Connect’s BT and Biennial Conferences

Next week sees Connect join the union conference season, this year in sunny Blackpool.

So, if you’re coming – safe trip and see you there. I’ll be blogging if not quite as normal, then at least to provide a few updates over the course of the next week, as well as regards the major events and decisions of the week.

The ‘Final Third’ levy: public or private asset?

Gavin Hayes, General Secretary of Compass, argued this week that a private company should not need the assistance of a levy to raise investment funds for next generation access and, furthermore, that in the context of broadband being seen as essential as electricity, gas and water, we need to get back to a discussion around the notion of public utilities being run for people not profit.

The latter comment is an interesting one, since it raises the question not just about the original privatisation of BT exactly 25 years ago but about the demands we place on private/privatised companies to fulfil public policy goals. As a nation, we gave up the right to ask a private telephone company like BT to supply universal broadband access, and at increasing speeds, on a scale and to a timetable made as a result of public policy rather than the commercial of the operator(s) concerned, when we decided that its future was better off in the private sector. If we now want it to fulfil those public policy goals, then either we have to find some way of returning it to state-owned hands – in a model which is otherwise reserved currently only for failed/failing banks – or else stump up the cash. Its woes in Global Services apart, BT is far from a failing company, even though years of being in private hands has delivered more of a concern for (and a return to) shareholders, as well as a plethora of dodgy executive decisions, than for ordinary citizens and the need to raise significant amounts of investment finance. Well (to paraphrase), that’s neo-liberal life as we know it, Jim.

If returning BT to state-owned hands is, for whatever reason, beyond us – and the whole point of Hayes’s argument is that it should not necessarily be, since state ownership ought not to be just a rescue point for failing banks – then stumping up the cash is the only alternative. We could do that as taxpayers – though that would be likely to raise an almighty row with the European Commission, which has quite strong and quite well-monitored rules on state aid to industry, or we have a levy: we raise the money more or less by old-fashioned public subscription – everyone pays, and pays the same amount too. There is a strong egalitarian, and therefore attractive, argument to that, albeit that you could also argue, as Nigel Stanley at the TUC did on Wednesday, that it is a very regressive tax.

That the funds have been raised in this way, however – or, rather, that some of them have, it being likely to take more, and probably a lot more, than just the contents of the Fund to deliver high-speed broadband to every home in the country – does raise interesting questions about the ownership of the assets bought with the Fund. There is a clear argument that ownership of assets ought to bring appropriate rewards, and I don’t just mean via the cheaper bills appropriate to us as consumers; the rewards appropriate to an owner ought to be additional. How those are to be determined is critical, not only as a matter of principle, but also in terms of justifying to ordinary people why they should pay the levy and, indeed, what benefits it will bring them.

Of course, the failure to provide investment funds to the desired public timetable is also a failure of a regulatory model based solely on increasing competition in the sector from the singular, short-termist perspective of driving prices down. From a more long-term perspective, such a policy has left regulated network operators with insufficient investment funds to make the necessary investment in high-speed broadband, not least of all without a clear picture of when, and how much, the return from that investment would be. So, it is the failure of regulation which has also contributed to this situation.

In this respect, one of the lesser-noticed actions being taken under Digital Britain is that Ofcom is to be charged with a new remit of looking also at the impact on investment of its decisions. This overturns a 20-year commitment to looking solely at competition in regulatory decision-making. This is a welcome step forwards in starting to correct the regulatory failures that have left us where we are.

Meeting 2 Mbps universally

This week’s Digital Britain White Paper committed, as expected, resources towards the achievement of an access speed of 2 Mbps for all broadband users throughout the UK, regardless of where they are based. This is a welcome commitment, albeit that there do remain questions as regards the detail and some reservations as to what it means in practice – see my other posts below (and not least in regards to contention rations dropping actual access rates in practice well below the headline ones).

One of those questions concerns the ‘platform’ (in less technical language – how) that commitment will be met. BT (and KCom, in Hull) provide fixed-line links to all homes on a universal basis – but some homes are poorly placed as regards the sorts of speeds being spoken about in Digital Britain (as they are too far from the nearest exchange); cable supplies an alternative source of fixed line communications, but to only half the homes in the country, with few prospects of building out much further; mobile base stations offer an alternative, although Digital Britain was somewhat critical as to whether mobile would provide significant inroads into the gaps in fixed-line provision before 2012, and potentially afterwards as well, depending on technical improvements and development decisions – see paragraphs 112ff). Overall, Digital Britain reported that some 11% of homes are currently unable to receive a speed of 2Mbps, so there is some way to go if the 2012 commitment is to be attained.

Apart from fixed and mobile ‘platforms’, the third possibility is via satellite, about which less is known. Digital Britain itself comments that market data on usage of satellite services is not widely collected at national level in the UK (paragraph 122). Eutelsat is one such operator, formerly owned by a consortium of European governments before being privatised in 2001. Taking commercial advantage of the debate afforded by Digital Britain, Eutelsat said this week that it was capable of meeting the 2 Mbps universal commitment for its subscribers already, with a free upgrade to 3.6 Mbps due as from 1 July, and that it was also investing in new satellite infrastructure capable of delivering speeds of up to 10 Mbps in 2010. It extended an invitation for further discussions as to the role of satellite service providers in meeting the commitment.

Without engaging in commercial puff on behalf of the company, the price of its basic 2 Mbps service does not seem exhorbitant – albeit clearly it is at a premium to the price of existing fixed-line service provision. At which point, the question of the universal service commitment does shift somewhat. How much further than 2 Mbps could access speeds actually be pushed on a universal basis via satellite? Are there any limitations of satellite providers in picking up all of the existing shortfall below 2 Mbps – for example, on a number of subscribers basis – and how should this be addressed? What, in other situations, will be the precise usage in practice of the public and other funds being committed to deliver universal service under the commitment? What about network security and reliability of satellite provision?

We understand the reluctance of the sponsors of Digital Britain to engage in debates around picking technologies, but if the technology already exists to deliver what public policy wants to achieve by 2012 and more, in terms of access  speeds, these are clear questions that need to be answered.