Democracy in action

Oh boy, talk about a blood bath…  As if the temperature in Committee Room 15 wasn’t high enough, yesterday’s meeting between the Public Accounts Committee (PAC) and interested parties in the BDUK fiasco generated a good deal more heat than light.  The Committee Chairwoman, Margaret Hodge, was her usual combative self but the other members of the PAC were equally belligerent in their interrogation of the apparent villains in the affair – BT and the civil servants.  The questioning of BT was particularly aggressive, poor old Sean Williams (Group Director Strategy, Policy and Portfolio) having to retain his sangfroid while BT was accused by Malcolm Corbett of acting towards broadband competitors like a “vampire death squid, lurking in the depths, waiting to gobble them up and destroy them. 

Predictably, Williams dismissed most of the flak as unfounded allegations but I was massively impressed with his ability to remain cool and collected under intense questioning.  OK, many of his responses may have amounted to ‘I see no ships’ but he never once ducked against any of the allegations levelled against BT, some justified, others less so. 

As regards DCMS, the meeting recorded a big vote of confidence in Maria Miller, who Nicholas James, (Chief Executive, UK Broadband) described as genuinely keen to foster more competitive outcomes in the BDUK process. The same could not be said for the two civil servants ‘on trial’ - Sir Jonathan Stephens (Permanent Secretary) and Jon Zeff (Senior DCMS Officer), who were accused by Hodge of working in a parallel universe. Their mauling by the committee was relentless but it did at least produce one credible action point: that BT’s planned speed and coverage maps for each local authority contract area should be published – not clear by whom – allowing potential suppliers to address the residual 10% of homes. 

Other than that, the main value of the meeting was in seeing the ‘bad guys’ being hauled over the coals.  Anyone else who relishes seeing them receive a ‘damned good thrashing’ should exercise their democratic rights here.  Enjoy!

Life in the fast lane

It’s quite a while since I last mentioned the thorny topic of net neutrality.  Then as now, however, my view has been that the internet is a quirky (‘two-sided’) economic beast and that the emergence of alternative charging models was both inevitable and welcome – particularly at a time when parts of the internet value chain are facing new costs to upgrade capacity.  It therefore came as little surprise to hear that John Malone, the ‘born again’ cable mogul, is involved in just such a paradigm shift between major content owners and some broadband carriers …. 

According to a recent report in the Wall Street Journal, Malone is urging the US cable operators to act collectively in order to flex their muscles in dealings with the content owners – notably Netflix and YouTube (who together account for roughly 50% of peak-time broadband traffic).  Apparently, Malone’s vision of the future is a world in which consumers are able to buy tiers of broadband connectivity bundled to ‘various levels of access to over the top video services’. 

Clearly, the implication is that content owners would have to pay towards the cost of network capacity, a development that has been anticipated elsewhere but thought not – by me, at least - to have been effected.  However, and again according to the WSJ, such arrangements  already exist, leading Web suppliers such as Microsoft, Google and FaceBook paying the broadband providers ‘to get faster and smoother access to their networks’.

The article confirms that this sort of arrangement, content owners paying for enhanced network delivery, is legitimate under the FCC’S ’open Internet’ rules but would the same apply in Europe – where the net neutrality debate has been a little more opaque?  Happily, Neelie Kroes provided the answer last month in an interesting speech entitled "The EU, safeguarding the open internet for all".  It contained a number of proposals, including the following:

“First, we should allow innovation. The new services round the corner depend not just on content, but on high-quality connections...If someone wants to pay extra for that, no EU rules should stand in their way; it's not my job to ban people from buying those services, nor to prevent people providing them. If you don't want to buy them that is also fine, and you should absolutely continue to benefit from the ‘best efforts’ internet".

With a green light as clear as that, how long before we see two-tier internet delivery in the UK?

