Then came sound radio. The strategy was flawed from the outset. Whilst the DAB technology had been standardised across Europe the frequency bands to roll it out on had not. The UK had managed to free up some spectrum at VHF (around 200 MHz). It was excellent spectrum to cover the country with the least number of transmitters and had good building penetration. But this spectrum was not available in any other country. The only spectrum available in many other European countries was at 1500 MHz. This would necessitate a lot more transmitting stations to achieve the same national coverage. A small meeting was convened at the DTI. The consumer electronics industry was represented by an UK industry trade association. But by then the UK had no indigenous consumer electronic manufacturers and their representative only took notes to send to far away places. The independent sound broadcasters were represented but were struggling financially. DAB was not a priority and they had no views one way or the other. DCMS were present but did not have the technical expertise to weigh the options. It boiled down to a conversation between a senior DTI official and an engineer from the BBC policy unit. The BBC interest was driven from the programme side who were frustrated by how test cricket kept disrupting their normal schedules.

Could the UK risks going it alone on the lower cost 200 MHz option? Could the UK afford the expense of rolling out sound broadcasting networks at 1500 MHz for what was the poor relation in broadcasting – sound radio? So no excuse for not knowing the issues. The wrong decision was taken.

A strategy was agreed where the BBC would drive out a 200 MHz DAB network and load it with a reasonable choice of sound radio channels. DCMS would bring in legislation to bring the independent broadcasters to the party. The third leg of the strategy was that low cost DAB receivers would arrive sooner rather than later. That was one of the two Achilles heels of the DAB strategy. The UK depended upon Far East imports and seen from Tokyo or Soul there was no visible market at such a great distance to warrant the investments. This might have been soluble had sound radio had some version of pay channels to cross subsidise the receivers to drive up volume and eventually achieve scale economies. But sound radio is free. Another industrial weakness to hit DAB fortunes was the lack of an indigenously owned car industry to draw-in to be part of the DAB story. Instead viewed from Detroit the whole world ran of analogue FM radio – so why complicate the supply chain for a quirky UK only service?…after all there were no plans to switch-off the UK’s FM sound networks.

The second Achilles Heel was sound quality. People expect digital to offer much better quality than analogue. In most cases it does. For DAB it does not. The quality (fidelity) of an analogue FM sound channel matches the quality of DAB in good signal areas. There is also a quality-quantity dilemma with DAB. One can have a bigger choice of sound channel providing a lower data rate is used for each channel. A lower data rate means poorer sound quality. This has led to the quality of a number of DAB channels not being as good as analogue FM. The DAB technology traps the UK into a less than ideal compromise.

So there we have it…more expensive receivers, quality that is certainly no better than analogue FM and a no new killer channels in the programme line-up. That does not look a compelling consumer proposition that is going to drive up DAB to 100% penetration. In fact in some regards the analogue-digital balance has got worse. When mobile phones have a sound radio built-in they are almost inevitably analogue FM. The day when the government can switch-off analogue FM sound broadcasting is not even in sight.

Had DAB been the same roaring success as GSM and Digital Terrestrial TV now would be the time when planners would be thinking what comes next for sound radio. There would be ideas for stunning high fidelity sound radio networks to be rolled out sometime over the next 5-7 years to replace DAB with all its limitations. Instead we have the sound of silence. Nobody in the DCMS or the BBC or Ofcom or anywhere else is spending any time thinking about the future of sound radio.

The reason is simple. DAB has reached an excruciating impasse. It has come too far to write off as a failure. The fact it has come as far as it has is down to the brave efforts of a few. But it has not got enough momentum to ever win. It may be doing a reasonable job today but it is not the future.  The UK’s version of DAB is never going to suddenly break out and sweep around the world to become a global standard. Waiting a few more years is not going to change this reality.  In technology cycle terms it is making its way slowly up a technical cul de sac. In cost terms it has left the BBC having to pay twice over to get its programmes to its sound radio listeners.

At some point in the future the UK’s version of DAB will time expire…all technologies do. What will replace it? Is it another dedicated sound broadcasting network offering stunning sound quality or will public service sound broadcasting somehow be integrated into the UK’s broadband mobile networks? The UK would be much better off for a DAB replacement system to begin sooner (say in 10 years time) than later (say in 30 years time). The industrial realities mean that the UK has to re-align itself with European and global standards particularly in terms of radio spectrum as well as technology. There is much to think about and discuss with our partners in the rest of the EU. Such long term thinking could begin now. Is anybody listening?

This Ofcom announcement begs three quite separate questions. The first is the wisdom of the 700 MHz band becoming available internationally for mobile broadband. The second is the wisdom of making all of this available for mobile broadband in the UK. The third is whether it is “the solution” to avoid a mobile network “capacity crunch”.

