Mr. Frank Doran (Aberdeen, Central): I am pleased to initiate this debate, because my constituents and people throughout Scotland who subscribe to the services of Atlantic Telecom are facing serious problems. The company appeared to be successful, but it went into administration in October, leaving its many thousands of cable customers in the lurch. On 9 November, telephone services were completely withdrawn. I propose to focus less on the short-term issues, however important, than on the longer-term consequences of the collapse.

I am grateful to the Minister for E-Commerce and Competitiveness and to the Minister for Enterprise and Lifelong Learning in the Scottish Executive - by happy chance his sister, making it a family affair - for working together to find the funds for an emergency system that will allow telephone calls to continue in affected cities. It is only a short-term solution, and by the end of January 2002 the problems faced particularly by businesses will not have gone away.

Mr. Malcolm Savidge (Aberdeen, North): Does my hon. Friend agree that this problem shows the weakness of existing legislation? If it were not for the helpful actions of the Minister and his sister and of British Telecom, the crisis would indeed have been grave.

Mr. Doran: My hon. Friend is absolutely right. Although I am grateful to the Minister for spending £500,000 of public money on the rescue effort, it shows that the structural problems are deep.

I have heard various figures for the number of Atlantic Telecom customers. BT told me that the number was 16,000. However, the Atlantic Telecom figure is nearer 12,000 customers, 2,000 of which are businesses that are concentrated mainly in Aberdeen, but are also in Dundee, Glasgow, Edinburgh and Manchester.

Domestic consumers have been seriously hit. Telephone services were withdrawn with minimum notice. Most people found out from the local newspaper on the morning that the services were withdrawn that they would not be able to make telephone calls. However, most domestic consumers have been able to have lines installed or get on to a programme to have lines installed.

The most serious consequences have fallen on the business consumers. This is the second collapse of a telephone supplier since competition was introduced in the telephone industry. It is the largest and the most significant collapse, and there are serious lessons to be learned from it, the most important of which is that there is almost no protection for the consumer in the regulatory system.All consumers were given notice of the intention to withdraw what the Office of Telecommunications calls "the complete service". The minimum legal obligation on a telephone provider when it decides to withdraw a service is to give 14 days' written notice to its subscribers of its intention. It has to provide access to emergency numbers only, so consumers cannot make outgoing calls, but they can receive incoming calls. In the case of

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Atlantic Telecom, the 14 days' notice expired on 25 November. I mentioned earlier the rescue plan that has been put in place, and I have tested the system. People are receiving calls, which is important.

By far the most serious consequence for businesses has been the fact that, if they had an Atlantic Telecom line, they have lost that number.

Miss Anne Begg (Aberdeen, South): A taxi company in Aberdeen has suffered as a result of the collapse of Atlantic Telecom. If someone is drunk in Union street in Aberdeen and is looking for a taxi, especially on a Saturday night, that company's number might be the only one that they remember or that is pre-programmed into their mobile phone. The loss of a well-known number is very serious, especially for a taxi company.

Mr. Doran: I agree with my hon. Friend, although I do not accept that anyone is drunk in Union street in the heart of my constituency on a Saturday night. That apart, I agree entirely.

I will give some examples of businesses that have been affected. My hon. Friend mentioned Abcabs, which is a small business in my constituency that started up three years ago. It was extremely successful and is now the third most used taxi company in Aberdeen. It had a very memorable number - 45 45 45 - and got a lot of business from that. On 9 November, it learned that its telephone service was to be withdrawn. It was in an awkward position, because it had foreseen the problems with Atlantic Telecom and had asked BT to install a new system.

That system was in place and was due to be implemented on the Wednesday after Atlantic Telecom went bust. In the meantime, the company was using its Atlantic Telecom number to forward calls to its new system. No calls were forwarded, because the Atlantic Telecom system could not make outgoing calls. For a company that expects 2,000 calls a day at the weekend, the sudden disconnection of the telephone line has had a devastating effect on its business. It advertised for three years, invested in literature, and put the number on its cabs—a huge investment—but what it considered its most valuable business asset was suddenly pulled away.