Lessons across the pond

Potentially a very big subject this, but I just wanted to mention a minor spat that erupted  recently over differences in broadband policy between the US and the EU… It probably kicked off when Susan Crawford, arch critic of the US broadband duopoly, promoted her latest book with statements like this:

“Investment by the incumbents is shrinking, competition is non-existent, America is falling far behind other developed nations, prices are high, and we have no path to the fiber upgrade the country desperately needs”. 

Unsurprisingly, the incumbents hit back.  David Cohen of Comcast posted this comment last month: 

“82% of U.S. homes have access to speeds in excess of 100 mbps, while in Europe, only 2 percent of the population has access to these speeds… No wonder Neelie Kroes, a senior European Internet policymaker, declared that Europe "needs to catch up," citing the United States as a model”. 

That 2% claim for European access to superfast broadband is of course completely wrong: reliable research confirms that the actual figure is twenty-times that figure.  Nonetheless, a similar statistic was trotted out out very recently by Lowell McAdam. CEO of Verizon: 

"More than 80% of American households live in areas that offer access to broadband networks capable of delivering data with speeds in excess of 100 mbps…Contrast this with the European Union, where innovation and investment in advanced networks have stagnated under an onerous regulatory regime… and where today only about 2% of households have access to broadband networks with 100mbps-plus speeds". 

Well, apart from reiterating the fallacious 2% for Europe, Mr McAdam now talks about US networks capable of delivering 100 mbps, not those necessarily doing so.  As others have pointed out, this US/EU comparison essentially boils down to the different coverage figures for cable technology – and has little or nothing to do with ‘an onerous regulatory regime’.

However, while the quoted statistical claims are simply untrue, I’m inclined to go along with some of McAdam’s other comments, e.g. 

“…European regulators have adopted policies that generally limited network infrastructure deployment to a single facility in a given country or region. Other companies were allowed to ‘resell’ broadband services to consumers, but only if they used the same infrastructure. This ‘retail’ competition resulted in prices that may have covered the costs of operations but left little capital or other incentive for companies to invest in improving these networks”. 

But on the bigger question of whether/how regulation suppresses investment, I leave the final word to a far more authoritative voice: 

“Both AT&T and Verizon proffer Europe as an example of a region that lags in broadband deployment because of overregulation.  Contrary to [the] Bells’ claims, sensible regulation targeted at bottlenecks does nothing to disincentivize network investment. That is the lesson from Europe and the USA”.  

Those words of wisdom come courtesy of Sheba Chacko, Head of North American Regulation for BT.

Train crash? What train crash?

Like so many industry commentators, I’ve been very critical in the past of the whole BDUK process for the distribution of broadband subsidies.  More recently, much of this technocratic criticism has been refocused to question the government worth of DCMS and the political future of Maria Miller herself.  While I take a modicum of credit for anticipating this sorry state of affairs, I have to recognise that others were there well before me.  In particular, I’d like to acknowledge the prescient commentaries of Philip Virgo in his IT/political blog.  As far back as January 2012 he was predicting the fiasco that was likely to ensue from DCMS oversight of a flawed broadband model – while still showing some sympathy for the enormity of the task..

In his blog of 4^th January 2012, Virgo anticipated the almost inevitable fiasco with what is alleged to be a Civil Service Staff College Case Study sent to him by a senior Whitehall Mandarin.  I apologise to those of you who may have seen the supposed Case Study before, and for its length, but - eighteen months on - I think it’s well worth another look… 

The scene

You are Head of Broadband Stuff at the Ministry of Entertainment, sitting in your office one day, idly wondering whether to spend the weekend with Fiona Bruce or with the Duke of Cambridge's mother-in-law, when the door slams open and in strolls The Boss (en route to lunch at the Savoy).  "Here's 10p" he says.  "Everyone is to have 100 Megs by Thursday".

"Right Boss", you say.  "I'm on the case".

You ponder for a bit and then you call Malcolm Corbett, because you've heard he's something to do with broadband.  "Malcolm", you say, silkily.  "I've got 10p for you and I want you to fix us up with broadband stuff.  100 Megs for everybody by Thursday.  Can do?"

