Connected Research

Union policy research in the 21st century

Posts Tagged ‘Universal service

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

Don’t worry: we’ve still got the 2 Mbps USC!

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After yesterday’s stripping out from the pre-election legislative timetable of several of the things that the Connect Sector of Prospect has campaigned for as outcomes from the Digital Britain initiative, picking over the guts of what’s left leaves us with little more than the 2 Mbps universal service obligation oops, commitment.

Having read this this morning, I briefly wondered whether even this had survived – although indeed it has; it actually never formed a part of the Digital Economy Bill since no aspect of delivering the commitment needed fresh legislation.

Delivering the commitment to a 2 Mbps service by 2012 reflects the intention that broadband should be delivered on a universal service basis to all those areas in the country which are currently poorly served by broadband – i.e. by ‘no later than’ 2012, all homes in the UK, more or less, should have access to a broadband service of 2 Mbps. Digital Britain reported that currently some 11% of homes (pp. 53-58) – 2.75m in total – are not able to get access at this level of speed. Pursuing this commitment is to be the responsibility of Broadband Delivery UK, a body announced by Stephen Timms in early March and which is to be headed, so Timms announced in Parliament later that day (although it never featured in the BIS press release) by Adrian Kammellard, previously Head of Major Projects at Partnership UK. Broadband Delivery UK remains a somewhat mysterious body; as thinkbroadband comments, it is currently without a web presence – this is as close as I can find – and little information is available about it apart from it being constituted of a body of 12 staff from within BIS.

In the uncertainties of the pre-election period, it would be surprising if Broadband Delivery UK was to have much of a profile: its original workload was yesterday cut in half, although this cut may be restored if the outcome of the general election was to return a Labour government. Nevertheless, the other half – the 2 Mbps commitment – does remain and, given that it has all-party support, the establishment of Broadband Delivery UK prior to the election consequently ought not to interrupt its progress after it, whatever the outcome.

In that context, here’s my ‘Dear Adrian’ letter of the issues that remain to be resolved within the commitment. Some of these are long-term ones, perhaps a little outside of the central remit, but an early recognition that they are ones which need to be addressed would be welcome:

1. 2 Mbps was picked, in the words of the interim Digital Britain report, since it represented what, by 2012, ‘will be in step with standard broadband usage’ (p. 57). This was even then a little unambitious; some 15 months later it looks increasingly outmoded when average speeds are already twice that and when much higher speeds are being rolled out elsewhere. The commitment to a 2 Mbps can’t be changed, at this point, but what is on the tin should be what is in the tin – people benefiting from the USC should get access speeds which are not ‘up to’ but ‘at least’ 2 Mbps. The approach of the US National Broadband Plan, based on actual speed, has a lot to commend in this area.

2. 2 Mbps is a welcome start in terms of ensuring that all broadband coverage is applied on a universal service basis. But it is only a start and, in the grander scheme of things, it isn’t very fast and will, in time, simply provide a very linear demarcation of the digital divide. Some thought therefore needs to be given to how this speed will change over time and, specifically, how it will be uprated: if it is not, people behind it are likely to lose out as speeds are driven faster and faster elsewhere. So, there needs to be a formal review mechanism to ensure continuing relevancy (or perhaps, better said, to guard against increasing anachronism).

3. A 2 Mbps speed refers only to download speeds, not upload ones. In a Web 2.0 world dominated by active sharing, rather than passive receiving, and by cloud computing, upload speeds will adopt increasing importance. Thought therefore needs to be given as to how these can be reflected within the commitment, and also encompassed within the regular reviews of the speeds embraced by it.

So, there remain some things within the current policy programme which can still be pushed, to go on top of the things which need to be reinstated on 7 May. And, above all, Charles de Gaulle was right.

Written by Calvin

08/04/2010 at 4:30 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

America’s National Broadband Plan

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After 11 months of work, extensive public consultation and heavy recent trailing of proposals, the American Federal Communications Commission released Connecting America, its National Broadband Plan, on Tuesday this week (Connecting America; press release). Not all the five Commissioners agree with the Plan so, instead of a formal vote, an agreed joint statement has been issued focusing on the principles at stake. More information is available at a specific broadband website.

Running to some 360 pages, the Plan is not a light read and I’ve as yet got only as far as the executive summary. However, it’s useful to compare and contrast policy approaches to the development of broadband; policy-making doesn’t exist within a vacuum created by geographical borders.

The Plan exists on the basis of a four-pronged approach to policy-making in what it calls the ‘broadband ecosystem’, each of which it has a series of recommendations numbering 200 overall, and the six long-term goals the FCC thinks can serve as a ‘compass’ for the development of broadband over the decade-long lifetime of the Plan.