Another small company, Aberdeen North-East Heating Ltd., supplies and fits boilers. It is five years old and began work in a rural area but set up in the city three years ago. The company, which is important in my constituency, supplies about 120 to 130 boilers a year and is an approved contractor for the Government's energy efficiency scheme. It tracks its advertising, which appears only in Yellow Pages and on yell.com, and knows exactly where its business comes from. Ninety per cent. of its business comes from the Yellow Pages advertisement.

The company's telephone number has been taken away. Yes, it can still receive incoming calls and, because of the Minister's intervention, will be able to do so until the end of January, when it will have to reconsider its position. The problem is that people do not use a heating company every day of the week. They go to Yellow Pages and run through the list to pick someone who suits their needs, based on an advertisement that attracts them. Yellow Pages in Aberdeen will not be republished until June, which is six months later.

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The company is looking at other means of advertising - it will do everything that it can to let the citizens of Aberdeen know about the business - and there will be a small amount of business from word of mouth, but it feels that 90 per cent. of its business will collapse from the end of January. That successful small business, which employs four people, is afraid for its future.

Those examples show that serious consequences stem from the loss of a telephone number. The Office of Telecommunications, which is the industry regulator, has spent a great deal of time and used much advertising space to tell us about portability. Telephone numbers are supposed to be portable. I looked on its website and picked out a couple of random statements. One is from a review of portability that was published in 1998:

"Changing number can be a major inconvenience for customers and a barrier which prevents them from exercising choice and taking advantage of growing competition in the telecommunication market. Number portability means that customers can change to a new operator without the hassle of having to change their number."

We all welcomed that important statement as a sign of progress in the newly liberalised telephone market, but what happens when an operator goes into administration or withdraws from the market? Atlantic Telecom customers discovered that portability was meaningless because, when the company collapsed, Oftel automatically reclaimed all the numbers. I asked Oftel why the numbers could not be reallocated to BT, which had put in the emergency services and was to be the new provider. I was told that the numbers could be redistributed only in tranches of 10,000 numbers, and that there were various technical reasons why the numbers could not be transferred. I understand those reasons, but it seems that the system militates against the consumer. There is a drive for portability, which is sold as a benefit of the system, but in practice there is no portability if the supplier does not continue in business.

A problem with competition is that there will be failures, even if they are not as spectacular as Atlantic Telecom's. From my experience of the gas market, which I know a little better than the telecoms market, I know that companies come and go. They may not go bust, but if they do not achieve their aspirations, they will move on to other areas in which they prefer to invest their money. In this age of communication, customers are put at a distinct disadvantage in such a situation.

I am uncertain about one matter, which I would like the Minister to address. I asked for a short brief on the consequences of reclaiming the numbers and what it would mean for existing consumers who had already transferred their number to another organisation, such as BT, and were no longer Atlantic Telecom customers at the time of the collapse. The response stated that

"if a number was allocated by Atlantic this cannot be ported to a new supplier. Number portability obligations on telecoms operators work on the basis of reasonableness and although it would be possible for all Atlantic's numbers to be transferred to other operators, this would be technically difficult and expensive as it would require operators to reconfigure the databases in their exchanges to recognise the new numbers."

I would appreciate it if the Minister would tell me whether I am interpreting this correctly. The response seems to say that, as well as existing customers, any customers during the lifetime of Atlantic Telecom who

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took their numbers to a new supplier such as BT will lose their number, despite not being a customer at the time of the collapse. That seems to me the logical interpretation of that response.

What protection is there for consumers in that situation? If I have read the response correctly, it implies that portability depends on the liquidity of the supply company and on historical factors. It is a serious situation, and I have tried to understand why it has occurred. I understand the technical reasons and financial consequences—I have been told that it may cost as much as £1 million for BT to take all the Atlantic Telecom numbers and reconfigure its own system to deal with them. However, I cannot understand why the relatively small number of consumers who decide to take advantage of portability should be punished and put at risk. I still do not know whether that is happening because it is more convenient for or a requirement of the regulator. I do not accept that we cannot devise a regulatory system that protects consumers, or that the problems of technical difficulty and cost in transferring telephone numbers between companies to sustain the portability principle are insurmountable. The system seems to operate for the convenience of the industry, not the consumers.

