Connected Research

Union policy research in the 21st century

Broadband connection speeds, competition and investment

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Akamai Technologies, which supplies web acceleration and performance technologies, has just produced its most recent quarterly report on global broadband connection speeds. In the light of the recent political debates in the UK, this is timely. The report can be found here (but note that the site requires a (free) registration).

The report is based on data gathered from Akamai’s global server network about broadband adoption and speeds (as well as attack traffic, such as denial of service attacks and hacking activity, which is also monitored regularly). So – it’s not necessarily authoritative (because it is intended to highlight the company’s services), but it is certainly indicative. Data was gathered for the third quarter of 2009.

South Korea was the country with the highest average connection speed – 14.6 Mbps – while its nearest rivals (and near neighbours) featured at just less than 8 Mbps: Japan (7.9 Mbps); and Hong Kong (7.6 Mbps). The UK had an average connection speed of 3.5 Mbps (this is close to, but lower than, the estimate most recently produced by Ofcom of 4.1 Mbps – see Figure 4.4). So, South Korea is much faster: but note that, in the context of references to building out towards access speeds of 1 Gbps, what is currently being achieved in this country is, on the Akamai figures, only around four times faster than average UK speeds. Which is still impressive enough but, given the existing and plain advantages of South Korea (based around very high population density), not bewilderingly so.

Appendix 6 of the report indicates average speeds for 19 northern and western European countries, and places the UK in 12th place – a rather dismal record in comparison to the fastest country (Sweden), where the average connection speed was 5.7 Mbps, although the UK was in touch with the median speed (4.2Mbps) – especially if we take Ofcom’s version. Clearly, however, access speeds in this country need to be better – much better – than the median if the UK is to profit economically from high-speed broadband.

Interestingly, the European country with the fastest average speeds, and the fourth fastest globally, was EU newcomer Romania (6.2 Mbps), while another EU newcomer, Slovakia, had four of the ten cities with the fastest speeds across Europe (headed by the 24.8 Mbps achieved in Lausanne, Switzerland).

It is unarguable that investment needs to be made to ensure that UK access speeds are improved – there is at least consensus on that. The circumstances in which investment in next generation access and fibre technologies is being made in South Korea, Japan and Hong Kong (and in Romania and Slovakia, for that matter) are not all that evident. But the lesson of the Ofgem report published today, remarking that the ‘open competitive energy market could fail to deliver secure, sustainable supplies in the coming decade’ (taken from the BBC report) is clear. In real terms, and despite a considerable increase over 2004-2006, gas prices are, following a long period of slow decline, lower than they were in 1986 while electricity prices are no higher. There are several reasons why the energy supply industry is in this predicament – but lack of investment is one of them and one of the reasons behind that lack of investment is the drive to cut end prices (driven not least by price comparison websites, as well as by the model of privatisation adopted in the industry, shaped to the same effect).

Good for the consumer in the short-term – but clearly not in the long-term. And it looks a lot like market failure to me.

The telecoms industry in the UK is heading, at least in some respects, the same way – average household monthly spend on telecoms (3.2% of total expenditure) is at a lower level than in 2003 (4% lower, in fact) while the proportion of the spend on internet and broadband, while higher than in 2003, also peaked in 2006 and has declined in each year since, now being at the same level as in 2005. These are not good conditions from which to mount convincing cases for expensive investment in next generation access technologies – and a regulatory policy which is focused on competition and price cutting is partly to blame. That new duty on Ofcom to promote investment in the industry can’t come quickly enough – and, in the meantime, we as consumers need also to recognise that, if we want high-speed services, the existing model of ever-increasing bandwidth at ever-lower prices is not an appropriate one.

The old adage that you get what you pay for remains an accurate one.

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Written by Calvin

03/02/2010 at 4:42 pm

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