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Communications Bill – is it going to look at the right subject matter?

Having mentioned the comms bill in my last post I now find that the expected Green Paper is not now going to be published. Instead over the coming months five seminars will inform the communications review.

The seminars will look at:

  • The Consumer Perspective
  • Competition in the Content Market
  • Maximising the value of spectrum to support growth and innovation
  • Driving investment and growth in the UK’s TV content industries  
  • Supporting growth in the radio (audio) sector

“The UK’s communications sector is one of the strongest in the world” said Culture Secretary Jeremy Hunt. “We must ensure the sector can grow by being at the forefront of new developments in the industry. It is essential that we set the right conditions for the industry to enable businesses to grasp the opportunities created by new technology.”

Communications Minister Ed Vaizey added “The communications industry is a key part of our economy. Through these seminars, we will look in detail at how best to drive investment and competition. We want to shape the Communications Bill so that we have the right framework to secure our place as Europe’s tech hub.”

Much of the blurb up until now is lifted straight from the DCMS website. I can’t argue with any of it though some of it seems to me to be very much born out of subject matter that government can get its brain around.

For example content providers, ie TV companies in the main, have been asking for a level playing field – the clues lie in the bullet points provided to us as a guide on what is likely to be discussed in the Seminar – how important is exclusivity in supporting investment and innovation, how much choice do consumers have and how open is the market to new entrants?

The bit about spectrum is also an easy one to grasp. Although there are legal minefields to tread at the end of the day it seems about making best use of the spectrum available.

This is all fair enough but I do find myself asking how much innovation and growth this is really promoting? It’s all about extensions to old business models.

I humbly suggest that what we really want is to create an environment that supports innovation in the new world we want to be encouraging the next Google or Microsoft to start up in the UK. We do see some signs of progress. The reintroduction of EIS Tax relief for entrepreneurial investors and the effort to create an emphasis on computer programming in schools spring to mind.

I think though that we need to think a lot bigger than we are doing. How about a 10 year moratorium on capital gains tax for new technology startup investment? I bet that would result in many Californian based VC companies moving to the UK.  How about government loans or matched funding for high risk high tech projects. How about creating an immigration environment that would encourage talent to want to come to the UK instead of Silicon Valley?

Perhaps I’m being naïve in thinking that “communications” extends beyond programming content and next gen mobile. Everything I do these days involves communications in some form or other.

The government wants the private sector to haul in the slack created by cuts in the public sector. It needs to come up with creative and innovative solutions to stimulate this. It also needs a level of understanding in government of issues relating to technology and the internet. Many of the noises that we have been hearing are counter-innovative and have been about constraining how we can use technology and not the opposite.  C’mon guys. Move it on.

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@edvaizey @jeremy_hunt please read this #deappg #digitalbritain #fttc #fttp

Last week I wrote an analysis on the superfast broadband strategy published by Jeremy Hunt. It attracted more comments than any other post I have written in the last three years. I concluded that whilst the published strategy might enable the government to meet its near term objectives it was not necessarily the best thing for UK plc.

Now Barry Forde, the brains behind CLEO, has written a post on that goes into fantastic analytical detail as to why promoting a FTTC based plan is not the right thing to do. Indeed Barry shows that in the medium term it would be the more expensive approach and would lead to continued requests for government handouts.

I can’t better this piece of analysis and suggest you read it here.

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Pros and Cons of @Jeremy_Hunt Superfast Broadband Strategy Document #digitalbritain

DCMS Minister Jeremy Hunt has finally announced the government strategy for providing “superfast broadband” to the final third. I’ve read the speech, the press release and the 64 page strategy document and this is my interpretation of where it is all at.

The government has the laudable aim for the UK of having “the best superfast broadband network in Europe by 2015. Moreover gov is not letting the grass grow under its feet. We have already seen work progressing on the 4 Big Society projects (initially three but apparently none included BT so a fourth was added).

Another positive is that the Universal Service Commitment of 2Megs is being rolled into the “superfast” activity. The investment in an infrastructure to just provide 2 Megs is a waste of money.

The announcement talks of a ‘digital hub’ in every community by the end of this Parliament. This is great. You do however have to read between the lines to see what is going on.
The idea of a hub stems from the concept of the Digital Village Pump as is now installed in Ashby de la Launde and is being looked at for the Cumbrian Big Society project. This concept brings a high speed fibre connection into a community and allows for that connection to be used to connect to a variety of means of terminating to local end users.

There are however some worrying indicators. In today’s announcement there are constant references to BT together with “cabinets” and “fibre connectivity to the nearest exchange”. DCMS has also now confirmed that in saying digital hub they do indeed mean FTTC. BT has said that it intends to tender for each project covered by the £830m of funding made available for this activity and that it will match any government funding. On the face of it this might not sound like a bad thing. BT has said that such an arrangement would allow it to extend superfast broadband reach to 90% or more of the population.

