Me and my shadow

I don’t often write about the negative impacts of ‘the wired world’ but I’ve recently been prompted to do so by my preparations for Christmas.  As is well known, Britain is the biggest online shopping nation in the developed world, with almost two-thirds of adults using the internet to buy goods or services.  I have followed that fine tradition by doing all my Christmas shopping on-line, and I’ve been very happy with my purchases, but what has made me less happy is the visible ‘audit trail’ that these transactions have left.  Every time I log on to a well-known electronic retailer, I am presented with pictorial information on the items I have purchased, the items I might have purchased - and the items my wife bought.  So much for surprises! 

Now, I realize that the audit trails should probably be seen as a benign and inevitable part of the on-line experience, and I’m told that there are ways to disguise buying information, but the experience got me thinking about other ways an on-line presence could easily become intrusive.  The hazards of social media are well understood but what about the prospective ‘internet of things?  Do I really want someone (or something) else to know where I go with my smartphone or what time I go to bed…? 

This is essentially a network security and surveillance problem.  I don’t have the technical expertise to suggest its resolution but I’m glad to see that better-equipped people – such as Glyn Moody – are starting to worry about the same issue.  I wonder if he could advise on Santa’s Dilemma…?  

‘Tis the season for giving

Whoa, can this be true?  Yet more money for broadband infrastructure?  OK, the latest (Autumn Statement) gift from the government - £10m for a ‘competitive fund’ to address coverage in remote rural areas – was really pretty modest, but just consider the investment already made: £530m for the original BDUK endowment; a further £250 allocated from the 2013 spending round; £150m for ‘Super-connected Cities’ (still- born but the subsequent voucher scheme is valuable nonetheless); £150m for improved mobile coverage etc. etc.  It all adds up to a tidy sum, and one nicely garnished with the latest upbeat opinions of research firm Point Topic: 

“95% [superfast coverage] by 2017 should certainly be achievable and is also desirable…In fact, with the inclusion of FWA, mobile and satellite in the metrics, the targets can in some senses said to have already been achieved” 

So, notwithstanding some recurring criticism of BT’s commercial tactics, the UK broadband outlook appears remarkably encouraging - and showing signs that the government’s drip-feed of subsidies is beginning to pay off. Enjoy the moment!  

It’s a pity, therefore, that some new research from the US shows Europe’s broadband investment is actually falling well behind.  Based on detailed CAPEX data compiled by Infonetics, Roslyn Layton of Aalborg University in Copenhagen has compared recent broadband investment levels in the US with that of the aggregate spend by the 27 EU states. Her results are summarized below.

	2011 CAPEX billions	2012 CAPEX billions	YoY Change	2011 Population millions	2011 $/pers	2012 Population millions	2012 $/pers
US	$72.4	$77.6	7%	311.6	$232	313.9	$247
EU27	$63.4	$50.3	-21%	501.9	$126	500.0	$100

As the table shows, Europe’s per capita investment in 2011 was already little more than half that of the US; worse, the 7% downturn in the EU’s spending last year meant that it was spending only 40 cents on broadband equipment for every dollar invested in the US.   

Now, there is clearly a ‘political’ agenda behind this research, and one might question whether the apparently superior US investment has resulted in such a vibrant broadband market, but it seems fair to conclude that any “best in Europe” claim by the UK might actually amount to a rather hollow victory.

 

 

 

 

 

 

 

 

Too important to fail

Writing quite recently about demand in the US for ‘gigabit networks’, I reported one very credible view that the phenomenon reflects recognition of our growing reliance on the internet for all manner of infrastructure and services.  The proponent in question went on to explain: “that reliance is only going to increase and people will continue to want faster and faster broadband speeds for peace of mind.”  That begins to sound like an unhealthy spiral of addiction but is our growing dependence on communication networks (perversely) a ‘good thing’?  Well, it might be…

Earlier this month, a US court ruled that the Department of Homeland Security must make a plan to shut off the internet and mobile communications available to the American public. While President Obama quickly condemned former Egyptian President Hosni Mubarak for turning off the internet in his country to quell widespread civil disobedience in 2011, the US government apparently has the authority to do much the same thing - under a plan devised during the Bush administration. Details of the controversial "kill switch" authority have been classified but thanks to a Freedom of Information Act lawsuit filed by the Electronic Privacy Information Center (EPIC), DHS is obliged to reveal these within the next few months. 

