22^nd February 2001

Ladies and Gentlemen,

On behalf of the providers of communication services, thank you, David, for your words of support and encouragement today for the launch of the Association of Communication Services Providers.

Although Centrica is a relatively recent entrant to the telecoms market we are rapidly expanding our customer base and currently bill about 40 million minutes a month of fixed line calls. We also have interests in fixed, mobile and internet services. We therefore welcome the relaunch of SPIG with its diverse membership and look forward to playing a full part in the Association, as we have endeavoured to do in its forerunner SPIG.

These are formative times in the rapidly changing telecoms market. Not only is the technology advancing rapidly, but there is growing competition in fixed line, both in terms of infrastructure and in the provision of services. We all have to ensure that consumer awareness of the opportunities now open to them increases substantially. No doubt the new Oftel consumer guides will assist in this, and we aim to play our part in raising awareness too.

In the last few weeks, Oftel has initiated a major review of the mobile market, and in the last week or so, we have all been finalising our responses to the Communications White Paper, which will fundamentally change the regulatory framework, not only for telecoms but for the entire communications sector.

It is encouraging, therefore, that – recognising this convergence and change – SPIG has sought to broaden its focus. Already SPIG/the Association is active in helping to develop the Calls and Access product, reviewing CPS processes and helping to shape the new Ombudsman scheme. The Association, in its new form, will continue to participate in such initiatives to assist the emergence of fully competitive markets.

It is critical that consumers benefit from such changes in the market and that there is a `clean market structure’ enabling service providers to compete on equal terms with BT and other operators and to have an equal place at the regulatory table.

We recognise that the coming months will be challenging for Oftel as well as for the companies represented by the Association. The Communications White Paper paves the way for a new regulatory body OFCOM, and existing regulators in communications will come together into a larger organisation with awesome scope and responsibilities. These include development of the regulatory framework to ensure that Britain becomes a world leading country in e-commerce.

We recognise the challenge which this represents, from both a regulatory and organisational perspective. What is clear, however, is that the work of Oftel in creating the present economical and regulatory framework in the UK and in overseeing the conduct of players in relation to their licences and the Competition Act – this will continue and, if anything, will become more demanding.

In theory, the introduction of competition should mean less of a need for regulation; in practice, we believe there will be a continuing need for regular reviews of competitive markets, particularly where competition has yet to be fully effective and for tough, sectoral regulation to address structural problems and market abuses. We trust that with convergence and the emergence of OFCOM, the work and concerns of Oftel will not be diluted.

Certainly as a company and via the ACSP, Centrica remains committed to the development of effective competition in telecommunications, which is a prerequisite for realising the vision of the UK having a leading communications sector. A key objective is that access must be granted on fair and non-discriminatory terms and that players in the competitive market must have confidence that this is the case, so that they are not deterred from competition. This argues for a greater degree of transparency than might otherwise obtain, and we look for Oftel (and in due course OFCOM) to secure this.

There are warning signs; some companies have withdrawn from the market. This underlines the importance of ensuring a level playing field in which all can readily compete and we will work with Oftel to achieve this.

We are encouraged by the intention of BT to separate its businesses. Correctly defined and implemented with robust Chinese Walls, separation of BT will be a key element in achieving a properly competitive market. However, while separation is a BT initiative, the regulator will, in our view, be responsible for ensuring that it delivers the level playing field on which the competitive market will depend.

Separation will trigger the need for a rethinking of certain of the concepts to which we have become accustomed. If there is to be a separation of network and retail services, should the network continue to bill for network services such as line rental? Who is responsible for the Universal Service Obligation, or is the responsibility shared? Questions like this will have to be faced and answered over the coming year - the answers will fundamentally shape the markets in which we operate.

Competitive markets are the best means of encouraging good customer service. However, we recognise the importance of having robust consumer protection arrangements within the industry. The White Paper correctly places strong emphasis on this area, and we are already active in industry groups looking at the practicalities and feasibility of setting up a co-regulated telecommunications Ombudsman scheme.

As the White Paper acknowledges, Regulation is in many – if not most – cases a partnership between the Regulator and the industry, as both work their way towards fair markets and sustainable competition. There is much for both sides to do, and my hope and expectations that the Association of Communication Services Providers will play a full role in this relationship and in securing this vision.