Author - bsg

07 Aug 2009

The COTS Project launch

We recently launched the COTS Project, short-hand for Commercial, Operational and Technical Standards for Independent Local Open Access Networks.

The objective of the project is:

“to work with representatives of independent local and community–led broadband projects, national network operators and major ISPs to develop a low cost standardised approach to enable a wide range of service providers to offer retail services over local or community-led open networks to end users.

As a result of this initiative consumers and small businesses should be able to access a wide choice of service providers, regardless of how the underlying infrastructure is either provisioned or owned. It should be in the interests of all local or community-led projects to be compliant with this approach, as more service providers should mean higher take-up and greater revenue.”

Essentially, we have described this as making open access a reality for consumers, who often face a limited choice of service provider on independent networks. For more on the detail of the work, why we are undertaking it, and how we plan to do it, there is a briefing paper available at the bottom of this post.

The project was launched at a kick-off meeting last Wednesday 29 July (getting the work off the ground in part explains our absence on this blog for the last couple of months). The kick-off meeting demonstrated the high degree of interest in this issue: a full house of over 50 industry representatives participated in a lively exchange, with more unfortunately not able to attend owing to the capacity of the venue.

The meeting highlighted three points for us. First, there is a clear agreement across the full scope of industry players that this issue needs to be addressed. No-one present felt that this wasn’t something we should be looking at; feedback before, during and after has re-iterated that this is a challenge affecting all stakeholders in this field, and that an independent body is required to address it.

Second is that, while there is consensus about the problem, there is more uncertainty about what the potential solution could be. Industry consensus will be difficult to achieve: some are already developing solutions; others have yet to consider what type of solution would work for them. There are many potential requirements, so compromise will be essential.

Despite this, however, the meeting also demonstrated a real willingness to engage and participate in the work, again from stakeholders across the industry. Building on this we intend to establish a steering group to drive the project forward that will be drawn from industry volunteers.

Since the meeting we have had a range of feedback, and we’d like to address two particular issues that have been raised. First, a number have asked about the level of engagement from national ISPs. Although they were generally in listening mode on the day, most of the major communications providers were represented at the meeting and have indicated a strong willingness to engage in the process.

The second issue is that of how we communicate and consult with the wider industry. We are keen to ensure that this is an open and transparent process – we hope that the project will achieve an industry consensus, which can’t happen without the whole industry. We are aware that we did not do as well as we could have with the kick-off event: a lack of live streaming and capacity issues meant that many who wished to take part in the meeting were unable to do so.

We will also improve our efforts to make the project more accessible. We are committed to running a second meeting for those who couldn’t participate in the first meeting (details to be announced shortly), and will make all documentation available online. We will also ensure that we build in to the process regular consultations and a feedback loop with the wider industry, to ensure that the process considers the views of all stakeholders.

Additionally, as part of our next steps we are also continuing to meet with companies and organisations, to gather feedback and thoughts on the work and how to take it forward. We are still gathering views, and are keen to hear from those whom we haven’t yet engaged. If any organisation would like the opportunity to discuss the COTS Project with us, we would encourage you to get in touch.

Over the summer we will also be pulling together a steering group, drawn from across the industry, to take this work forward, as well as appointing an independent chair. Membership of the steering group is open to anyone; again, any organisation that wishes to have representation on the group should get in touch with us.

We will continue to provide regular updates on this project as it develops.

COTS Project Briefing Paper: Principles and Process

Peter Shearman, Policy Manager, BSG

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30 Jul 2009

The COTS Project

What is it about?

Around the world there are now numerous examples of successful local and community-led broadband infrastructure projects. Looking forward, it is likely that similar projects could play a key role in delivering next generation broadband to parts of the UK.

However, there is a need to ensure that this does not lead to the emergence of a disjointed patchwork of networks that resulted in consumers and businesses being offered a sub-optimal range of services at the retail level.

In order to mitigate this risk a degree of standardisation and harmonisation is required at both the technical and process levels. This would aim to reduce costs for scale retail service providers, for whom cost minimisation is a central concern. However, any standardisation and harmonisation should not inhibit the scope for grass roots innovation at the local level.

