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?

Small is beautiful (maybe)…

I think it’s fair to say that Ofcom takes considerable pride in its efficiency and value for money.  To quote from the Draft Annual Plan for 2013/14: 

“…Ofcom has responded to the wider challenges facing public expenditure by reviewing how it delivers effective, targeted regulation in the interests of citizens and consumers, while maintaining value for money for its stakeholders” 

This value-for-money narrative goes back to the period just after Ofcom’s formation in 2003 when the new organisation argued – with some success – that its economies of scale allowed it greater efficiency over the combined cost of its constituent sectoral regulators – Oftel, the ITC, the Radio Authority and the RA.  But is it possible that an entirely different regulatory construct could prove even more effective?  That may be an implication of a recent paper by the Scottish government entitled Economic and Competition Regulation in an Independent Scotland.  In essence, the thesis here is that a combined economic regulator for Scotland, covering all utilities, transport and communications industries would provide both a better focus on Scottish concerns and do it at lower cost.  Regarding the former, broadband is a particular concern: 

“Scotland has a challenging geographic landscape with a number of rural and remote communities to serve. In an independent Scotland, there will be a need to look at regulation differently to eliminate the digital divide and to ensure our world class digital ambitions are delivered. A strong regulator focused on the needs of Scotland's economy, business and consumers will be needed to tackle these issues”. 

In terms of efficiency, the paper is unambiguous: 

“…The consensus from all the discussions which we have held, to date, is that merging economic regulation functions benefits both businesses and consumers…Our detailed analysis…indicates that a combined regulatory body is achievable, less bureaucratic and more cost effective”. 

Does this suggest that a UK regulatory regime excluding Scotland might also require reassessment?  If so, is the current Ofcom model still fit for purpose for us Sassenachs?  Make sure next September 18^th is in your diary!

In search of excellence

Well, I’ve waded through all 38 pages of Ofcom’s statistical commentary on the European Broadband Scorecard and I’m still looking for ‘the best broadband network in Europe’.  Oh, we all knew this was a silly target for the UK that the DCMS set back in 2010, and it wasn’t helped by Jeremy Hunt’s announcement last year that Britain also aspired to having the fastest broadband network in Europe.  How can you possibly define ‘best’?  Come to that, how do you define ‘fastest’?   (Download?  Upload? Combined?).  And, even if you know what you’re looking for, where on Earth do you find comparable data for every EU Member State?  

The good news is that Ofcom has opted, rather ruthlessly, to consider only five aspects of broadband performance – coverage, take-up, speed, price and choice.  Even more ruthlessly, it reckons that ‘Europe’ should be interpreted to mean just the UK, France, Germany, Spain and Italy (for the primary analysis). Sadly, even this stripped-down version of the DCMS objective throws up a long list of statistical concerns.  So we’re told that: “the direct comparison of individual metrics does not take account of the dynamics and relative challenges of developing broadband networks in different countries”.  Ofcom’s description of the ‘Scorecard therefore consists of an eminently reasonable, but rather dull, explanation of the chosen basis for each parameter.  (Unfortunately, a basis for international speed comparisons remains elusive…). 

As I’ve suggested, the tragedy is that there’s no reward for all that statistical wrestling.  Never once, after all the qualifications, caveats and disclaimers does Ofcom let its hair down enough to hazard an overall judgement of the UK’s broadband performance.  (For my money, ‘best’ is still some way off).

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…