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”.
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You raise some interesting economic questions. However, there are some equally important questions about the services that will make use of this bandwidth, and Jeremy Hunt is extremely vague on this in the Guardian article. Basically, all services that require high bandwidth involve the delivery of moving images or hifi sound - which for consumers means TV or perhaps audio file sharing. The former is largely a competition to Sky. It is also hard to see the justification for small businesses needing high bandwidth, because only a small proportion involve rapid exchange of high resolution images or video, and even then, this rarely needs to be in real time. International comparisons are very unreliable, because the marginal value of FTTC or FTTH depends on the capability of the alternatives. Also, just because other countries are doing something does not mean that it is justified or good value. There are very few other areas in which the government would even consider public funding on this basis.
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I agree that the need for superfast broadband hasn't be demonstrated, though I thought much the same about the first generation when I worked for BT on VoD.
ReplyDeleteI thought differently though when I learned about TV sets with internet access built in directly. The viewer can then watch broadcast TV, VoD (iPlayer etc), YouTube and Facebook all on the same main screen, in HD/3D. You can see how this requires high speed. Also more sophisticated video games require higher upload speeds and low latency.
In the business market the only application I can see is HD/3D videoconferencing/videophones. Apparently these are good enough to read people's eyes and body language so making it more like a real meeting.
None of these applications is likely to lead to ahuge growth in GDP, so don't justify Govt funding.
I also agree that international comparisons are weak (being driven by many different factors) and are more appeals to vanity than economics.