This question has been asked quite a few times, and there seems to be a different story for each time.
Here's an interesting story about the song, from someone who attended a concert where Rice talked about the meaning (1/2 down web page):
"The thing with the clarinet teacher is a common misconception about this song. It's been said so often that it's almost become a self-fulfilling truth. Can't remember where it was first mentioned but it's been picked up and gained momentum. Anyway, it's not true.
Back when I first saw Damien play years ago he explained the meaning of the song, and it took me a while to understand the relevance. I didn't get it at the time, but luckily someone taped the show and I was able to listen back to it.
The Blower in question wasn't a clarinet teacher, but the cockney rhyming slang for the telephone (Stick with me, I know it sounds ambiguous!). Before he was in Juniper Damien worked at a call centre selling mortgages and loans, and spent all day on the telephone. He grew sick of speaking to people for 8 hours a day without seeing anyone's face, and he began to fantasize about the people behind the many voices he heard. One summer day he phoned a house and a girl with a melodic soft, sweet voice answered the phone. He was calling for her father, but he wasn't in. Protocol said he should have ended the call and phoned back another time, but he was mesmerized and enchanted by her voice and ended up chatting to her for over an hour. Damien began a secret relationship of sorts with the girl, always calling when he knew her father wouldn't be home just so they could talk, despite knowing that it could get him sacked. He dreamed of her at night, daydreamed about her all day long.
This continued for over a month, but one day he called and there was no answer. For the next week he called again numerous times a day, but still nobody picked up the phone. Confused by this abrupt end to the relationship, Damien became angry and obsessive (you were right about the obsessive bit) and found out the address of the girl. He took a day off work and got the bus out to the address.
Hidden in a hedge he watched the front door fervently for any signs of life, but he didn't expect what he finally saw. The voice was unmistakably the same, and as she shouted 'bye mum', closing the front door behind her Damien was amazed to see that this dreamgirl of his was wearing a school uniform. He couldn't believe his eyes and could not stop staring at her in shock. All the pieces of the puzzle finally fell into place - she was at home during the school holidays, led him on and played games, then when school started back she just stopped. Damien was angry but obviously couldn't tell anybody about it for fear of being branded a perv. He left the company and formed Juniper shortly after.
Apparently, although this hasn't been confirmed, this girl was part of the inspiration for volcano as well. (She's still too young)"