Government, regulator, industry and other stakeholders have all indicated that this is an issue that needs to be addressed, and similar activities are currently being undertaken in other markets. The BSG is therefore undertaking the COTS Project (Commercial, Operational and Technical Standards), an industry-led project to examine what needs to be done in order to ensure consumers have access to a full range of service providers, regardless of the underlying network ownership or technology.

In addressing this issue there is an opportunity to create a win-win-win situation where network operators are able to provide a choice of services to consumers and maximise wholesale revenue potential; retail service providers benefit from a larger addressable market; and consumers and small businesses benefit from a wider range of services.

Kick-off meeting

The COTS Project was launched at a kick-off meeting on 29 July. The agenda and presentations for this meeting can be found below, along with the meeting notes.

COTS Project Objectives, Principles and Process paper

COTS kick-off meeting notes

Presentation: Antony Walker, CEO, BSG

Presentation: Chinyelu Onwurah, Head of Telecoms Technology, Ofcom

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18 Jun 2009

Digital Confusion

The Digital Britain Report was finally released on Tuesday, and despite the build up, reactions to it have been mixed and, particularly where the broadband measures are concerned, somewhat confused. (Although given that few journalists would have had time to read the 240 page report before filing their copy, this level of confusion is perhaps excusable.)

The national media have been critical of a ‘broadband tax’ and questioned the logic of whether broadband for all is an appropriate policy goal; the public are confused about what exactly the proposals are; and even rural fibre advocates appear displeased.

Here we will attempt to unravel the ideas set out by Lord Carter. The report sets out two strands to government’s approach to broadband infrastructure.

First, the universal service commitment will ensure that every household has access to a 2Mbps service by 2012. This will be paid for using funds left over from the Digital Switchover Help Scheme, a contribution from the government’s Strategic Investment Fund, and contributions from the private sector and other public organisations.

This will be delivered by a range of solutions: in some cases a simple improvement in home wiring will be sufficient; others may require wireless technologies such as satellite; and others may require new fibre infrastructure.

Second, the Final Third Project aims to ensure next generation broadband coverage to at least 90% of households by 2017. It is called the Final Third Project as cost modelling suggests that the market should deliver next generation broadband to two-thirds of UK households, mainly in the most densely populated areas of the UK. The project would support rollout to the final third of homes unserved by the market.

How superfast broadband will be delivered in the UK

It seeks to do this by providing a subsidy in those areas where the high costs of deployment make commercial investment difficult. The subsidy should bring the cost of deployment down to the cost in urban areas, at which point the investment should be commercially viable. This will be paid for by a 50p a month levy on all fixed lines (including DSL and cable) that will go into a Next Generation Fund, which would raise around £150m per year.

How the Final Third Project could work

These two policies (the universal service commitment and the Final Third Project) will work together to ensure that the most appropriate solutions are developed in each case. For example, in the report the government sets out that the universal service commitment may have to use a fibre to the cabinet solution as the most cost-effective and efficient solution for around 420,000 homes – delivering on both the universal service and Final Third goals.

The benefits of ensuring everyone has access to superfast broadband will be substantial: supporting rural businesses, particularly SMEs; strengthening communities; and enabling genuine transformation of public services in areas where it could make the most impact. A failure to act risks leaving behind remote, rural and even some suburban communities as the UK moves into a 21st century global digital economy.

It is important to emphasise that this is not simply about providing next generation broadband in deep rural areas, however. As the map below demonstrates, the benefits would be felt across the UK (the areas in green will likely see investment by the market; those areas in yellow and red are likely to require support from the proposed Next Generation Fund).

Map of South West UK showing the areas requiring next generation fund support

This is a challenge that governments around the world are attempting to address, and a variety of solutions have been proposed, usually involving large scale government funding. We feel that this approach is a forward-looking solution in that it is targeted, proportionate, and smart.

It is targeted as the subsidies are aimed at those areas that require them because they are currently unattractive to investors. Blanket subsidies end up subsidising deployments that the market would have made anyway, wasting valuable public resource.

At the same time, the subsidy itself is proportionate, in that it is at the right level to be able to tip the balance in favour of investment in many areas, without crowding out private investment.

Finally, payment through a levy is smart in that it places no further burden on the UK’s already-strained public finances, and the level of the levy, at the price of a cinema ticket a year, is comparatively cheap compared to the level of taxpayer funding found in other markets.

