Not Neutrality

Is it bad for consumers if ISPs to make it easier for them to reach selected websites? Even if this means that the ISP can offer lower prices and reach consumers who would otherwise not be able to afford a connection? Well Professor Thomas W Hazlett of George Mason University in Arlington, Virginia, thinks not. In his article in today's FT he argues that MetroPCS, with a market share a tenth of that of Verizon, could not conceivably have any market power to abuse and that their offering is a benign outcome of competition on the internet, not a threat to it.

MetroPCS offer a $40/month "Unlimited" package over 2G and, more recently 4G (LTE), which is substantially cheaper than rival offerings in the US, where similar packages cost as much as $120. As part of the deal, they provide access to a compressed YouTube stream that enables subscribers to enjoy this popular website, even though the 2G service does not otherwise support video streaming or VoIP. According to Hazlett this is a co-operative (not paid-for) arrangement between the ISP and Google, who own YouTube, though he would argue that even if it were a financial one, consumers clearly benefit and the the internet needs no "protection" from the FCC from innovations of this kind.

Westminster eForum “Building 21st Century Broadband” – Robert Sullivan, Broadband Delivery UK

The opening talk at yesterday’s Westminster eForum meeting was given by Robert Sullivan, the relatively new head of Broadband Delivery UK, itself the quite new organisation charged by Government to facilitate the roll-out of superfast broadband in the UK.

He first addressed the objective as set out by Jeremy Hunt, Secretary of State for Culture, Media and Sport: “within this parliament we want Britain to have the best superfast broadband network in Europe.” This clearly begs the question what one means by “best” - Sullivan said BDUK was working on a definition and thought it would not be a single measure, such as headline speed. Instead it would be some sort of “scorecard” based on “outcomes”. They wanted a dialogue with stakeholders about this. If one were being sceptical one might think the target would be set in a way which pre-figured success.

Sullivan discussed the “Theoretical Exercises” that had examined the economics of providing superfast broadband in three challenging real-world areas – a paper is being written on this and will be out “soon”. But some particular points had already emerged:
• Delivering the USC is not a separate issue
• The cost of backhaul is a major factor in the economics
• Getting revenue to cover opex is difficult enough even if capex is 100% funded
• A mix of technology solutions is likely

The key obviously is getting a viable business case. Sullivan covered the three primary ways of doing this:

Reduce costs: duct and pole sharing as in Ofcom’s Wholesale Line Access review – BT reference offer due by January 2011; reuse of other utility infrastructure – electricity poles seems the most promising; reuse of public sector networks
Increase demand: through community engagement; demand registration (eg BT “Race to Infinity”); and increasing online activity by demonstrating benefits (Race Online 2010)
Public funding: £530m was secured through the Comprehensive Spending Review (ie taken from BBC); ERDF funding is available; other public sector bodies (eg councils, Devolved Administrations) might wish to contribute; and a variety of business models could be explored – gap funding, revenue share, public asset ownership.

The four Pilots announced – in North Yorkshire, Highlands & Islands, Cumbria and Herefordshire – will be funded to the tune of £5m to £10m each. These pilots will test the reuse of public sector networks and infrastructure sharing.
A BIS strategy paper is due in December.

In questioning, Sullivan explained that he thought the scorecard would be more about applications than headline speeds, and that performance requirements would follow from that. Tendering for pilots would be done locally through the usual open procedures – details are being worked out now, but they will not all be ready at the same time. Finally, we had the inevitable question about “fibre tax”, the rating system applied to fibre networks. To which we had the civil service answer of “ongoing round table discussions”, need for a level playing field etc etc.

So on the plus side there is some money available and pilots are soon to get under way. On the other hand. BDUK seem to be a classic civil service outfit, Sullivan has no telecoms experience and no real decisions have been made yet. It will still be for community groups to drive things forward.

Westminster eForum Building 21st century broadband

Sub-titled "paying,laying and simulating demand", this WeF meeting today went over much of the common ground on "superfast broadband"- things do move forward but not exactly in leaps and bounds.

I'll be writing more detailed reviews of each session over the next couple of days, but to give an overview, here is my summary

"Same old barriers" - Robert Sullivan, Broadband Delivery UK: a classic civil servant session: we're reviewing what "best broadband in Europe means" ("When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean); a strategy paper will be out "soon"; we must have a dialogue about all this. There were some real points too: eg backhaul is an issue.

