Britain risks its economic competitiveness as a result of lack of investment in next generation networks, but there is no clear business case to build new broadband infrastructure. That was the message from a conference of the self-appointed industry advisory body the Broadband Stakeholder Group held in London.
The Broadband Stakeholder Group comprises a number of companies, including the current leading broadband service providers in Britain, such as BT, Virgin Media, Tiscali, Carphone Warehouse, BSkyB. As stakeholders they clearly have a vested interest in the existing broadband market and some might say maintaining the status quo.
To coincide with this conference the group published two reports on evaluating the value of next generation broadband and models for public sector intervention. They looked at the likely costs and benefits of providing high-speed networks.
They tentatively conclude that the cost of providing fibre to the home reaching 80% of the British population, those in major cities and towns, with a take up of 50%, would cost in the region of £12 billion.
They are rather vague on the benefits, especially those that are less tangible such as the value of having educated citizens and an informed democracy. They conclude, rather bizarrely, that there is benefit in delaying investment in the short term, adding that “investing now simply because some others are would not be sensible”.
Kip Meek, the chairman of the Broadband Stakeholder Group, a former member of the communications regulator Ofcom, said the report sought “to bridge that gap between the visionaries and sceptics”.
Rachel Clark, director of broadcasting and content at BERR, the government department of business, enterprise and regulatory reform, which replaced the department of trade and industry, aligned herself with the sceptics. “Broadband is good economically and socially,” she said. “I don’t think there is evidence of huge incremental value in rolling out high speed networks. It all sounds great but we can’t quantify the incremental benefits.”
Ashley Highfield, currently director of future media and technology at the BBC but soon to head up a video on demand venture codenamed Kangaroo, was clearly one of the visionaries. “I find the BERR position quite amazing,” he said, barely able to conceal his incredulity, to sudden spontaneous applause from the audience. He said he was worried that the implication of the report was that it was alright to do nothing for 18 months.
The BBC, he said, bridges the role of visionary and sceptic rather well, he said. It was once described as the Catholic Church meets the Post Office, which rather neatly sums up its unique blend of ardour and bureaucracy. From his point of view, he said “we have to make an assumption that the networks will be there”. He said that in ten years time it will all look obvious and we will wonder why it was ever even a matter of debate.
Of course, £12 billion is a lot of money. To put it in perspective, BT had revenues of over £20 billion last year, spending £3.3 billion on capital investment, making a pre-tax profit of a mere £2.5 billion.
In comparison, the government has risked £90 billion propping up and nationalising the Northern Rock bank, equivalent to £3,600 per tax payer. So at under £500 a head, enabling a national fibre-optic network seems comparatively cost-effective.
No one is assuming that the government will intervene to invest in broadband, at least not beyond supporting small regional regeneration projects, but what is required is a regulatory environment that offers the private sector a reasonable long term return on investment.
At present there appears to be a lack of vision and a leadership vacuum on the issue. One only has to consider the countries that are investing heavily in fibre broadband, such as South Korea, Japan and China to see the risks of failing to consider next generation networks as a vital part of national infrastructure.
Next generation networks are the modern equivalent of the canals, railways and roads that previously drove economic growth. They will be a key factor in determining future economic competitiveness, particularly for countries that depend on the knowledge economy. Wait and see is not an option.
The government is now awaiting the outcome of a review of next generation broadband, headed by Francesco Caio, which will report in the autumn.