The real issue is something that Jeremy Hunt alluded to unwittingly in his speech in saying

  • “…unless you take extraordinary risks, you won’t survive in the digital world. I want our broadband infrastructure to make it possible for our entrepreneurs and investors to take those risks.”

It would appear that the government is taking a safe, non-risk based option here. The signs are that it is lining up BT to provide the digital hubs into these communities. Superfast broadband to 90% of the population would get the UK a long way towards Jeremy Hunt’s stated objective.

So is this a bad thing we have to ask ourselves? The problem is that BT is not a company that is going to take risks. BT is also too big to be able to innovate. Everything BT does has to scale, which is one of the reasons that the government will inevitably want to partner with it. In this case however scale = inflexibility and lack of innovation.

If, as reading between the lines suggests, we are going to see FTTC as the solution for the final third this has the following issues:

  • Once FTTC is in that is it. The end user will be stuck with a copper based solution for a long time to come. BT has said that it won’t be upgrading users to FTTP if they already have FTTC. Note that the residents of Ashby de la Launde already enjoy 100Mbps symmetrical FTTP with an upgrade path if necessary. My own view is that 100Mbps symmetrical is the minimum standard we should be aiming for. This is supposed to be a long term investment.
  • BT does not currently allow competitors access to its cabinets to connect their own services. This will prevent innovative communities and service providers from providing cost effective solutions to that last 10% that still wouldn’t be getting FTTC. BT’s preferred solution for this 10% is a copper based BET technology that facilitates the government’s 2Meg USC.
  • Even if competitors were allowed cabinet access, the backhaul for FTTC is expensive – on a wholesale basis up to 3 x the cost per Megabit as putting in your own fibre backhaul.
  • The government would effectively be extending to BT a monopoly status in these areas – something that successive governments have been working hard to erode – to the great benefit of UK plc it might be added.

It seems fairly clear to me that BT will probably win the majority of tenders. For one thing today’s strategy document effectively hands it to them because the government has said that it does not see any reason to change the way fibre rates are calculated.

  • “First, that the decisions of the Valuation Office Agency are made independently of ministers. It is not our role to decide who is liable for what under the business rates regime. Second, that the existing rates regime has been tested in court numerous times and no ruling has required any change to the regime. Third, that while in general we favour a low tax environment for new investment; it is right that non-domestic property should continue to be taxed to provide the essential public services we all rely on.”

This means that only BT is likely to be able to submit a competitive bid – all other network operators will be required to pay rates on their connectivity.

There are also other issues that weigh the scales in BT’s favour. Third party access to BTs poles and ducts has been mandated by Ofcom and we await a proposal from BT in January telling us how they are going to do this. BT’s most recent offer to NextGenUs (Ashby’s network operator) required them to use BT engineers (and consequential high labour rates & uncertain availability ) to do all the work. NextGenUs were also being quoted 21 days repair time for any problems. This is not a viable business situation. They would almost certainly repair their own problems within hours. It is very important that Ofcom negotiates hard with BT re this. Ofcom’s reputation in the industry for being another department of BT does not augur well.

If, as it appears, that BT is being lined up to take most of the cash available for NGA I can understand why the government is taking this approach. Let us not however delude ourselves into thinking that this is the best long term strategy for UK plc. This strategy is not an example of innovation and risk taking. It is anti competitive and is likely to be a step backwards from the progress of recent years. FTTP and true open access are the only sensible long term solutions.

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Government Pushes Back 2Meg USC to 2015 – Let’s forget 2Meg and Go Straight to FTTP

I read in Jeremy Hunt’s speech at the Broadband Delivery UK industry day today that due to the lack of funds the government has moved the target date for implementation of its 2Meg Universal Service Commitment out to the “end of this parliament” or in other words 2015 (see my post in March on the feasibility of doing it by 2012).

It is about time everyone realised this is a waste of effort.  Lets forget about 2Meg and go straight for Fibre To The Premises (FTTP).  FTTP for the Final third by 2015 is a sensible objective.

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Broadband Delivery UK Industry Day #BDUK

Broadband Delivery UK (BDUK) is today holding an “industry day aimed at companies and organisations that have skills, capabilities and assets that they believe could be used to help deliver the government’s Universal Service Commitment and superfast broadband market testing projects”.

The agenda for the day, which is being held within the BIS offices at 1 Victoria Street, London is as follows:

09:30 – 10:00   Registration & Coffee
10:00 – 10:10   Introduction and Welcome – Ed Vaizey
10:10 – 11:00   Setting the context – Jeremy Hunt