BSG comment

BSG responds to EC NGA consultation

The BSG has submitted its response to the EC consultation on its draft Recommendation on regulated access to NGA networks.

The BSG welcomes the general principles set out by the Commission for guiding NRAs when regulating for next generation access, but expresses concern at the level of detail and prescription included in the Recommendation currently.

The BSG believes that the Commission’s objective should be the harmonisation of outcomes, and that this is best achieved by giving national regulatory authorities the responsibility to implement regulatory principles in the most appropriate way for local market conditions, rather than prescribing specific regulatory remedies.

BSG response to EC NGA consultation

EC NGA consultation document

Pakistan to create their own Broadband Stakeholder Group

News came through today that the Pakistan Telecoms Authority is to take the lead in a newly formed Broadband Stakeholder Group in Pakistan. The group have identified a range of issues that, on the surface, appear very similar to those that the BSG were tasked with addressing back in 2001.

Pakistan are not alone in examining the BSG model. There is already a Broadband Stakeholders Group in the Lebanon (which has produced a Broadband Manifesto), and other countries such as Chile have shown an interest in the concept.

For me, these developments highlight two things. First is the acceptance of the central role and importance of widespread coverage and take-up of broadband for the economic and social wellbeing of a country and its citizens. Markets across the globe are developing at different speeds, starting from very different positions and at different times. However, the issues they are facing are similar and the conclusions reached in response are broadly aligned – certainly no-one has said that broadband is not important.

The second point is that many of these issues require a collaborative effort to be addressed. They are too big to be solely the responsibility of a competitive industry, or a government department, or a regulator. Lebanon, Pakistan and others are finding this to be true of first generation broadband; in our experience, so it is true of next generation broadband.

Peter Shearman, Policy Manager, BSG

The broadband vision

As someone who spends a lot of his time discussing the importance and value of broadband, in all of its forms, to the economy and wider society I’m struck by how few manage to articulate a worthy vision for the impact of broadband.

A recent example of this was Ofcom’s timid attempt at a vision in its recent superfast broadband consultation (see section four). The Caio review made a good effort with broadband as an ‘essential digital utility’, but still didn’t quite capture it to my mind.

So it was pleasing to read, in an article in the Guardian early last week, that Stephen Carter is able to set out a vision superior to most efforts, referring to broadband as ‘commercially, socially, culturally, economically and politically transforming’.

This is about as good as I have heard, and hopefully bodes well for the future of Digital Britain.

Peter Shearman, Policy Manager, BSG

Government to undertake Digital Britain Report

On Friday last week the government announced it would be undertaking a Digital Britain Report, led by the new minister for technology, communications and broadcasting Stephen Carter. This represents an opportunity for Government to tackle a range of issues in a coordinated, strategic way. Hopwever, doing so requires that the report is not a stock-taking exercise of ongoing issues, but a proactive plan of action that provides strong government direction.

The value of this report would be in bringing together the various activities going on in the area of convergence, across different departments, in a coordinated, strategic way. In doing so, government can provide a strong direction, with the ultimate aim of ensuring that the UK’s digital infrastructure (and the surrounding policy and regulatory frameworks) is fit for a world-leading knowledge economy.

Commenting on the report, Peter Mandelson stated that ‘the digital economy will be central’ to Britain getting through the worst of the current crisis and preparing for the upturn; with this focus the report could be a valuable contribution to the health of the sector and the economic activity that it supports.

Looking at the issues identified for the report, there are already numerous initiatives either completed or underway that are tackling these. Indeed, one key issue for government is how this report interacts with these ongoing activities such as the Convergence Think Tank or the implementation of the Audio Visual Media Services Directive. A report that simply reviews these various policy debates will be of limited value.

The opportunity here is to bring together a range of ongoing issues that all relate to convergence but often sit across a number of government departments and lack an overall coordination. Addressing these at a strategic level, with government providing strong direction and leadership would be of benefit to the development of the converging industries.

It is rare that a new minister already has a command of their brief upon entering a new role, but in Stephen Carter this is exactly what has happened. With his knowledge and experience he should be able to hit the ground running, and use the Digital Britain report to drive government action, rather than simply set the scene for further reviews.

Peter Shearman, Policy Manager, BSG

Digital Britain Report must ask hard questions

Digital Britain Report must ask hard questions says Broadband Stakeholder Group

The communications sector is absolutely vital to the UK’s future as a competitive knowledge economy. At a time of unprecedented change and disruption we have to face up to some fundamental questions and challenges about broadcasting, broadband, our creative industries and the impact of the internet.

