Since 1922 12 Bills have been enacted to provide capital for telephone development. The Bill now before the House is the 13th in the series. Like its predecessors, it is an enabling Bill. Its purpose is briefly to empower the Minister for Finance to make further capital available for telephone development up to a limit of £350 million.
With the exception of the amount provided for and a few minor drafting amendments, the text of the present Bill is the same as in the last Bill enacted in 1973. It provided for advances of up to £175 million. This figure represented the then estimated cost of meeting capital requirements during the period from mid-1973 to mid-1978. Advances made under the 1973 Act to a recent date 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 mainly due to the reduction in the value of the pound arising from the high rates of inflation experienced since 1973.
Of the £158 million already drawn, £67 million was spent on subscribers installations and local distribution plant; £44 million on new exchange equipment; £34 million on the trunk system and £13 million on buildings, sites and miscellaneous works. The total number of exchange lines in service was increased by 104,000 during the period. Local distribution net-works—that is underground ducting and cabling in built-up and overhead cabling elsewhere—were considerably expanded.
About 670 telephone kiosks were erected. Sixty-three new automatic telephone exchanges were brought into service and most of the existing automatic exchanges were extended. The extra exchange equipment installed in automatic exchanges for connecting subscribers exchange lines represented an increase of 56 per cent as compared with an increase of 39 per cent in working subscribers lines.
About 10,000 extra trunk circuits were added to the system and additional trunk equipment was provided at many centres, the largest 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 Britatin, was increased more than fourfold. New telephone buildings and extension to existing telephone buildings were completed in about 200 centres.
Because of the integrated nature of the telephone system the full benefits of some schemes already completed will not become evident until complementary works, many of which are in progress, have been carried out. While much has been done over the five years to expand and improve the system we have a long way to go to match the kind of service available in countries like Denmark and Switzerland. I need only mention our long waiting list for telephones and the service difficulties that still exist to indicate how much leeway has still to be made good.
We have the lowest telephone density in the EEC. It now stands at 15 per 100 of the population as compared with 27 telephones per 100 in France which is the next lowest.
The percentage of telephones connected to automatic exchanges at 87 per cent may seem high but the networks of all our partners in the EEC are now 100 per cent automatic except that of France which is over 97 per cent automatic. We still have over 500 small manual exchanges serving extensive areas throughout the country.
I do not intend to dwell further upon the shortcomings of the system. Commercial and industrial interests rightly stress that they constitute a hindrance to efficiency and an obstacle to attracting new industry to the country. Clearly they most be remedied as quickly as possible.
It would however be unrealistic to suggest that spectacular progress can be made within a few years in clearing arrears and resolving the problems of the system throughout the country. Even for the most advanced systems 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 as quickly as we would like 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 conditions in their system. Intensive efforts have been in progress there for well over 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 the rapid momentum has been gained.
Ten years ago our capital budget for telephones was about £6 million. 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 over the next five years. This level of expenditure 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 over £1,000 million. This is required for a system which is already fully automatic. Investment in telecommunications, excluding broadcasting, in France in the current year is estimated at over £2,000 million and for the period 1976 to 1980 expenditure of £15,000 million is envisaged.
These figures are an indication of the demand which the provision of a modern telephone system makes on available capital. This is due to the huge potential for growth of the telephone service itself, which is likely to remain for a long time ahead the most important form of telecommunication, and to the fact that it provides the basic network for other forms of telecommunication including such services as telex, television, data links between computers, telecopying, and so on.
The £350 million development programme proposed for the next five years has four main objectives:—to increase the annual rate of connections progressively from about 45,000 at present to 85,000; to raise to 96 per cent the percentage of automatic telephones and provide for progress to full automatic as soon as possible; to further expand and improve the quality of service in order to attract and handle efficiently a high level of increase in traffic; and to 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.
In order to achieve these objectives it is planned to spend about £135 million on subscribers' installations and local network development, £70 million on local exchange development, £110 million on trunk development, £28 million on buildings and £7 million on miscellaneous works. I propose to comment briefly on each of these broad divisions of the programme.
On installation of subscribers telephones, including provisions of local underground and overhead plant, 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 over the next five years 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 thorughout the country very extensively. In doing so provision will be made for further rapid growth in the years immediately following the current programme period.
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 auto-manual exchange at Letterkenny—at present in progress—which will complete the planned number of auto-manual centres. Some 330,000 extra automatic exchange line terminations will be installed in automatic exchanges.
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. In total it is planned to bring over 22.000 additional trunk circuits into service. A number of major new trunk routes will be provided including a microwave link to Britain over the Irish Sea between Dublin and Welsh mountains.
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 over 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 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 over 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, Dongeal, 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.
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. Within the programme period it is planned to replace on an extensive scale existing coinboxes with STD boxes from which trunk calls can be dialled, commencing with the public boxes which are most used for trunk calls.
There are at present over 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 by fully secured.
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 have 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 of microwave links for televi-vices, such as data transmission, telex, television, facsimile transmission. At present an extensive programme is in progress for replacement and extension of miscrowave 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 growth 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 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 as to 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 telephones 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 investment in the service is basically a sound proposition. Capital invested in it is fully paid for by the users of the service over a period. 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 for 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 deductions 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 subscribers lines as well as yielding extra revenue from connection and rental charges will increase call revenue.
A major benefit of the programme, which is of considerable importance in the current economic situation, is the amount of employment which the programme itself will generate. At present there are about 13,000 people employed on the telephone service within my Department, and an estimated 2,000 more employed by contractors in the erection of exchange buildings, manufacture and installation of equipment, supply and laying of ducts and cables.
The £350 million programme will give rise to an estimated 7,000 additional jobs. The bulk of these new jobs will be created within the Department. The aim is that there will be a build-up of recruitment over the five-year period according as extra staff can be used productively, as there are limits on the numbers which can be usefully absorbed at any given time. Most of the extra jobs will arise on the engineering side; in the technician installer, labour and trainee grades. There will be more jobs for engineering graduates too and some extra in the clerical and administrative grades. Of course, the creation of the additional jobs will depend on the speedy and efficient implementation of the development programme.
I commend the Bill to the House.