The first question is easy to address. International alignment of spectrum is very hard and when it is achieved it adds considerable value to that spectrum. So where there is a strong international trend to align a specific band for a specific purpose the UK must support it. The only question I would raise is whether the allocation should be exclusive to mobile broadband or some flexibility left for other compatible possibilities at national discretion.

The response to the second question builds upon this last point. I have a considerable unease that the broadcasting community has been fast asleep these past 5 years. There has not been a really well informed debate on what sits beyond the current TV and Sound Radio terrestrial broadcast technologies and whether new spectrum will be needed to bring those new possibilities to market. For example what will be the future of sound broadcasting after DAB…a technology that is currently crawling its way up a cul-de-sac. We are accepting too readily that all future broadcasting will happen over the Internet. Maybe this is right, maybe it is wrong. My point is that this debate has not taken place with the rigour that such a far reaching decision merits. This risks the broadcasters waking up in a few years time and up-setting the apple-cart.

The third question is the one I want to centre on. Is this “the solution” to avoid a mobile network capacity crunch? This was the headline of an Ofcom press release on November 16^th 2012. I believe this claim to be 99% misplaced. The 1% recognises that new spectrum must always be useful to the mobile industry but the claim that it will avert a capacity crunch hopelessly over states the case.

There are two pieces of thoughtful work that Ofcom have drawn from in arriving at their sweeping conclusion. The first is an Infrastructure Report update. According to this study the average mobile user used 245MB of data in June 2012 and the average fixed-line user a monthly consumption of 23GB. So today a fixed-line user is consuming 94 time more data than a mobile user. This number is helpful in assessing Ofcom’s projection about future growth in mobile data consumption. Ofcom suggest that in 2030 a mobile user will be consuming 80 times more data than in 2012. In other words they believe a mobile user in 17 years time will be consuming less data than a fixed user is consuming today. This seems quite unambitious.

The word “ambitious” is important as there is an element of self-fulfilment in these projections. If policies are focussed on the country creating a surplus of mobile network capacity (supply moving ahead of demand) prices will fall, consumption will rise and the spare capacity consumed. If the policies structures-in a scarcity of network capacity (supply is not keeping up with demand) then one of two undesirable states will emerge. Either prices will rise to choke off demand or prices do not rise and chronic congestion results. Both are bad. So supply side policies are particularly critical to the UK’s mobile future.

The second piece of work Ofcom are drawing on is some complex modelling from a very credible research company Real Wireless. But the claim Real Wireless make in their study is that the new spectrum will only “defer” the capacity crunch and not solves it. This is more directionally correct as there is something inherently implausible that demand increasing by a factor of 80 can be addressed by a factor of 1.09 increase in the supply of mobile spectrum (only 40 MHz) and particularly spectrum at 700 MHz where the signals spread out too far too easily and leads to poor re-use factors.

There is so much more that Ofcom could be doing on the supply side and spectrum is not the most effective place to be looking. Top of the list is surely how to create the conditions that encourage the mobile operators to switch-on national roaming. It delivers a ten fold increase in capacity available to millions of consumers. Solutions do not come any cheaper.

The next most fruitful place to look are for policies that bring down the cost of new base stations (eg back-haul). It also may be very important to focus on where those new base stations are placed and the spectrum they use. Amongst the clever ideas being examined at the Surrey University 5G Research Centre of  is an “inter-laced” base station network. The term “inter-laced” is my term and not theirs. It is a network of new base stations using different spectrum and different geographic locations that transforms the 4G technology over nearly half the current coverage area from the relatively low capacity QPSK technology to the very high capacity QAM technology. Its impact on network capacity and access speeds would be substantial.

My conclusion is that 700 MHz is likely to be useful but in a rather different way than Ofcom are currently assuming. It is almost certainly not “the answer” to the mobile capacity crunch. What is most unhelpful about such an emphatic claim is that it gets in the way of exploring a more ambitious policy responses. It may well be the case that I am reading more into the Ofcom press release of 16^th November 2012 than their experts intend. It would not be the first time that a PR department have been a bit over zealous in dressing-up the message. But that is all we have and it is influencing informed opinion towards undue complacency.

The story of cellular radio from the beginning has been adding a new base station roughly half way between two existing base stations as traffic has built up (it is called cell splitting). In the early 1990′s a 900 MHz network operator might only need 1600 base stations. Today the number is more in the order of 16,000. Eventually the end destination (at least in dense urban areas) will be a super high density wireless networks comprising millions of very low powered base stations each providing coverage of 100m radius or less. This follows from the laws of physics. It is a story of first getting the reach (coverage) and then the long haul of driving-up the density (capacity).

