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.