We cannot be complacent about past successes. The communications sector is being re-shaped by convergence and we must re-shape the policy and regulatory framework to go with it. The next couple of years will determine whether the UK remains a world leader or becomes a quiet backwater. If our ambition is to lead, then hard questions must be asked in the course of preparing this report.

BSG response to Digital Britain report – full press release

BERR-DCMS Digital Britain report – full press release

A busy month for next generation broadband

September has been a busy month in the world of next generation broadband. Government reviews, UK and EU regulatory consultations, not to mention our report on the cost of fibre-based next generation broadband, have certainly moved the debate on in the UK.

The month started with the BSG publishing its report ‘The costs of deploying fibre-based next generation broadband‘. This report used geographic and cost data specific to the UK, allowing us to model the cost of deployment across a variety of geotypes. The long and the short of this is that the report suggests that fibre to the cabinet will cost up to £5.1bn, and fibre to the home up to £28.8bn.

The total costs are interesting, but the purpose of the report was to breakdown the various cost components, to examine where the real costs lie. Unsurprisingly, this was in the civil infrastructure elements of the network – 42% of total costs for FTTC, and up to 80% of total costs for FTTH. Any steps that could be taken to reduce these costs would obviously help reduce this barrier to investment, and the report modelled how various actions, such as if higher duct re-use was possible, would impact the overall costs.

The report also clearly set out that there is a definite difference in the cost of deployment between urban, rural and remote areas of the UK. For fibre to the cabinet, for example, the cheapest 58% of households would cost £1.9bn to deploy to; the next 26% would cost £1.4bn, and the most expensive 16% would cost a further £1.8bn. Clearly, deploying beyond the first 60% of UK households will be a more challenging case for investors to make, which has a number of implications for government and the regulator.

This was closely followed by the launch of the final report of the Caio Review – ‘The Next Phase of Broadband UK: Action now for long term competitiveness‘. The Review suggested that, while we shouldn’t be panicking about a lack of NGA in the UK, the government could take actions to reduce the barriers to investment, and set out the need for leadership from the government and the regulator. A range of initiatives were recommended, including providing certainty for investors and reducing the costs of deployment, while increasing the competitive pressure on copper-based services, and benchmarking our performance against other countries while considering the ‘batstop’ remedies should the market fail to deliver NGA.

We welcomed these recommendations at the time, and look forward to hearing the government’s response to the Review. Certainly, our reports over the last 18 months have supported the conclusions and recommendations of the Review.

What followed was then followed by a flurry of regulatory activity. First, the European Commission set out its long-awaited draft Recommendation on the regulation of NGA. The Recommendation sets out how the Commission would like regulation to support investment and competition in next generation broadband, and makes for interesting reading for Ofcom and the operators, who will no doubt be submitting their views to the Commission before the 14 November deadline.

This was swiftly followed by Ofcom themselves publishing their latest consultation on the regulatory environment for NGA, ‘Delivering superfast broadband in the UK‘. The consultation discusses a range of issues and, although differing in depth of detail across the issues, certainly moves the debate on from its previous consultation last September. Positioning itself as a ‘framework for action’, the regulator will further progress these issues through a range of activities with stakeholders.

And, just to add to the fun, the Commission has also now begun its second periodic review of the Universal Service Directive, as well as launching an EU-wide broadband performance index.

Quite a lot to absorb for those of us who spend their days working on next generation broadband. So where has it left us? Well, the Caio Review has set out a number of options for government if it is serious about trying to reduce the costs of deployment. The government response will be interesting, and whether they are actually able to implement some of the suggested changes (such as to the way fibre is treated in the rating system) is up for debate. Caio’s recommendation that government and the regulator take a strong lead on NGA is one that we support, and are keen to see.

Our report has added further to the evidence base for policy making that we are committed to creating, to ensure appropriate policy is developed. It adds numbers to views that were likely already held, but also raises interesting questions, and the granularity of our figures should be of real use to those interested in local or regional broadband projects.

The Commission’s Recommendation, and Ofcom’s consultation, take us closer towards regulatory certainty than we were before, although a number of questions remain unanswered and this is unlikely to be the end of Ofcom’s process for creating the right regulatory framework. Certainly there could be a sense that every time you delve deeper into an issue, the list of questions a regulator needs to answer gets longer.