Where BT is being pioneering is that they have started their high-speed mobile network (currently called FON) at the very end destination and are working back to build-up useful mobile coverage. It has been built on a partnership with their fixed broadband customers to share the capacity of the customer’s WiFi unit between private use and public use. The public use comes as some of this WiFi coverage spills onto the streets (inside to outside). The up-side is that it offers very high speed mobile access at a very low unit cost. The down-side is that WiFi will reach out of a home for only 50-100m. So the coverage story is very weak.

Here is where BT’s success at the 4G auction could be game changing. It jumps the coverage story up by an order of magnitude. Where WiFi coverage peters out at 100m (or less) a typical 2.6 GHz cell will provide 1km of coverage. It will not be long before the marketing wizards will be coining buzz words like Super-Hot-Spots or Mega-Fons. From there it is an open road to gradually covering cities and large towns as gaps between the 2.6 GHz cells get filled-in.

But for most mobile customers that is still not enough coverage. We may spend most of our time within 50 miles of where we live but we all take the occasional holidays and business or family visits to the rest of the country. It would make absolutely no economic sense for BT to try to use 2.6 GHz to create national mobile coverage. Fortunately BT already have that piece of the jigsaw in place by other means – they have an MVNO deal with Vodafone where they buy capacity wholesale from them on their national network and resell it to their own mobile customers. It also gives BT the benefits of Vodafone’s real-time home location register…customers can be found…which WiFi can never adequately do.

That is why BT’s new spectrum from the 4G auction has the potential to be game changing – they now have so many options to attack mobile data capacity, much higher data speeds and lower unit costs. At one end BT’s customers are supporting the inside WiFi coverage spilling out to the public streets absolutely free of charge.

If anyone wants to compete with BT’s approach say by hanging a low power mobile base station on a local lamp post to do much the same street level coverage job…they are likely to find (to most people’s surprise) that many local authorities have outsourced the lamp post provisioning to private company who is likely to demand the usual sky-high site rents. Add the cost of back-haul…and that route is effectively choked off.

At the other end of the story the mobile coverage of up to the final 30% of the population loses money for the national mobile operators. That is not BT’s problem…they only pay for what they use. Somewhere in the middle BT’s mobile customers are leaking their traffic onto the Vodafone network in varying degrees. BT now have the option to keep dropping in 2.6 GHz LTE cells where that leakage is at its greatest to keep driving down their payments to Vodafone.

Setting out the possibilities does not mean this is what BT will actually do…but somebody on the strategy side of BT has done an outstanding job…BT is in a position to drive significant change in the UK mobile market. Their mobile strategy is being under-rated by analysts and that is probably because the impact will be minimal in the short term. It’s a long term play.

BT is not the only under-reported story from the 4G auction. The second was O2 picking up the 800 MHz licence that has the impressive national coverage obligation. They paid around £55m/MHz for it. The price that Everything Everywhere and H3G paid per MHz was not only very similar(why so high as their spectrum had no coverage obligation?) but the sting in the tail for them is that they only managed to come away with 5 MHz spectrum each. But 4G (LTE) in only a 5 MHz wide channel is a performance disaster. It does not deliver anything better than today’s 3G (HSPA).

This leaves O2 in a strong position with an exceedingly well advanced 900 MHz HSPA network…which they will now re-enforce with national 4G (LTE) network on the even more favourable 800 MHz spectrum. This will allow them in the future to take serious cost out of serving the last 30% of the population with a very high-speed mobile network (and do a fair job serving those inside buildings everywhere else). Trying to do the same job at 2.1 GHz (which H3G is trying to do) or at 1800 MHz (which EE’s is doing currently for 4G) is much more costly…and come the inevitable crunch…the most rational option to cut back on.

Nobody is currently positioned to over-take O2 on such a cost effective 4G national story. Vodafone was the only other mobile operator to come away with the minimum 10 MHz wide channel at 800 MHz necessary for 4G. But they have a site sharing agreement with O2 – so whilst they may pace O2 there is no incentive to outpace them. Therefore unless and until Everything Everywhere and H3G pool their two lots of 5 MHz into a single 10 MHz wide channel at 800 MHz…O2 (and Vodafone) finds themselves on route to a competitive advantage in providing high-speed mobile coverage in many rural and semi-rural areas.

What is poetic about this story is that BT used to own O2. It is a nice touch that the two entities now find themselves leading from the two polar positions of tomorrow’s mobile network development paths – the outside-in (cell splitting to build capacity) and inside-out (cell aggregation to build coverage)…and eventually cross-over somewhere along the way.

A final bit of the untold 4G auction story emerges in the prices paid for different spectrum at the UK 4G auction versus the prices paid for the identical spectrum in the Germany 4G auction. My rough calculations (*) are that 2.6 GHz FDD spectrum costs around £12.4m/MHz in the UK but only £3.15 m/MHz in Germany. The 800 MHz digital dividend spectrum went for £102m/MHz in Germany but only £55m/MHz in the UK . So the UK auction appears to have driven the UK price for 800 MHz digital dividend spectrum to well below the German level but driven the 2.6 GHz spectrum considerably higher…a quite unexpected twist.