Miss Begg: There has been a failure of regulation in television, which is another aspect of Atlantic Telecom's business. It took over Aberdeen Cable, but the business went bust before the telephone system went down. People in Aberdeen arrived home to discover a message on their television to say that they had lost their service. There is a problem with regulation, or more particularly consumer protection. We must ensure that people continue to have a service when companies go bust.

Mr. Doran: That is right. We are shortly to have a telecommunications Bill, and I hope that that topic will be addressed.

Mr. Savidge: My point follows that made by my hon. Friend the Member for Aberdeen, South (Miss Begg). My hon. Friend has rightly concentrated on the business implications, but it is important to emphasise that domestic customers who lost both their television and telephone service at the same time have been caused considerable stress.

Mr. Doran: Again, I accept that point, and I hope that it will be addressed in the telecommunications Bill.

There are serious implications for competition in the telecoms industry. The collapse of Atlantic Telecom has shown that there is no protection for the consumer in this new era of competition in the telephone industry. In any competitive situation, some companies will succeed while others fail. If a company fails or decides to pull out of the market, services are liable to be withdrawn overnight and telephone numbers, which may be a small business's single biggest asset, could be taken away without compensation. That would have a devastating effect on the businesses concerned.

The issue is not local to Aberdeen and the other centres that I have mentioned; it affects the whole industry. We encourage individuals and businesses to enjoy the new marketplace in telephone services,

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but there is no health warning and nothing to tell consumers of the risks that they are running. If consumers knew the risks that they were taking, would there be any competition in the telephone market? Would consumers take the risk of leaving large but apparently stable companies such as BT to sign up to companies like Atlantic Telecom? If they knew the whole picture, I doubt that they would. What incentive would they have under the current regulatory framework?

The Minister and the Scottish Minister for Enterprise and Lifelong Learning have done everything possible to mitigate the immediate effects. I take their intervention as an admission of the seriousness of the problem. They have dealt with the short term, but the long term must involve a complete overhaul of the regulations governing the telecoms industry in order to give consumers more protection and tilt the balance away from the industry. I welcome the Minister's public statement at the weekend that he will consider the regulatory framework. All the evidence from Atlantic Telecom's collapse is that such a review is needed extremely urgently.

12.46 pm

The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander): I congratulate my hon. Friend the Member for Aberdeen, Central (Mr. Doran) on securing the debate. I acknowledge his diligence in representing his constituents' interests at this difficult time, following the failure of Atlantic Telecom. I welcome the debate as an opportunity to place in context the announcement that the Scottish Minister for Enterprise and Lifelong Learning and I made on Saturday afternoon. I hope that I can assure my hon. Friend and others affected by the closure of Atlantic Telecom that, working together, the Minister and I are doing everything possible to ensure a smooth transfer of telecoms services.

I shall address the circumstances of the weekend's events, before discussing how I intend to take forward the policy issues raised by my hon. Friend. Atlantic Telecom was a company of about 260 employees, with a total of 128,000 customers - 7,000 of whom were business customers - covering the cities of Glasgow, Edinburgh, Dundee, Aberdeen and Manchester. As my hon. Friend said, the challenge was not confined to the Aberdeen area.

Some of those customers were served by a fixed wireless access telephone system. The company was established in 1991. Atlantic Telecom went into administration on 5 October 2001. At the time, there was a fair degree of confidence that the company would be sold. However, five weeks later, on 8 November, the administrators concluded that they could not sell the company as a going concern and duly informed Oftel that the fixed-wireless network was likely to be switched off shortly, without notice to customers.