One issue worth noting is the change of view towards public sector projects. Sympathies certainly appear to have shifted within Ofcom, and possibly within BERR given the Review’s recommendations, since the DTI/Ofcom Best Practice Guide for Public Broadband Schemes was put out in 2007, and this is a welcome development.

This is one of many issues raised this month, however, and stakeholders will be watching with interest to see how these are played out in the coming months.

BSG comments on Caio Review

The Caio Report on Next Generation Broadband is a key step towards UK consumers getting superfast broadband, according to the Broadband Stakeholder Group, the government’s advisory body on broadband.

Kip Meek, Chairman of the Broadband Stakeholder Group, says, “Importantly, this report states that although there is no government money on the table, there is a key leadership role for both government and Ofcom, and that everyone involved in the provision of broadband must work more closely together if we are to address the challenges of deployment of next generation, super-fast, broadband in the UK.”

BSG believes that the report is important for three reasons:

  • Firstly it is saying that government needs to come off the fence and recognise that next generation broadband will be of fundamental importance to the UK economy

BSG agrees and believes that government and Ofcom together must show leadership in creating the right environment for investment to take place.

  • Secondly, it is saying that we shouldn’t expect a single entity to deploy a single fibre network universally across the UK. Instead we are likely to see different networks, being deployed in different areas, by different organisations using a mix of fibre and wireless technologies.

This is borne out by the BSG’s recent cost modelling work which concluded that universal Fibre to the Home (FTTH) would cost £28.8bn

  • Thirdly while it rejects the need for blanket subsidies, it is saying that local innovative projects, involving the public and private sector and local communities should be encouraged and supported both as a stimulus to competition and as a way of extending coverage into more rural areas.

BSG research earlier this year demonstrated that if built on international best practice, such projects can be both efficient and effective. But coordination is required at national level.

The BSG is committed to assisting government and the regulator in implementing the recommendations from the Caio Review.

Caio Review final report

BSG response to Caio Review – full press release

Caio Reveiw – Full BERR press release

Home broadband improves GCSE results

According to the latest UK Internet Access Report from the Office of National Statistics those students with home broadband access are likely to do better in their GCSEs.

This is not really surprising. Broadband provides students with access to a wealth of resources that previously were simply unavailable. It can aid independent learning by encouraging independent research and discovery, and increase collaboration not just within schools, but across schools, countries and continents. At its most effective, it can completely transform the learning experience.

In 2003 the BSG published a report highlighting the opportunities that broadband presented to the education sector in the UK, and the barriers against wider take-up and use within the education system. It is good to see that broadband is having an effect, and we hope that this will continue as schools and teachers continue to understand how broadband can be utilised to enhance their students’ experiences.

There is still a long way to go, however. There is a big difference between those that do make effective use of broadband, and those that don’t, and particularly between students with access and students without. Progress is continuing in the right direction, with the Home Access To Technology programme within DCSF, and it is important that all concerned continue to work towards realising the full benefits that broadband access can offer education in the UK.

Peter Shearman, Policy Manager, BSG

One small step from BT, one giant leap from Virgin Media?

Virgin Media’s statement today that it could be offering broadband speeds of 200Mbps by 2012 certainly puts the cats amongst the pidgeons in the ever noisier debate surrounding next generation broadband.

Last month, BT announced that it would invest £1.5bn to bring next generation broadband to 10 million homes by 2012. The speeds that would be available were quoted in BT’s release as 40Mbps to 60 Mbps for those homes serviced by a Fibre to the Cabinet (FTTC) deployment. Fibre to the Premises (FTTP) could, it said, offer speeds up to 100Mbps.

Although BT stated that the exact split of FTTC and FTTP was still to be determined, it did state that FTTP would be primarily focused on new build sites, whilst FTTC would be more “prevalent” elsewhere.

However, even in the unlikely scenario that it pursued a 100% FTTP deployment, delivering speeds of 100Mbps, the 200Mbps speed quoted by Virgin Media today knocks that straight out of the water.

The potential next generation broadband speeds that can be delivered depend on the technology being used. I could take this opportunity to harp on about the different potential capabilities of BT’s network as oppposed to the cable network owned by Virgin. I could point to the fact that the technology Virgin Media is deploying to deliver faster speeds, DOCSIS 3.0, uses channel bonding technology to (as the name suggests) bond channels together to achieve these super-fast speeds.

