Out of the Policy Maze for the UK’s optical fiber broadband network

Out of the Policy Maze for the UK’s optical fiber broadband network

The recent House of Lords Report on the Broadband Internet has challenges us all to think about broadband Internet policy is new ways. They set down an alternative vision of open access unbundling fibres down to a large number of “hubs”. They are right that broadband network needs a new policy approach quite different from what we have been used to with telephone and TV networks. But I have my doubts that their alternative vision is sufficient. But first it is important to understand why the broadband network creates its own unique policy challenges…

The past 50 years have taught us to view a national communications infrastructure in a certain way. The digital terrestrial TV network provides a good recent illustration of this traditional approach:

  1. A Civil Servant sits somewhere in the Ministry and thinks “the UK needs a digital terrestrial TV network” (it happened to be me on that  occasion). He takes it to Ministers who accept the proposal and a political decision is taken. (Ian Taylor and Michael Heseltine)
  2. Parliament then approves a new regulatory framework that is fairly prescriptive on the powers of the regulator and Ministers to provide long term stability for investment…say over the next 25 years.
  3. A consensus is arrived in the industry on the services that customers appear to want and these are mapped closely to the technical capability of the network.
  4. The network is then rolled out on the principal that the UK is a single market. Thus whilst the network may begin to be rolled out in urban areas, eventually the rest of the country will get the broadly the same network and services
  5. There is an element of public subsidy to kick-start things – in this case in the form of the BBC’s contribution, that was particularly inspired (Greg Dyke).
  6.  Some 20 years later all parts of the country (within economic bounds) has digital terrestrial TV and the old network can be switched-off (after a brilliant job by Ofcom on the digital switch-over).
  7. The Government, Regulator, the Industry and consumers then enjoy digital TV for the next decade without having to change anything or do very much that is radically different.

The broadband Internet is different in character to the approach just described on just about every count:

First nobody in Whitehall sat thinking that the country needed an Internet. It has grown up driven by a number of disruptive forces that first brought a limited academic network that morphed into a public dial-up Internet that was soon overtaken by the broadband Internet. Data speeds have ramped-up in leaps and bounds and generally well ahead of demonstrable market demand.

Second, the UK is not a single market in terms of broadband infrastructure. Today it is intrinsically three separate markets defined by the choice of “broadband” network infrastructure (2, 1 or none).  In each market the technical performance of the Internet is radically different and so is the competitive market energy.

Third, unlike digital TV, where the service players pay directly for their transmission to their customers – with the broadband network it is free. Most of the benefits of new services over better networks go to the over-the-top players (that could be located anywhere in the world) and most of the cost of providing the network improvements falls on the national infrastructure provider(s).

Normally Governments, faced with something of this complexity, would put the issue in the pending tray marked “all too difficult…leave for another day!” But the Internet has become central to all our lives, massive opportunities are tied up in its exploitation as a route to local, national and global markets and it has moved centre stage as a force in our social lives and politics.  It has become too big to ignore. But it begs so many questions:

(i)                 What will we all be doing with the broadband Internet say 10 years from now?

(ii)               How far is it sensible to build speed capabilities (and capacity) way ahead of proven services demanding these capabilities? How will they be paid for and particularly where competitive forces are much weaker or non-existent?

(iii)             What are the next disruptions about to hit the Internet? We can already see the massively rising amount of data coming out of the home, the amount of TV finding its way onto the Internet and the new HDTV formats.

(iv)             Where is the broadband network heading in the very long term ie can we already see the likely infrastructure end game?

The House of Lords Report got it right that we have to think about broadband policy in a quite different way. Where I disagree with their alternative vision of open access unbundling down to “hubs” is that this can only sensibly be applied to the 50% or so of the country where BT is the monopoly provider of the infrastructure and it is quite insufficient on its own to carry the UK to the final end destination – which they themselves define as a separate fibre between every home and the local exchange with symmetric data.

The unique challenge is to put in place a framework for the long term as there will be no “job done” moment for the UK broadband infrastructure improvements for the next 20-30 years.

My alternative vision is in three parts:

1. Just in Time Data Speed Up-grades – Broadband access speeds are rather akin to storage on personal computers…it is a game of technology push. The technology moves way ahead of demonstrable market demand. But eventually market demand catches up. Many people, when buying a new PC, stretch to buy the maximum storage technology offers…that seems more than they will ever need at the time. But it all eventually gets filled and they are back for the next leap in storage 3-5 years later. The only difference with broadband networks is the cost is huge for a country to stretch and buy the maximum data speed that technology offers, say 2 GB’s symmetric. What Governments need to do is to recognise that they face a moving target and need to try to get around 5 years ahead of market demand for data access speeds (to allow for lead time) and then re-set a new target around every 5 years.  So the current Government has got it about right in setting their targets for the best super-fast broadband network in Europe – but must recognise that the job needs to be done again for what happens after 2015.

2. Map policy to the complexity of the current UK infrastructure – the UK broadband infrastructure market is in fact three markets defined by the current choice of “broadband” network infrastructure (2, 1 or none). Government needs to imagine across these three markets are three conveyor belts of continuous change. Each of those conveyor belts have different levels of competitive energy driving them. The first is brimming with competitive energy and where network improvements are most likely to begin. The trick is to optimise the amount of regulation and public subsidy to the second and third markets (the third being rural areas) to drive these network upgrades across the entire country. The objective is to arrive at the end state with a single UK broadband network market that is both internationally competitive and internally inclusive.

3. Create a political consensus through train – To achieve this vision Parliament will need to entrust to Ofcom and the Government of the day with far more discretionary powers than it usual in order for the UK to sustains this engine of broadband network change for the huge length of time network up-grades are going to be needed. We also need a single agency made responsible for broadband network policy and performance that can provide continuity as different governments come and go.

 

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