Credit where it’s due

Hats off to Ed Vaizey and his colleagues for their notable triumph in media management… It was potentially such a juicy story: Margaret Hodge, still flushed with success from her attacks on tax evasion by major media corporates, was about to sink her teeth into both the government (DCMS) and BT for ‘ripping off Britain’.  Her conclusion as Chair of the PAC and its investigation into the BDUK fiasco had been scathing: 

“The programme to extend superfast broadband to rural areas has been mismanaged by the Department for Culture, Media and Sport. The sole provider BT has been placed in a quasi-monopolistic position which it is exploiting by restricting access to cost and roll-out information. The consumer is failing to get the benefits of healthy competition and BT will end up owning assets created from £1.2 billion of public money” 

The story did not receive universal coverage; The Times, for example, restricted it to a small paragraph on page 4. But the BBC decided to bill it as a major news item and lined up Ms Hodge against Ed Vaizey for the headline 'Today' interview on Radio 4 with John Humphrys at 8.10.  Hodge duly launched her rehearsed attacks on BT and government, and the scene was set for a ritual execution.  But the response strategy by Vaizey (and BT), a nice mixture of blunt denial and data obfuscation, was perfectly judged to kill the story stone dead.  Humphrys floundered.  The DCMS minister was therefore able to rebuff this and later BBC questioning with his head held high: 

“Well, we don’t agree with the report at all.  We think the broadband programme is fantastic; it’s very good value for money and it’s going to deliver broadband to millions of people living in rural areas who wouldn’t otherwise t get it” 

Give that man a coconut.

Beware blind alleys on the Superhighway

The European Commission issued a short 'memo' late last week that was admirable in a number of ways, i.e.

• Its straightforward aim is to promote European investment in superfast networks.
• Its language is clear and non-technical, as evidenced by the blunt title: “Regulatory mess hurting broadband investment”
• Its policy prescriptions are correspondingly simple:
• To create consistent copper unbundling opportunities – and prices – across the EU.
• To harmonise the regulation of fibre networks (while maintaining flexibility in charging models) 

The mantra throughout the document is ‘predictability and consistency’.  In Neelie Kroes’ words, “It’s vital that all companies have a stable and consistent system. That is how we can maximise investment and the infrastructure competition that encourages investment.”  

Well, up to a point.  I can see that levelling unbundling prices – currently ranging across the EU from €4 to €14 per month – might just persuade the likes of Sky or TalkTalk to venture into Europe, and more consistency in fibre regulation would certainly do no harm, but where I slightly part company with Neelie is the presumption that the two broadband markets can be structurally linked, i.e. 

“If the [copper unbundling] price is too low this…reduces the incentive for ‘alternative operators’ to move from renting a network to building their own Next Generation network. This is a frequent problem today”. 

‘Frequent’?  Really?  How likely is it that a broadband operator will migrate from renting copper to building fibre?  No examples spring to mind and, intuitively, it’s hard to imagine a developer of FTTP having much interest in a copper solution (other than the incumbent, of course).  Even at the theoretical level, arguments that might link the two markets – such as the ‘ladder of investment hypothesis’ -have largely been discredited by economists in recent years.  For example: 

“The “ladder of investment” theory argues that it is good to promote intra-platform competition as a stepping stone for new entrants to induce them to invest. Our study shows there is no support for this theory, and that to the contrary intra-platform competition may even give adverse investment incentives. (Bouckaert et al). 

“Academics have not been very gentle with the ladder of investment approach, not only because the theory itself lacks logical fundamentals but also because empirical evidences tend not to support it” (Jund et al). 

Overall, there’s a lot to be welcomed in the memo’s intentions and regulatory objectives, particularly the recognition that the long pay-back times of broadband investment call for predictable prices and revenue streams.  But it would be a pity if the Commission came to rely too heavily on copper pricing as a determinant of new network investment.

The case for smarter pipes

There’s been wide coverage lately of the spate of system failures affecting major internet companies.  For example, in last week's Guardian: 

“A series of system crashes affecting Google, Amazon, Apple and Microsoft in the past fortnight has brought warnings that governments, banks and big business are over-reliant on computer networks that have become too complex”.

The reporting has conveyed an unmistakable feeling that ‘the sky is falling’ on these complex internet traders. 

"The complexity of the systems created to support big data is beyond the understanding of a single person and they also fail in ways that are beyond the comprehension of a single person."