"Delivering next generation infrastructure" - Liv Garfield, BT. Impressive roll-call of statistics, a sound grasp of reality, and no bullshit. But no solution to final third.

"Making rural broadband a reality": Charles Trotman, Country Land and Business Assocaition; "our members own half of Britain", "The Duke of Westminster's estate has not-spots in it" - perhaps the Duke could cough up a contribution to rural broadband himself !
Malcolm Corbett INCA; "patchwork quilt of initiatives" - INCA is stitching together (not stitching up, I trust)
Jonathan Freeman, Arqiva - surprise, a common radio network would be a good thing
Mark Falcon, Three - surprise,surprise, Three do a lot of mobile broadband.

"100Mbps Britain", Duncan Higgins, Virgin Media
Fast broadband is selling. VM broadband is fastest and most accurately advertised

NGA and 100Mbps demand
Martin Scottt, Analysys Mason: demand comes from multiple uses of known technology (eg HD, P2P), then from increased cloud computing and then who knows (Rumsfeld "unkhown unknowns")
Adrian Crook, Fibrecity: customers buying 100Mbps - offered on a "suck it and see" basis
Colin Browne, Consumer Panel: very anxious that the superfast broadband debate doesn't eclipse the 2Mbps Universal Service Commitment.
Antony Walker, BSG: customers view headline speeds as a proxy for quality of experience; industry needs to understand demand levels for business cases and network dinmensioning; public policy should not be driven just be headline speeds, but by opportunities for innovation and improved productivity

Delivering and laying the 21st century network: Ronan Dunne, Telefonica O2 UK.
Glossy presentation and corporate speak (eg "O2Learn") got in the way of a real message, but clearly there is an investment challenge, a need to revise business modela and a concern about inclusion.

"paying for the laying"
Tim Johnson, Point Topic: £530m not enough (no evidence though)
Andrew Riseley, Berwin Leighton Paisner: Australian Government is investing £26bn and structurally separating Telstra - but will it happen and will it work ?
Simon Loe, Alcatel-Lucent: understated presentation given all they are doing, but highlighted a key issue of how to capture benefits of eg TeleHealth within the business case.
Aidan Paul, Vtesse: usual complaint about ratings system and "fibre tax" - doesn't mean he's wrong though.

Watch this space for more over the coming days.

£530m for super-fast broadband

In yesterday's Comprehensive Spending Review, despite the huges cuts elewhere, the government announced that the £530m earmarked for rural broadband will be safeguarded. Super-fast broadband will be trialled in the Highlands, North Yorkshire, Cumbria and Herefordshire. The money is being recycled from the BBC:
- £230m is left over from the Digital Switchover budget;
- and the BBC will contribute a further £150m in each of 2013-14 and 2014-15.

The recently announced project in Cornwall cost £132m - so how far will the money go ?

Previously we analysed the Labout Government £6/year "broadband tax"

Then we suggested that this figure looked close to the amount needed,but probably fell a little short. So on that basis the current amounts won't do the job.

However, there may be other ways forward. The costs for local initiatives tend to be less than BT; the fund might be used only for initial capex rather than full funding; and local community services may generate extra revenues that telcos could not capture.

We wait with interest further details from BDUK

Broadband Delivery UK explain more of their plans

A new page has appeared on the BIS website, devoted to Broadband Delivery UK - http://www.bis.gov.uk/policies/business-sectors/telecommunications/broadband/bduk

Interesting snippets from this include:

- BDUK Chief Exec is Adrian Kamellard, reporting to Ed Vaizey (joint DCMS, BIS)
- 4 organisational goals for BDUK are defined, covering USC, "high speed connectivity", and use of public asssets
-BDUK is responsible for 3 "market testing" projects for superfast broadband
- BDUK are holding an "Industry Day" to make announcements about these projects on July 15th - if you want to go email martin.doyle@bis.gsi.gov.uk.

No news yet on how they will choose the trials.

Do Jeremy Hunt's forecasts for superfast UK broadband stack up?