As with all of these ideas, however, the devil will be in the detail. There will be a need to ensure that the proposal doesn’t favour any one operator; that it leads to open access networks; that it is technology neutral; that it is properly targeted at areas that genuinely need subsidy; that it has no negative impact on broadband take-up; and that an appropriate role and remit is set out for the design group charged with structuring the and delivering both the Final Third Project and the universal service commitment. Government will consult on these and other issues in the autumn.

It is perhaps worth considering that ultimately consumers will pay for this investment one way or the other, whether through higher prices for current broadband, through general taxation, or through the proposed levy, which is perhaps more transparent than funding from general taxation.

Many governments have committed to expansive public projects, using significant levels of public funding.
– The Australian government is committed to a A$43bn (£21bn) fibre to the home project to 90% of the population, with 12Mbps to the remaining 10%.
– New Zealand are spending NZ$1.5bn (£0.6bn) of public money on fibre to the home to 75% of the population.
– Singapore have committed public funds of $0.75bn (£0.46bn) to their fibre to the home project.
– In the EU, Finland and Greece have both recently proposed spending significant levels of public money on superfast broadband.

On a per home basis, the UK’s commitment is one of the cheapest of those made across the world, demonstrated below (note: the US intervention is mainly to expand coverage of current generation broadband).

Cost of interventions per household in other markets

During the height of the economic stimulus discussions late last year superfast broadband networks were touted by many commentators as one of the best infrastructure investments to make – the Keynesian solution for the 21st century.

Now that government has accepted its importance and made a commitment to ensuring coverage of superfast broadband for at least 90% of households, ire has turned towards how it is to be funded.

However, it is not possible to have our cake and it eat it. Funding and investment will ultimately come from us as consumers in one way or another if we are to deliver this critical enabling infrastructure for the entire UK.

Digital Britain Report

Peter Shearman, Policy Manager, BSG

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16 Jun 2009

BSG comments on Next Generation Fund in Digital Britain

Forward looking, innovative and proportionate proposal that will benefit all

The Broadband Stakeholder Group, the UK’s leading advisory group on broadband, believes Lord Carter’s proposed Next Generation Fund provides an innovative solution to a problem that governments around the world are struggling to address – how to extend the reach of next generation broadband networks beyond just towns and cities.

“The challenge is to find the intervention sweet spot, not so much as to be heavy handed and not so little as to be ineffective. This intervention could be just enough to incentivise investors in areas that would otherwise be considered commercially unviable,??? comments Antony Walker, Chief Executive of the Broadband Stakeholder Group.

These proposals set out a smart and proportionate approach to ensuring that families, businesses and communities across the UK have access to the broadband they need now and will need in the future.

They are smart because they recognise the wider national financial constraints and take the pressure off public finances.

They are proportionate because they only address areas where commercial interest is unlikely. As a result the scale of the intervention is smaller than in other markets we have seen around the world.

“The cost to consumers is relatively small: less than the price of one cinema ticket per year. But the scheme would generate sufficient funds to tip the balance of investment in many areas that would otherwise face an indefinite wait for next generation broadband,??? says Walker. “This is the kind of forward looking, innovative and proportionate response that the BSG has been calling for over the last two years.???

How would it work?

“Our initial assessment is that the 50p levy could generate around £150 million per year, or around £1billion over seven years. We believe this funding could ensure that many of the 8 or 9 million homes that are otherwise unlikely to be served in the medium to long term get next generation broadband.

“When you look at a map of Britain you can see that these households are not just in remote areas, in fact they are all over the country – we are talking about the edges of towns as well as villages and the countryside – and make up a third of all UK homes,??? continues Walker.

The Fund is not intended to cover the full cost of deployment in rural areas, but to provide sufficient additional funding to make areas that would otherwise be uneconomic more attractive to investment. Both existing players and new entrants would be able to bid for the funding to support investment in these locations.

The benefit of putting the fund in place now, is that companies, local authorities and even local communities can start planning and developing new solutions that should mean that next generation broadband deployment is extended in the most effective and efficient way possible.

Return on investment

Walker adds, “Our analysis shows that the Next Generation Fund would be worth around £1 billion by the end of the scheme in seven years time. There are several ways of measuring society’s return on investment for this money including improved healthcare, better access to education, greater employment, innovation within SMEs.

