Non-BSG reports

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

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

Digital Britain Interim Report launched

The government’s Digital Britain Interim Report has been launched. The press release is available here, and the report itself is available here. The BSG press release responding to the launch is available here.

We have produced an initial analysis of the report in a special edition of our newsletter. We are keen to hear the views and opinions of members of the BSG community, and anyone else with an interest in the broadband value chain, on the issues raised in the report.

If you have any views you wish to share please either comment on this blog or send us an email. We will pass on all views to the government’s Digital Britain team.

Ofcom the best regulator in Europe?

While we wait for the publication of the government’s interim Digital Britain Report, the annual ECTA (European Competitive Telecommunications Association) Regulatory Scorecard was released yesterday, and as last year Ofcom scored the highest of all European NRAs.

Ofcom generally scored strongly in most areas. However, for economic market conditions for broadband, Ofcom ranked as ‘neutral’, rather than ‘strong’. Only Portugal and France achieved a strong rating.

The scores are based on responses to surveys that review: the overall institutional environment; key enablers for market entry and network roll out; the NRA’s regulatory processes; application of regulation by the NRA; and regulatory and market outcomes.

Next Generation Broadband will be key to delivering Digital Britain

The BSG welcomed the publication today of the Digital Britain interim report.

Kip Meek, Chairman of the BSG said, “the Prime Minister made it very clear today that digital networks will be the driving force of the economy going forward. Next generation broadband is the biggest economic prize at stake in this report.

The government has set out the key issues and is stepping up to the task of setting a clear strategic framework that encourages the sector to invest – and the country as a whole to benefit.”

The report recognises the central importance of broadband to the UK economy and sets out three key challenges: firstly, to agree a minimum level of service that should be universally available; secondly to further drive the levels of take up; and thirdly to ensure the timely and widespread deployment of next generation broadband networks.

  • Universal broadband: Kip Meek proposed the idea of a universal broadband commitment in a speech November. Broadband access is fast becoming an essential utility for families and business across the UK.The BSG welcomes the goal of setting a minimum level of broadband that should be available universally and will work with government to determine the scope of the universal service commitment and the potential mechanisms for funding it.
  • Driving take-up: The BSG’s own research has highlighted the importance of achieving high levels of adoption to maximise the social and economic benefits of broadband.Driving take-up significantly beyond current levels will require government engagement and effective collaboration across the sector. The BSG will support this process.
  • Next generation broadband: Economic conditions have changed significantly since publication of the Caio report making next generation broadband both more important to the economy and harder to deliver for the industry.The next few weeks provide an opportunity for government to set out a vision for how, where and when next generation broadband can be delivered.The BSG welcomes the announcement of a strategic review and will directly engage in this process to ensure a clear vision is established and that specific measures are identified to achieve it.

The BSG also welcomes the emphasis placed in the report on ensuring that consumers are empowered to navigate the digital future effectively. The BSG believes that a coordinated approach is required to ensure that consumers have trust and confidence in digital services and are comfortable with the rapid innovation taking place across the sector.

Proposed measures to improve levels of media literacy, and empower consumers to make informed choices through the provision of transparent information about the nature of content and the use of personal data are positive steps to achieve this important outcome.

The BSG has produced a special edition newsletter providing further comment and analysis on the contents of the report – available to download below. We are keen to hear the views of members of the BSG community on the ideas discussed in the report.

Full press release

Digital Britain Interim Report

DCMS/BERR Digital Britain Interim Report press release

Special edition BSG Digital Britain Newsletter

Can superfast broadband save the economy?

This week saw NESTA publish a policy paper advising that investment in fibre-optic broadband would be a vital part of the infrastructure of our digital economy as it emerges from the recession.

NESTA go on to suggest that ‘a spectrum for speed swap’ could be used to incentivise deployment of universal next generation broadband.

So can next generation broadband play a role in our economic recovery?

There has been a lot of lobbying for NGA in the US, with the incoming Obama administration promising investment in broadband as part of the stimulus. However, the latest statements from the Obama camp suggest that these investments will be restricted to expanding current broadband access to ‘unserved and underserved’ areas.

This may make more sense as an immediate stimulus. Having the government invest in NGA now, on either side of the atlantic, would be unlikely to help the economy in the short term. The lead in times for these sorts of projects, not to mention the time for deployment, would make it unlikely to have an immediate impact – in short, any project would not be ‘shovel-ready’.

However, the government needs to keep a watch on NGA investment. We are yet to fully see the impact of the current economic conditions on investment decisions. If investment fails to materialise, the government may need to step in, in some form – a conclusion made by the Caio review.

It also may be true that the window of opportunity for government to make an impact on investment decisions is closing, given the fiscal austerity planned for the future.

Finally, there is a strong case for ensuring that, when the economy does begin to recover, we have spent wisely and invested in infrastructure that can support future growth – and most would consider NGA to be such an investment.

This is a challenging issue, and worthy of debate. We wait with interest to see what ideas will be discussed in the government’s Digital Britain Report this week.

Peter Shearman, Policy Manager, BSG

Ofcom publishes broadband speeds report

Ofcom yesterday published a report on broadband speeds in the UK.

The report is a first for Ofcom in that it is based on actual line testing, rather than consumer perception surveys, and builds on the work of the SamKnows team, who produced an earlier report last year.

Alongside the headline numbers, the report identifies the lack of understanding many consumers have about broadband, and particularly the factors that can impact the speeds they receive – an issue we have raised previously on this blog.

It will not be news to many that you are unlikely to receive the headline speed that you sign up for. However, speed can be impacted by a variety of factors, such as in-home wiring or your choice of router, which ISPs have little or no control over (and can be remedied by the consumer themselves).

