I move: "That the Bill be now read a Second Time."
The purpose of this Bill is, briefly, to empower the Minister for Finance to make further capital moneys up to a limit of £350 million available for the development of the telephone service.
Expenditure on the telephone service is broadly of two kinds. One is expenditure on the day-to-day operation of the service and on the maintenance, upkeep and renewal of existing plant. This expenditure, which is normally more than balanced by telephone revenues paid into the Exchequer, is met out of moneys voted annually by this House. The second kind of expenditure is capital spent, or rather invested, on telephone development works such as the provision of new telephone exchanges, trunk routes, underground cables, extension of existing plant and the installation of telephones, for subscribers. The moneys required for these works are not voted year by year. They are made available under the authority of Telephone Capital Acts which normally provide for requirements for about five years ahead.
Telephone Capital Acts do not sanction expenditure; they are enabling Acts empowering the Minister for Finance to make issues out of the Central Fund for telephone development. They also authorise him to borrow for that purpose. The issues are made to the Minister for Posts and Telegraphs on foot of annual capital works estimates approved by the Minister for Finance. Capital and interest are repaid by annuities extending over a period of 25 years.
The present Telephone Capital Bill follows 12 previous Bills enacted since 1922 to maintain the flow of capital for telephone development. Its provisions, apart from the amount of advances provided for, namely, £350 million and some purely drafting amendments, are similar to those of the last Bill, passed in 1973, which provided for advances of £175 million. This latter sum represented the then estimated cost of meeting capital requirements during the period from mid-1973 to mid-1978. Advances already made under the 1973 Act have amounted to some £158 million. The balance remaining under the Act will not be sufficient to complete this year's investment programme. The need for a new Act now, instead of next year, is primarily due to the high rate of inflation experienced since 1973 which have effectively reduced the value of the £175 million to an estimated £126 million in 1973 money terms.
The £158 million already drawn has been spent as follows:—subscribers installations and local distribution plant £67 million; new exchange equipment £44 million; trunk system —circuits and switching equipment £34 million; buildings, sites and miscellaneous £13 million.
The total number of exchange lines in service was increased by 104,000 during the period. The local distribution network throughout the country, comprising mostly underground ducting and cabling in built-up areas and overhead cabling elsewhere, was considerably expanded.
Some 670 telephone kiosks were erected during the period.
Sixty-three new automatic exchanges were brought into service including those at Castlebar, Cavan, Clonmel, Dungarvan, Fermoy, Monaghan and Thurles in provincial areas. A number of major exchanges in Dublin including those at Beggars Bush, GPO, Tallaght, Santry, Crown Alley and the new International Telephone Exchange at Marlboro Street were also brought into operation. Most other automatic exchanges were extended.
The quantities of equipment installed in automatic exchanges for connecting subscribers' exchange lines were increased by 56 per cent as compared with an increase of 39 per cent in working lines.
About 10,000 extra trunk circuits were added to the system and additional trunk equipment was provided at numerous centres, the largest installation being a new trunk exchange at Dame Court, Dublin. International Subscriber Dialling was made available in the Dublin (01) and Shannon areas to some 21 countries, mostly in Western Europe and North America. Direct dialling was also extended to major cities in Britain from Dublin and the chief provincial centres. The number of international circuits, not including those to Britain, was increased more than fourfold.
New telephone buildings and extensions to existing telephone buildings were completed in about 200 centres.
Because of the integrated nature of the telephone system the full benefits of many schemes already completed will not become evident until complementary works have been carried out. Numerous main and complementary projects are in progress on which heavy expenditure has been incurred but which will not be completed for periods up to some years ahead.
While much has been done over the years to expand and improve the service, it is clear that much remains to be done. I need only refer to the long waiting list for telephones and the service difficulties that still exist. Comparisons of our general state of telephone development with that of our partners in the EEC are still very unfavourable to us.
The telephone density in Ireland now stands at 15 per 100 of the population. This figure is well below that of France which, with 27 telephones per 100, is the next lowest in this respect in the EEC.
The percentage of telephones connected to automatic exchanges at 87 per cent appears high but the networks of most of our partners in the EEC are now 100 per cent automatic. The other exception is France which is over 97 per cent automatic. We still have a large number, over 500, of small manual exchanges serving extensive areas throughout the country.
I do not propose to labour the inadequacies and deficiencies in the service. They are only too evident; commercial and industrial organisations rightly stress that they constitute a hindrance to efficiency and an obstacle to attracting new industry to the country. They must therefore be remedied with all practicable speed.