"Well," says Malcolm.  "I'd like to, but the trouble is, I've got all these tiny projects and 10p won't go very far.  I really need a quid."

At that you blanche (because you suspect The Boss is spent up on film studios and museums and broadcasting "Strictly" and throwing the javelin in 2012 and other vital stuff).  So you promise to let Malcolm know and ring off.  More pondering and then one of your team lifts his head from the Guardian crossword and suggests that you might get some advice from BT.  "Good thinking," you say and call Ian Livingstone.  "Ian", you begin.  "I've got 10p and if you promise to give everyone 100 Megs by Thursday, it's yours!"

Ian pauses for a couple of seconds before he replies.  "Well," he says, thoughtfully.  "I admit I've got a bit of a problem with my pension fund and Openreach is certainly in need of some support.  So - yes - send it over and I promise to accelerate our existing hyper-speed programme that has been covering 125% of the country since 1991, even though there is no demand and the technology isn't ready and which makes UK the best country in the whole world for everything thanks to BT."

"Great," you reply, and hang up.  "Chaps;" you say, interrupting your team's focus on the latest syllabus for Theatrical Studies and Asian Dance in All Schools.  "I've just done a deal with BT and they'll give everybody 100 Megs by Thursday, so long as I give them our 10p."

One of the guys looks up from his papers.  "Isn't that a bit dodgy?" he asks.  "Won't The Boss be a bit nervous about lack of competition and Brussels and all that stuff?  And won't the small players get upset at being left out?"

But another of the guys also looks up.  "How about divvying up the 10p among County Councils and letting them take the flak?  Only a few of them know what they're doing and so you can give them a bit of guidance, nudge-nudge.  They'll run some sort of competition but end up giving their share to BT anyway.  Takes the heat off you, let's them feel they're in charge - doing Big Society stuff - and you can tell The Boss that the job's done so far as you're concerned and that Dave will be happy."

"Sounds good," you say.  "But hang on, what if there's some more money from somewhere else in government?" 

At this, everyone looks confused.  Even a bit shocked.  "But that's nothing to do with us," somebody says.  "That's their business.  DEFRA and BIS and things.  You'll be talking about joined-up government next!"

"True" I murmur, settling down to think about Fiona Bruce again. 

But not for long.  There's a tap on the door and in marches Neelie Kroes and Malcolm Corbett.  You suspect that your day is only just beginning.

Your Task

You are to produce a comprehensive, funded, broadband implementation plan for the whole of the UK that is: future-proof; exceeds EU targets; based on either infrastructure or service competition (or both); sustainable; attracts maximum private investment, and rewards innovation.

=================================

Exactly.

Great minds thinking…

I don’t know why but I find myself surprised – and a little excited - whenever I see something in the press that echoes one of my own stories.  Like a little boy, I want to put my hand up and shout out: “Sir!..., Sir!, I wrote that in my blog last year!” Well, you can imagine my reaction when I recently spotted not one but two such reports…  

The first was another reminder that the explosive growth in mobile data relies very heavily on capacity provided by fixed networks. My piece last November used new data from Ofcom’s Infrastructure Report to show that the volume of data flowing on fixed lines is roughly 24-times that of the mobile networks.  The more recent – and rather more interesting - perspective on this issue comes from a chart in a WIK presentation recently reviewed by Fiber Revolution.  The chart shows an international comparison of the proportion of mobile data traffic that is offloaded to Wi-Fi networks. The conclusion drawn from this is striking, i.e. 

 “Basically, only a quarter to a third of the data traffic consumed by mobile devices is actually delivered over mobile networks (except in Japan and India where it’s half)”. 