Since the 2.6 GHz spectrum prices went so high it makes it all the more puzzling why the more desirable digital dividend spectrum at 800 MHz appears less valuable in the UK than Germany…even when the size of population is taken into account.

 The most likely explanation is the way Ofcom divided some of the digital spectrum into 5 MHz packages instead of aligning with the LTE (4G) standard of 10 MHz packages at 800 MHz. BT’s sole interest was 2.6 GHz, so if the other new entrants are dismissed as non-starters  there were effectively less bidders than packages on offer…no wonder the Treasury were disappointed. 

*Note: most published international comparisons will adjust for the difference in population size but that will not affect the point that the auction designs in Germany and the UK appear to have driven prices for 800 MHz and 2.6 GHz in quite different directions.

Piecing together the big picture of economic change

Mobile is an industry in its own right and contributes in the region of 2% of GDP. However the mobile Internet, together with the fixed Internet, have become critical underpinning infrastructures for an economy far bigger than their own. These two pillars support an Internet economy that is estimated to be 5.7% of GDP and growing. Added to this are the efficiency gains they contribute to the rest of the economy. Mobile, in particular, contributes mobility, personalisation and location to a digital economy. So both networks are important. The Government has a good grip on policy for the fixed broadband network. But they have taken their eye off the ball for mobile networks and missing a picture of huge transformational changes: 

1.Internet economics subvert mobile network economics

The world has moved from “mobile phones connected to a telephone network” paid for “by the second” of telephone usage to “computers connected to the Internet” and paid for by a “monthly subscription”. Data caps provide only a weak link to usage.

The absence of a data usage charge is essential to the Internet economy. It provides powerful and plentiful “over the top” Internet players with free distribution to millions of consumers who feel free (from usage charges) to explore and use at whim. A perfect high growth model. These “over the top” players generate huge wealth (GDP) from the Internet services (and jobs), stimulate a rising demand for data in the process but leave the phone companies to find the cost of the extra capacity to meet this demand. The mobile network operators have less scope to sustain this model than the fixed broadband providers but smart-phones are pulling the market towards mobile networks:

2. Highly skewed delivery from the new 4G (and 3G) technologies

The new mobile technologies (3G HSPA and 4G) have improved mobile connections speeds significantly but the capacity to deliver these high speeds drops very steeply away with distance from a radio mast. Left unaddressed large dark valleys of chronic under-speed will envelope the country. Redressing this requires “denser” mobile networks (ie more base stations). Nobody is yet planning for this new layer of investment. (Note: “National roaming” would jump start more dense wide area networks but this does not fit with the current network competition model).

3. The impact WiFi on mobile network economics

The introduction over the past 3-4 years of WiFi on almost all new smart-phones is opening up consumer choice to totally by-pass national mobile networks whenever they are near a WiFi point. Other players such as BT and Virgin are pursuing WiFi strategies whereby “club members” can access not just their own home WiFi but a substantial number of other WiFi access points. Thus the country is essentially on two parallel mobile network tracks. In the short term the two are complementary. In the longer term they are competitive.

In this competitive mode one technology is getting free spectrum from Ofcom and free back-haul from BT (and Virgin). For the other technology billions of pounds is being charged for spectrum and BT (and others) are charging commercial rates for the back-haul. So mobile operators will inevitably lose their grip in very dense urban areas where they compete. In parallel Skype and IT messaging will be haemorrhaging their telephone and SMS revenues.

4. Convergence of Fixed and Mobile Internet’s

Hitherto fixed broadband and mobile broadband have been treated as separate stand-alone networks. As mobile networks get ever denser the fixed broadband Internet will essentially gate not just the technical performance of mobile networks but their costs. Denser mobile networks will drive up these costs significantly. Over some of the country these mobile back haul links are provided by a monopoly provider (BT).

5. Spectrum Auctions and spectrum pricing

If Ofcom is asked whether the purpose of a spectrum auction is to raise money for the Government they reply emphatically that it is not. Few understand why an auction is held “not to raise any money”. The explanation is that Ofcom follows an economic theory (of the telephone age) that a company who pays the most for spectrum must have a business plan to generate the biggest profit. The theory equates this to the country generating the most wealth from the resulting network. So the purpose of the auction is to filter out the company “believing” it has the best business plan and the money raised is an unintended consequence. But it is not the only unintended consequence. The 3G auction showed that intense competition blocked off the ability to recover auction payments from customers, so instead the mobile operators slashed their capital budgets for building the networks. Put in simple terms: a pound extracted by Ofcom at a spectrum auction will be a pound not spent on the 4G network. Ofcom plan to extract more money through much higher fees for existing spectrum.