Before I proceed to what is proposed for the coming years, I wish to refer to some general aspects of the service. Telephone service is at present and is likely to remain for a long time ahead the most important form of telecommunication throughout the world because it satisfies a basic need for extension over distance of bothway word-of-mouth communication between persons. Since it has to provide for this purpose huge numbers of communication channels within and between countries it has become the natural carrier for most of the other forms of telecommunication. A vast worldwide network of telecommunications is developing in which the telephone network is providing the channels for switched and leased lines for such services as television, data links between computers, telecopying and so on. Some authorities foresee that in the long term electronic mail transmission will become a partial substitute for traditional mail. In planning national networks it is of course necessary to ensure that they will be suitable to link with high quality installations abroad. Modern telephone systems must therefore be provided to meet high international specifications and to satisfy growing technological needs often beyond purely telephone requirements. This brings me to the magnitude of the investment required and to the time necessary to implement a programme of modernisation.
Ten years ago the capital budget for telephones was £6 million approximately. For the current year it is £57 million and in this Bill we are providing for the probability that £350 million at current prices will be required during the next five years. Expenditure of this magnitude makes the telephone service one of the heaviest users of capital in the State. The position of our telephone service in this respect is similar to that in other developing and highly-developed countries. In Britain, for instance, the capital budget of the British Post Office for the current year for telecommunications—mostly telephones— is more than £1,000 million.
It may well be asked whether a special all-out drive to solve the telephone problem would remedy our difficulties within a short time. Unfortunately, the situation does not lend itself to spectacular progress. Even for the most advanced system such as the Swedish and American, major schemes necessary for large-scale development have to be planned between five and 15 years ahead. International experience has shown that it is virtually impossible in a democratic state to expand a national telephone service really quickly because of the inescapably long intervals between initial planning and physical completion of large numbers of related works involving site acquisition, buildings, manufacture and installation of plant, training of technical staff and so on. An outstanding example in this regard has been the modernisation of the French telephone service. The French PTT Administration began a succession of planned programmes in the 1960s to remedy as quickly as practicable the relatively undeveloped condition of their system. Intensive efforts have been in progress there for more than a decade but despite the advantage of a long engineering tradition and a telecommunications manufacturing industry it is only in the past few years that rapid momentum has been gained. Investment in telecommunications, excluding broadcasting, in France in the current year is estimated at more than £2,000 million and for the period 1976 to 1980 £15,000 million. These figures are a further indication of the massive size of the demands which the provision of a modern system makes on available capital.
Coming now to the programme proposed for the next five years, the following are the main objectives:—
(1) Increase the annual rate of connections progressively from about 45,000 at present to 85,000; (2) Raise to 96 per cent the percentage of automatic telephones and provide for progress to full automatic as soon as possible; (3) Further expand and improve the quality of service in order to attract and handle efficiently a high level of increase in traffic; (4) Make advance arrangements for the acquisition of sites, contracts for buildings and manufacture of equipment to provide for continuing progress in the years beyond 1982.
This programme, which is estimated to cost £350 million, may be considered under the following heads:—
Subscribers' Installation and Local Network Development; Local Exchange Development; Trunk Development; Buildings; Miscellaneous.
The amount estimated for the installation of subscribers' Telephones including provision of local underground and overhead plant is £135 million.
The programme proposed in connection with the 1973 Act envisaged that a target of 460,000 subscribers' lines would be reached in 1978. It has not been possible to speed the connection rate sufficiently to reach this figure, but on the basis of connection targets for this year and next a figure approaching 420,000 should be reached, leaving a shortfall of about 40,000. This is roughly the number of applications on the waiting list at present.
In the past three years effective annual demand has been between 36,000 and 39,000 despite the economic conditions. This year there has been evidence of a rise in demand and, with recovery of the economy, demand in the years ahead can be expected to increase rapidly.
Connections on the scale envisaged will bring the total number of exchange lines in service to around 575,000 by 1982 and the number of telephones to 775,000 representing a density of 23 per 100 population.
To reach these figures it will be necessary to expand the subscriber underground and overhead plant network throughout the country very extensively. In doing so provision will be made for further rapid growth in the years immediately following the current programme period.
For local exchange development, the amount estimated is £70 million. In order to meet demand for new subscribers' lines, 22 new automatic exchanges will be provided in the Dublin, Cork, Galway and Limerick automatic exchange areas and the equipment in virtually all other automatic exchange areas will be extended.
It is planned to convert 270 manual exchanges to automatic working. This includes provision of a major automanual exchange at Letterkenny—at present in progress—which will complete the planned number of automanual centres. Some 330,000 extra automatic exchange line terminations will be installed in automatic exchanges.