The idea that we may have created Frankenstein systems that are more complex than we know how to deal with is, indeed, a little scary.  But human frailty explains only a limited part of the recent malfunctions. Again, from The Guardian:

“While a malicious attack [on the New York Times] was initially suspected, the problem was caused simply by a scheduled system maintenance… On the same day, Microsoft customers began to report email failures. The outage was traced to problems with the Exchange ActiveSync service which serves email to many of the world's smartphones…”. 

The problem of man’s inability to manage the complexity of his own data constructs, such as high volume securities trading, is ultimately a matter for mathematicians - and maybe even philosophers.  But the robustness of data networks, the so-called ‘dumb pipes’ of internet commerce, is a matter that ordinary mortals can and should address.  Sadly, however, both government and industry have paid insufficient attention to the issue of communications infrastructure policy. Establishing a suitable policy for the UK is not only important for economic growth but, equally, to guard against the economic harm that can be – and now is being - caused by disruptions to that infrastructure.

All aboard for the Ministry of Truth

I return from holiday unsure whether I’ve really been in deepest Sussex or whether I’ve emerged into a regulatory time warp.  I dimly remember headlines in 2006 announcing Viviane Reding’s ambitions for a single EU telecoms regulator to replace the (then) 25 NRAs.  Seven years on, I see that the same European ambition has been advocated, this time by Joaquín Almunia, the EU's antitrust commissioner.  Apparently, he has been critical of the plans put forward by Neelie Kroes earlier this summer for a single market in EU telecoms.  She said then that a new EU telecoms package would be put forward in early September in a bid to ‘make it easier to run a network across borders, with better interconnections and new access products’.  However, Almunia is said to have described these plans as “suboptimal”, that they “lack ambition" and that creating a true pan-EU regulator would be the most effective way of harmonizing national differences in telecoms markets. The latter would clearly bolster the current intent to eradicate high roaming charges but the immediate objections to a single EU regulator are much the same as those voiced in 2006.  James Robinson, telecoms regulation analyst at Ovum, cited two obvious candidates:

"Firstly, spectrum that is currently auctioned on a national basis could fall under the jurisdiction of this new, super-regulator. Governments would certainly be reluctant to let this happen as such auctions have provided valuable revenue in recent years… A single regulator would also face issues with the inherent differences of national markets.  For example, EU member states are at varying stages with the rollout of next-generation broadband networks. The regulation of these networks also varies considerably: fibre unbundling has been mandated in Denmark whereas this obligation does not exist in France where next-generation broadband rollout has been relatively slow”.

As I’ve said, all of this is pretty familiar territory: a single EU regulator does indeed represent a ‘logical proposal’ on economic grounds but what surprises me a little is that I’ve seen no mention yet of the daunting scope of governance such a body might enjoy.  In an age of converged media, I assume that the Ofcom model of regulating telecoms, (postal services?); broadcasting and online media by a single body would persist.  But at a pan-European level, that implies an awesome sphere of influence!

The joys of summer

As widely tipped, the inexorable 2-year Communications Review by DCMS has not produced a White Paper, as originally intended.  Instead, the Department squeezed out a so-called Strategy Paper today, only just in time for the summer recess.  The overwhelming feeling of anticlimax was heightened by the way DCMS trumpeted the publication:

“Putting consumers at the heart of communications policy: Maria Miller announces new strategy, including a nuisance calls crackdown, ending ‘bill shock’ and protecting children online”.

Two years of widespread consultation and a series of silly seminars for that…??!

Happily, there’s actually quite a lot more to the Strategy Paper than those headlines suggest.  In particular, the government finally appears to have taken on board that a broadband objective of ‘the best superfast network in Europe by 2015’ is seriously misjudged, not least because of its narrow focus and its shortsightedness.  At last, there is some prospect of the government aiming to develop the ’all-encompassing vision of pervasive broadband connectivity’ that the House of Lords said was missing from current policy:

“We need to plan long-term now if we are to have the digital infrastructure to support the technological advances that will be the platform for growth and opportunity in the UK… We will work in partnership with industry experts to develop a UK strategy for our digital communications infrastructure from 2015 to 2025... It will be underpinned by a technology-neutral approach, since fixed, fixed-wireless, mobile and satellite communications networks all have a part to play in achieving world-class connectivity”.

Heaven be praised!

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?