Yet a discussion purely on the technical capabilities doesn’t tell the full story. Indeed focus on these headline speeds alone misses the main reason why these announcements are interesting to the next generation broadband debate as it stands now.

The point is, the fact that such announcements are being made is exciting in itself.

Next month we expect to see the publication of a range of documents that will move the debate forward – the independent review on next generation networks being led by Francesco Caio, Ofcom’s regulatory statement on next generation access and the European Commission’s recommendation on the regulatory framework for a next generation environment.

Operators and investors need clarity about the regulatory framework before they can really get going on deployment.

The signals from both BT and Virgin Media are significant and welcome.

They and the rest of the industry now need regulatory clarity to make next generation access in the UK a reality, and not just a pipe dream.

KPN to open its FTTH network to competitors

Rather under the radar this week, KPN, the Dutch incumbent, announced that it would be opening its FTTH networks to its competitors, in order to maximise the utilisation of their network.

In a deal with Reggefiber (a fibre network construction specialist) KPN will take a share in existing local FTTH projects and build on these as they deploy their FTTH network.

This is an interesting development in the EU context. The majority of incumbents within the EU are less than enthusiastic about opening up their networks having made such a large investment, but KPN have positioned this as an appropriate way to share the risk and ensure utilisation of the network. It moves KPN closer towards a civil utility-type of model, with many providers offering services over the network, owned by a single operator.

The local/community projects are also an interesting aspect of this development, as it shows that these can play an important role in demonstrating that these networks can be efficiently deployed – Reggefiber’s assets in the local networks they have built out are included in the joint venture with KPN.

KPN announcement

On Wednesday KPN, the Dutch incumbent, announced that they would be opening up their FTTH deployments to their competitors, in order to maximise utilisation of the network.

This announcement builds on KPN’s announcement in May that they were setting up a joint venture with Reggefiber, a fibre network construction specialist, to build out their FTTH networks. KPN will hold a minority 41% share of the JV, and both KPN and Reggefiber will add their existing FTTH assets to the venture.

Reggefiber were responsible for building the network in Nuenen, and own 5% of the Nuenen network along with other local networks.

This approach is very different to those of other European incumbents. It is also interesting to note the process by which they have arrived at this announcement, as it builds on a number of local projects that have already been deployed, and moves KPN towards a civil utility-type arrangement.

For more information on this announcement see http://uk.reuters.com/article/rbssTechMediaTelecomNews/idUKL2334840820080723

BSG welcomes BT announcement on next generation broadband

The BSG welcomes today’s announcement from BT that it plans to invest £1.5 billion in making next generation broadband available to up to 10 million homes by 2012.

In April 2007, the BSG, – the UK’s leading independent advisory group on broadband – published its Pipe Dreams Report that stated that there was a two-year window to create the right environment for next generation broadband deployment in the UK.

Commenting on the announcement, Antony Walker, CEO of the BSG said “There has been a question mark hanging over the UK telecoms sector for the last 18 months about how we move to next generation broadband. Today’s announcement is by no means the whole answer, there are still questions about the regulatory framework and how we extend services to more rural areas, but it is a very significant step forward”.

BT’s announcement comes in response to increasing competition from cable and new mobile broadband services and growing demand for bandwidth from consumers. Walker described it as “a positive sign that the transition to next generation broadband can be market-led. The key question now will be whether Ofcom can move quickly to create a regulatory framework that both enables large-scale investment and ensures effective competition”.

The BSG believes that the move to next generation broadband will be at least as important as the move from narrowband to broadband. “It will bring about a revolution in the capability and quality of services and will enable the next big development of the internet. You could think of it as the catalyst for web 3.0”.

Full press release

The broadband speed debate

uSwitch.com has collected data on the speeds received by those who visit their site, and compared them to the maximum speeds these users signed up to receive. Similar to the recent research from the BBC and thinkbroadband.com, they found that the majority of users did not receive the maximum speeds that they signed up to.

This is not a surprise, of course. The speed of a broadband connection depends on many factors, including the number of other users online at the same time, the distance of a connection from the local exchange, the tuning of the modem in the home, and even faulty electrical goods within the home, which are clearly outside of the control of ISPs (see this excellent atricle in PC Pro for tips on how to improve your broadband speed).

But is speed really the be all and end all of broadband performance? There are other aspects of a broadband service that impact on performance, as I have discussed before, and these are often overlooked.