For trunk development the amount estimated is £110 million. The capacity of the trunk network will be greatly increased and large-scale extensions will be made to the trunk system serving most major centres including Dublin, Cork, Limerick, Galway, Wexford, Navan, Portlaoise, Carlow, Cavan, Ceannanus Mór, Drogheda, Mullingar, Sligo and Athlone. In total it is planned to bring more than 22,000 additional trunk circuits into service. A number of major new trunk routes will be provided. These will include a microwave link to Britain over the Irish Sea between the Dublin and the Welsh mountains. New microwave systems will also serve the Waterford, Enniscorthy, Arklow, Wicklow, Sligo, Castlebar, Ballinrobe, Tuam, Galway and Letterkenny areas. The capacity of the western co-axial cable will be increased from 960 circuits to 2,700 circuits and new trunk cables will be provided to serve Manorhamilton, Edenderry, Belmullet, Kanturk, Achill, Killybegs, Clones, Baltinglass, Midleton, Macroom, Bantry, Dingle, Athboy, Gort, Scariff, Banagher and Bridgend. Major extensions of trunk exchanges will be carried out at key centres in the network including Dublin, Cork, Limerick, Galway, Waterford, Sligo, Dundalk, Drogheda, Tralee, Athlone, Mullingar, Portlaoise, Naas and Wicklow. The buildings for some of these are being erected at present.
Automatic dialling facilities to Belfast, London, Birmingham, Glasgow, Liverpool and Manchester areas, which have recently been made available in Dublin and certain large provincial centres, will be extended progressively to all automatic exchanges during the next 12 months. Further extensions will be made as quickly as they can be arranged with the British Post Office.
In the course of the next two years subscribers in eight large provincial centres will be provided with the facility for dialling calls direct to most European and North American countries. The facility will be extended progressively to other centres as quickly as practicable.
International telephone call traffic has continued to grow rapidly in recent years. In order to cater for further growth of calls, substantial additions to the international exchange equipment will be made.
The sum estimated for buildings is £28 million. The availability of adequate accommodation in good time is a basic essential for rapid development of the telephone service. Difficulties in acquiring sites and in having buildings erected quickly have in the past been a main cause of slowing telephone development.
The provision of new buildings or extensions of existing buildings to house telephone equipment and/or staff are already in hand or planned at more than 260 centres. Major new buildings will be provided in the Dublin 01 Area at Ballyboden, Clondalkin, Dolphin's Barn, Lucan, Palmerstown, Sandyford, and Terenure. Outside Dublin the centres will include Athlone, Carrick-on-Shannon, Donegal, Drogheda, Ennis, Galway, Kilkenny, Limerick, Navan, Cork, Sligo, Tralee, Tuam, Waterford and Westport. The new automanual exchange and District Telecommunications Headquarters building being erected at Churchfield, Cork, will be the biggest telecommunications building project yet undertaken in the State.
For miscellaneous items the amount estimated is £7 million.
A small number of STD coinboxes have been in experimental use in selected public call offices in Dublin and provincial areas for some time with satisfactory results. During the next five years it is planned to replace existing boxes with STD boxes on an extensive scale, commencing with the public boxes which are most used for trunk calls.
There are at present more than 35,000 coinbox telephones in the country, including about 3,000 public telephones—kiosks and call offices—which account for 35 per cent of all operator controlled trunk calls. As the telephone system moves towards fully automatic working, replacement of the existing coinbox—which requires the assistance of an operator for trunk calls—becomes of increasing importance in order that the benefits of automatic working to users can be secured fully.
Policy in regard to kiosks has been that they are provided only where they are considered likely to pay their way and existing facilities are regarded as not meeting reasonable need for public telephone facilities. This policy still applies in urban areas. In 1969, it was decided to undertake a programme for providing subsidised kiosks in rural areas by replacing call office telephones in rural post offices by outdoor kiosks with 24-hour service. All but about 350 of the 2,000 odd call office telephones in rural post offices have been replaced by kiosks. With few exceptions, the stage has now been reached where kiosks provided in replacement of the remaining call offices would be unlikely to pay their way even with a very substantial subsidy.
A scheme whereby local authorities may have kiosks provided at their request under guarantee against loss in areas where the Department considers them unlikely to pay their way is also in operation. About 100 kiosks have been provided under this scheme, mainly in areas where there is no post office and accordingly no public telephone. I am having an examination made of the present arrangements for providing rural kiosks to see whether they can be improved.
