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  1. Technology
September 5, 1988


By CBR Staff Writer

Some years ago the Ferranti company appears to have suffered a mild heart attack of a disease called enterprise – fortunately rare until recently in this country, but prevalent in Japan and some other parts of the world. The company then decided to spend its own money recklessly in pursuing a new idea in the telecommunications field: the CT2 technology. This work led Ferranti recently to approach the Department of Trade & Industry for a licence to introduce the equipment it had developed, and start the world’s first public Telepoint service here in the UK. (Apparently Ferranti took the view that, having conceived the idea for such a service and developed the technology to put it into service it had some sort of right to be given a licence to do so). If the DTI had fallen for this proposal it might have been a disaster not only for our revered monopolist network operator and duopolist cellular operators, but also for others who have not spared themselves over decades in supplying the necessary hardware for these operators. All would have been exposed to the danger that such a new service could have proved attractive to the public (whose judgement can sometimes be unreliable in these matters). Niggardly The service might have competed with British Telecom and the cellular networks in many respects, forcing them to consider improving even more their present near-perfect services – and their already very low charges to the point that their return on capital could have been eroded below the present niggardly 30% or so. It certainly would not have been fair to allow this little known company Ferranti, to go forward, attacking the profitability of national institutions ahead of all those who had not wasted precious national resources developing this technology before being invited to do so. A competition had to be held to check that more deserving licensees could not be found among those whose existing businesses might be threatened by such a new service, or at least had not worked secretly on their own initiative to give themselves an unfair advantage. This underlines how careful we have to be to ensure that over-clever little companies do not contrive to establish market advantages for themselves over important national assets like BT. A compe tition will therefore be held. Dangers, however, still exist. The DTI is conducting the competition over a short time scale and seems to little concerned about the important matter of standards. As you will readily apreciate, standards are not only important reasons for general delay, but also necessary in the UK to ensure that the British public does not become confused by being offered two separate services. (The fact that the public seems not to have noticed the confusion which currently exists in that citizens cannot swap between Cellnet and Vodafone at will – should be disregareded because the public is notoriously stupid in these matters). These Ferranti chaps – quite irresponsibly were trying to start before a British standard had been debated at length and properly agreed. They argued that this would delay them – and, anyway, that the Europeans (who also might be con cerned by this British company trying to start a service before they are ready) would then argue for eveything to be further delayed until a pan-European standard had been agreed. Properly conducted, this standards issue could be used to delay the Fer-ranti fellows by at least three years. I hope that we can rely on GEC and others to work with us on this. We can justly applaud progress made in thwarting the threat so far. But much remains to cause concern. Apparently Ferranti – so far from seeing the error of its ways – is still actually going to seek a licence for itself and argue that it should then be allowed to proceed immediately, provided it undertakes to meet any UK or European standard when imposed. In this situation, the only real remaining hope is Oftel, the Office of Telecommunications. Regrettably, that organisation has not shown itself wholly reliable in the past. It sometimes forgets what I would regar

d as its prime duty: protecting the networks from any new competition. (You will remember how Oftel forced BT to allow all that non-BT manufactured equipment on to the market so quickly. How some of us were not electrocuted in mid-telephone call, I do not know…) Can we rely on Oftel not to ignore the sage, disinterested advice of all those who may be disadvantaged? Instead of taking the obvious, prudent course of only recommending the grant of licences to sound operators of the network or cellular system, so that this disturbing new service can be introduced in a way which will minimise any adverse effects on their business – and on a time scale that will offer at least equal advantages to our European friends – Oftel may still recommend Ferranti for a licence too. Even worse: Oftel may mischievously not recommend licences for BT, Racal et alia, thus tyrannically forcing them to compete with the new service on price and service. It may seek to excuse this by pointing to the – quite inadequate – 50% of Telepoint revenues which BT will get anyway, for the complicated business of allowing its calls on the network. You can rely on the Ferranti people to put forward the argument that no licensee should have the benefit of already owning the network or having a cellular licence if you want fair competition. It may seem inconceivable to us, but Oftel may not even insist that Ferranti wait for a UK or European standard to be properly debated. Worst of all, Oftel may recommend Ferranti for the only immediate licence – unreasonably refusing a licence to any other applicants until they, too, can demonstrate fully trialled equipment, and are actually in a position to operate the service. Terrible If that were to happen, we are in serious trouble. Here, in the UK, Ferranti will start the first public service in the world; inconvenience the general public with more choice; hurry BT and the cellular services into reducing prices; and annoy many of our international friends by seeking to exploit their position. If Ferranti make large profits from the service, it may use these to do even more dangerously innovative things, thereby quite ruining the UK’s national culture. You may feel that as chairman of Ferranti I should be doing more to ensure that these rogues do not outwit the forces with legitimate interests to protect. Unfortunately, the electronics industry has adopted this terrible de-centralised management style; I am quite powerless to stamp on their enterprise. In the circumstances, I can only call upon you to rally the British Government, Oftel, and all the great companies of this important industry to foil the rascals. should we fail, we could have enterprise breaking out all over the nation.

This article, by the chairman of Ferranti International Signal Plc appeared as a letter to the editor in yesterday’s Financial Times.

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