceded by seven years' notice. Some 200 companies were able to submit proposals, which we considered, although I notice that the Labour party did not do so.
The hon. Gentleman said that there was nothing in the way of improved regulations for consumers. To describe a tighter price cap which will mean a reduction of 6·25 per cent. in real prices every year as no improvement for consumers shows an extraordinarily short-sighted view, particularly in a party which, when it had a nationalised telecommunications industry, had no regulator at all and allowed the industry to regulate itself.
The hon. Gentleman said that the cap ended in 1993. Of course, it will be revised in 1993. I remind him that on the last occasion it was increased so that the reduction in real prices increased from 3 per cent. to 4·5 per cent. It is now 6·25 per cent. The hon. Gentleman said that the basket included international calls so that domestic and other users would be no better off. He is wrong. The reduction in international calls, although included in the basket, will leave plenty of scope for even greater reductions in domestic tariffs than would otherwise have been the case.
The hon. Gentleman said that a typical household would face an increase of 6 per cent. In fact, the regulator has introduced a cap on the bill of the medium sized household which will mean that there can be no real increase in the tariffs for such a household.
The hon. Gentleman said that rental charges abroad were lower. The Director General of Telecommunications carries out a detailed study every year of our tariffs on a basket of aspects of telecommunications charges and compares them with those abroad. He finds that they are very much in line with charges abroad.
The hon. Gentleman said that the proposals would prevent the poorest from signing up. He ignores the new scheme being introduced by BT to spread the cost of signing up and, therefore, make it easier for people to do so.
The hon. Gentleman said that BT would be restricted and would not be allowed to provide entertainment services over its network while cable television companies would be able to do so. In fact, BT obtained franchises and provided entertainment and television services over its network in those franchise areas to the extent that that was technically feasible. It has decided to withdraw by and large from those franchises. As I said, none the less, from April 1994 it will be allowed to apply for all unfranchised areas on a national basis if it so wishes.
The hon. Gentleman said that we should establish performance targets. He was content with the performance of British Telecom when it was a nationalised industry and, indeed, he wishes to return it to the nationalised sector, but since British Telecom was privatised, its performance on every measure of quality and performance has improved and is up to international standards. The hon. Gentleman said nothing about his party's commitment, reaffirmed last week, to renationalise British Telecom. I am not surprised.
My right hon. Friend's statement should be widely welcomed on both sides of the House. He has recognised that Mercury and British Telecom are marketing their services on a world stage and that that is most welcome to the British telecommunications industry. However, may I remind my right hon. Friend of a question which I addressed to him when he announced his review, which I fear slipped his ear at the time: will he go on please to examine the workings and efficiency of the regulator, Oftel?
I am grateful to my hon. Friend for his welcome and for his recognition of the fact that this strengthens the international position of both British Telecom and Mercury. As for his question about Oftel, I am pleased with its performance. It has achieved effective regulation and lower prices for British Telecom users. I pay tribute to Oftel's work and to the response of the television companies. I thank also my officials for the good work that they have done in producing the review.
Is the Secretary of State aware that there are Opposition Members who welcome the greater competition, the end of duopoly and the lower prices that have been announced today? However, there is still very much more work to do. Is the Secretary of State also aware that the greatest hindrance to the delivery of the Lifeline service is the installation cost and the deposit requested by British Telecom from elderly people who are often unable to meet that cost? Will he look into that matter?
Is the right hon. Gentleman further aware that in rural areas and in developing towns the greatest need is for the installation of public call boxes? Very often their installation does not match up to the development of those areas.
Lastly, is the right hon. Gentleman aware of the deep resentment that was caused on Christmas Day 1990 by the inability of people throughout the country to obtain numbers from directory inquiries? Will he ensure that directory inquiries is made readily and freely available to those who wish to use that telecommunications service?
I am grateful for the hon. Gentleman's welcome of the proposals. I agree that there could be an improvement in the provision of Lifeline services. BT proposes to spread the cost of connection for newly connected individuals. That, I believe, will provide the help that the hon. Gentleman seeks.
As for call boxes, when BT was privatised there were 77,000 of them in this country, of which on any one day a quarter were not working. There are now 100,000 call boxes, including Mercury's, of which on any day 96 per cent. are working. I shall certainly take back to BT the hon. Gentleman's point about directory inquiries on Christmas day.