“We believe that even if you looked at just one of these areas alone you would see a return that will justify £1billion of investment in the medium to long term. However, these returns won’t happen automatically and the next challenge for government and industry is construct and implement the Next Generation Fund effectively. It will be important to ensure that it is both pro-competitive and supports technology neutrality, in line with the market.???

BSG response to Next Generation Fund in Digital Britain – full press release

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12 Jun 2009

Attitudes divide

Last week the Communications Consumer Panel published research that found that public support for broadband is strong, with over 80% of respondents believing that it should be everyone’s right to have access to broadband, regardless of where they live. 42% of those questioned who do not have broadband believe access is essential.

This would appear to be an impressive level of support, and reflects UK citizens’ position as the most active broadband population in Europe. However, this week Ofcom offered a slightly different version of events.

According to their research, 30% of adults do not have Internet access at home; 43% of those felt they had no need for it, or felt that Internet access held no interest for them.

Of course, these results are not incompatible, and allowing for questioning bias and other factors support what previous studies have found – digital exclusion is found in those without means and those who feel they have no need (the self-excluded).

There was a renewed emphasis in the Digital Britain Interim Report (iDBR) on increasing take-up of broadband, as part of the government’s commitment to a broadband universal service. So, as the publication of Digital Britain draws ever nearer, what do these studies tell us?

The Ofcom study in particular shows the challenge that lies ahead. When given options for policies that would encourage take-up, such as cheap computers and discounted Internet connections, a third of those with no access said none of the ideas appealed. Broadband simply held no interest for them.

Amongst the remainder, no particular idea stood out, reflecting the broad range of reasons why some don’t have broadband (financial concerns, lack of skills, lack of available infrastructure, no need and so on).

Providing the infrastructure through delivering the broadband universal service commitment is only part of the equation for government. They must also, with the help of other stakeholders, drive usage and take-up of the infrastructure. We wait to see what the final Digital Britain Report has to offer to this debate.

Peter Shearman, Policy Manager, BSG

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15 May 2009

Superfast broadband – is there a willingness to pay?

My recent posts have involved tying current events back to the findings of our report ‘A Framework for Evaluating the Value of Next Generation Broadband’. One of the challenges we highlighted then was creating the need for business models to evolve to support investment in next generation broadband.

Considerable uncertainty existed then as to consumers’ willingness to pay for next generation broadband, which in effect is a premium service. There was some initial evidence, particularly from the US, that we cited, but ultimately there was little certainty for investors to go on.

It is willingness to pay, however, which is crucial for the business models of investors. Increasing demand for bandwidth and bandwidth-hungry services could not form part of a business model for investment unless consumers are also willing to pay for that increase in bandwidth.

So, almost a year on, how has this picture developed? Here I will look at three areas for evidence: consumer spending, particularly on telecoms, in the UK; consumer appetites for premium services; and fibre demand emerging from other markets.

The most obvious place to start is the economy’s impact on consumer spending. The collapse of Lehman Brothers, the bailout of AIG and others, and the onset of a global recession has hit consumer confidence hard. Retailers have struggled as consumers have kept their money in their pockets.

For the broadband industry, this has perhaps been reflected in a slowdown in the growth of fixed-line broadband subscriptions. Quarterly net subscriber additions across the industry have broken the cycle of the last few years and are falling quarter on quarter.

However, this could equally be due to the market reaching a natural saturation point, heightened by the growth in popularity of mobile broadband (and increase of mobile-only homes) and the reduction in the number of people moving homes.

Perhaps a better indication of the sector’s performance is the level of ARPU (average revenue per user) companies are achieving. Spending on telecoms by UK consumers has been particularly robust, indicated by the results of the consumer divisions of BT, Sky, Virgin, Carphone, O2 and Orange.

– BT Retail reported an increase in ARPU in their most recent results.
– Carphone’s broadband ARPU grew during 2008 (although ARPU will be impacted over 2009 by the recent Tiscali acquisition).
– O2’s parent Telefonica reported that O2’s ARPU is up year on year.
– As did France Telecom, who reported ARPU growth for its UK subsidiary Orange.
– Virgin Media’s Q1 results this year showed a year on year quarterly ARPU increase, as did Sky’s most recent results

Although many of these results include products other than broadband, such as fixed-line and mobile telephony, and pay-tv servce, these results add weight to the argument that in times of tightening consumer spending, household spending on communications could be one of the last areas that households are willing to cut. Broadband could perhaps be becoming an essential digital utility for the majority of households.