6. An investment crunch sits around the next corner

Ofcom have spent the past decade focussing on competition to drive down phone bills and they have been very successful in this. But the same measures have also driven down the “return on capital”. It has nearly halved in the past 10 years. The large multi-national companies that own the UK mobile networks are now having to ration their capital between the various countries in which they operate – all hungry for investment. In global markets capital flows to where it gets the best return. The UK is no longer offering the best return. So we have an inevitable investment crunch around the next corner. On the one hand there is a substantial demands for additional layers of investment to fill out the large dark valleys of chronic under-speed (the feature of the new technologies) and sustain ever expanding capacity over the entire network(driven by a successful digital economy). On the other hand revenues are coming under growing pressures over and above those of normal market competition.These new dynamics sit within a UK mobile market offering less and less attractive returns for inward investment. 

When the numbers no longer add-up the mobile network operators will take the best decisions in their own interest. These are most unlikely to align with a mobile Internet infrastructure outcome that maximises the wealth and job creating potential of an expanding UK digital economy. The government’s mobile policy (created in a telephone age) is simply not up to meeting this new challenge.  

The core of the patent issue in the mobile industry is that a mobile phone is only of any benefit to anyone if it can communicate to every other phone in any part of the world and from anywhere a consumer wants to travel. It is what creates the mass mobile market. This demands a high degree of cooperation. Enter the miracle world of mobile standards making. “Miracle” is not too strong a word to use. Intense rivals in three quite different sectors of the industry have to agree on every last detail needed for a mobile to communicate with the network. The big network system suppliers (like Ericsson, Alcatel etc) have to cooperate over network standards. The mobile network operators (like Vodafone, France Telecom etc) have to cooperate over network implementation versions. The mobile handset suppliers (Apple, Samsung, Nokia etc) have to cooperate over essential mobile standard interfaces. Even more remarkable is that global mobile standards have held together now for over three generations of mobile technology (first GSM, then 3G and now LTE or 4G).

The heart of this success has been the European Telecommunications Standards Institute (ETSI) and its extension to the more global 3GPP. The origins of all the wars over patents trace back to the failure of ETSI to solve the issue of patents (and other intellectual property) in their standards in the late 1980′s.

ETSI were caught out in a fast changing world. Prior to ETSI most patents in telecommunications were held by the huge laboratories of the big telephone companies like Bell Labs in the US and CNET in France. The telephone companies freely gave their patents to their supply companies to make the kit needed to modernise their networks. There were less patents around in those days, so everyone generally knew when a new standard was based upon somebody patented technology. There was time for deals to be struck between the standards body and the patent owner of the chosen technology. The deal could be a royalty free licences (since if a big company had their technology chosen for a standard it gave them an early lead). Or more generally a licence would be given on fair and reasonable terms. In those days “fair and reasonable” usually meant around 2% of the selling price.

The world changed very suddenly in the 1980′s. First global patent protection was tightened up in world trade agreements. This was a US led industrial strategy to protect their industries from competition from low wage countries in the new global market. Second, new players entered the telecommunications market with quite aggressive business practices. The computer industry was an example of this with their “winner take all culture” based on technology supremacy. Motorola in particular shocked other members in ETSI with the aggression of their patent policies. European based companies got their fingers badly burnt in believing for too long that everybody would behave in a “fair and reasonable” way.

Another huge change was the astronomical rise in the number of patents being filed in the new digital technologies. With each filing came an 18 month period of secrecy where a patent could be filed and nobody could find this out. ETSI and other standards bodies were flying blind and at ever faster speeds. Enter “the patent trolls”. These were private speculators quietly buying up patents from Universities etc with the intent to ambush unwary manufacturers down the track.

All these changes left ETSI floundering around trying to find a solution. Around 1990 they almost did it through an agreement that 80% of ETSI members supported that would have produced the biggest patent cross-licensing agreement in the world. But if was wrecked under pressure from the US government on the one hand (protecting the interest of their Computer industry and Motorola) and an extraordinary obdurate bit of wishful thinking by Italy that everything should be entirely free of charge.

The ETSI Plan B was to fall back to a deliberately ill defined commitment that ETSI members who held patents in ETSI standard would licence them on Fair and Reasonable and Non-Discriminatory (FRAND) terms. What was “fair and reasonable” was left to commercial negotiation. The biggest flaw in the whole process is that by the time anyone found out that a patent owner’s idea of “fair and reasonable” was quite unreasonable – it was all too late to change the standard. Once networks had been rolled out and millions of new mobile were in the market – all that was left was a whole series of legal confrontations and Court battles. Another great shock was the sheer number of patents that got caught up in a mobile standard. One company might ask for a modest royalty of say 3% of sales but by the time another 7 holders of essential patents had all asked for exactly the same “reasonable” royalty the total has accumulated to a quite unreasonable 25% or so.