I congratulate my right hon. Friend on providing more choice and competition. Will he confirm that British Telecom has paid the Treasury more money in corporation tax and dividends since it was privatised than ever it did from profits when it was nationalised? When my right hon. Friend considers the granting of licences to overseas companies, will he look carefully at opportunities for reciprocity? We want the advantages of privatisation to be spread among all public communication networks throughout the world.
I am grateful to my hon. Friend. He is correct when he says that BT pays much more each year in corporation tax than it used to pay in dividends when it was 100 per cent. owned by the Treasury. We do not intend to deprive our consumers of investments that may be made by overseas companies, but we shall certainly seek to ensure that their Governments open up their markets, both within the context of GATT and by means of direct representation, so that our companies can invest in those countries. We shall support any of our companies that seek waivers— for example, in the United States from the limitation on the ownership of more than 25 per cent. of an American telecommunications company. Morover, if it is treated as a dominant supplier under the Federal Communications Commission's rules, it will have our full backing when seeking entry into those markets.
Is the Secretary of State aware that his statement will come as a great disappointment to the many people who work in BT and Mecury, particularly to those who at this moment are to lose their jobs? Is he further aware that his commitment to back British companies by attempting to achieve reciprocity will be completely unsuccessful? His announcement fails to recognise the imminence of 1992 and the fact that our major European competitors will have the benefit of an integrated broad band network by the end of the century. His announcement has sounded the death knell of that happening here.
Does the Secretary of State also accept that the very many Conservative Members who represent rural constituencies will find that their constituents never benefit from any of the limited opportunities that he has put on offer today? Is he further aware that his statement is unacceptable and that his claim that it was welcomed by all who had made representations is misleading?
BT said in its recent announcement about jobs that it hoped to achieve the greater level of efficiency through retirement and turnover on a natural basis. The key result of the changes that we have introduced, in this review and earlier, is a dynamic market which is generating jobs in a variety of firms and businesses. That will create new opportunities for people from BT.
In terms of broad band and optical fibre, we are ahead of the rest of the world. We have more mileage in trunk cabling than France or Germany. When BT was privatised there were only 13,000 km of optical fibres; there are now over 1·1 million km. BT is 'forging ahead and has a technical advantage over much of the rest of the world. Mercury is doing likewise.
It is a myth to suppose that it is always more expensive to supply rural users. Often it is just as low cost and the cost can be met by ways that we have opened up to BT, if need be using radio links instead of fixed links. So we believe that the rural user will benefit as much as anyone else from the changes that we have announced.
In replying to a question that I asked some time ago, my right hon. Friend gave an assurance that in the duopoly review he would put the user first. I congratulate him on doing far more than I think any user would have expected him to do at this stage in terms of keeping down prices. In response to the tirade of socialism and nationalisation that seems to be coming from Labour Members, will he say what happened when Germany decided to go the way of state monopoly in its mobile network, while the United Kingdom decided to have two private enterprise operators? Did the Germans increase their mobile network at the same rate as we have?
I am grateful to my hon. Friend for his remarks. We have indeed put the user first. The users will benefit enormously, as will the suppliers. He is right to mention the difference between the performance of this country and that of Germany, since at exactly the same time we decided to follow the competitive route in licensing two suppliers of cellular radio while the Germans had one monopolistic supplier. We now have a market five times larger than theirs and larger than any other country in the world.
Is the right hon. Gentleman aware that the British Telecom of which he speaks is not the BT with which I can identify in my constituency? Dialling a telephone number in Clydesdale is almost a lottery in terms of whether one gets the right number. Is he aware that telephone kiosks have been closed in the rural community of Clydesdale and that, after two years of calling for their replacement, they have still not been replaced?
I congratulate my right hon. Friend on the excellent creative package that he has announced today. Does he agree that, in terms of telecommunications, the Conservatives have an absolutely marvellous story to tell? Since BT was denationalised, prices have fallen by 20 per cent. in real terms and where there is greater competitive pressure—for example, in trunk calls—prices have fallen by as much as 30 per cent.
I thank my hon. Friend for those remarks, and he is absolutely right. Wherever competition is effective, prices have fallen even more. We believe that over the lifetime of the cap, which ends in 1993, the average price of calls since privatisation will have fallen by more than a third in real terms.