The second instance of look-alike coverage concerns the government’s proposed spend on the HS2 rail project.  Way back in March 2011, I merely observed that this planned spend, £33bn, was more than enough to provide point-to-point fibre to every household in the UK - the deluxe broadband option (estimated by Analysys Mason to cost less than £29bn).  In fairness, the updated version of the same comparison, provided by Nesta, does a much better job.  Nesta argue, pretty convincingly, that the broadband option would not only be cheaper but achieved faster and capable of delivering greater economic benefit… 

So, OK, it’s always possible for subsequent coverage to buff up the prose or to refine the analysis:  but I just remind myself that this is, after all, ‘the sincerest form of flattery’!

Some old, familiar tunes

Still trying to catch up with the last month’s news, I’ve only just got around to looking at the widely reported criticisms, by the Public Accounts Committee (PAC), of the government’s handling of major infrastructure projects – including the various broadband funds administered by BDUK. Primarily, the PAC berates the government’s National Infrastructure Plan (NIP) for being merely ‘a list of projects’, rather than “a real plan with a strategic vision and clear priorities“(phrases which will be all too familiar to Members of the House of Lords’ Select Committee on Communications).  However, it was another of the PAC’s observations and suggestions that I thought particularly apposite; there are only five Recommendations in total, and I think it’s worth quoting this one in full. 

“Investors must accept some degree of transparency over their costs, risks and rewards in delivering infrastructure projects given that the costs of government support will ultimately fall on taxpayers and consumers.  Most economic infrastructure investment takes place in a private sector market where investor returns are often supported by government and households bear the costs of infrastructure in their bills. In return, investors should provide sufficient information to show that their returns are reasonable and that any government support is justified. The Treasury should require investors to supply the information needed to facilitate this transparency and should reserve the right to audit such information”. 

For ‘investor’ in this context, indeed sole commercial investor, please substitute BT and its role in the BDUK affair.  Now, I nearly said ‘fiasco’ there but I know that wouldn’t be right because, as Ed Vaizey assured us all on 18^th April: 

 “It just so happens that BT has won the [rural broadband] contracts, and I reject the suggestion that it is behaving like a monopolist. We are getting value for money for our contracts, and BT is a great British company doing a great job for Britain.” 

Followers of Ian Grant will recall seeing that Vaizey quote in Ian’s original story of 22nd April.  The relevance of the PAC recommendation (above) to BT’s legitimate expenditure (and return on investment) is detailed in Ian’s reports on the variously reported costs of BT’s new, FTTC street cabinets – on 16th April and earlier.  Can we really ask ‘a great British company’ to provide (audited) justification of its costs…?

Confusion reigns

Out of the loop for quite a while, I return to find a comment in the press that rather shakes my confidence.  The article itself, in ‘Think Broadband’, is one of several to record how advances in vectoring techniques have allowed BT to increase the potential speed of its ADSL offering beyond 80 Mbps – possibly up to 100 Mbps.  The subsequent comment from a reader, ‘New_Londoner’, included this: 

“I presume those that keep pushing the "FTTC is a cul-de-sac" line will be feeling more than a little foolish”. 

Now let’s be clear about this: my technical knowledge of broadband systems is virtually zero.  I rely on others to tell me what the alternative technologies – specifically, fibre to the home and BT’s FTTC alternative – can and can’t do.  For example, I’ve relied heavily on the House of Lords Communications Committee pronouncements last year on the preferable technology for the future: 

“We anticipate and recommend that policy should ultimately be directed towards universal, point-to-point FTTP as this is a technology not only able to accommodate current demand, but at current rates of growth, will be able to accommodate the UK’s bandwidth demands for many decades to come”. 

The same committee argued against BT’s FTTC technology on the basis that it both precludes full physical unbundling, thus limiting the scope for service competition, and that it may frustrate the upgrade path to fibre, i.e. 

“Critics of FTTC argue that while FTTC is cheaper to install in the short term, it may prove more expensive in the long run to upgrade FTTC to FTTP”. 

All of that sounds like a resounding ‘No’ for FTTC but I’m bound to wonder whether that conclusion still holds.  Can anybody help?