Apple has further changed the nature of the game by patenting shapes of mobiles and just about every feature of its compelling display interface. Had ETSI not had any rules in place then a company with patents in the essential radio technology in the standard could have bargained with Apple for access to aspects of its unique display interface. But the ETSI rules limit the extent to which this is possible – so the ETSI “FRAND” rules distort the normal industry practice of cross-licensing deals.

Then there is the transition from hardware to software dominance in the mobile industry. This is home turf for the computer industry. “Fair and reasonable” is a licencing term about as popular in the computer industry as Latin is in the local pub.

There is little likelihood of government policy makers going anywhere near something of this heat and complexity. The solution can only come from the industry itself. It requires the top handful of patent owners to decide that the Courts are not going to deliver any knock-out blows. Out of such an impasse ETSI, 3GPP or the ITU could have their chance to bring some order to patents in the mobile industry. These organisations need to be ready for it. My speculation is that a fresh approach might end the FRAND model and centre more on a “patent pool” that properly rewards those making the most investment in innovation. It would have to bind the parties not to seek Court orders to block competitor products but seek other means of reconciling differences of view. A carrot Governments could offer to help parties comes to a new deal is some statutory means of dealing with Troll patents caught up in formally recognised standards. The prize of a fresh agreement would be all that money going to the legal profession could be ploughed back into developing even better mobiles.

In October I attended a meeting of  experts (hosted by the IET) to address a number of questions the Home Office had put together on the technology issues. For the most part the questions centred on the middle option – a new LTE network on Home Office spectrum tailored to the needs of the emergency services. To an outsider, like myself, this seemed to signal a preferred direction of travel.

I was certain that the second option of another specialist network on Home Office spectrum for the emergency services would be a strategic mistake. I also believed that the status quo would be an even more epic mistake in cutting the emergency services off from being able to fully exploit the future smartphone revolution on a high performing mobile data network. But I could not find a question on the Home Office list to make the case for the third option. So I decided to invent one, answer it and delivered it in a short written contribution to the meeting. This can be summarised in the three short paragraphs below:

“If we share the assumption that trying to keep broadband mobile data performance up with the rising performance of the fixed broadband networks is the likely future trend over the next 20 years – then we know that new mobile technology alone will not meet this challenge. LTE (or what might follow) will never be in the same performance league as a single mode optical fibre cable that is driving the ever higher user data speeds on the fixed broadband network. Spectrum is scarce so trying to get hold of ever more spectrum offers no escape route.

This leaves only one degree of freedom to win the long term mobile data speed/capacity challenge – continuously shortening transmission ranges…that is adding a lot more base stations. But the number of base stations fundamentally drives the Capex and Opex of a mobile network – so this future challenge is perhaps more economic than technical. Put another way the above trends could drive a growing economic and/or technical disparity between the public cellular networks and a financially constrained specialist mobile network. My fear is that the specialist network route could prove economically unsustainable and/or significantly fall behind in data performance in the long term.”

My alternative strategy is for the emergency services to buy data services on two public cellular networks, with one contract going to either EE or H3G and the second contract going to either Vodafone or O2 (enabling access to an order of magnitude more masts in totality) and use standard smartphones with dual SIM’s or National Roaming to always route data to the nearest base station (which drives up data speeds in the worst 50% of the coverage area). My scenario embraces exploiting Wifi /Femto Cells where available (just as everybody else will have to do).

This scenario would offer the emergency services the following advantages for their wide-area broadband mobile mobility needs:

• Mobile data speeds up to 10 time faster over the worst 50% of the coverage area  (simply based on the fall-off curve of LTE or HSPA over the cell area and exploiting the diversity of Cornerstone and EE base station sites)

• ·Twice the resilience (all the way down to and including the HLR with dual SIM)
• ·At least 50% cheaper for the same QoS with on-going competitive pressure to sustain low prices in the long term (no lock-in)
• ·Considerably better mobile data outdoor and indoor coverage (multi-band and multi operator site diversity)
• ·Much faster to bring into service
• ·Economically sustainable in the long term
• ·Aligns better with faster standard global mobile handset innovation (by not using odd ball spectrum)

There would also be benefits for the public cellular networks in making public rural broadband mobile provision more economic. There are some rural areas where Tetra has better coverage than the current public cellular networks. It seems wrong that public money has been spent on rural coverage of a network that spends most of its time empty (in such areas) and where the public has no access to any mobile network.

My expectation was of a battle royal.

The big surprise to me, the Chairman (Prof Will Stewart, who did an excellent job) and I suspect most of the meeting participants there was a large degree of consensus, if not on every detail, but certainly on the broad end vision. The real complexity was how to get there and on what time-scale. The issue boiled down to how quickly the adaptations to a public LTE network could be implemented to meet the operational needs of the emergency services and whether this would be in advance of…or after the current contract renewal date for the existing Tetra network.