Will the Secretary of State confirm that his statement means further featherbedding of the cable industry, much of which is in United States ownership? Will he also confirm that he has had many representations from many parts of the country, including my own, against that? How can he possibly justify the protection of the cable industry in the way that he is doing, and how on earth does that offer more competition? Will he undertake to publish as an addendum to the document that he intends to place in the Vote Office a full list of his right hon. and hon. Friends who have financial interests in British Telecom and the cable industry? Will he clearly advise them that if there are any votes on these matters they should not vote?
The hon. Gentleman is talking absolute nonsense. Of course the cable companies are not being feather-bedded. They will compete with BT for the provision of telephone services and BT has had the same opportunities to seek franchises as the cable companies and will have slightly better opportunities in future.
Does my right hon. Friend accept that most people, apart from the Opposition, will welcome this increase in competition? Competition is the friend of the consumer, and that point has been well made and understood. The consumer gains from competition, and deregulation, as my right hon. Friend has said, has been brought about by the Government. We now have two major players on the international scene, BT and Mercury, both of which are world-winning companies. Also, many thousands of small and medium-sized firms would never have been allowed to get into the business if liberalisation had not taken place.
My hon. Friend makes a good point. Many small businesses have grown up on the back of liberalisation. That is one reason why so many countries are beginning to emulate the changes that we have made.
The statement will be generally welcomed throughout the country. I should like further clarification on one or two matters. I am sure that some people who are not well acquainted with new maths will wonder when the 6·25 per cent. reduction will stop.
The hon. Member for Eastbourne (Mr. Bellotti) spoke about the elderly, especially those living alone and who need telephones. They have not received much help with installation charges and they are sometimes penalised over portability. I know of old people who had a new phone installed and then moved to residential accommodation which had cable, and they had to pay another installation charge. Surely the companies should look after such elderly people.
I am grateful to the hon. Gentleman for welcoming the statement. He asks when the 6·25 per cent. real cuts will stop. The cap will be revised and renegotiated in July 1993 and no one can say what it will be thereafter.
We share the hon. Gentleman's worries about the elderly. That is one reason why BT has decided to introduce a scheme for spreading the charges. I will inquire about whether that applies to reconnection charges in the circumstances that the hon. Gentleman envisages, and I shall write to him about that.
As an advocate of competition for 10 years, I congratulate my right hon. Friend and his team on the announcement. I also congratulate him on refuting the allegation that Oftel has performed badly. There is a widespread feeling that it has performed excellently in improving choice. Does he agree that the Opposition's response to the statement shows why, if not their industry policy, certainly their telecommunications policy is impossible to sell? Does he further agree that equal access will give real choice to all telephone users within five years and must be a vindication of his announcement?
I am grateful to my hon. Friend. I shall pass on his compliments, which were well-merited, to Oftel and to Sir Bryan Carsberg.
My hon. Friend is quite right about Opposition policy. They have little in the way of policy that they are prepared to admit to and nothing that they could sell to the public, least of all their proposal to require BT to spend up to £21 billion over and above what is required for the commercially viable cabling of this country. I hope that within five years the majority of the country will have access to the second phase, the easiest type of equal access, which will spread onward from there as digitalisation and the new exchanges come in.
Is the Secretary of State aware that it is worrying that he should have ministerial responsibility for such a vital and important industry in this country because he seems to be totally out of touch with the reality of the situation, which is that BT customer satisfaction is at its lowest level in the history of British telecommunications? The Minister ought to face up to that problem.
On the question of prices, what is the Secretary of State really saying? Is he telling the customer that bills will be reduced, or that the increase will not be as great as it might have been but that their bills will increase in any case? What the Minister is doing is a cruel deception on the people of this country.
The hon. Member is quite wrong about the level of satisfaction. The latest survey shows that the number of people who are very dissatisfied with BT has shrunk to 2 per cent. and that about 18 times as many people were very satisfied with its performance. However, I am sure that BT can adequately defend itself on that front.
As regards bills being reduced only in real terms, as inflation comes down I expect 6¼ per cent. less than inflation to mean negative increases in bills, even in cash terms. That will help inflation to come down and to give a boost to my right hon. Friend the Chancellor's efforts in that direction.
My right hon. Friend properly stressed the fact that only greater competition brings greater benefits to the consumer. Can he confirm that the success of that policy is manifest in the example of the value-added services industry, which is substantially more than the size of the German and French markets combined? Can he confirm that he has undertaken studies into the impact upon the value-added services market in Britain of renationalisation, as proposed by the Labour party? Would it reduce it to the size of the French and the German markets?