It is proposed to convert the larger Government manual private branch exchanges to automatic working. This will improve the service given and reduce operating costs.
Growth in the volume of international call traffic will warrant provision of a satellite earth station during the next decade. A site and radio interference study to identify technically suitable locations has been commissioned. It is expected that some costs of providing the station will be incurred in the period of the proposed programme.
The feasibility of introducing a mobile public radio telephone service enabling calls to be dialled between vehicles and the public telephone system is being examined both from the technical viewpoint and in relation to the likely extent of demand for such a service. While the main emphasis in use of resources must be on meeting more basic needs, it is hoped within the next programme period to commence arrangements for the introduction of a mobile radio telephone service.
As previously mentioned, the telephone network provides the transmission channels for various other services, such as data transmission, telex, television and facsimile transmission. At present an extensive programme is in progress for replacement and extension of microwave links for television; and the use of microwave links for special purposes such as offshore communications is likely to increase considerably in future years. Equipment for data transmission — between computers — over telephone lines is supplied by the Department on a rental basis; the demand for this service is expected to grow rapidly with the accelerated development of multiple access computer networks.
At present the most modern switching equipment in widespread use among telephone administrations is the electro-mechanical crossbar common control type. About 75 per cent of automatic switching equipment in this country is crossbar, the remainder being the older Strowger (step-by-step) equipment. In recent years the advanced manufacturing countries have made much progress in the design and production of electronic exchanges. It is clear that these will be the exchanges of the future. They are most compact, require less maintenance and offer the possibility of giving subscribers a wider range of facilities. Although many electronic exchanges are already in use abroad, there is not yet clear evidence which designs will prove most satisfactory. It is likely that within the next few years an electronic exchange will be purchased on a trial basis for use in this country. However, a first requirement here, as elsewhere, is that the electronic exchange shall interwork with the electro-mechanical exchanges already in service. A feature of telephone systems everywhere, and especially in the most highly developed countries, is that investment is so enormous that no administration will scrap its existing equipment in favour of new designs even if substantially more attractive. An instance of this is that Strowger type exchange equipment which the Department discontinued purchasing—except for extension of existing exchanges—in 1962 is still in use throughout the world, and in Britain forms 80 per cent of the network.
Turning to the general financial position of the telephone service, I would like initially to emphasise that despite losses in recent years the service is basically a remunerative one. Over a period investment in the telephone system is fully paid for by the users of the service. Moreover, an appreciable part of the capital invested comes from within the service. Of the £350 million required for the next programme it is estimated that £120 million will be financed by depreciation provisions. Over the past few years the telephone service has secured loans amounting to over £50 million from the European Investment Bank. More recently grants from the European Regional Development Fund of over £6 million have been approved for telephone projects.
For almost 40 years until the 1971-72 financial year the telephone service operated at a profit. The period of the 1973 Act has been one of exceptional difficulty for the finances of the service, due to the concurrent incidence of high inflation, high interest rates and economic recession. The first two of these factors combined to raise the cost of the service sharply and the third depressed growth of traffic and prevented the higher costs being offset by the additional revenue the traffic would have brought. A programme of rapid expansion in a capital intensive service such as telephones normally results in fall-off in profit or even in temporary loss. Plant and equipment for the needs of an enlarged system have to be provided some time in advance of being brought into use and to that extent a burden is imposed on the revenue of the service. Under stable conditions profit would recover within a relatively short period of time with the growth in traffic.
Costs increased overall by almost 150 per cent from £34.4 million in 1973-74 to an estimated £85.6 million in 1977, some £34 million of the increase being attributable to the effects of inflation. Telephone charges were increased in the same period but because of the difficult economic conditions growth of call traffic was below normal levels. The loss for the current year after deduction of interest and depreciation charges is estimated at £7.6 million.
It is expected that the service will revert to its traditional profit-earning position within the period of the programme proposed. Call traffic will grow more rapidly with the return of more favourable economic conditions. Moreover, the more rapid addition of subscriber lines, as well as yielding extra revenue from connection and rental charges, will increase call revenue. Another important benefit of the programme is the substantial extra employment it will generate. The telephone service gives employment at present in the Department to 13,000 people and indirectly to about 2,000 employed by contractors who erect exchange buildings, manufacture and install equipment, supply and lay ducts and cables, and so on. It is estimated that the new programme will give rise to a total of about 7,000 extra jobs overall. A high proportion of the jobs will be on skilled or semi-skilled work by graduates, technicians, tradesmen and other staff.
I commend the Bill to the House.