As is so often the case the destination is easier to define than the best route to get there. But the prize in enormous. Whilst the Cabinet Office may see the public cellular networks route as a cost saving opportunity I see it as a huge opportunity for operational efficiency gains. The smartphone revolution is all about mobile computers and the opportunities abound to exploit mobile Apps to improve the efficiency of all those whose jobs are highly mobile – and no jobs are more highly mobile than those of the emergency services. If there is money to be saved on the basic communications infrastructure of the emergency services it is important for some of those savings to be ploughed back into the Home Office commissioning innovative smartphone software apps for the emergency services – the impact could be really transformative!

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.

Up until around 2000 there was a strong link between spectrum and innovation held together by the engagement of Government in both innovation, spectrum and competition policy. Over several decades spectrum was sometimes identified ahead of the game and then reserved for several years. This proved to be a very powerful driver of new innovation (eg GSM). Other times a more “just in time” approach has been used. This was the case for Digital Terrestrial TV (Freeview).

When Ofcom took over spectrum and competition policy they came out with new vision of how spectrum would be found for innovation. It was called “spectrum trading”. It would began with Ofcom releasing all the spectrum they could (nothing held in reserve). Companies with innovative ideas would no longer have to wait for Ofcom to find spectrum. Instead they could buy it in the market from those who had spare spectrum. The theory was that companies with spare spectrum will be only too happy to turn unused spectrum assets back into cash.

What has become clear from the delays and judicial review over the past 3 years is that the mobile network operators have showed absolutely no intention of letting any of their spectrum go…voluntarily. The reason is clear. Network competition is squeezing them very hard and they fear that any “spare” spectrum will eventually find its way to deliver further competitive damage.

Here is the irony: Ofcom’s current competition policy is to sustain this intensity of network competition. But under these condition mobile network operators will not let go of any of their spectrum. This leaves spectrum trading, as a means of delivering internationally harmonised spectrum for future mobile innovation, dead in the water…killed off by the success of Ofcom’s network competition policy.

What is the result of all this? At the big ticket level, the spectrum for 4G (LTE), far from coming on stream “just in time” or even ahead of the game, it is coming far too late. At the other end of the scale we see that the 2.5 GHz initiative to help small start up companies is simply not matched to the Ofcom evidence driven policy framework. “Evidence” and “speculative risk” pull in opposite directions.

Had there been government engagement in support of innovation Ofcom may have been able to lay-off the risk for the low power 2.4 GHz channel initiative…perhaps even holding this one channel in reserve to stimulate innovation. But the Government has lost touch with this area ever since responsibility for spectrum moved from BIS to DCMS but responsibility for innovation remained with BIS. As so often when everyone is responsible for something – it finishes up with nobody being responsible.

My experience in these sorts of situations is that it never pays to try to change anything going on in the near term. There is too much luggage…too many vested interests. One has to look sufficiently far ahead where everyone can look at things afresh. Fortunately innovation lead times take us into this creative space. The key to the UK getting itself back into a leading position for radio innovation is just how quickly an engagement can be forged between Government, Ofcom and the Industry to focus on this white sheet of paper and start to fill it with a new beginning of spectrum driven innovation policy.

We find a similar situation with competition. It is an act of faith that more competition has always to a good thing. It is forced into every nook and cranny – however in appropriate or ineffective. There appears no light bulbs anywhere in Whitehall or Westminster that ever comes on and questions whether direct regulation by the government or its agent might actually do a better job. Instead we are bamboozled with how wonderful all our competition is and any ill effects are down to the laziness of the consumer not switching suppliers. The classic example of this is the UK electricity market.

At the heart of the UK electricity market is gas. More UK electricty is produced from gas than any other means. The international price of gas is linked (for mysterious reasons) to the price of oil. This gets the “competitive” UK electricity market off to a very bad start…a vital raw material prices set by an untouchable international cartel. The raw material price colluders sit quite out of reach of Ofgem, the EU Commission competition authorities or anybody else.

From a cartel setting a floor on the raw material prices we move onto the international trading of gas. This is driven by totally unpredictable events…like revolutions in the Middle East and a cold snap across the US. This leaves the average electricity production price from gas as a matter of pure chance of when gas contracts happened to have got placed…which are quite unpredictable.

It is true that from time to time that one supplier may buy a quantity of gas at a cheaper price than another. This has nothing to do with competition but when they happened to strike the deal. So the switching of suppliers by large numbers of consumers to the supplier with the cheaper gas works only until they run out of the gas bought at that price. Everyone has then to turn to the supplier sitting there with the higher cost gas contract. It is a zero sum game.

We then come to the generating stations. Not much scope for competitive differentiation here. The technology of gas fired generations becomes set on stone at the point the plants were built.

Things get a whole lot worse with the national and local electricity distribution of the electricity. The National Grid is a monopoly. The local distribution wires are another monopoly.

