Industry news

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 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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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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29 Jan 2009

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

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26 Jan 2009

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

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12 Jan 2009

Conservatives set out next generation broadband views

Building on Conservative Party Leader David Cameron’s commitment to broadband earlier in the week, last Friday Shadow Culture Secretary Jeremy Hunt set out the Conservative Party’s views on next generation broadband.

The main commitment in Hunt’s speech was to re-iterate Cameron’s commitment to bring next-generation broadband to the majority of the population within five years, and to provide near-universal coverage as soon as possible after that.

Hunt went on to say that deployment should be market-led, and that the role of the public sector was as a facilitator of investment. In conjunction with their broadband policy, the Conservatives will conduct a review of the creative industries, details of which will be released soon.

The full speech is available here.

Peter Shearman, Policy Manager, BSG

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07 Jan 2009

Broadband – flavour of the month

It may have been the holiday season, but broadband was rarely off the news cycle in one form or another, so here’s a round-up of some of the most interesting stories from the Christmas period.

Most interestingly, David Cameron yesterday committed the Conservatives to fibre optic ‘high speed broadband’ for the majority of the population within five years, and, ‘to as near as possible, universal coverage within ten years’. A bold promise, although we are still waiting to see the detail of this policy. This followed Gordon Brown suggesting in an Observer interview that high-speed broadband could play a similar role to investment in infrastructure during previous recessions. Prior to this, also in the Observer, Professor Christopher Bishop, chief scientist at Microsoft Research Cambridge had suggested that the government could ‘do no better than rewire the nation with fibre optics’ if it was looking for an infrastructure project to stimulate the economy.

At the same time, we were given an indication of what could be included in Stephen Carter’s Digital Britain report. In an article in The Times, a universal broadband service of 2Mbps was suggested, alongside a comprehensive reform of the existing universal service obligations. Carter’s interim report is due to be published this month, with the full report later this year.

Gordon Brown wasn’t the only global leader to reference broadband over Christmas. President-elect Barack Obama spoke of his plan to provide a stimulus to the US digital economy, including improving broadband and increasing take-up. He described the US performance on broadband as ‘unacceptable’.

Staying in the States, the Recording Industry Association of America has decided to abandon its strategy of suing individual downloaders of copyright material. Instead it will adopt a more constructive approach, working with ISPs to identify those who upload copyright material in a move similar to the approach being taken in the UK.

Coming back to the UK, Culture Secretary Andy Burnham made headlines with an interview in the Telegraph in which he suggested that cinema-style age ratings could be applied to the Internet, and said he wanted to work with Obama’s administration to develop international deceny rules for English-language websites. This has caused an interesting debate to occur, with many comment boards filling up in response, and the majority not in favour.

Finally, fulfilling one of the recommendations of the Caio Review, the Valuation Office Agency set out how it will rate fibre in next generation broadband deployments. This is a timely clarification by the VOA, and although containing few surprises, helps to remove some of the uncertainty facing potential investors in NGA.

Peter Shearman, Policy Manager, BSG

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15 Dec 2008

NGA underway in the UK

Virgin Media today announced that they are offering a 50Mbps service to 5m homes on their network, with plans to offer the service to their whole network of 12m homes by Summer of 2009.

The BSG has issued a statement welcoming this announcement. The next generation broadband debate has now moved from the realms of theory to reality. How this service impacts on the market will be a key indicator of the likely deployment of next generation broadband more widely in the UK.

Focus will now be on the success and take-up of this service, and the responses of other market players.

Peter Shearman, Policy Manager, BSG

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15 Dec 2008

BSG welcomes Virgin Media launch of 50Mbps service

BSG welcomes Virgin Media’s announcement of its new 50Mbps service, currently available to 5m homes on the Virgin network. This is the first major commercial rollout of next generation broadband, and represents a significant step in the development of the UK’s knowledge economy infrastructure.

Commenting, Antony Walker, CEO of the BSG said, “This is a very significant development in the context of next generation broadband deployment in the UK. Over the last two years the debate has moved on significantly, and this last year has seen intentions to deploy expressed by both Virgin Media and BT.

