Downwardly mobile

I was foolish enough in my last post to take comfort from the UK’s lofty position in Ofcom’s latest ‘European Broadband Scorecard’. Sadly, however, Ofcom’s apparent national confidence has been widely criticised, not least because of the sampling techniques used to derive the regulator’s data.  As a statistical dunce, I won’t attempt to enter that particular debate: I feel much more at home with the straightforward critique of Ofcom’s analysis put forward in a recent blog by mobiThinking 

In common with many others, the blog criticises Ofcom for limiting its main comparisons to the 5 major European economies, rather than the totality of Europe.  Results for the latter, contained in an annex to the Ofcom report, show the UK in a much less flattering light.  But as the name of the website suggests, mobithinking’s primary interest is in the data for mobile broadband.  In particular, it addresses two key questions: what is the rural coverage for mobile broadband (since this probably offers a more important assessment of useful internet access), and what type of mobile access is available (3G or 4G).  Again, using these criteria, the UK ‘score’ is very much second division – indeed, the UK’s relative diffusion of 4G looks woeful. 

It’s not difficult to criticise a statistical report of this kind, and Ofcom has an almost impossible task in trying to assess whether the UK can aspire to “the best broadband network in Europe”.  Nonetheless, in just the four years or so since Jeremy Hunt made that pledge, the shift in importance from fixed to mobile broadband internet has been inescapable and, to that extent at least, the criticism of Ofcom’s complacency seems entirely justified.

What ‘good’ looks like?

I recently let slip that I had been warming to the view that ‘the UK’s broadband experiment has been going pretty well’.  This unnatural show of confidence seemed fully justified when Ofcom subsequently published its European Broadband Scorecard which cheerily claims that: 

“the UK leads the EU’s five biggest economies on most measures of coverage, take-up, usage and choice for both mobile and fixed broadband, and performs well on price”. 

But I should have recognized all this this euphoria as my moment of springtime madness, and I’m grateful to Ian Grant for restoring my sanity by flagging up the highly critical report by Digital Business First (DBF) on ‘The UK’s Enduring Broadband Deficit.  The conclusions of this analysis are indeed pretty damning, for example: 

 “Although the urge to rank the UK as highly as possible is understandable, it appears as though the manner in which Ofcom ranks UK broadband coverage is not credible, nor indeed realistic”. 

Ouch!  On its own terms, the report undoubtedly has much to deride in the UK government’s handling of broadband diffusion but, like the Ofcom report before it, those conclusions depend crucially on the authors’ chosen benchmarks of performance.  For Ofcom, it is the other four major European economies; for DBF, the more relevant metrics lie among Asian economies such as Hong Kong and Korea.  But if international benchmarks are so obviously treacherous, is there a better way of gauging the success of broadband policy? 

That was essentially the question posed to Blair Levin, the eminence grise of the American National Broadband Plan, in an interview last week with the Washington Post.  Levin concurred that international rankings are problematic ‘because they both cherry pick data and are backwards-looking’.  He suggested instead a 4-part test, expressed in typically folksy terms like this: 

“Are you driving fiber deeper?”

“Are you using spectrum more effectively?”

“Are you getting everybody on?”

“And are you using the platforms to deliver public goods more effectively?” 

Through this lens, the Scorecard for UK policy begins to look very different.  It fails miserably on 1 and 2; it does better on 3 but these people are evidently spending most of their time in social networking or home shopping because on 4, expressed in Ofcom’s terms as the ‘Percentage of population who interacted online with public authorities within the last 12 months’, the UK comes a lowly fourth out of five. 

Scepticism fully restored…

Voice from the grave

Who says ‘voice is dead’??  I admit I thought myself that the advent of video conferencing, even at the modest level of Skype video calls to far-flung relatives, had largely undermined the demand for plain old voice telephony.  No doubt it will one day but it seems we’re not there yet.  (I have to admit that the poor quality of most of those Skype calls would be a material issue if they were not free). 

The origin of the technical challenge was really the quality of voice reproduction on mobile phones – poor at the best of times.  Like me, you may have seen that downside as the inevitable cost of mobility but the increasing bandwidth available on modern networks has allowed the handset makers to address the problem.  4G-capable smartphones (and a few 3G handsets) are increasingly being equipped with so-called HD Voice calling, which extends the audio frequency range to something closer to that of the human voice (and also helps to suppress background noise).  The implementation of HD Voice has been frustrated by the obvious compatibility problems:  essentially, both handsets (calling and receiving) and the connecting base station all need to be enabled for HD.  Nonetheless, most of the mobile networks have now introduced this functionality. 

While the mobile networks were the initial focus of HD, I was surprised to see that the technology has also been applied in the fixed sector.  Is that necessary?  Well, if you’ve ever tried to conduct a conference call through a conventional ‘squawk box’, you’ll understand the need for a better solution – particularly if one or more participants is using a mobile phone.  The trick here has been to introduce Dolby noise suppression techniques to improve audio reception.  Dolby also claim that their audio separation technology makes it much easier to distinguish between the voices of speakers at the other end of the call.  Still not convinced?  Then let me refer you to the news that BT is now incorporating this Dolby-enhanced HD technology in its latest generation of conferencing hardware.  