It is not too much of an exaggeration to suggest that the much vaunted UK competitive electricity market structure boils down to little more than competition between retail billing systems and calling centres…both peripheral activities.

With so little control over the cost of production and distribution – no wonder the suppliers have applied their creativity to dress up their offerings into a byzantine array of tariffs so complex that another small unproductive industry has grown up on the Internet to make any sense of price comparisons.

To add insult to injury the consumer gets periodic hectoring from Ministers and Ofgem that rising electricity prices are somehow their fault for not being more willing to switch suppliers.

An real Alice in Wonderland world of make-believe competition.

It is not the purpose of this article to take cheap a pop shot at the electricity market (nothing I have said will be new to most people) but to show just how competition has so embedded itself more as a new age faith than a useful tool in the right circumstances. The question of whether price regulation (that takes into account what new investment is required) might not deliver a better outcome is not the sort of question that true believers in the faith would ever think to ask.

Many years ago there was a very passionate campaign by some beer drinkers who adopted the slogan “Bring back real Ale”. My slogan is “Bring back real thought” on whether competition is the best sole solution – for example with a number of our national infrastructures.

Just how does a company extricate itself from such a situation?

A good place to look for an answer is a past example of a company that has managed a successful turn-around in comparable circumstances. By a twist of fate…one of the best examples is Apple itself. In the very early days of the PC Apple found itself in a not too dissimilar position. Just look where Apple is today…fabulously wealthy.  Surely there is some pointers in one of the industry’s great “come-back” success stories that could guide Nokia’s strategy today?  So…if Steve Job were alive today and running Nokia…what would he be doing?

The first steer from the Apple story is that this it is going to be a long haul to turn things around at Nokia. A winning strategy has to begin with setting realistic expectations. Telling shareholders that a turn-around will take 4 years and managing to do it in 3 is far better than offering to turn things around in 18 months and it turns out to take at least 3 years…shareholders rarely forgive a string of broken promises.

There are probably three elements of the Steve Job story that have a direct read-across to the Nokia situation:

(i)                 Maintaining a strong brand – In the early days of the PC market Apple was struggling to survive with its minority operating system on its own hardware. Apple was kept alive by a sizable hardcore of fanatically loyal customers. Steve Job had understood that this sort of brand loyalty is based on strong values…including great product styling.  There is a hardcore of Nokia fans (I am one of them)…what are the values Nokia needs to keep building into its products to hold onto their stubborn loyalty?

(ii)               Securing some strong niches (defensive strongholds) – When Apple was being trounced by Windows in the business world there was one industrial sector…publishing…where Steve Job ensured Apple retained a strong profitable grip. It provided a redoubt to first of all survive and then attack from. Is there one or more strong niche areas for Nokia to seize as its own? Nokia’s own thinking in this direction is demonstrated in their new 41MP camera phone…the Nokia 808.  The choice of Windows for its smart phones may allow Nokia to thrive particularly well in the business market at the expense of Blackberry. It may still be early to talk of strong niches whilst Nokia still has ambitions to battle across the entire consumer front…but they are not necessarily incompatible.

(iii)             Passion for the detail –  Executive influence is enormously powerful in a corporate world. What the man at the top demonstrates as his Number 1 priority becomes the number 1 priority for all those of ambition down the chain. For Steve Job it was a passion for the product down to the smallest detail. Nokia shareholders may like to hear the man at the top talking about cost cutting and profits…what is most likely to get Nokia back to health is the man at the top being obsessive over products coming out of the door…not just the flagship products but every product carrying the Nokia name. We know Nokia has the passion…but have they the obsession over every detail..?

A point that deserves a special mention is the sheer ease of use of the Apple iPhone.  Those with long memories will recall that this one of the unique selling points of Nokia in early days of the mobile phone?  Customers loved the intuitive interface of the early Nokia phones. They stole market share from Motorola because of it. So the formidable Steve Job has not just stolen Nokia’s market share but done so with what was once Nokia’s own unique selling point. Perhaps this is where Nokia fight back has to start…a re-discovery of their roots that first put them on their path of mobile phone success. One of the great paradoxes of filling a company full of super intelligent design engineers and marketing folk (as Nokia does) is that they often lack the capacity or empathy to see how simple folk (most of us) struggle to cope with even the simplest software based products.

And on the subject of discovery it was encouraging to hear Steve Elop, at their annual shareholder’s meeting, make reference to the hidden gems in Nokia’s own R&D labs…perhaps the glimmer on the horizon where Nokia can move from catch up to leap frog.

It is not easy to think clearly on a burning deck. All that noise. In the same circumstances I suspect that Steve Job would hold his hands over his ears to blot out the cacophony of concerns over short term performance and set his sights firmly on the horizon…and the limitless potential for a brand as well regarded as Nokia.