“With the launch of this service, Virgin have moved the debate on again. The impact this service has on the market will tell us a lot about how next generation broadband will develop in the UK.???

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12 Dec 2008

iPlayer Day

To celebrate the iPlayer’s first anniversary since its soft launch, the BBC’s Internet blog has been blogging on a variety of iPlayer issues for iPlayer Day.

The blog has produced some interesting discussions, particularly their developments for delivery on multiple platforms, such as games consoles and mobiles as well as over broadband and cable networks. It was interesting to note that views over Virgin Media’s cable service accounted for a third of all iPlayer programmes viewed in September.

iPlayer has had a successful first year, with over 180m programmes watched. It has not been without controversy, however: data from one ISP suggested that iPlayer was responsible for 5% of all traffic on their network, and the BBC came under increasing pressure for its impact on ISP and consumer costs.

The debate about the impact of iPlayer on the network seems to have calmed down (or perhaps it is just simmering under?). Either way, it is here to stay, and perhaps its continued popularity will catalyse further debates that need to be held across the value chain.

Peter Shearman, Policy Manager, BSG

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04 Dec 2008

The role for public sector intervention in next generation broadband

Ofcom’s Super-fast broadband blog recently raised the issue of ‘when and where?’ public sector intervention in next generation broadband would be required. This is a key issue, and something that the BSG has examined.

The BSG’s position has been, and continues to be, that next generation broadband deployment in the UK should be market-led. The market is most likely to achieve efficient and timely investment. This said, there will likely be a role for public sector intervention in the future, such as there has been to date, for example in South Yorkshire.

What is important to remember is that next generation broadband is very different to first generation broadband, in this instance for two key reasons: the length of time required for deployment; and the magnitude of the costs involved.

Deployment could take many years, particularly if FTTH was deployed, and so it could be 5 or 10 years, or more, before the market has finished its deployment. This is significantly longer than first generation broadband.

Therefore, the question we need to ask is this: can we afford to wait this long before addressing areas the market doesn’t reach? Given how quickly the digital divide has developed since the deployment of broadband (not yet 10 years old), it would be difficult to see how this would be acceptable.

The costs involved also change this debate. We can be more certain about where the market is likely to deploy to – we recently published a report showing how the costs breakdown across the UK, and how the deployment costs increase as you reach more rural areas. We also have experience from first generation broadband, and know where those places are that were the last to receive broadband, or still cannot access it.

Given what we know, we need to have the debate about how we bring superfast broadband to those areas unlikely to be covered by commercial deployment. This is not to say that the government should write a cheque – this is not necessarily the way forward at this time. But thought needs to be given to finding creative solutions to address the looming digital divide on the superfast-broadband horizon.

Peter Shearman, Policy Manager, BSG

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01 Dec 2008

Obama and the growth of broadband

Much has been made of Barack Obama’s successful use of the Internet in organising and coordinating his campaign, and in engaging (and soliciting donations from) his supporters, with many refering to him as the first candidate to successfully do this.

This is true, but it is worth remembering that he and John McCain were the first candidates with this opportunity. Currently, the US has 64% household penetration of broadband, which is sufficient critical mass for an organisation like Obama’s to flourish. However, in previous election years the same statistic was at 25% (at the start of 2004) and 0.25% (at the start of 2000).

Broadband growth has been exceptional, in the vast majority of markets. Growth has generally been faster than the mobile phone experienced, the spread of PC usage in the home, or even the take-up of tv. That broadband has been one of the fast growing trends in recent memory is worth remembering if the pace of the debate around many of the issues today feels slow – keeping up with such a fast-moving trend provides many challenges.

Obama made excellent use of broadband during the election. However, his extensive network may now be causing his transition team some problems. Apparently 290,000 applications have been received through his change.gov website for the 8,000 posts available, with the number of applications expected to rise to 1m by January.

By comparison in 2000, George W. Bush received just 44,000 applications. And this doesn’t include the bombardment of Obama staffers’ email accounts or social networking profiles. Information overload, perhaps? Sounds like a familiar debate…

Peter Shearman, Policy Manager, BSG

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07 Nov 2008

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

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