Voice lives on…

A sad reflection

One of my few claims to fame is that I briefly knew Colette Bowe in a previous life – when she was, perhaps, rather less of the ‘grande dame’ of regulation that we know today.  I’ve therefore followed her subsequent career with interest and, now that that she has elected to leave the chairmanship of Ofcom, I wondered whether she might offer us some indiscrete remarks or other obiter dicta about her 5 years with the UK regulator.  No such luck of course but, courtesy of a recent blog by Roger Darlington, I did notice some interesting remarks she made in an interview at the close of the Oxford Media Convention.  In particular, she was asked about the public perception of Ofcom’s role – in the wake of David Cameron’s famous “Bonfire of the Quangos” speech in 2009 (announcing his intention that Ofcom would be stripped of its policy-making function). Colette apparently insisted that: 

  “Policy making is not our job” and that “Ofcom is the keeper of the facts”. 

Oh dear. The first statement may be the unfortunate reality but I didn’t realize that Ofcom’s emasculation had gone as far as the second. Doesn’t bode well for regulatory policy…

Seconds out, the internet gloves are finally off

Well, after many years of fretting about the net neutrality debate, I see that the combatants have now begun the move into battle formation.  Presumably encouraged by the FCC’s recent set-back in its attempt to enforce net neutrality principles, and the FCC chairman’s rather limp response,  Comcast has exploited the virtual vacuum by establishing something like ‘most favoured nation’ commercial terms with Netflix. 

There is no shortage of doom-mongers to proclaim that the (internet) sky is falling but, however controversially, I’d like to put forward a contrary, albeit rather simplistic hypothesis.  Another recent Washington Post article by Timothy Lee is right to focus on competitive dynamics in its analysis of how Comcast and Netflix reached this new negotiation but I would argue that an ISPs’ exercise of market power needs to be regarded in the same light.  Why does Comcast have market power over Netflix – and other content providers?  Simply because Comcast has chosen to invest in the – hitherto – least rewarding segment of the value chain, the local access network.  There is, in principle, nothing to prevent another player - or Netflix itself – exploiting these economic rents if it is prepared to make a similar long-term investment in infrastructure.  It won’t, of course, and the chances are that the wounded FCC will still find some way to minimise rent-seeking by the ISPs but the clash between these leading internet players may yet prove to have been a useful reminder of basic economics.

 

Steady as she goes?

After a good deal of reflection, I’ve slowly been coming round to the view that the UK’s ‘broadband experiment’ has been going pretty well – always assuming we’re content with the limited FTTC architecture mandated by BT. It came as little surprise, therefore, that a recent report led by Richard Cadman’s SPC Network on the future of regulation in EU telecoms markets was highly complimentary, e.g. 

“The European broadband story, like that of European telecommunications, is generally one of success.  Consumers have benefited materially from increasing broadband competition over the past ten years: access speeds have increased, retail prices have fallen, while choice has expanded and European consumers enjoy faster access speeds and lower prices than their American counterparts.….. The picture for investors and for investment in the industry in the EU is also a positive one”. 

Where I felt less comfortable with the report was in its affirmation of existing regulatory policy.  In particular:

 

“From our evidence-based review of the performance of the market to date we conclude that there is no case for an extensive overhaul of the current regulatory framework…. It is also our view that the ladder of investment remains a valid concept and is critical to the continued development of the market”. 

OK, I think we all accept that LLU has played a vital part in the diffusion of consumer broadband, and the report is careful to stress the importance of developing new forms of unbundling in an NGN environment, but I always thought the ladder of investment concept was about more than access to incumbent infrastructure…

Sure enough, digging around in Martin Cave’s original papers, I came across this:

“The ladder of investment approach articulated by Martin Cave in 2006 suggests that access regulation is not only pro-competitive per se as it reduces barriers to entry but also is an indirect device to promote facility-based competition” 

Happily, we’re seeing more and more examples of new network being developed, most of it fibre-based, but I’ve seen very little evidence that these new networks owe their origin to the report’s acclaimed ‘ladder of investment’ philosophy..

 

Not neutrality

One of the surprises for me in the whole Snowden/surveillance/data security controversy is that, relatively speaking, it hasn’t created more angst on this side of the Atlantic. Perhaps for similar reasons, the net neutrality debate appears not to have engendered the same levels of outrage within the UK’s business and civil liberties camps. For my own part, I’ve resisted commenting over the past year or more because there seemed little new to add, given that the two factions were merely reiterating their already entrenched positions. But there was some real news earlier this month and I couldn’t resist commenting on some of the coverage. 

On 14^th January, a U.S. Court struck down the most recent attempt by the FCC to enforce net neutrality rules – its so-called Open Internet Order. The court found that parts of these regulations violated the Communications Act's clear prohibition on imposing common carriage requirements on networks like the Internet. 

While many would argue that the court ruling actually propels the FCC towards a more sensible regulatory approach, several long-time champions of net neutrality reacted angrily.  For example, Tim Wu, a professor at Columbia Law School, wrote an article for the next day’s edition of The New Yorker entitled ‘Closing Time for the Open Internet’.  He wrote:

“Acting together, the Internet service providers could destroy Netflix by slowing its data to a crawl, making movies impossible to watch”.

The next week, another publication,The Register, reported as follows:

“Netflix – which has roughly 40 million subscribers globally – yesterday warned its investors (and the wider world) that cable companies and other ISPs could arbitrarily strangle access to online video sites or block them entirely unless, say, said websites coughed up some cash. If this were to happen, Netflix vowed it would unleash hell”. 

 So, a justifiable declaration of war by Netflix?  Well, not quite… The Netflix ‘warning to investors’ was contained in that week’s letter to shareholders by senior management.  This goes on to say:

“The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination… ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action… Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video”. 

Precisely, and the same point is actually reiterated later in the Tim Wu article:

“These days, Internet firms like Google and Facebook are so powerful that they could decide to turn around and demand that Internet providers pay them for the right to access their sites. This is the norm in cable television.” 

To my mind, the net neutrality debate might finally have become interesting!