Even assuming President Obama (or David Cameron) wanted to invoke such a measure, would it actually work?  Happily, the expert view seems to be that activating any kind of kill switch would do more harm than good.  According to Harold Feld, Vice President at Public Knowledge, a US lobby group focused on communications and technology policy, "I find it hard to imagine why an internet kill switch would ever be a good idea, short of some science fiction scenario wherein the network comes alive à la Terminator/Skynet.  At this point, so much of our critical infrastructure runs on the internet that a 'kill switch' would do more harm than anything short of a nuclear strike.  It would be like cutting off our own head to escape someone pulling our hair”.  A very similar argument is thought to apply to disabling mobile phones. The benefit of people being able to communicate on their cellphones in times of crisis is enormous, and cutting that off would potentially be very dangerous.  

At a time of growing concern about government security and surveillance issues, it’s heartening to find that the ubiquity of modern communications networks might actually be proof against ‘big brother’ measures.

Hail, the new economic wonder drug!

Well aware of the sundry benefits of faster broadband (not least the vastly improved performance of i-player!) I was fascinated to read recently that it’s also just the thing to supercharge economic growth.  According to analysis commissioned by DCMS from a consortium led by SQW (with Cambridge Econometrics and Dr Pantelis Koutroumpis), government interventions to upgrade broadband connectivity are projected to return approximately ‘£20 in net economic impact for every £1 of public investment’.  Wow!    

Unsurprisingly, I was not alone in feeling a tad sceptical about this conclusion: 

“Basically, BDUK has been getting a lot of flak and bad press…so the DCMS thought they best pay someone to write a nice report bigging up how much its broadband investment is going to bolster the economy”. (Computer Weekly) 

“The government, perhaps keen to cut through all the negative press, commissioned its UK Broadband Impact Study  in what appears to be a vain attempt to search for some good news about BDUK”. (The Register)

Within the Report itself, however, SQW appear to be refreshingly honest about its findings: 

“While recognising that there are still gaps in the empirical evidence base, and that the future is inherently uncertain, the study’s projections are the outputs from a rigorous and detailed analysis which draws on the best data currently available”. 

I was intrigued by that phrase, the ‘gaps in the empirical evidence base’, but it seems to stem largely from the Report’s later admission that: “The productivity impacts of increased speeds are, as yet, highly uncertain.” In fact, given the relatively recent introduction of high-speed broadband, SQW have had to invoke a labyrinth of tortuous logic and heroic assumptions to arrive at their central conclusion that: ‘an increase of 100% in the used speed in a year will lead to a 0.3% uplift in productivity  over the following three year period’. 

This sounds like a risky finding but, guess what…?

 “It also aligns…with research by Chalmers University of Technology, which found that a doubling of speed in OECD countries is associated with a 0.3 percentage point increase in GDP growth”.  What a coincidence!   

It turns out that the ‘research’ in question by Chalmers University (who??) consists of an econometric analysis of the past relationship between broadband speed and GDP growth in a sample of OECD countries.  A closer look at that analysis reveals this cautionary note from the authors: 

“This study concludes that the hypothetical impact of broadband speed on economic growth is statistically significant…. As the impact is modelled as linear, it needs to be judiciously applied when hypothetical country growth is far away from the sample means. The hypothetical impact is based on an elasticity measurement and any forward-looking simulation should be applied with care “. 

In other words, the past relationship established for this data set may not apply in the future for a different group…. As expected, therefore, take the ‘good news’ from DCMS with a pinch of salt.

Of broadband cats and pigeons

My goodness, what a flurry of feathers.… The Broadband Stakeholder Group (BSG) set out to conduct a perfectly sensible exercise, looking at the key statistical determinants of bandwidth requirement and how these determinants might change over the next ten years. Quite properly, they described this as “a model for forecasting bandwidth demand” but that choice of words may have been responsible for the subsequent furore and howls of protest when the ‘average demand’ turned out to be surprisingly low (19 Mbps).  For example, the FT reported that:

“A key government advisory group will raise questions over whether most homes in the UK are likely to need superfast broadband in 10 years’ time”.

