Connected Research

Union policy research in the 21st century

Posts Tagged ‘Social justice

The politics of fibre

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Alongside its annual results, BT announced its plans for an expansion of its investment in fibre earlier today. The clear link between the two is that the cost reductions and greater efficiencies identified in the company’s financial reporting have freed sufficient resources for an acceleration of the investment programme so as to allow a further £1bn to be put into fibre projects, extending the reach to two-thirds of UK homes by 2015.

Current investment plans had envisaged 40% of UK homes being fibred up by 2012: thus, an expansion of 67% in the investment budget brings about the same percentage expansion in the number of homes within the reach of a fibre network at the local level. This is interesting in itself, since cost models predict that fibre investment should become more expensive on a per home basis the further investment travels, although this seems to apply largely only once fibre roll-out has been extended into rural areas, i.e. above about 58% of homes (Figure 1.5).

(Incidentally, the Analysys Mason model looks to remain fairly accurate at this point: it seems to predict that, with an investment of £1.5bn in fibre to the cabinet solutions, BT ought to reach about 46% of homes (compared to the 40% in the company’s plans); while a total investment of £2.5bn ought to see it through to about 72% (compared to ‘around two-thirds’). Either the model is slightly out, and the costs associated with roll-out to particular stages are slightly higher than envisaged; or else BT’s mix of fibre to the cabinet and fibre to the home solutions has raised the cost slightly, since the model is based only on the former. The BBC news report of today’s story identifies that around one in four of all homes envisaged as being covered by fibre by 2015 will have fibre to the home – and, therefore, much faster connection speeds. This would seem to suggest that the Analysys Mason model actually slightly under-estimates the cost of fibre roll-out.)

The announcement of BT’s roll-out plans has clearly been well-timed, given the events of the last seven days; and appears to put BT on the front foot.

Firstly, this takes BT to what we might call the ‘Digital Britain’ point – i.e. the two-thirds of homes that ‘the market’ would identify as being suitable for fibre investment. Taking fibre installation beyond this was intended to be the purpose of the ‘Final Third’ fund, raised by the landline duty, which of course has now been scrapped – and without actual plans for its replacement which are more than mere suggestions.

Secondly, the plans will achieve download speeds of (up to) 40 Mbps. The Tories’ manifesto commitment was to getting ‘a majority’ of UK homes wired to (up to) 100 Mbps connections by 2017. BT’s current plans seem to indicate that, by 2015, only around 17% of UK homes will have download speeds at this level. If the manifesto commitment is to be realisable – though today’s reporting seems to indicate that Digital Britain may well not be a priority for the new government – then plans need to be made for how this is going to be achieved. This is not the same as what also needs to be done to roll-out broadband in rural areas (into the ‘final third’) – which mission also needs to be accomplished – since this 17% seems to leave plenty more homes in urban areas with download speeds of much less than 100 Mbps.

Thirdly, Ian Livingston’s announcement contains a strong caveat: that the plans assume ‘an acceptable environment for investment’. This is clearly critical and is an evident acknowledgement not only that the regulatory environment plays an important role in investment decisions, but also that the change in government brings uncertainties in this area which will need to be settled. Inevitably so. But what matters here is that the announcement of the plans now indicates that the existing environment, both known and in the pipeline, is acceptable in terms of the plans – what is unknown is whether that will change and, if so, what impact that will have on the investment. The caveat is a clear indication that the plans are predicated on at least the continuation of the current regulatory environment (if not its further improvement) and that any deterioration may well lead to a reconsideration of them.

How the government responds will be interesting.

In terms of BT – well, it’s clear that more needs to be done to get Britain faster online so as to realise the benefits of Digital Britain, though the importance in this of a healthy, financially strong BT needs not to be forgotten (as well as that the company is still rebuilding its profitability). It should also be remembered that the expansion of the investment in fibre will be ‘managed within current levels of capital expenditure’ – something which implies cut-backs in expenditure on investment in other areas.

A new statutory duty for Ofcom to promote investment in the communications infrastructure in its approach to regulatory decisions would help enormously right now…

Written by Calvin

13/05/2010 at 5:02 pm

OK, on with the show

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Though before we do, some interesting reaction to the overnight events picked up via TIGMOO by Anna Rose at Unison Active, as well as by Tom over at labour and capital.

