Crisis….what crisis?

I wrote recently about the ‘Connecting Europe Facility’, previously earmarked for the subsidy of new broadband networks, and the news that this source of European largesse had been more or less wiped out by enforced EU budget cuts,  I was rather surprised to see that what I saw as a passing reference was cited in so many subsequent articles – as if the Brussels fund was the only and last source of broadband investment.  I have since noticed that, on the contrary, there is still plenty of money being ploughed into the networks of tomorrow.  The EU itself has reportedly set aside €700 million in grants over the next five years to develop so-called ‘5G’ wireless technologies; perhaps more surprisingly, the (relatively) new French government appears to have pledged £17bn for deployment of a national superfast broadband network.

These developments may bring little cheer to aspiring communities in the UK’s ‘final third’ but the good news has to be that, whatever its form, the importance of new investment in Europe’s digital infrastructure has at least been fully recognised.

Comfort crumbs

There’s been much moaning and gnashing of teeth this week because EU budget cuts have slashed the Connecting Europe Facility (CEF), some €9.2 billion of which was previously earmarked for subsidising superfast broadband networks in member states.  No one likes to lose a potential hand-out but I do wonder whether largesse from Brussels is the best funding model for the UK’s broadband development.  For similar reasons, I’ve always had some reservations about the abstract performance targets set by the Digital Agenda. 

This touches on a difficult debate: should broadband provision be driven by what’s technically possible or by what’s envisaged from current needs? In the language of elementary economics, are we talking about ‘supply-push’ or ‘demand-pull’?  I freely admit that I’ve long been an advocate of the former: let’s build networks now that are resilient enough to cope with unforeseen demand. But there’s a good argument, too, for linking broadband objectives to some kind of long-term view of the type of network provision that makes sense as an aspiration for the market in question.  This was a central argument put forward in last year’s report by the House of Lords Select Committee on Communication, ‘Broadband for all - an alternative vision’: 

“In this report, we propose an alternative vision for UK broadband policy, which, rather than being target driven, makes the case for a national broadband network which should be regarded as a fundamental strategic asset, to which different people can connect in different ways according to their needs and demands”. 

Is there a risk that this ambition of ‘knowing where we’re going’ might be harder to maintain if both the performance metrics (targeted download speeds) and network funding (subsidies) originate outside the UK?  Or am I just making the best of bad news?

The right knight?

Fascinating to see reports that Liberty Global, the US-based cable company, may be about to bid for Virgin Media.  Having swallowed all its UK counterparts to become this country’s sole cable operator, Virgin seemed to lose some of its testosterone.  While it may be winning on the technology front, it often seems that Virgin fails to punch its weight in other battles – either against its formidable rivals, BT and Sky, or against some of the dafter ideas of the industry regulator.  Liberty’s chairman, John Malone, is well known for being a feisty character, not least in his former confrontations with Rupert Murdoch.  He just might be the man to help raise Virgin’s game.

Brightening the gloom…

The current financial press is of course full of recessionary woes, this week’s news about the likely demise of Blockbuster just the latest in a series of blows to the UK High Street.  Sooner or later, this chill to the retail sector is bound to have an effect on upstream investment, not least in the telecoms sector.  This may be the explanation behind the recent story in 'Wired' magazine that Verizon and AT&T have apparently suspended their investment in deployment of new fibre networks.  Interestingly, the same source contrasts these moves with the continued network expansion by Google:

“..Google saves money on its deployments in various ways, such as piggybacking on existing power line infrastructure and building its own network gear.  [Also] by encouraging people who want home service to get their neighbors to sign-up in advance, lowering the risk of deploying to a particular neighbourhood…”

 

It’s good to hear that these cost-saving ideas, well rehearsed on this side of the Atlantic, have been successfully put into practice. On the revenue side, financial prospects would no doubt be further enhanced if ISPs were free to offer tiered levels of internet service, the sort of customer segmentation widely seen in other retail markets.  Hitherto, many have assumed that regulators would not permit this sort of pricing freedom, judging it to be contrary to the celebrated principles of 'net neutrality'.  There was therefore considerable surprise this week when Neelie Kroes, no less, appeared to challenge that assumption.  Writing in the French newspaper, Libération, she is reported as saying that telecoms providers should be able to sell access to the internet at varying speeds and with differing download limits. Because this appeared to represent a change in the Digital Commissioner’s stance, her official spokesman later clarified these statements:

 

"Neelie Kroes supports people having real choice over their internet subscription. That absolutely includes a right to choose full internet service, but if an operator wants to sell you a basic package for a lower cost, and you want to choose that because it suits your needs or if you have a limited budget, then what is the problem with that?” 

