Non-BSG reports

Europe-wide survey shows bundling trend and growing appetite for switching

New data was released last week in the European Commission’s latest E-Communications Household Survey, which contains the results of questions put to consumers in member states on areas ranging from the quality and different types of telephone and internet access, penetration of communication service packages, sensitivity to connection speed, affordability and the transparency of communication service pricing.

The headline on bundling is that 45% of EU households purchase a bundle of communication services, a proportion that has risen continuously over the last few years, with the Internet the service which is most likely to be purchased as part of a bundle. Bulgaria (+13) and Luxembourg (+13) saw the greatest increases in bundle purchases. Making up that 45% figure includes triple-play penetration at 16% and quad-play at 3%. (more…)

BitTorrent use drops as innovations in Video-on-Demand re-shape traffic stats

Consultants Sandvine published a report last month observing an emerging pattern that many suspect will become the norm in consumer traffic habits. That is that the use of BitTorrent – the practice of peer-to-peer file sharing, and the protocol often associated with the illegal download of copyrighted material – is waning. In the words of the authors, “We believe as more over-the-top Real-Time Entertainment (RTE) sources are made available to subscribers in the future, the rate of decline in share will begin to accelerate.???

As the report highlights, Netflix’s market leadership in RTE continues to dominate the American market, accounting for almost a third of peak downstream traffic on fixed networks, with share on mobile doubling in the last year. Elsewhere, YouTube is still the largest single source of RTE traffic on both fixed and mobile – yes, YouTube is still the leading source of Internet traffic in the entire world.

The report considers global trends, but I have picked out a number of highlights relevant for the European market:


The curious and ongoing case of national fibre strategies: BSG review recent Arthur D Little report

A recent paper from Arthur D Little has aimed to shed further light on the global conundrum that, despite a number of great macro-economic justifications, private industry has struggled to make the case for national fibre strategies. National Fibre Strategies: National economic imperative or just another private industry task?, presents five models for national fibre strategies, looking at the relationships between very fast speeds, productivity and innovation. The report does not claim to have cast light on causal relationships, but nevertheless its claim that increasing home speed broadband by 1Mbps increases household income by an average of $100 per year is a powerful one. (more…)

New report calls attention to the offline populace

Just over a week ago the National Audit Office published Digital Britain 2: Putting users at the heart of government’s digital services. Its authors looked at the progress being made with the Government’s ‘digital by default’ agenda for public services. Today we see that it has been taken up for further inquiry by the Public Accounts Committee, indicating that this agenda will continue to receive further scrutiny from various quarters and will have to address the significant numbers of people who cannot, or do wish to, go online. (more…)

Lords publish report on Media Convergence and ‘the elephant in the room’

The Lords Select Committee on Communications has published its report on Media Convergence yesterday, after months of evidence sessions with some of the big hitters from the media world (including our very our Chair Richard Hooper). The report is available here with accompanying information here.

The Chair of the Committee, Lord Inglewood, commented on the report that “The elephant in the room has been the impact of technological change – the Internet. Sitting over most of the media we consume is a complicated framework of rules and regulations. These are supposed to make sure the content the UK public engages with meets their expectations. However, the simple days have gone.???


National average fixed download speed reaches 12Mbps

Last week saw the release of Ofcom’s bi-annual UK fixed-line broadband performance from November 2012, which gave latest figures on residential speeds across ISPs. Much of the recent coverage (including in the Telegraph, BBC and Cable) has focused on the surge in speeds over time, with the main headlines being that the average fixed download speed was 12.0Mbps. This figure was 34% higher than the 9.0Mbps from six months prior, and a whopping 234% faster than the 3.6 Mbps average in November 2008. (more…)

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.