In what is otherwise, given its timing, likely to be one of my more immediately unread posts in the one year (next week!) that this blog has been functioning, I did find this week that there were some interesting things happening in the world of regulatory broadband policy, both in Australia and in Italy, and in the world of net neutrality, in the US, which reflect some aspects of why the blog exists.

In Australia, the centre-left government has published a A$25m (£15m) report commissioned by McKinsey and KPMG that says, essentially, even if Telstra, the former incumbent, doesn’t decide to throw in its lot with the government’s plans for an initially publicly-owned national broadband network company, NBN Co can still go ahead on its own as a viable commercial entity (see here [registration required; limited viewing time] and, when that runs out, here for the basic news story].

Such a conclusion is really no great surprise, and perhaps its most important function is the practical assistance it will provide the government in its continuing negotiations with Telstra on the folding of its assets into NBN Co (although whether that’s a suitable use of public money is a different matter) – both that and the re-starting of structural separation discussions in the Australian parliament, scheduled for next week. The government’s intention to create a ‘Telstra 2’, having not so long ago sold the last one off to a lot of individual (‘mum and dad’) shareholders, with a long-term intent to do the same thing with NBN Co, is the subject of a lively debate, as the comments in The Australian show.

Meanwhile, a proposal for a super-fast broadband network in Italy was made by Vodafone, Wind and Fastweb (the latter two being existing Italian network operators) in Milan today. La Repubblica originally broke the story on Tuesday (you’ll need to speak Italian or else have a good translator – or else, if you’re quick, see either here and/or here for an English language version). The consortium of three want to spend €2.5bn on building a 100Mbps fibre network in Italy over the next five years – but che sorpresa, they want to build it only in the 15 major towns and cities. At the launch, it was also made clear that, over 5-10 years, the network could be extended in an €8.5bn investment to all towns with more than 20,000 inhabitants (representing around half the Italian population). Former incumbent Telecom Italia, which was invited into the project and which has always welcomed the notion of joint partnerships (provided that it keeps its finger on its existing network), has its own €7bn investment plans over three years but deployment so far has been somewhat relaxed.

Cynicism aside, any investment in high-speed broadband is welcome – but it does need to be part of a nationally- planned advance in fibre installation, and one that extends high speed broadband provision on an equitable basis right throughout the country: to rich and to poor; to urban and to rural; to young and to old. Where the market is allowed to dictate investment in nationally-important infrastructure, the end result can only be inequity, exclusion and a widening of the social and digital divides as a result of the inevitable cherry picking that will occur. Leaving the poor old incumbent to pick up the pieces for the rest is hardly reflective of a level playing field, while the concept of social justice – as well as that of evenly-spread economic development – deserves better treatment.

An interesting parallel between Italy and Australia is also that Agcom, the Italian regulator, has been looking at the creation of a separate, new company responsible for the country’s next generation broadband infrastructure.

Finally, in the US the Federal Communications Commission has made progress with its response to last month’s legal ruling against its sanctioning of Comcast for traffic management policies. I blogged about this here. The danger of the ruling was that an inability of the FCC to take action in this way, because broadband internet access is classed under US regulation law not as a telecoms service but as an information service (and thus subject to a different, lighter regulatory regime), left it unable to guarantee net neutrality – i.e. the freedom of internet users not to be subject to the ‘management’ of their surfing by their ISP. This impasse in turn seemed to threaten the FCC’s ambitious National Broadband Plan.

What the FCC has done, according to the BBC – a bit of a lighter read than the FCC’s own statement – is to develop a ‘third way’ (just like 1997 all over again!) which classifies the ‘transmission component’ of broadband access as a telecommunications service while taking a principled non-intervention approach to much of the rest of broadband access. The Chair of the FCC was at pains to point to the ‘narrow and tailored… cautious’ approach, and the need to overcome the difficulties posed to the National Broadband Plan by the legal decision, but even this limited compromise appears to have left the two Republicans on the FCC behind. Here, the Chair’s view is likely to be supported by the two Democrats, indicating it will thus prevail, but ISPs themselves already appear (according to the BBC report) rather unhappy.

These three highly separate, but highly linked, stories highlight the problems of regulating broadband access both in an environment of seeking control of the technology so that it serves the interest of the people, and in free market situations in which competition is supposed to prevail but which doesn’t necessarily always support the interests of the consumer, both taking place in the context of a neo-liberal dominated world view. You might wonder – just as bond markets opening in the middle of election night, as results are starting to come in, and subsequently with its intermittent results, was thought to be newsworthy as part of the BBC’s online internet coverage – just how we’ve got into this mess.

