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Plan D is needed to create demand for broadband

January 10, 2002

Three attempts have failed so far. People need to be offered something they actually want to buy

 

THE UK GOVERNMENT is fond of setting ambitious targets – particularly where the new economy is concerned. One key goal was for the widespread deployment of broadband telecommunications “to have the most extensive and competitive broadband market in the G7 by 2005”. 

 

As of last June’s reshuffle, this has become the job of Douglas Alexander, the Paisley MP and brother of Scotland’s Enterprise minister, Wendy Alexander.

 

So how is it going? In short – not so good. According to figures just published by the OECD, the UK is 22nd in the top 30 league table of broadband penetration, below not only the USA & Canada, and of course the well-wired Scandinavians, but also trailing the Italians, French and Germans. Other European countries have been making particular progress in the last year but, here in the UK, only around 100,000 ADSL Broadband lines have been installed by BT, and a similar number by the cable TV companies.

 

Widespread availability of broadband services are seen by many to be vital to building a modern competitive economy – comparable to the development of the railways in the 19th century, and the motorways in the 20th. Until recently, government advisors were confident that the UK would be among the leaders. After all, we were one of the first countries to deregulate telecommunications, and Britain’s telecommunications regulator, Oftel has been especially fierce in promoting competition. Unfortunately for the UK Government, it’s best laid broadband plans have been going agley.

 

Plan A, formulated during Margaret Thatcher’s reign, was to encourage an entirely separate second telecommunications network to be built by the cable TV companies. BT was prohibited from providing any television content over its own networks to give the cable companies a clear run. 

 

Today, the UK cable TV companies run past approximately one third of UK homes. Unfortunately two factors conspired to slow things down. One was the fact that a wide variety of cable companies entered the market and installed many incompatible systems, which today’s duopoly of ntl and Telewest are still struggling to rationalise. The second is that Rupert Murdoch chose to invest enormous sums of money into creating a British satellite TV industry, dramatically reducing the customer demand for cable TV in the UK.

 

Plan B, in the mid 90s, was to encourage local high-bandwidth radio provision, pioneered by a Cambridge start-up called Ionica, and followed by the licensing of five operators for next generation G3 mobile phone networks. Unfortunately wireless, so far, has been a flop – Ionica went spectacularly bust, and the mobile phone companies are so financially strapped that the G3 roll-out is slipping badly.

 

Plan C, last year’s special, was for ‘local loop unbundling’; forcing BT to allow competitors into its exchanges to install their own equipment. This has been a fraught exercise, with BT’s competitors complaining that the terms for access are too restrictive, and BT commenting that nobody much seems to be interested in taking up their kind offer of rented space in their exchanges. Recently Oftel has ordered BT to be more accommodating to their competitors, allowing them unfettered access to their own equipment at BT’s exchanges without a BT engineer looking over their shoulder.

 

Something needs to be done to create demand for broadband and it doesn’t look like competitive suppliers by themselves are going to do it – people need to be offered something they actually want. This is why Christopher Bland, BT’s Chairman has said this week that BT might get into the business of supplying television programmes in competition to Sky and Cable TV, now that the restrictions have been lifted.

 

And what actually happens when you provide widespread broadband services. Well you might be surprised to learn that one answer was provided in Glasgow when the whole city was broadband wired in 1994. After 5 years, broadband take-up seemed modest – only two thirds of businesses and one quarter of homes. The city did use the network to link up the traffic lights, and all the electric meters; but several new businesses were created and many others successfully expanded their offerings onto the internet.

 

Did I say Glasgow? Yes I certainly did – Glasgow, Kentucky, USA (population 14,062).

An estimated 7,000 new jobs were created and a historically high unemployment rate has been largely eliminated.

 

I wonder if it might work for our Glasgow, or even Paisley?

 

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