Administrators are appointed by a court to try to rescue a failing company or to achieve a better return for its creditors. To help them to do that, the company is protected from any legal action while the administrators are in place. That includes enforcement action by Oftel,

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which is the independent regulator established under the Telecommunications Act 1984. It is specifically charged with responsibility for promoting the interests of consumers and ensuring that telecoms services are provided in the UK to meet all reasonable demands. Oftel cannot require an administrator to act in breach of its duty, but after intensive discussions on 8 and 9 November, it agreed that the administrators would maintain the network with a minimum service until 25 November. It also agreed that the administrator would give all customers immediate written notice to that effect.

The Government hold the view that competition brings choice of services to customers, encourages innovation and drives down prices. That is why we believe in promoting competition widely. It is a fact of life that, in a competitive environment, not all companies are guaranteed to succeed, as my hon. Friend said. When a telecoms company fails, the customers can usually be easily transferred to alternative suppliers. Indeed, that has happened for most of Atlantic's customers. Those using Atlantic's indirect access service have a wide choice of alternative suppliers. Those using Atlantic's fixed-line network have been able to transfer to BT or another cable operator.

BT and other telecommunications companies that have received orders for new lines have been working as fast as possible to process the orders. However, it was proving impossible for BT or any other company to provide services to everyone by Sunday 25 November, when the administrator planned to switch off the Atlantic network. Some of Atlantic's customers would have realised only late in the day that they had to make alternative arrangements for their telephone services. That is why the Government, the Department of Trade and Industry and the Scottish Executive resolved to act to ensure that Atlantic's customers, particularly its business customers, were given a reasonable time to make the switch to an alternative network provider before the Atlantic network was completely switched off.

Mr. Savidge: My hon. Friend mentioned that Atlantic Telecom used fixed radio access. Did that technical issue make the problem worse?

Mr. Alexander: I thank my hon. Friend for that contribution. We struggled with several technical issues during the hours immediately before the switch-off. One of those was the nature of the access provided by Atlantic Telecom. As I understand it, following the provision of a wireless service, lines into some properties had been removed. That obviously made the problem more complicated and increased the delays for those seeking alternative line access. Despite the technical constraints, BT and other telecom companies that received orders for the new lines worked as fast as possible to process them.

I met my hon. Friend the Member for Aberdeen, Central on 19 November and he spelled out the concerns of his constituents at that DTI meeting. The following day I met the director general of Oftel and expressed my resolve that everything possible should be done to smooth the transfer of customers from Atlantic to other operators. On 21 November, I met my hon. Friends the Members for Edinburgh, North and Leith

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(Mr. Lazarowicz) and for Aberdeen, South (Miss Begg), who explained the problems that their constituents were having in transferring telephone numbers and obtaining alternative operators. I pay tribute to all those hon. Members for their effective and constructive representation of their constituents.

The next day I arranged to meet the chief executive of BT, Sir Peter Bonfield, and the group commercial director, Colin Green, to seek their assistance in expediting the connection of Atlantic customers. At that meeting, Sir Peter assured me that BT would do all it could to help facilitate a quick transfer of customers. He confirmed that the company had already diverted resources from elsewhere to help speed up the process, and that it would work closely with Oftel and the DTI to minimise the disruption to Atlantic's customers.

The Scottish Minister for Enterprise and Lifelong Learning, my sister, Wendy Alexander, met the Stop Atlantic Closure campaign on 21 November and again on 23 November. She also met the administrators on 22 November and the Scottish Chambers of Commerce and Scottish Enterprise on 23 November. From those meetings we were clear about the importance to Atlantic's business customers of not losing telecom services for any period, and about the difficulties surrounding the transfer of numbers.

We required a complex deal. We needed to persuade the administrators to keep the Atlantic network running long enough for Atlantic's customers to obtain telecom services from BT or other operators, but all customers with a number from Atlantic's allocation would lose its use as soon as the network was switched off. We therefore decided that the Atlantic network must be kept running until customers had had a reasonable time to organise alternative arrangements. For an interim period, a messaging service was also needed to provide the new telephone numbers when calls were made to the old Atlantic ones.

The administrators would not fund that arrangement, so we quickly secured the Treasury's approval and considered whether providing public money to support businesses in that way would constitute state aid, which the European Commission permits only in limited circumstances. We believe that the money meets well-established criteria for rescue aid. This week, we are notifying the Commission of that aid, and we believe that it will be approved.