Improvements in these factors that affect performance could make far more difference to the current broadband experience than improvements in speed alone.

So what are the benefits of next generation broadband? The economic story part II

Following the earlier piece, I thought I’d briefly set out what the economic benefits are that are identified in our ‘A Framework’ report, in order to illustrate where we think value would accrue.

The largest categories of private value in the report are: doing things that we do now, but more efficiently; doing more of what we do now; and doing new things.

Each of these categories of value has the potential to be very significant. We make no attempt to quantify the last two, as it would be difficult (if not impossible) to do so.

Doing things more efficiently we have attempted to quantify. Based on 80% coverage, if 50% of broadband users saved 3% of their time, time savings worth £0.9bn per annum would be achieved (based on a value of leisure time used by government studies).

Note this is only an assumption, for indicative purposes. We would be interested in seeing any evidence that could refine this value, such as more detailed research on the activities consumers do online and how long they spend doing them.

The largest categories of wider economic value were: resilience, adaptability and policy options; and spill-over and virtual agglomeration. Again, these were not quantified as this was not appropriate, but we think these are likely to be significant in value.

The substitution possibilities created by next generation broadband would mean that the economy would be far more resilient and able to adapt to shocks, for example an oil price shock by providing alternative to travel. This also creates an additional range of options available to policy makers, which would be highly valuable in itself.

Virtual agglomeration had been identified as likely to be a big benefit from next generation broadband. Agglomeration refers to the productivity benefits of cities and clusters of activity – London, for example, has a higher productivity level than other areas in the UK. Through virtual agglomeration, next generation broadband could achieve some of the benefits of clusters and cities, and without some of the costs of cities such as congestion and pollution.

We also identified other categories of wider economic benefit, such as: an increase in competition in the economy; network effects as consumers and businesses both in the UK and across the world move to next generation broadband; reduced traffic congestion; the value created by the re-use of land and buildings no longer required by a next generation broadband network; reduced business travel; increased online backup; video distribution; and improved connectivity for SMEs. Some of these we did attempt to quantify, such as a reduction in business travel. For our estimations see section 5 of the report.

That’s the whistlestop tour of the categories of benefits we identified. We are keen to see these categories built on over time. We hope that as evidence emerges we will be able to more accurately populate this framework, to build up a more accurate quantitative picture of the benefit of next generation broadband.

Peter Shearman, Policy Manager, BSG

So what are the benefits of next generation broadband? The economic story

Following the launch of our report ‘A Framework’, I thought it would be worth setting down a few pieces about the benefits highlighted in the report. I’ll start with a general view of the economic impact the report sets out, which although substantial in terms of benefits, may be difficult in practice for investors to capture.

First, a brief note on the methodology. We have taken a bottom-up approach, examining where in the economy specific value could possibly accrue, rather than making general estimations of the impact of next generation broadband on productivity or GDP. For more on this in the report, it is worth looking at the section on ‘pseudo costs and benefits’. We also broke down economic value in to two categories – private value that accrues to investors and consumers, and wider economic value.

The report sets out a wide variety of categories where value would accrue. Some of these benefits would be captured upon deployment; others would take time, require transformations and would accrue in the medium to long term. In addition some of these benefits may be impacted by various policy agendas – for example, the role for next generation broadband in reducing carbon emissions is potentially significant depending on whether a carbon tax was introduced that encouraged substitution for emission-intensive activities.

The report suggests that these benefits are potentially very large, and in the long term likely to be larger than the cost of deploying the network. Particularly, there is likely to be significant private value that will be captured by investors and consumers. This does not mean, however, that the business case is made, and in reality there are difficulties for investors in trying to capture this value.

The report highlights three key constraints on investors’ ability to capture private value. First, to the extent that next generation broadband is an experience good consumers may not be willing to pay a premium for the service until they have experienced it. Second, creating this value may require the transformation of value chains, which may take time and would be disruptive. Third, investors do not yet have accurate knowledge of how much consumers are willing to pay, meaning that there will be difficulty in setting the correct pricing structures in order to maximise how much of the value they are able to capture.

Generally, the report calls for further work that would address these and other uncertainties. Resolving these uncertainties will be key to creating a business case that is acceptable to investors. The BSG is continuing its work programme that will hopefully shed some light on these and other issues. We are keen that further evidence is put forward that can help illuminate these, and would be interested to see any evidence others have to this end.