A lack of strategic thinking is one reason – and it’s clear that only strategic thinking can get us out of it.

Britain’s digital future

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The Guardian‘s Tech Weekly podcast this week focuses on the parties’ views and attitudes towards Britain’s digital future, featuring discussion and comment from the three leading parties’ main representatives (Stephen Timms, Jeremy Hunt and Lord Razzall) on the following issues:

– curbing piracy and file sharing

– intellectual property copyright reforms

– how to fund rural broadband penetration

– dealing with the library of government data.

I haven’t yet listened to this in full but will be doing so with some interest, blogging any issues that arise. In the meantime, you can pick up the podcast, or listen online, here.

Written by Calvin

29/04/2010 at 11:55 am

Landline duty dropped

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The BBC is reporting that the proposed landline duty – the 50p/month levy on fixed lines to contribute towards building out high-speed broadband services beyond where the market would deliver – has been dropped.

The dropping of the proposal, on which a BIS consultation closed only last week, is not because the government is suddenly unconvinced of the need for the Next Generation Fund which the duty would have established; it has been dropped since the political controversy over it would potentially have held up the Finance Bill, which has to include the duty since it is a fiscal measure. This is one of a series of three measures – including also the rise in cider duty – which the government has dropped from the Finance Bill so as to ensure that it can complete its passage through Parliament before Parliament is dissolved later this week. Consequently, the landline duty is very much a victim of the election.

Should Labour win the election, it is likely to be re-instated – the government’s policy has not changed – perhaps in a second Finance Bill after the election. However, it is disappointing that the landline duty has been dropped since the policy which lay behind it – that of extending high-speed broadband on a socio-economically equitable basis right across the nations and regions of the UK – was both sound in principle and, actually, far more important than the levy itself. Without the levy, and the Fund, the UK has no practical, resource-based response to the need to spread high-speed broadband equally across the UK other than where the market – i.e. the major network operators – decide where it can be done profitably. That is likely to lead to the over-provision of networks in large urban areas and the under-provision of networks in less populated, more rural areas and, in turn, to a widening of the digital divide. It is also likely to contribute to the further economic overheating of the large urban centres.

For its part, the Tory policy on extending high-speed broadband beyond the market is ill-thought: based as it is on a reliance on the regulated opening up of BT’s ducts – a policy with which BT is happy to comply but which, as Ofcom has previously pointed out, is likely only ever to be a partial solution – backed by some money from the BBC licence fee otherwise earmarked for the digital switchover. The digital switchover is due to be complete by 2012 and the underspend in this budget is £200m, which Digital Britain had intended to use to meet its universal broadband service commitment by 2012. Any continuation of this budget beyond 2012 essentially takes money away from BBC programming – thus, for the Tories, killing two birds with one stone but which is likely to mean further cuts in the production of quality media content.

The landline duty was fair in the context in which it was originally put by Digital Britain – that households had received a benefit from falling telecoms prices in recent years and that it was thus reasonable to ask them to share some of that benefit. The Connect Sector of Prospect had always argued that it was a moderate, affordable and specific contribution from consumers towards the cost of roll-out of NGA infrastructure beyond the market, and we also supported it as a welcome sign of the government’s commitment to a policy of ‘industrial activism’.

The decline in consumer telephony bills has been well documented by Ofcom:

Source: Figure 4.55, Ofcom Communications Market Report 2009

The chart shows clearly the falling nature of household telecoms bills, which declined from 3.4% of monthly expenditure in 2005 to 3.2% in 2008 – the same proportion as in 2003. If we focus on the decline in the amount of expenditure on fixed voice and on internet and broadband – i.e. the sums going to the operators charged with responsibility for rolling out high-speed broadband services – we can see that these have fallen by £5.68 per month – at standard prices – since 2003 (a drop of 14.7%). In this context, a 50p/month levy was, and remains, fair.

This decline in return is not a rational basis on which to found an expectation that operators will roll out costly investment in fibre networks in areas where it is even partly speculative. They will, instead, concentrate only on the clearly most profitable areas. That will inhibit the roll out of fibre networks, putting the extension of fibre roll-out some twenty points lower than it otherwise would have been by 2017, and it will exacerbate the divides within the UK.

That would be a disaster for the UK both socially and economically.

Written by Calvin

07/04/2010 at 12:16 pm

Gordon Brown on high-speed broadband

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Prime Minister Gordon Brown has today made a powerful speech promising universal access to high speed broadband services by 2020. The No. 10 website today also has the story as its lead item, containing a full transcript).

