Connected Research

Union policy research in the 21st century

Britain’s Digital Future II

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I’ve now had a chance to listen to The Guardian‘s Tech Weekly podcast I blogged about last week. Unlike some of the comments on the podcast page, which mostly seem to reflect continuing disappointment over the copyright and file sharing aspects of the Digital Economy Act, I thought this was an interesting and reasonably open discussion on the policies of the three main parties towards Digital Britain, underpinned by some thoughtful and articulate comments on the issues and the policies.

The bits on broadband, specifically on how to fund broadband access in rural areas, occur from the 39.17-minute mark and wrap up around 48.50. I learned the following:

– an acknowledgment from Jeremy Hunt, shadow secretary for culture, media and sport, that the market won’t provide for all and that an element of subsidy would be necessary to extend broadband to rural areas. This is not new by itself, but the Tories’ vehicle for this, i.e. using the £200m surplus in the digital switchover portion of the BBC licence fee, was, according to Hunt, supported by the BBC on the grounds that the hungriest consumers of bandwidth were iPlayer users and that the BBC wanted to extend access to iPlayer further. This BBC support for the use in this way of the digital switchover surplus was news to me.

– Stephen Timms, minister for Digital Britain, argued that the switchover money would not be available until 2013 and that doing nothing until then was simply not good enough, while making progress in rural areas demanded investment of £150m per year (i.e. the sums being spoken as being raised by the landline duty). At the same time, conceding the switchover surplus for rural broadband would leave little left for the universal service commitment. Hunt’s reply was that he would rather use the sums which Labour had spoken of to subsidise regional news programmes from ITV for rural broadband instead. So, here we have a Tory spokesman unsympathetic to the notion of the need to subsidise independent sources of regional news – while I also remain unconvinced that the Tories in office would do much towards a universal broadband service at all: having a policy for rural broadband is not the same thing as ensuring that all households in the UK can get access to a minimum broadband service.

– Hunt commented that next generation investment could cost £29bn [apparently, for fibre to the premises solutions right across the UK] and that this was not something that one company [BT] could afford on its own.  He lamented the failure of the Digital Economy Act to do more about encouraging other private sector operators to step forward and said that he wanted ‘Virgin Media to do more; Sky to do more; Carphone Warehouse to use our pilons, telegraph poles, ducts and sewers’ as a way of stimulating a lot more investment in fibre. Of course, there’s nothing to stop any other operator from building out a fibre network and then connecting that with the networks of others to extend coverage. (Except, of course, the need for investment finance and then the obligation to offer that network on a wholesale basis, just like BT has to do. That ‘our’ is an interesting and revealing word, too!)

– Hunt’s reference to Virgin Media having a fibre network which reaches the major towns and cities, and half UK households, whereas BT was the only operator which had the infrastructure to reach rural areas, and that it was ‘madness’ to wait for BT to make that investment as it simply could not afford to do it, seems to me symptomatic of a Tory desire to see BT only as a provider of last resort – that competition will provide in the major areas and that, where it doesn’t, BT will have to provide. So, other operators would be allowed to cherry pick the best areas for their investment, i.e. those which offer the best returns, while leaving to BT alone the prospect of investing in low return areas (and then having to do so on a wholesale basis). I’m extremely unconvinced that this is a sensible, rational approach to getting fibre rolled out across the UK: it leaves far too little in terms of returns for the operator relied upon to undertake the most costly investments (and the only one with sufficient scale to generate the necessary finance). In a situation in which the costs of fibre investment have already been identified as too high for one operator to deal with, it seems completely contrary then to ask that same operator to fund all the unattractive, low return investments. The UK deserves much better joined-up thinking than that.

– ‘Anyone who laid fibre would have an obligation to wholesale the fibre they laid to anyone who wants it’. I’m quoting here because I was quite astounded by what I heard and replayed several times to make sure I got it right. This goes well beyond BT, for which wholesaling obligations as regards fibre investment will inevitably be mandated by Ofcom, while that ‘anyone’ seems on the face of it to encompass, for example, Virgin Media, as well as any other operator which currently does not have SMP (significant market power – only BT and Kingston Communications currently have SMP). On the other hand, it might be argued that there is a strong whiff of ‘in future’ to the quote and, bearing in mind that Virgin Media is expecting to have completed its delivery of superfast broadband right across its network by next year, it may well on this basis be held not to have been caught by the need to respond to such wholesale obligations.

By the way, the programme ended with a comment on the impact on fibre investment of valuation office decisions. This has been well summarised by Computer Weekly and is based on a court case brought by Vtesse, and lost, earlier this year. It had been Tory policy to ‘realign’ business rates charged on fibre networks, although this seemed to lead to a bit of a spat with the Valuation Office Agency and this policy seemed eventually not to make it into the Tories’ Technology Manifesto. Making the cost of fibre essentially cheaper is likely to have some impact on investment decisions since it will increase returns: but, where that investment wouldn’t otherwise be made at all – i.e. in the rural areas – it’s unlikely to have any impact.

[5 May edit: Today’s The Guardian has a summary of all the manifesto commitments to technology, broadband and digital issues.]

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Written by Calvin

04/05/2010 at 5:51 pm

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