Starting with the latter – the vision thing – the six goals are these:

1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second.

2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.

3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose.

4: Every American community should have affordable access to at least 1 gigabit per second broadband service to anchor institutions such as schools, hospitals and government buildings.

5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network.

6. To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption.

To ensure delivery of these goals, the Plan envisages the release of 500MHz more spectrum – the aim being that auction monies will be sufficient to finance the Plan; a Connect America Fund based on a shift of $15.5bn over the decade out of the existing Universal Service Fund and the provision of public funds of ‘a few billion dollars per year over two to three years’; and a Mobility Fund designed to ensure that no states lag behind the national average for 3G wireless coverage.

Aside of a small quibble around the slightly hyperbolic reference to the Plan ‘always being in beta’ (well-intentioned as the reference is to ensuring the Plan is flexible enough to meet changing circumstances, drafts do have to be concretised if action is ever to result), there are a lot of good things in it. Specifically, I like the following:

– the measure for high-speed broadband to be not ‘average’, or ‘up to’, but ‘actual’ and ‘at least’

– the specific requirement for upload speeds, as well as download ones, to be of a minimum standard

– an interim milestone of 50Mbps download and 20Mbps upload speeds to be delivered to 100m citizens within five years

– the universal service aspects of broadband to be based on delivering a ‘robust’ service to ‘every American’ which appears to be based on 4Mbps actual download speeds (not my emphasis but that of the Plan)

– the requirement for ‘anchor institutions’ (schools, hospitals, government buildings) in each community to have a 1 Gbps service

– the serious component based on improving digital literacy to improve the choice for citizens to be online.

There are some clear gaps. The availability of high-speed broadband is, despite the impressive language around speeds, aimed at just one-third of Americans; while a universal service of 4Mbps by 2020 might be said to be a little conservative. Such a programme creates, or exacerbates a clear digital divide within America with some, inevitably heavily urban, citizens to have super-fast speeds while others, inevitably out in the sticks, have to be content with a much poorer service.

There also appears to be little said about the levels of investment required to deliver such high speeds, which clearly require fibre to the home, other than via private sector investment based on competition. Estimates have put the costs of the Plan at some $350bn (£230bn). Given that there is a simultaneous requirement for access to be ‘affordable’, and in conjunction with other aspects of the Plan being funded by sales of wireless spectrum, that is likely to place a serious burden on capital expenditure amongst telephone companies and on the regulatory environment in which they operate. Whether that could be supplemented by state funding other than the $7bn intended to come from President Obama’s 2009 stimulus package is an interesting point for debate.

I would also be concerned that the Connect America Fund, designed to deliver universal service, is to be funded largely by a shift in existing Fund resources, together with a few billion dollars extra. The Fund (raised, incidentally, by a levy on telephone providers’ revenues, currently running at 15.3%, which may then be passed on to consumers) is already in difficulty concerning its existing responsibilities, so there is a natural concern as to how these will be met once the Fund is re-focused and – more so – how an expanded target will be delivered.

Nevertheless, the Plan – welcomed by the Communication Workers of America as a ‘good roadmap’ and described by it as ‘far-reaching’ – provides policy-makers with an extensive amount of material to debate over the coming months as the recommendations start to turn from paper towards implementation.

Written by Calvin

18/03/2010 at 11:50 am

EU consultation on universal service

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The European Commission has announced its long-awaited consultation on universal service principles in the communications industry. Existing rules at the European level, put in place ten years ago (although regularly reviewed since), seek to ensure on the basis of social exclusion that everyone has access to the public telephone network services and basic internet access. The Commission is now seeking views on whether these should be updated for the digital age – particularly concerning whether they should be extended to cover fast broadband service.

Hat-tip: Roger Darlington’s Comms Watch blog.

This is an interesting development for us in the UK, not least in the light of the government’s intention to have a separate and distinct universal service broadband commitment, on the basis of a minimum access speed of 2 Mbps, in place by 2012; whereas the Tories want to roll this up with their other plans for fast broadband services, letting the market take charge.

This is the first consultation produced under the EU’s new Digital Agenda commission under Neelie Kroes. The Connect Sector of Prospect will be responding to the consultation, which closes on 7 May, both directly and via our partners in UNI.

There are eight major questions on which the consultation is seeking views and the main principles under which the Connect Sector will be developing its response are likely to be as follows:

– the market is an insufficient mechanism to deliver access for all on the basis of widely-accepted principles of social inclusion

– universal service principles should encompass broadband internet access, on the basis of decent minimum speeds which are regularly reviewed to ensure continuing relevancy and which encompass upload speeds as well as download ones

– the burden of providing universal service coverage needs to be met from within a specific fund levied across communications service providers more widely: increasingly, this is likely to lend itself to broader definitions of players in the industry

– there needs to be particular attention to the needs of people with disability in terms of access to communications services.