Similarly, Sean Royce of Kingston Communications (KC) is reported as describing the BSG result as a 'red herring' that the Government might use as a ‘yard stick’ to help lower the bar for its own superfast broadband targets. 

The BSG has rightly defended its statistical results, and neither of the above policy claims would be justified, but I’m bound to agree with a further aspect of the criticism from Sean Royce, i.e.

“The second concern I have with the study is need versus desire. From our experience, there is a clear distinction between the broadband capacity that households need and the speed levels that consumers want. This isn’t simply about keeping up with the Jones’. It’s a recognition that…we [already] rely on the internet. That reliance is only going to increase and people will continue to want faster and faster broadband speeds for peace of mind.” 

Anyone in any doubt about the importance of broadband ‘aspiration’ need only consider the eruption in US demand for Gigabit capacity – probably sparked off by the pioneering deployment of Google fibre networks.  There is no shortage of editorial advice that ‘nobody needs gigabit capacity (yet!)’ but that hasn’t stopped the emergence of so-called gigabit envy.  The latest metropolitan examples are in Los Angeles and Las Vegas but there are now dozens of US cities planning Gigabit networks.  And the rhetoric isn’t confined to city mayors: earlier this year,

Julius Genachowski, then Chairman of the Federal Communications Commission, wrote an article entitled, ‘Why the U.S. Needs Gigabit Communities’.  It argued:

“We’re in a global bandwidth race, and we need to ensure the U.S. has a strategic bandwidth advantage. Without it, we risk losing our global lead on innovation, and we risk watching jobs and investment flow elsewhere….”

So much for the determinants of demand…

Hold the Champagne, boys…

Great news this month that every EU household now has access to basic broadband!  Well, that is if you include satellite coverage - which we didn’t before.  As Neelie Kroes says: 

“The EU is technology neutral, but for those in the most isolated areas, satellite is a good option to stay connected; and it's likely to remain so… Thanks to the extra coverage provided by satellite broadband, we have achieved our 2013 target of broadband for all. That's a great result for European citizens” 

As a reminder, ‘basic broadband for all’ was the first leg of the Digital Agenda for Europe (DAE) targets, i.e. 

·        Basic broadband (0.5-4Mbps) for all by 2013;

·        Next Generation Networks (30 Mbps or more) for all by 2020;

·        50% of households having 100 Mbps subscriptions or higher 

In the absence of satellite coverage, however, there is still some way to go before fixed networks of acceptable quality reach 100% of the population (the Universal Service Commitment in other words)..  At an EU level the same Press Release claims that fewer than 4% of citizens are denied access to fixed broadband but data released by Ofcom last week show that the equivalent UK figure is now hovering around 8%, i.e. 

Percentage of connections receiving

less than 2Mbit/s (June 2013) 

England                            8%

 

Scotland                            8%

Northern Ireland                12%

Wales                                12%

Total UK                          8% 

The good news is that these percentages have been falling pretty steadily over the past two years: the less positive story is that getting the figures down to zero may be more challenging than expected. We tend to assume that ‘citizens’ who have access to even relatively modest broadband improvement will grab it with both hands but the Ofcom Infrastructure Report suggests otherwise: 

“There are consumers on these slow lines who are in postcodes where NGA networks are available and, by upgrading their service, could receive much higher speeds.  When slow lines in postcodes where NGA is available are excluded, the percentage of connections operating at below 2Mbit/s reduces from 8% to just 3%”.  

Who are these people?  Why put up with an inadequate broadband service when a much better alternative is readily available?  Or is the real problem one of in-home wiring?  Whatever the reason, it’s evident that upgrading the infrastructure is only part of the battle.  Going back to Neelie’s Press Release, she was clearly wise to frame her celebration in terms of digital potential, i.e. 

“My motto is Every European Digital – now every European genuinely has the opportunity. We have more to do to improve networks and equalise the opportunity, but the opportunity is there.”

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.