I pay tribute not only to the Minister for Enterprise and Lifelong Learning, but to my officials in the DTI, the Scottish Executive and the staff of Oftel who, under considerable pressure, worked flat out on this package on Thursday, past midnight on Friday and again on Saturday morning. Everything was in place and the deal was concluded with the administrators by Saturday afternoon, when we notified the campaigners and announced the deal publicly.

As part of the deal, we are working with Oftel and telecom companies to ensure that a message to every caller on the old Atlantic numbers provides the appropriate new numbers. That service will remain in place during Christmas and new year. By 2 January 2002, not only will all Atlantic's fixed wireless customers have working fixed lines, but businesses will have had several weeks to advertise new numbers. Some of those who benefit from the messaging service will want it to

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remain for longer, so at least one switch in the Atlantic network will have to continue operating. Those customers must arrange the financing.

Assuming that people act on the notice of network closure from the administrator, the rescue package announced on Saturday will ensure that 12,000 residential users and 2,000 businesses have time to get a new telephone line and to advertise the new number. This time of year is traditionally busy, and the £500,000 grant provided by the DTI and the Scottish Executive is essential to maintaining vital telephone services. We have financed the administrators to keep the Atlantic network operating with a messaging service up to 2 January 2002.

I want to consider the regulatory regime under which the events took place. In future, the regulatory regime should provide adequate consumer protection in a fully competitive telecommunications market. The regime presently provides several safeguards, the terms of which merit consideration.

Mr. Doran: I see that the Minister is on the last page of his speech, and I do not want him to sit down without addressing the concerns of business consumers, who are losing a major business asset. What does he have to say to them?

Mr. Alexander: My hon. Friend asked whether customers who moved from Atlantic before it went into administration, and who transferred their old numbers to an alternative supplier, would lose those numbers when the network closes. That is the case, because of the technical difficulties, but the possibility remains of further discussion about a messaging service based on a single Atlantic Telecom switch.

Under current terms, BT is subject to a universal service obligation. It will provide a service to all Atlantic's customers who make a reasonable request. Other operators, such as Telewest Broadband and Thus, are also taking ex-Atlantic customers. It should be possible for all Atlantic's fixed wireless customers (business and residential) who had placed an order with another operator for a replacement service by last Sunday to receive that service in two weeks, or four at most.

As for portability, telephone customers have the right under present arrangements to require the transfer of a telephone number from the existing operator to a new operator if that is reasonable. However, I draw my hon. Friend's attention to the terms of that definition, especially the word "reasonable". It is for the operator to judge what is reasonable, although ultimately it may be a matter for the director general of Oftel, who would consider whether the operator had complied with its obligation on number portability.

It is technically possible for all Atlantic's numbers to be transferred to BT, but it would have to rebuild the databases at each of its exchanges. BT has intimated in discussions with the regulator that that would cost about £1 million (an amount that the company does not consider reasonable) and would take several weeks to complete. Given the technical and operational characteristics of Atlantic's telecommunications system, similar difficulties would arise if numbers were transferred to other operators. Ultimately, the director general of Oftel may have to consider the reasonableness of a request for a number.

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The Atlantic case has shown the clear limitations of present customer protection measures. Now that the rescue package is in place, I assure my hon. Friend that I shall review whether steps should be taken in the light of those limitations. I welcome the views of all hon. Members, as we seek to establish appropriate further action. My hon. Friend accepted that providing such assistance is not something that the Government do lightly. Atlantic did not ask for assistance. We took action because the administrator, acting in the interests of the creditors, announced that the network would be switched off faster than Atlantic's customers could transfer to alternative operators. For reasons beyond their control, that placed those customers, especially businesses, at unacceptable risk. Jobs were clearly at stake at a peak period of the year for many of the companies, and at an especially sensitive time for their employees.

We have listened to Atlantic's customers. The DTI, in close partnership with the Scottish Executive and Oftel, worked hard and fast under real time restrictions to find what we believed was a workable solution. The other operators have also played their part...