Hold the Champagne, boys…

Great news this month that every EU household now has access to basic broadband!  Well, that is if you include satellite coverage - which we didn’t before.  As Neelie Kroes says: 

“The EU is technology neutral, but for those in the most isolated areas, satellite is a good option to stay connected; and it's likely to remain so… Thanks to the extra coverage provided by satellite broadband, we have achieved our 2013 target of broadband for all. That's a great result for European citizens” 

As a reminder, ‘basic broadband for all’ was the first leg of the Digital Agenda for Europe (DAE) targets, i.e. 

·        Basic broadband (0.5-4Mbps) for all by 2013;

·        Next Generation Networks (30 Mbps or more) for all by 2020;

·        50% of households having 100 Mbps subscriptions or higher 

In the absence of satellite coverage, however, there is still some way to go before fixed networks of acceptable quality reach 100% of the population (the Universal Service Commitment in other words)..  At an EU level the same Press Release claims that fewer than 4% of citizens are denied access to fixed broadband but data released by Ofcom last week show that the equivalent UK figure is now hovering around 8%, i.e. 

Percentage of connections receiving

less than 2Mbit/s (June 2013) 

England                            8%

 

Scotland                            8%

Northern Ireland                12%

Wales                                12%

Total UK                          8% 

The good news is that these percentages have been falling pretty steadily over the past two years: the less positive story is that getting the figures down to zero may be more challenging than expected. We tend to assume that ‘citizens’ who have access to even relatively modest broadband improvement will grab it with both hands but the Ofcom Infrastructure Report suggests otherwise: 

“There are consumers on these slow lines who are in postcodes where NGA networks are available and, by upgrading their service, could receive much higher speeds.  When slow lines in postcodes where NGA is available are excluded, the percentage of connections operating at below 2Mbit/s reduces from 8% to just 3%”.  

Who are these people?  Why put up with an inadequate broadband service when a much better alternative is readily available?  Or is the real problem one of in-home wiring?  Whatever the reason, it’s evident that upgrading the infrastructure is only part of the battle.  Going back to Neelie’s Press Release, she was clearly wise to frame her celebration in terms of digital potential, i.e. 

“My motto is Every European Digital – now every European genuinely has the opportunity. We have more to do to improve networks and equalise the opportunity, but the opportunity is there.”

The levers of competition

In the classic debate about the most efficacious form of competition, infrastructure versus services, there was new evidence of support for both camps this week… 

First, for believers in service competition, who better to champion that cause than Dido Harding, CEO of TalkTalk?  Giving evidence to the PAC inquiry into the performance of BDUK (on 17th July), she said this: 

“I think that the infrastructure build is a natural monopoly…It’s the retail competition that really matters in this market” 

To be fair, Dido was speaking mostly about the copper broadband market but her emphasis on retail competition was borne out by the latest ITU rankings for Information Society performance. Helped largely by its intense retail competition, and correspondingly affordable internet access, the UK moved up from 12^th to 8^th in the ITU’s international league table.  

Speaking at the same PAC meeting in July, Nick James, CEO of UK Broadband, outlined why his own company had decided not to participate in the initial round of BDUK funding.   He cited the familiar explanations that the original BDUK funding areas had been too small and that BT had failed to identify the residual 10% for potential altnet coverage.  But what he had to say about infrastructure options was perhaps more enlightening.  The initial rules of the ‘competition had disallowed fixed wireless technology, thus excluding two potential bidders.  He went on to explain that, more significantly perhaps, the BDUK decision to reduce target superfast coverage from 100% to 90% had effectively played into BT’s hands: by allowing the feasibility of a single technology option, BT’s FTTC network, BDUK effectively removed the technology advantages an investment consortium could offer.  As he said: 

“Bidders planning to supply 100% [coverage] were disadvantaged against BT; the advantage a consortium could bring disappears…We were going to use a mix of technologies in order to get 100%: if you deploy multiple technologies, you can do more for less money…” 

This week’s hastily convened meeting by BDUK to discuss possible approaches for tackling the ‘final 10%’ may have proved to be something of a non-event but it did set out with the appearance of an open mind on the technology options – and the meeting’s invitation was extended to various wireless operators.  It remains to be seen whether these different technologies play any part in government-supported deployment of superfast broadband but there must be a realistic chance that the task will involve some kind of consortia – possibly including BT.  But in response to the Dido Harding camp, at least one thing is certain: the challenge of the final 10% cannot be met by retail competition.