This isn’t necessarily the fault of the consumer – they should not need to understand to a technical level the service they are buying. It can partly be attributed to the marketing focus on speed by ISPs, and we are beginning to see ISPs market their services on other attributes such as bit caps, which may help.

However, the crux of the issue is that broadband is a difficult service to accurately buy and sell. The actual service received is partly out of the control of the service provider, which creates difficulties and confusion for consumers.

If we are to have a proper public debate about the future of broadband (and now would be the time, given the interest being shown by our senior politicians) a more informed consumer is an important requirement.

The Caio Review recognised this, which is why one of its recommendations was for ISPs to make public their traffic management policies – consumers would then be given more information about their service, particularly how it is likely to operate at peak times.

This Ofcom report also seems to recognise this, laying bare as it does the capabilities and limitations of the network. We need to continue along the path of an increasingly informed public debate.

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

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

Through the looking glass? What lies within Ofcom’s Comms Market Report?

Last week saw the publication of what has become a bit of a bible in the TMT sector – Ofcom’s Communications Market Report for 2008.

Perhaps some of you who are more diligent than me and have worked through the 2inch thick report by now, may have more detailed views, which I would certainly be interested in hearing.

However, even the headline themes and stats make for initial interesting reading.

Working for the Broadband Stakeholder Group, it is no surprise that my attention immediately went to observations about the development of the broadband market.

There are no great surprises in here. However, the findings set out by Ofcom do confirm some of the trends various pundits have observed over the last 12 months or so.

Firstly, the number of consumers buying bundles of three of more services is on the rise. Whilst the number of households taking a bundled communications service in 2007 remained the same as the 2006 figure – 4 in 10, the nature of these bundles has changed.

Triple-play bundles now account for 32% of bundles taken in 2007. This increase perhaps reflects both the efforts providers such as Virgin Media and BSkyB to market these packages, and the value consumers now put on certain services. Have we reached the stage where multichannel on-demand TV is now seen as a core service people will pay for, alongside their phone and broadband?

Mobile broadband is another key development identified in the Ofcom study. Much has been said about the success of the dongle in recent months, and here are some stats to back up that assumption. Ofcom’s research shows that between February and June this year, monthly sales of these devices rose from 69,000 to 133,000 a month. Furthermore, 1.5 million people state that they use them at home as well as outside, giving credence to the perception that mobile broadband is beginning to put a real competitive pressure on fixed-line providers.

This trend is particularly important in the context of the UK’s move to next generation broadband (discussed briefly at page 303). Mobile broadband could prove to be popular as we move to faster, fixed-line broadband speeds. However, the role that it could play in a next generation environment is harder to predict.

We, like many others, look forward to Ofcom’s regulatory statement on NGA, for clarity on the regulatory framework that will underpin and support this important transition.

Pamela Learmonth, Policy Manager, BSG

The Byron Review: What now for regulation of Web 2.0?

“If our children were leaving the house, or going to a swimming pool or going to play in the street, we would take all the care possible about their safety – is there proper policing, is there proper safety? When a child goes on to the computer and on to the internet or on to a video game we should be thinking in the same way.”

This was the response from the Prime Minister to the review published last week by psychologist Tanya Byron, setting out recommendations to ensure that children and young people are protected from inappropriate and harmful material on the internet and in video games.

The publication of this landmark review reflects a growing policy emphasis on how web 2.0 should be effectively regulated.

Whilst no one would disagree with the importance of ensuring child protection on the web and on video games, there is a vocal concern from industry that regulation should not inhibit innovation. The new media industry is one of the UK’s most vibrant and is constantly developing new services – the principal users of which are, in many cases, children and young people.

Byron’s report is a considered and ambitious response to this important issue. Whilst many of last week’s headlines focused on her recommendation to extend the range of age classification for video games, a closer read of the 200+ page report (for those of you with the stamina) also reveals an important proposal on how regulation of web 2.0 should be driven forward.

Her solution to this quandary is the establishment of a UK Council on Child Internet Safety to develop a child internet safety strategy, that will cover both illegal and legal (though potentially harmful or inappropriate) activity.

Built on the structure of the existing Home Secretary’s Task Force on Child Protection on the Internet, the Council will be co-chaired by the Home Office and the Department for Children, Schools and Families, involve other relevant government departments and be staffed by a cross-departmental secretariat. It will report directly to the Prime Minister.

The Council will also be supported by an expert advisory group and research sub-group and involve industry through working groups to deliver specific initiatives such as codes of practice.

Byron also strongly recommends that mechanisms should be established by the Council to effectively involve parents, children and young people.

At first glance, this seems like an eminently sensible solution. It draws the relevant stakeholders together and an over-arching strategy would arguably reduce confusion about the array of policy developments individual departments are currently pursuing in this area.

However, it is an ambitious task, and Byron’s recommended deadline of Spring 2009 for both the establishment of the Council and publication of the strategy is a challenging timescale.

It remains unclear at present who will drive forward the development of the strategy, and what regulatory issues it will cover. Elsewhere in her report, Byron throws down a gauntlet to industry to develop codes of practice on areas such as user generated content, improving access to parental control software and safe search features, and better regulation of online advertising.

This builds on the vast array of work the industry has already taken to set common standards on issues that are important to their consumer. One example of which is the Good Practice Principles on Audiovisual Content, which were facilitated by the Broadband Stakeholder group (www.audiovisualcontent.org).

However, looking forward, could further regulatory proposals emerge under the strategy as a whole? Would this regulation be developed under a self or co regulatory model? And who will police and enforce these standards?

It has to be recognised that Byron has done an admiral job in pulling a wide array of issues together in her review. When it comes down to a more detailed look at how child internet safety will be regulated, however, there is still a very long road to travel.

By Pamela Learmonth, Policy Manager, BSG