If members have any comment on these principles, we’ll ensure they’ll be taken into account when we draft our response – so, let fly with a reply!

Written by Calvin

03/03/2010 at 5:21 pm

The ‘Final Third’ Fund: some early thoughts on the US experience

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According to a report on totaltele.com (limited viewing time without subscription), citing a Federal Communications Commission press release, the FCC (the regulatory authority in the US) has said that the subsidy fund to provide telephony services to outlying, hard-to-reach areas needs to increase to 12.9% of US inter-state and international revenues from 9.5% at the start of the year.

In the US, universal service is provided on the basis of a consumer levy raised from telephone bills (under a separate line on the bill headed ‘universal service’) and then allocated on a needs basis to companies supplying telephony services on a universal basis. The fund pays out around $8bn annually (£4.9bn at today’s exchange rates) and the increase in the revenues required to meet the universal service provision is likely to mean an increase in the consumer levy which is reported to run to a ‘few dollars per month’.

Fixed-line, wireless and internet-based phone subscribers all pay the levy, albeit at different rates, with internet telephony and wireless subscribers paying a lower fee. According to the report, there is an element of substitution under which fixed-line subscribers are switching to other services with cheaper contribution rates, leading to an increasing burden on remaining fixed-line subscribers in a situation where the size of the fund required is increasing (while the exclusion of local and broadband revenues from the calculation of the levy brings its own problems).

In the context of the publication yesterday of the Digital Britain White Paper, which has proposed a 50p levy on fixed-line consumer bills to meet the costs of building out high-speed broadband beyond the market, this is an interesting news story.

Firstly, the UK’s 50p levy is proposed to be on fixed-line consumers only, so the possibility of increased fixed-mobile substitution (i.e. outside that which has already been going on for some years) as a result of the levy would seem to exist. The proposed levy is not large in overall terms, but it may well make a difference around the margins, especially in the light of the US experience that there is some substitution effects on the basis of the levy on mobile subscribers being lower in the US, compared to there being none at all proposed for mobile subscribers in the UK for the ‘Final Third’ Fund.

Secondly, the proposed UK levy would seem to be lower than its counterpart in the US (bearing in mind that the two funds have slightly different purposes). It’s lower in absolute terms (50p compared to a ‘few dollars’) and it is likely to represent a small proportion of overall fixed-line telephony bills: for example, BT’s average annual revenue per consumer currently stands at £287 (so the levy would represent just 2.1% of current BT per consumer revenues). No comparative information is readily available for the US so it is not possible to say whether the proposed sum in the UK is also relatively lower.

Thirdly, the FCC capped in 2008 the amount operators could recoup from the fund, as a means of limiting its growth. There are further pressures for reform from both Republican and Democratic senators, as well as from telephone companies. In the UK, the Fund has only just been proposed, so it is a little premature to be considering how its future growth might be stemmed – although it is entirely legitimate to consider whether the levy should be envisaged as increasing in the future, and whether there should be a differentiation in the levy between better-off and poorer-off consumers (Digital Britain envisages a single exemption, on the grounds of those accessing social telephony schemes).

Nevertheless, the amounts to be raised by the UK 50p levy are small: c. £150-£175m per year. Digital Britain wondered aloud whether this might raise enough to have met the ‘final third’ provision by its 2017 target: in seven years, a total ‘pot’ of £1-£1.3bn seems unlikely to have been enough by that point without any increase in the levy, given that BT is to spend £1.5bn by 2012 on providing fibre to the first 40% of households (roll-out costs are evidently likely to rise over time as a result of inflation and also because there is a step change in incremental roll-out costs once a figure of 60-70% of homes is reached).

Nigel Stanley posts today on Touchstone regarding whether the levy is the right way to meet the ‘extremely sensible’ policy aim of extending broadband on a universal basis, given its ‘utterly unprogressive’ nature in taxation terms. It’s a fair point and one that does need to be taken into account as the shape of the Fund is debated. In the light of the event of the likely shortfall in the Fund, it is entirely possible that a somewhat less regressive regime might be implemented over time – although that doesn’t of course prevent this from being built also into its initial design.

Written by Calvin

17/06/2009 at 1:41 pm

Digital Britain final report published

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The final report of the Digital Britain team has been published today as a joint White Paper of the Department of Business, Innovation and Skills, and the Department of Culture, Media and Sport.

I’ve written a guest post for the TUC’s Touchstone blog on aspects of the White Paper dealing with the modernisation of the fixed-line infrastructure, which you can read here.

Written by Calvin

16/06/2009 at 5:15 pm