The Guardian’s Charles Arthur asked this question in his blog today - http://www.guardian.co.uk/technology/blog/2010/jun/08/superfast-broadband-jeremy-hunt-analysis .

Interestingly, it’s a topic we considered in regards to Stephen Carter’s £6 pa proposal back in July last year:
http://telecomsregulation.blogspot.com/2009/07/do-stephen-carters-numbers-add-up.html#links

Carter’s “Next Generation Fund” would have generated £163m pa. We concluded that, using the Analysys Mason study figures for FTTC costs, this would be close to the amount of subsidy needed to get BT to fibre the “final third”. But for FTTH it was nowhere near enough.

Creaming money off the BBC digital switchover fund (with dubious logic, and against the prevailing “savage cuts” philosophy) generates £250m pa apparently – but only until 2012. Our NGF calculation assumed 10 years of tax (or a 9.2 year payback), so there is a big shortfall from the £2.8bn cost the A-M report implies.

The way around this impasse is to do things more cheaply than BT would. The new Government has talked of “pilots” to examine other ways of doing things, and community groups generally believe that BT’s costs are much higher than theirs would be. Ofcom are pushing BT into duct sharing, but anyone who’s looked at this knows what a nightmare this would be in practice. The BBC guessed that other utilities (sic) might also be required to share ducts – but again this would be challenging, since they can’t even agree to dig the roads up at the same time. It will be interesting to see what these pilots are, and what they are planning to do.

This statement neither “details” not “clarifies” government policy, but simply raises a new set of questions.

So: “nice try, no cigar”.

Analysys Mason report on “NGA risk in the UK” – missing the moment

Back in March, Analysys Mason (AM) published a report on behalf of HMG entitled “An assessment and practical guidance on next generation access (NGA) in the UK”
(available here http://www.communities.gov.uk/publications/communities/assessmentngafinalreport) . An assessment it may have been, but its approach and consequent guidance has been undermined by the recent election.

The approach AM took was to create two dimensions: (1) three scenarios for the penetration of NGA across the country at 2012, 2015 and 2017; (2) three areas where the impact of not having NGA are highest – areas of highest “deprivation” (or social exclusion), “rurality” and “e-attitudes”. From this they produce areas classified as “priority”, “action probable” and “watching brief. This they do in commendable detail at the level of “lower super output areas” (LSOAs), producing many pretty maps of the country to illustrate their conclusions.

The problem however is that neither dimension is really solid.
The “base case” roll-out assumption has commercial plans (BT and Virgin) supplemented by the Next Generation Fund (Labour’s £6 pa tax) to subsidise up to 90% coverage. The “extended coverage” takes this up to 95%, on the basis of aggressive local initiatives (publicly funded). The third scenario is a “downside” case with no subsidy, reaching 70% population by 2017. In addition, they make some minor adjustments to take into account local initiatives, such as South Yorkshire Digital Region, but these affect only 2.5% of the LSOAs.

Clearly now, with the new Government’s focus on reducing the public sector deficit, and from the coalition partners’ manifestoes, there is little chance of public investment in such adventurous projects. Instead guidance on how that gap could be filled by community initiatives that require little public subsidy would have been helpful. Structured properly, these projects would be driven by local volunteers and use lower-cost local suppliers. This would be a better focus for a new NGA roll-out programme.

Similarly, the impact dimension is pretty soft. There is an unstated assumption that NGA is all about access to some sort of “socially valuable” services – e-government, training, education, even cheaper shopping. Yet the most likely driver of NGA take-up is television/video entertainment – broadcast, on-demand, YouTube, facebook etc, particularly once TV sets come with internet access built in (Sony has already launched one). Most other services are readily accessible at 2Mb/s. If government is concerned about citizens lacking access to important services, it should make sure they are available on the most widely available platform – the TV set.

The AM approach is to mash together Experian and CACI measures for social deprivation, mash them further with e-attitudes (ignoring obvious correlation effects) and overlay a fairly arbitrary “rurality” factor for good measure. It is not at all clear what that final index really represents and whether it forms a firm basis for the investment of several billion pounds of tax-payer money.

AM has as always produced a report which has admirable analytical detail. Sadly on this occasion they have missed the political sea-change and missed the opportunity to find ways of liberating local energies.