So what of consumer spending on premium products? There was initial concern that premium products would be adversely affected. However, recent results from Pay-TV operators have been promising, with Sky in particular highlighting a consumer demand for premium products through the success of their HD push (they now have over 1m HD subscribers, up from 465k a year earlier).

HD is a useful comparator for next generation broadband, as consumers are paying a premium to access the same service, but at a higher quality. While consumer demand for premium products has not been maintained across the economy, it is interesting for this debate that it appears to have been sustained in the in-home entertainment market.

To add to this, Virgin have said that their 50Mb service is experiencing the take-up levels that they expected. However, it is likely we won’t see useful, mature results for this service for at least 12 months, so it is too soon to consider this as evidence of willingness to pay.

Internationally, the US provides perhaps the most appropriate market to examine for evidence of willingness to pay. It was the main market examined in our report because: information is readily available; investment has been underway for a number of years and is more mature than other deployments; no public funding is used; and no price regulation is in place, so pricing and take-up is likely to reflect genuine consumer willingness to pay.

AT&T, with their fibre-to-the-cabinet (FTTC) U-Verse service, has 1.3m fibre broadband subscribers, a take-up rate of 12% of homes passed by their network. They have reported a year-on-year quarterly increase in ARPU on their wireline business.

Verizon’s fibre-to-the-home (FTTH) service FiOS has 2.8m broadband subscribers, with a take-up rate of 27% of homes passed by the network. They have also posted a significant increase in wireline ARPU. Both have seen subscriber growth increase quarter on quarter over the last year, in spite of the recession.

These results do suggest that there is consumer willingness to pay for a fibre-based premium broadband service. However, caution must be used when reading across from these results, as broadband subscriptions are in part driven by the respective IPTV offerings of AT&T and Verizon. As such, it is difficult to separate out demand for high-speed broadband and demand for their video services.

There is also little sense of what broadband speed packages consumers are taking, although according to Verizon their most popular plan is their 20Mbps service (although this doesn’t necessarily mean that ADSL2+ would be sufficient, as with their FTTH service 20Mbps really means 20Mbps).

Following our report, BT announced an intention to deploy superfast broadband to 40% of homes, so they clearly see a business case for it. However, there is still some scepticism about whether a willingness to pay really exists for these speeds in the UK, particularly for FTTH – with BT CEO Ian Livingstone saying that “the economic case is not great” at the government’s recent Digital Britain Summit.

The evidence set out above is not conclusive, comes with caveats and ultimately is not direct evidence of the willingness of UK consumers to pay for superfast broadband. However, they are useful indicators, and a fuller picture will develop as this evidence continues to emerge.

We would be interested to hear from anyone who has views on emerging evidence of willingness to pay from other markets.

Peter Shearman, Policy Manager, BSG

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01 May 2009

The UK’s Digital Road to Recovery

The ITIF, an influential Washington think-tank and prominent campaigner for the value of broadband and ICT more generally, have worked with the LSE on a new report that identifies how investment in ICT infrastructure could assist with the UK’s economic recovery. A launch event was held on Wednesday at the LSE with the report authors Jonathan Liebenau and Robert Atkinson, and a selection of industry representatives and policymakers.

The report uses three examples of digital infrastructure – next generation broadband, the smart grid, and intelligent transport systems – to show the possible impact of significant investment in each of these on direct jobs in these sectors, indirect jobs in related sectors, and induced jobs in other sectors.

The report makes for interesting reading, and will certainly grab the attention of policymakers – a £5bn investment in next generation broadband, they estimate, could retain or create as many as 280,500 jobs. At the launch the authors indicated they would make available their model to demonstrate how these numbers were arrived at, which should shed some light on how the numbers involved are as big as they are.

Although the report focuses on jobs and stimulating consumer spending, the more important point to come out of the report is the reason for investing in these networks, above other stimulus investments. The report suggests that investing in these networks creates a network effect, or ‘multiplier’, which grows as more and more individuals and organisations join the network.

This multiplier basically points to the innovation and productivity gains that existing and new businesses would develop once connected to the network. This benefit would only be realised by new networks, as improvements to existing infrastructure (to which the majority are already connected) would not have the same capacity for growing the number of individuals and organisations attached to it.