The reason for the universal aspect of the promise is simple social justice – that high speed broadband ‘must be for all – not just for some’, in contrast to alternative plans reliant on the market alone which would see access determined ‘not even by need or social justice, or by the national interest, but by profitability alone’, ensuring the creation of ‘a lasting, pervasive and damaging new digital divide’. Under such a reliance, the Prime Minister continued, the UK would be ‘split between a fast-track and a slow-track to the future, between those fortunate to live in densely-populated areas and those not’.

The Connect Sector of Prospect has been arguing on precisely these lines for some time (and will be doing so again to the continuing BIS consultation on the Next Generation Fund. NB: I’ve reported the broken link; you can also find the consultation document here). Consequently, it is very pleasing that the Prime Minister is making the same points.

The commitment to a 2020 vision for high-speed universal broadband access builds on the government’s existing commitment to high-speed broadband to cover 90% of the population by 2017, towards which goal the Next Generation Fund is designed to assist and which the Prime Minister justified by saying that ‘if every household is to benefit, then it is fair that every household contributes’.

Interestingly, the aim to have universal access by a decade matches the timeframe for the Federal Communications Commission’s plans in the US (about which I blogged last week), though the approaches are otherwise quite different, based around the two headline issues of coverage and speed – which are clearly linked together in terms of investment (I would not go as far as saying that there is a trade-off between the two, but there may well be in terms of the ability to provide investment which meets required rates of return). The US approach builds on universal service at a minimum speed, but is otherwise dominated more by a high speed, ‘big bang’ (or should that be ‘big bucks’?) type of model; while the UK is more inclined to one based on universal coverage and a more incremental pace to speed.

Ensuring that the digital divide does not widen is the right approach – access to a high-speed broadband service is indeed an essential service (the Prime Minister repeated in his speech that superfast broadband is ‘the electricity of the digital age’). It should therefore be delivered on a universal, equitable basis across the nations and regions of the UK and it should be the preserve of every household. But the speed of the service is important, too, not least from the point of view of securing the economic benefits to the UK as a whole of high-speed services, and we must therefore ensure that we see the existing plans for high-speed access as part of a continuous approach to investment in the industry which does deliver guaranteed high speeds, and in both directions.

Written by Calvin

22/03/2010 at 10:50 am

Policy Exchange nonsense

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Policy Exchange, a right-wing think tank interested in ‘free market and localist solutions to public policy questions’, which has the status of an educational charity, is promoting a new report on the future of broadcasting. The focus of the report is largely outside the main remit of this blog, but its recommendations do include the dropping of the 50p/month landline duty suggested in Digital Britain and the subject of recent BIS consultations (the author of the report – Mark Oliver, a media policy adviser, insists on referring to duty as the ‘telecom tax’, which I feel gives something away about the report’s intentions). In contrast, this blog has supported the principle of the duty.

[Edit 15 January: Liberal Conspiracy has a good blog posting on the rest of the report here].

The report’s recommendation on the landline duty – that it should be dropped because the case for building out high speed internet infrastructure to the whole of the UK is unproven and that, even if it was, it was likely to benefit the whole of the UK economy and thus should be funded out of general taxation – is fair comment. We’ve taken the alternative view that there are strong social justice, integrationist arguments in building out such a network outside of the major urban population centres, taking such access speeds ‘beyond the market’, and that there are also strong economic benefits to doing so as well, spreading economic development away from overheated areas. [15 January edit: Policy Exchange has form here too, having previously argued that regeneration programmes were doomed to fail in many areas and suggested that funds might be better used in encouraging people to move to other locations. Hat-tip: New Statesman]

Where the report overstays its welcome, however, as far as this blog is concerned, is on the costings associated with the duty. All on the same page of the report (p. 67), it persists in quoting a figure of £3.5bn as being the cost of ‘overall spending for Digital Britain’s broadband vision’ as well as being the costs of building out ‘high speed infrastructure to the whole UK’ and of ‘going from 60 to 90 per cent 50 Mbit/sec household accessability’.