My hon. Friend is absolutely right. Value-added services in this country are of the order of £700 million, and are rising, whereas in France and Germany they are about £300 million each. I have not done any studies into the impact of renationalisation because I do not envisage that the Opposition will have any chance to carry out their policy, but I have no doubt that if they did my hon. Friend's guess about the direction of its effect is absolutely right.
So that the general public are not misled by anything that the Secretary of State might say, will the right hon. Gentleman confirm that 48 per cent. of British Telecom shares are still owned by the state— the Government and the taxpayer —which means that they are only 3 per cent. short of having full control of the company?
Order. I must have regard to subsequent business. There is another statement after this on air traffic distribution. I shall call three more hon. Members from each side and then we must move on.
Is my right hon. Friend aware of the importance of telephone boxes in rural areas, especially of the old red telephone boxes? Can he tell the House what effect the provisions of the White Paper will have on those telephone boxes and how many of them actually work?
My hon. Friend is absolutely right. At the time of privatisation, the Opposition expressed fears that the 77,000 telephone boxes then in operation would disappear. As I said earlier, there are now more than 100,000 in both rural and urban areas, 96 per cent. of which are operating every day. They are also checked every day.
Does not the Secretary of State realise that his statement represents a narrow-minded, inward-looking attitude? His proposals mean that the opportunities provided by Britain's current world lead in fibre-optic technology will be lost. The advantages offered to the cable companies, which are largely foreign owned, will enable them to develop a system that will lead to needless duplication and triplication—and, indeed, to a second-rate and third-rate service— while using foreign technology. Meanwhile, restraints on trade are denying British Telecom the opportunity to develop a world-class system in our markets, using British technology which Britain could then market to the world, with consequent benefits to our balance of payments and to British jobs.
The hon. Gentleman may consider it narrow-minded to put the consumer's interests first, and to achieve reductions in real prices, but he completely ignores the fact that we are ahead of the rest of Europe in the introduction of optical fibre cables for trunk and other uses; we have achieved that by means of a competitive and deregulated market.
It is a pleasure to be able to declare an interest in the cable industry. I believe that the expansion of cable will enhance competition and choice throughout the country.
Will my right hon. Friend confirm that, although British Telecom has so far been able to resist interconnections with cable operators, such operators will in future be able to interconnect with anyone, and that, should a company such as British Telecom make it difficult to agree terms, the director general will make a determination?
My hon. Friend is absolutely right. The White Paper mentions the regulator's powers to ensure a much easier, simpler, more streamlined process for interconnection, so that people on different networks will be able to communicate. Proper arrangements will eventually be made for the costs to be met.
May I follow up the answer given to my hon. Friend the Member for Knowsley, South (Mr. O'Hara), and ask why only 1·9 per cent. of the funds are to be put into research and development? The right hon. Gentleman told my hon. Friend that we were ahead of the rest of Europe. If that is so, for how long will it remain so, given the meagreness of our investment in research and development and, particularly, in optical fibres? Why should the Electronic Equipment Association feel so uncomfortable about that general area of investment?
The hon. Gentleman is quite right: British Telecom's research and development investment amounts to 1·9 per cent. of its turnover, which is exactly the same percentage as was invested under Labour. The big difference is that its turnover has expanded enormously, and, as a consequence, so has its research and development.
Does my right hon. Friend agree that one of the successes of competition policy in telecommunications has been the emergence of the regulatory agency Oftel? Does he accept that the many opportunities that he has described today will require Oftel to make additional efforts, and can he assure us that adequate resources will be provided for it to do that important work?
I can give my hon. Friend that assurance. We do, of course, need an efficient and effective regulator while British Telecom remains in a dominant position and the structure of the market gives scope for monopolistic abuse in the absence of such a regulator. We cannot understand why the Labour party wishes to return to a regime that did not involve a regulator.
I am sure that the Secretary of State agrees that advanced telecommunications are vital for peripheral regions such as Wales. To attract inward investment beyond branch plants, they are selling themselves on the basis of having advanced telecommunications infrastructures. Does the right hon. Gentleman agree that such an infrastructure would provide Wales with a very good facility? Certainly Mr. Gwyn Jones, the chairman of the Welsh Development Agency, agrees with me. If the right hon. Gentleman also agrees, what will he do to try to persuade British Telecom to install that infrastructure, and to ensure that it is installed beyond the obvious markets of Newport, Cardiff and Swansea?