So while the immediate benefits in terms of jobs retained or created would exist regardless of the sector in which investment was made, only new networks actually provide the network multiplier. This is an important point for policymakers considering stimulus spending.

The BSG has something to offer to this debate. Our report ‘A Framework for Evaluating the Value of Next Generation Broadband‘ discusses the value of the network effect of next generation broadband. We estimate that it would be valuable, but less so than the biggest areas of value.

This is because the benefits of the new network would often be that existing services worked better, which would not generate a network effect. Furthermore, the network effect for services on next generation broadband would be global, and so would not rely overly on the UK’s rollout and take-up of superfast services.

However, in so far as new services are developed that require the higher speeds and better quality connectivity (particularly those requiring two-way communications), a network effect would be evident. And as other countries move towards next generation infrastructure, and consumers increasingly take up these services, we would want to be part of the global network effect that superfast broadband would create.

Peter Shearman, Policy Manager, BSG

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30 Apr 2009

Broadband in the time of swine flu

In a deep global recession the last thing the world needs is a new economic shock, but that seems to be exactly what we are facing. The World Health Organisation raised its flu pandemic alert level to 5 yesterday and governments around the world are stocking up on anti-viral drugs and face masks, however, broadband could prove to be just as important in helping the UK to cope with a flu pandemic.

In what turned out to be a highly prescient piece of work, the BSG explored the role of broadband in a global pandemic in its 2008 report on the value of next generation broadband to the UK. Broadband didn’t exist when the UK was last hit by a flu pandemic but its near universal availability today could prove vital in ensuring that the economy keeps going in the event of large numbers of people falling ill.

Many large organisations will already have flu pandemic contingency plans in place but almost all organisations should be thinking about how they could use broadband to help them cope with the disruption that could result if the flu virus really does take gripe in the UK.

The advice from government, if you notice symptoms, is to stay at home and call the NHS for advice. However, it is not only those who are sick who are likely to be staying at home. In an effort to reduce the spread of the virus through their staff, many companies will be recommending that employees avoid crowded offices and public transport and work remotely from home instead.

This should help many companies maintain a continuity of service but will also have an additional benefit of reducing the pressure on public transport systems, which will themselves face severe disruption as key staff fall ill.

Remote presence provides all sorts of options and flexibility for coping with a pandemic which may well require draconian social distancing measures to be put in place.

For instance, while many school children and no doubt some teachers will relish the thought of schools being closed, remote learning could be implemented so that children continue to be educated, even while school buildings are closed. Remote diagnosis and support could alleviate some of the pressure on the health service, while preventing the spread of the virus through facilitating treatment in the home (and avoiding infecting our invaluable healthcare professionals).

The 2008 BSG report went as far as trying to calculate the economic value that broadband would offer in a pandemic. Essentially we estimated that, based on the probability of a pandemic, a given mortality rate, the economic value of a life, and assuming next generation broadband could reduce the mortality rate by 5% by enabling more social distancing measures, the annual benefit in terms of avoided deaths would be £200m.

The role that broadband could play in the event of this pandemic becoming a reality should highlight to government the importance of ensuring everyone is connected – a ubiquitous broadband society has far more tools to deal with the pandemic threat than an equivalent less-connected society.

More than this, however, it should highlight the importance to government of ensuring their own services make full use of broadband and have the flexibility to continue to function and support society as events, such as pandemics, unfold.

Peter Shearman, Policy Manager, BSG

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23 Apr 2009

Broadband in the Budget

In yesterday’s Budget, Alastair Darling stated government’s support for the knowledge economy and the communications sector, and set out a number of policies affecting the broadband industry. Broadly, the top-line statements were as follows.

– Government re-iterates its support for the broadband universal service commitment set out in the Digital Britain Interim Report; will consult on using Digital Switchover Help Scheme underspend to fund the policy.

– Government will review the powers and duties of Ofcom “in advance of the Digital Britain Report” so that it can “strike the right balance between delivering competition and encouraging investment”.

– Government’s doubling of the capital cost allowances to 40% could aid up to £10bn on investment in communications infrastructure.

– Government has approved the South Yorkshire Digital Region next generation broadband project.