All this is a bit confused (and, actually,  the language is all a bit breathless, too). I may be wrong, but I can’t recall that Digital Britain was ever this specific about the costs of its vision. (And the report doesn’t seem to reference where it believes this £3.5bn comes from – it just cites it as an assumption.). What Digital Britain does state is that the 50p/month duty will raise £150m-£175m per year (or, by the end of 2017, a total of a maximum £1.225bn, given a start date for the duty of 2011). This is around one-third of the cost of the duty apparently assumed by the Policy Exchange report. The Digital Britain assumptions are also commensurate with the £200m per year that would be raised based on Ofcom’s figures for the number of fixed landlines in operation (33.2m – see Figure 4.1) (there will be some exemptions from the duty, taking the figure closer to the Digital Britain estimate). This would thus seem to be authoritative.

It’s also worth pointing out that, back in 2007, Enders Research quoted a cost of £11.2bn as the costs of building fibre to the home to 90% of UK households (see the NGA briefing published by the Connect sector of Prospect, and repeated in the Broadband Stakeholder Group’s Pipe Dreams).

Neither can I recall Digital Britain talking about rolling out a specific 50 Mbps access speed right across the UK: it talks about rolling out ‘next generation broadband’ and refers specifically to Virgin Media’s trials of its 50Mbps cable technology, but it is not specific about the speeds of the fibre connections which will be the access route outside the urban areas of Virgin Media’s network. It could not be – these will vary, based on whether fibre is rolled out to the curb or to the home – and they could actually be much higher.

The political divide around the duty is a reasonably clear one – but it doesn’t help the essential clarity when numbers are apparently plucked out of thin air and, evidently, bear no relationship to the sums likely to be raised by the duty. A credible report – and conclusion on the issue of the duty – would seem to demand a little more preparatory homework first.

Written by Calvin

14/01/2010 at 12:36 pm

The recession and middle Britain’s shrinking wages

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The TUC has published a ToUChstone pamphlet – the first in a new series – exploring the role of the declining share of wages in national wealth and the much less well-known role this has played in the recession (see TUC press release).

The author on behalf of ToUChstone – Stewart Lansley – also wrote the earlier work on middle income Britain (blogged here) which documented the rise of an onion-shaped distribution of wealth in the UK and the rising divide between an affluent 40% and the bottom 60%. In this new report, he focuses in more detail on why middle- and lower-income Britain has been left ‘in the slow-lane of rising prosperity’ (a theme also picked up in The Guardian‘s Comment is Free pages today, although seemingly rather obliviously to Lansley’s work).

In his blog post for ToUChstone introducing the pamphlet, Lansley highlights that wages held steady at around 60% of national output for much of the twenty five years after 1945, before rising to 65% in 1975. Now, however, they account for 53% – a fall mirrored elsewhere: more steeply in the US, more shallowly in continental Europe – as a result of the erosion of employment rights [here Lansley is kind to his hosts: trade union weakness in general terms is also a factor], as well as reduced demand for unskilled labour and the transfer of jobs triggered by globalisation. All of this has contributed to boosting the bargaining power of employers which has had the effect of wages falling behind productivity growth – the wage squeeze.

The effect is that families borrow more to maintain living standards – staggeringly, households borrowed an average of 45% of their income in 1980 but 157% in 2007.  Of course, individual choice is an aspect here, but the wage squeeze implies that, formerly, such a level of living standards were financeable from wages whereas this is currently not the case. At the same time, rising company profitability – the counterpart to wages falling behind productivity – flowed into justifying record dividend payments and an explosion in executive remuneration, while higher rates of return in financial engineering led to the replacement of funding for long-term success with money being moved around specifically to chase the quickest return. This, in turn, lays behind the other, more well-known, factors in the current crisis.

The policy conclusions are not only that cuts would end a recovery before it has properly begun – since wages fuel spending – but that, in the long-term, the share of wages in national output needs to rise again.

Clearly, this latter is much easier said than done. Essentially, we need to confront and overturn a thirty-year orthodoxy which, albeit incorrect, has led to a major weakening of, and support for, the institutions capable of delivering that level of confrontation. It means essentially that people need to adopt a much greater degree of solidarity with and for each other, and reducing the importance of self (and self-interest) in doing so. Twelve years of Labour government, despite some important initiatives and an awful lot of warm words, has done little to change the increasing individualisation which lays behind the policy initiatives of the previous twenty. Challenging that orthodoxy clearly needs to take its place in a proper consideration of economic alternatives and Lansley’s pamphlet certainly helps to inform the debate here. Nevertheless, we should recognise not only that this sets out a specific challenge for trade unions (and, indeed, their members) but also that the scale of that challenge is significant.

Written by Calvin

12/11/2009 at 7:16 pm