Superhighway deal irresistible to Labour

Anatomy of a policy: Tony Blair's agreement with BT shows how he saw a political opportunity and seized the initiative

DONALD MACINTYRE

Political Editor

The remarkable arrival of Lord Tebbit and Sir Iain Vallance, chairman of British Telecom , in Brighton yesterday to defend Tony Blair's agreement with BT from Tory attack, brought to a fresh and hugely public climax a policy process which, until this week, had attracted little attention but which has been long in the making.

It was last October that Tony Blair - who has his own E-mail address, and whose computer-literate wife Cherie is fully Internet-friendly, asked Chris Smith, the shadow Heritage Secretary, to make the development of policy on the information superhighway his central priority for the year.

The Commons Trade and Industry Select Committee, chaired by Labour's Richard Caborn but Tory-dominated, had in the late summer of 1994 already recommended the gradual relaxation of restrictions on BT's access to the cable entertainment business between 1998 and 2002.

The company insists this is necessary to secure an adequate return for the pounds 15bn investment needed to finance the right mix of fibre optic, radio link and modernised networks of copper cable to put the whole of Britain on line.

This sort of infrastructure would allow a schoolchild in Falkirk to tap into the Science Museum's database in London or a doctor to take a instant second opinion from a consultant by showing him an X-ray while his patient is still in his surgery.

The Government rejected the recommendation outright-though there were uncorroborated suggestions in Westminster yesterday that Mr Heseltine would have liked to adopt the proposals but was advised by two senior officials in the DTI's telecommunications division that this was impossible, given the commitments made to the cable companies

But well before then Mr Blair had been talking to media heavyweights about the implications of the superhighway. Indeed it was that subject over which Mr Blair's relationship with Rupert Murdoch, international media tycoon, began to warm. In July, Mr Blair was a keynote speaker at Mr Murdoch's international conference for his senior staff, held at the luxurious Hayman Island resort, off the coast of Queensland.

Chris Smith, who was anything but a computer expert when Mr Blair's summons came, but is now widely respected in the industry as a very fast learner, travelled to the US, met Vice President Al Gore's information technology experts, talked to Department of Commerce officials and went to Stamford University and California's "Smart valley" to bring himself up to date with the information revolution.

Mr Smith set up a policy forum not only of front benchers and Labour MPs but a number of outside consultants, ranging from Sir David Puttnam to Logica's Philip Hughes, Professor Steve Hepple of Anglia Polytechnic's Ultralab, Sir John Daniel of the Open University and James Purnell, information expert at the left of centre Instititute of Public Policy Research, an Islington Labour councillor and one of Mr Blair's key advisers on the issue.

And by February, when Tony Blair met Sir Iain to hear his pitch on behalf of the Select Committee report, Mr Smith was already floating the idea in speeches that the Government would need some form of social return for relaxing the restrictions. That idea - which was virtually the only aspect of the policy announced on Tuesday which did not crop up in the Select Committee Report - eventually bore fruit in the BT offer to connect every school, college, hospital and library for free.

By the time Mr Blair travelled to Hayman Island in July the policy of agreeing to lift the restrictions on BT, Mercury and other potential telephone companies in return for free interconnection of public institutions was already complete. But it may have been Mr Blair's trip to Australia that finally persuaded of him of the political profile such a policy could be given.

For as Mr Blair chatted with the Australian premier in one of their adjoining suites overlooking the hexagonal pool, Mr Blair remarked that he had to return home to make a speech to the information superhighway conference Mr Smith had convened for July 18.

By all accounts, Paul Keating, who also has an agenda of connecting up every public building, was lyrical about the political implications of the superhighway. Immediately, Mr Keating who, even more than Tony Blair, has never made any secret of his admiration for the political drive of Margaret Thatcher, had an imposing dossier of speeches and documents faxed down from Canberra and communicated his enthusiasm to Mr Blair.

It was not long after Mr Smith's conference at the Queen Elizabeth II centre in Westminster that discreet contact was made between Mr Blair's office and BT, and the basis for the proposal which Mr blair announced on Tuesday was put to Sir Iain. Highly secret negotiations were carried out by Alan Rudge, BT's deputy chairman and Jonathan Powell, Mr Blair's chief of staff, who worked closely with Geoff Norris, the industry and education adviser in Mr Blair's office.

After the summer holiday, the negotiations fell into place with remarkable speed. Copies of Mr Blair's speech drafts passed between his office - and later his suite in Brighton's Metropole Hotel - to BT in London, and according to one account, to some of the senior BT executives gathered, ironically, along with Ian Taylor, the DTI Telecommunications Minister, at an international telecommunications conference in Geneva. By Tuesday the text was agreed and the deed done.