So, a glimmer of light…

 

Christmas list from Ofcom

“In many ways, infrastructure underpins the other elements of the value chain – it enables content and service delivery and as convergence continues it is increasingly relevant to a wider range of devices…” 

It’s so refreshing to read these words, particularly when they come from the industry regulator.  Ofcom’s draft Annual Plan, for 2013/14, published just before Christmas, includes this statement in its commentary on the continuing evolution of the communications environment.  As in previous years, however, Ofcom remains reticent about its precise role in the development of the country’s broadband networks - it is not until the document’s focus on ‘emerging issues’ that we find the following: 

“Another potential work area may be to continue to advise or to provide our expertise to the Government in meeting its targets for UK broadband and superfast broadband coverage”

If Ofcom seems a trifle lukewarm about this potential involvement, I was nonetheless gratified to read that it anticipates doing more in relation to the resilience of our public networks:

“To date our activity has focussed on ensuring that the largest communications providers can demonstrably follow industry best practice. However, as communications services become increasingly important to consumers, citizens and the economy, there may be increasing calls for Ofcom to adopt a more proactive role, beyond our regular infrastructure reports, in securing a resilient critical national infrastructure”

This heightened awareness of network security is well taken: as the ‘Digital Britain’ report noted in 2009: “sudden removal of communications would not only bring business and commerce to a halt, but also our traffic, public services, finance, energy supply and much of our personal interaction.”

Happy New Year, Mr Vaizey

Not for the first time, Telecom Pete finds himself behind the times.  My fascination with the idea of 'the redundant telco' and the rivalry with local authorities to provide ultra-fast broadband access turns out to be an old story in the US.  By way of example Susan Crawford, well-known advocate of the ‘local access as public utility’ school, tells the tale of the struggle to establish a municipal fibre network in Lafayette, Louisiana:

“Push-back from the local telephone company, BellSouth Corp., and the local cable company, Cox Communications Inc., was immediate. They tried to get laws passed to stop the network, sued the city, even forced the town to hold a referendum on the project - in which the people voted 62 per cent in favour. Finally, in February 2007, after five civil lawsuits, the Louisiana Supreme Court voted, 7-0, to allow the network….” 

The conclusion Crawford draws from this and similar experiences is perhaps predictable: 

“All Americans need high-speed access, just as they need clean water, clean air and electricity. But they have allowed a naive belief in the power and beneficence of the free market to cloud their vision”. 

Not sure I totally buy the ‘naïve belief’ accusation but there’s certainly something here to trouble our own government’s thinking on broadband development.  Discuss.

The redundant telco?

A couple of months back, I relayed the story of a 'perfect storm' in Birmingham, where BT and Virgin were attempting to block the Council’s attempt to develop, independently,  a new superfast broadband network in and around the jewellery quarter of the city – the development funded by the government’s ‘Super-connected Cities’ project.  I’ve heard no more about that impasse but it occurred to me that, as the penetration of fibre networks grows, and broadband speeds head from famine to feast, our ISPs will increasingly lose what may be their major source of differentiation.  This certainly appears to have been the case in the US where a number of university towns, including Chicago and Seattle, are partnering with a venture capital operation called Gigabit Squared in raising the money to construct new ‘ultrafast’ networks (comprising FTTH and wireless solutions).  Following the deployment of its fibre network in Kansas City, Google is similarly looking to work with municipal partners in other areas.  

This new, non-ISP model appears to have been generally well received by users.  As one commentator put it: “our problem with broadband is not with technology - it is because the networks are too often accountable to entities outside the community - Wall Street most notably”.  And the views of the ISPs themselves?  Well, short of the sort of legal intervention attempted here by BT and Virgin, it is not at all clear how they can - or should – respond…