The BSG has published its response to these measures. While we support the government’s commitment to the broadband universal service commitment, we are concerned that the proposals set out on next generation broadband will not support more widespread investment and coverage than current market commitments.

It is not clear that the one year capital cost allowances increase, while providing a useful stimulus for existing investment commitment, will incentivise next generation broadband deployment given the timescales of investment and deployment, which will take many years (although it may have some limited impact in incentivising Virgin Media to invest, who are planning small expansions to their footprint over the next year).

More importantly, the characteristics of the costs of deployment mean that specific, targeted measures are required in areas where market-led deployment will not reach, rather than a blanket subsidy across all areas including those that are already commercially viable.

However, a potentially more significant development is the review of Ofcom’s powers and duties. Essentially, this would appear to come down to re-focusing Ofcom more towards promoting investment, as opposed to promoting competition. While not necessarily opposing principles (stronger competition should spur investment), there is certainly a balance to be struck, particularly given the scale of the investment required for next generation broadband.

This reflects an issue the BSG raised in January 2004 in its 3rd Annual Report (pp116-121). There was a concern then that the focus on short-term consumer interest could drive static efficiency in the market, at the expense of the dynamic efficiencies of investment.

The announcement of this review could be a sign that this argument has found support amongst senior policymakers.

Peter Shearman, Policy Manager, BSG

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22 Apr 2009

BSG provides submission to Welsh Affairs Select Committee inquiry in to digital inclusion in Wales

The BSG today submitted a report to the Welsh Affairs Select Committee as part of their inquiry in to digital inclusion in Wales.

Focusing on broadband availability and take-up, including the prospects for next generation broadband, the report highlights the challenges facing Wales, owing to the low population density and high proportion of rural communities.

BSG submission to Welsh Affairs Select Committee

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22 Apr 2009

BSG response to the Budget

Timely investment in next generation broadband will provide platform for innovation and productivity growth

The BSG welcomes the recognition given to the importance to the UK’s communications infrastructure in today’s budget and the confirmation of the government’s intention to make basic broadband services universally available across the UK.

However, the BSG is concerned that the budget announcements on next generation broadband do not yet provide grounds for confidence that such services will be made available beyond urban areas. The full benefits of next generation broadband will only be achieved through a combination of widespread availability and adoption.

Delivering the Universal Service Commitment

  • The BSG welcomes the confirmation of the government’s intention to implement the Universal Service Commitment for broadband and the suggestion that this could be part funded through the underspend from the Digital Switchover Help Scheme.
  • The BSG also welcomes the commitment to support the improvement of basic digital skills and the promotion of broadband take-up. Achieving the universal availability and take up of broadband is not only a matter of social equity but is also a necessary pre-condition for the eventual switch off of analogue public services which is the only way to ensure better and more affordable public service delivery in the future.

Next generation broadband

  • The BSG welcomes the doubling of capital allowances which should help to bring forward investment. However, the BSG is concerned that this will not, in itself be sufficient to ensure the timely and widespread availability of next generation broadband.
  • The BSG will be looking to the final Digital Britain report for further measures to ensure that next generation broadband deployment meets the needs of the wider economy. This could include more support for projects like South Yorkshire Digital Region that was endorsed in the budget report today.

“The key is to find the intervention sweet spot, just enough but not too much???, said Antony Walker, Chief Executive of the Broadband Stakeholder Group.

“The aim should be to provide a sufficient nudge to the market that enables it to deploy more quickly and more extensively that it would do otherwise. The announcement on capital allowances may help to bring forward investment but does not address the challenge of extending availability beyond urban areas.???

Although difficult to quantify, there is a growing body of evidence [see notes below] to suggest that the long-term benefit to the UK economy of a measured and carefully targeted intervention could potentially significantly exceed the cost to government.

Today’s budget announcement comes almost exactly two years after the BSG first highlighted the need for action in its Pipe Dreams report on next generation broadband. The rapid deterioration of the UK economy means that the potential for market investment in low density areas has become further constrained.

Without additional action next generation broadband will be rolled out more slowly and less extensively, meaning that many rural areas will be left behind and the net economic benefit to the economy will be smaller and slower to emerge.

Explaining the significance of next generation broadband, Antony Walker said “This is really about the future potential for innovation and productivity growth right across the UK economy. Broadband is what economists call a general purpose technology that is relevant to almost every aspect of economic activity. It provides the potential for households, businesses and governments to do things differently, more effectively and more efficiently. And for some key parts of the economy, such as the creative industries, it will be the platform for transformative change that will open up a global market for entirely new products, services and applications.???

However, these benefits do not accrue automatically. The government will need to put as much effort into ensuring the rapid adoption and exploitation of these networks as it puts into ensuring their availability in the first place.

BSG response to Budget – full press release

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21 Apr 2009

BSG submits response to BBC Trust Canvas consultation

The BSG’s response to the BBC Trust consultation on the BBC’s Project Canvas proposals sets out the potential and significant impact this proposal could have across the broadband value chain.

Depending on how the proposal is taken forward in practice, it could have various implications, such as heightened pressure on broadband networks from increased levels of video traffic, to how Canvas could drive demand for higher quality broadband services and how such a UK centric development could affect global manufacturers of set-top boxes.

Central to the BSG response is the view that the BBC Trust needs to view the Canvas proposal in the wider context of an industry making the gradual and difficult transition to next generation broadband.

Furthermore, it is essential that this consultation is the beginning of the debate rather than a one-off and final assessment of the proposal.

Detailed, open and ongoing discussion across the value chain is vital to effectively assess a proposal that has such far-ranging relevance for the UK broadband value chain.

BSG response to BBC Trust consultation on Project Canvas

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07 Apr 2009

Australia dumps FTTN proposal – and starts again with FTTH

In an extraordinary announcement this morning, the Australian government have announced that they will spend up to A$43bn ($31bn, £21bn) on a new National Broadband Network, providing FTTH to 90% of Australian premises. The final 10% will be served using wireless technologies, capable of 12Mbps.

This scheme replaces the original FTTN project that the government had been developing since coming to power in late 2007. This plan, which had seen a number of bids submitted by industry, has been terminated. This was said to be partly due to the pressures brought by the global economic downturn on the value for money that Australian tax payers could achieve.

The Australian government will create a new company to carry out this project, in which it will be the majority shareholder. Private investment is anticipated. The new company will provide wholesale access (no retail services), and will be operated on a commercial basis. The government intends to sell down its stake in the company once the network has been constructed and operational for five years.

It is expected that the network will take 8 years to build and create 25,000 jobs. Some quick calculations suggest that the cost will be c£2,700 for each of Australia’s 7.8m households, although without more detail it is difficult to provide accurate costs per home passed or home connected.

Our cost modelling report suggested that providing point-to-point FTTH to 90% of UK households would cost about £21bn – about the same cost of the Australian proposal, but covering 22.5m homes, rather than Australia’s 7.7m.

This difference could be explained through the quite different geography and population density in Australia, and the fact that the network would presumably be an overlay to the existing network that didn’t make use of existing assets. However, the cost still appears on the high side.

The announcement has been welcomed by both the incumbent Telstra and its competitors. However, there are sure to be many challenging debates that will need to be held. The telecoms landscape in Australia is likely to change significantly as a result of this project and the regulatory reforms announced alongside the FTTH investment.

As before with the FTTN proposal, this is only the beginning of a process that has many hurdles to clear yet.

Peter Shearman, Policy Manager, BSG

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13 Mar 2009

One Year On – the Good Practice Principles on Audiovisual Content Information

The BSG today published the ‘Good Practice Principles on Audiovisual Content Information – One Year on’.

Last year the BSG facilitated the creation and publication of the Audiovisual Content Information Good Practice Principles. The principles committed signatories to providing clear, consistent information about audiovisual content, in order to ensure that consumers are able to make informed choices about commercially provided content.

This paper has been published one year following the launch, to give an update on how the principles have worked in practice. This includes how the signatories are working to meet the principles, and also includes information from three new signatories to the principles: BSkyB, MySpace and Tiscali.

Good Practice Principles on Audiovisual Content Information – One Year On

Good Practice Principles on Audiovisual Content Information

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12 Mar 2009

BSG submits response to interim Digital Britain Report

The BSG today finalised its submission to the government’s interim Digital Britain Report.

The response recognises the ambition and rationale of the report, while noting the challenging timescales. It goes on to highlight a number of challenges and issues facing developments in each of the areas of the report, and makes a number of suggestions as to how to address the actions raised.

BSG response to interim Digital Britain Report

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