Rising to the broadband challenge
Why broadband matters
Broadband is a nascent industry. We’re at the beginning of a long journey. Both Government and industry are learning and developing, day by day. As we learn we are faced with questions and challenges. How do we best develop the regulatory framework? How can we take forward our work to bridge the digital divide? How do we stimulate broadband content?
All of these questions are important. All need to be addressed with care and attention. However, before delving into such complex issues, we should take a step back and address a straightforward but more fundamental issue: “What is broadband?”
This sounds like a simple question. We all know broadband is fast, always-on access to the Internet, with bandwidths greater than 2mbit/s. We often define it as whatever we currently think should no longer be called “narrowband”.
All of these definitions are valid. But they do not capture why we are interested in broadband. They do not explain what we aspire to develop. Nor do they explain what it is about broadband that fires our imaginations.
In trying to map the future of telecommunications, I believe we can draw inspiration from the past. A hundred and twenty-five years ago there was a man in Cambridge, Massachusetts. He and his business partner, Mr Watson, were British inventors who had just created the world’s first ‘electrical speech machine’: a machine capable of converting sound into an electrical signal.
This was a truly revolutionary invention, but the inventor’s business was not doing very well. After a month of trading, the Bell Communications Company had only sold six phones. This was hardly surprising. To the public, his invention was still technical gobbledegook – a strange collection of wires and magnets.
In 1876 no one could really answer the question ‘What is a telephone?’ No one had ever used a telephone. No one had ever used a telephone to call a doctor when they were sick. No-one had ever used a telephone to check their bank balance from their living room, to win business from competitors, or to say goodnight to their daughter on the other side of the world.
Because people had never used this new invention, they could not possibly dream of the way it would change their lives. To the vast majority of people, it was still nothing more than the sum of its parts.
It took time for that invention to move from the laboratories of Cambridge to the homes of communities across the world. (Indeed as a member of parliament for the town of Paisley I take a quiet pride in the fact that the first private telephone line in Britain was laid between two houses in Paisley.) Here in today’s United Kingdom, that journey to ubiquity is almost complete. Describing a telephone by describing the parts that make it would be as dismissive and myopic as describing the words “Mr Watson – come here – I want to see you” as idle chitchat.
This must be our guiding principle in answering the question ‘what is broadband?’ In the decades to come, no one will talk about broadband in terms of bits and bytes, x-DSL, or mega bits per second. Instead, they will talk of the services that such technologies allow. These are services that let children learn and play online without getting bored waiting for screens to download. Services that allow doctors to make a medical diagnosis from a distance.
But they will also talk of enabling increased productivity in the private sector, with businessmen and women reach new levels of competitiveness. Enjoying access to services previously thought impossible, such as video conferencing from PCs, or instantaneous online storage and data retrieval.
In my visits abroad I have seen how broadband can make a difference. In India I saw companies for whom broadband was the enabling technology that allowed them to trade and work across countries and continents. So in the future the talk will be about the bolstering of rural and remote economies, rendering geographical location a forgotten restriction. Allowing rural businesses to compete head to head with urban rivals.
These services and that opportunity are the reasons why broadband is a priority.
How are we doing?
Narrowband
Amidst all the dot com-related doom and gloom we’re used to reading in the Sunday Papers each week, we must not lose sight of the progress we have already made.
The UK is currently one of the world’s most connected economies. Internet use is higher than in any other European country, with 43% of the population and 39% of households now logging on. An additional 3 million households gained internet access in an eighteen-month period from March 2000, with current access levels four times higher than three years ago.
This comes as little surprise when considering the competitive nature of our prices. The latest OECD figures show the UK as one of the cheapest countries in the world for Internet access.
And despite the so-called dot bomb, more and more people in the UK are conducting business over the Internet. The UK has the highest level of e-commerce outside the US when compared against leading economies:
- This year, 2.3m more adults are buying online – a growth of 41%.
- £57bn of sales were conducted over the Internet in 2000- representing 2% of total sales.
- An additional 200 thousand SMEs are online – showing a growth of 12%; and
- Approximately 2 million more adults are banking online – an increase of 45% on last year.
A great deal of skill, talent and sheer hard work has led to this success. The challenge now lies in repeating this these achievements for broadband. We should be clear: this is a task that has not been, and will not be, easy.
Broadband
We face great challenges. But we must also recognise that there are positive signs.
66% of the population is now covered by an affordable broadband technology, while satellite holds the potential for rollout in rural areas. Many consumers – around half the population – have a choice of packages.
There are now well over 200,000 cable modem users, with an eightfold increase in just over a year. Cable companies are rolling out broadband to augment their existing “triple play” offering of telephony, TV and Internet access. And consumers are responding.
BT has now rolled out its ADSL service over the traditional copper loop to 1000 exchanges covering 60% of homes and business addresses (plus Kingston Communications has made great strides in Hull). This represents a major investment in the potential of broadband. And while much more progress needs to be made, the number of end users of ADSL is now over 140,000 – up more than 200% in just over a year.
OFTEL has required BT to offer its wholesale ADSL product to other operators and service providers on the same terms as to its own retail arm. As a result, the UK now has Europe’s most competitive broadband marketplace, with over 100 ADSL providers. The first unbundled local loops are now operational and there are signs that this is beginning to impact on price.
ADSL and Cable are not the only technologies. Satellite and fixed wireless access offer considerable potential to deliver services to more rural and remote areas.
So after a slow start real progress is being made – but more now needs to be done.
An international challenge
The UK is by no means alone in seeking to meet this challenge. Governments around the world each have their own targets and are developing their own strategies. And there is a great opportunity for us all to learn from their experiences.
Take Canada for example – a land I know well. Canada is a country the width of a continent, with a population density of only three people per square km. This country of vast distances and sporadic urbanisation sees broadband as an important tool to bring its people together. Our Canadian counterparts are working on initiatives to support infrastructure development and to aggregate demand within communities.
What we learn from Canada and other countries – and what we learn from our own experiences – is that there is no magic answer.
So we need to rise above the cyclical and often sterile debates about what is needed first – more extensive supply of infrastructure or more demand resulting from more compelling broadband content. The simple fact is we need both. We need to stimulate the virtuous circle in which supply and demand increase in parallel, each reinforcing and driving the other.
The challenge to industry
The industry has to play its part in that virtuous circle. As the major communications provider in the UK, BT has a particularly important role to play. If BT is to now reap the benefits of the major investment it has already made in broadband rollout, it needs to rise to four key challenges.
Analysis of OECD figures for DSL price and take-up show time and again that if you reduce price, take-up will rise. Therefore the first challenge for BT must be to continue to drive down its costs so that broadband prices can be brought down to mass market levels. Not just in their retail offerings, but in wholesale too – so that the 100 plus resellers of BT’s ADSL services can help drive the market.
Second, and related to this, a greater variety of product choice must be introduced. With lower-priced items, that will make it easier for consumers to take the first steps up the broadband ladder.
Third, BT should also drive down its cost-base in the local loop, so that Local Loop operators can also contribute to the roll-out and take-up of ADSL and other DSL technologies more effectively.
Fourth, BT should market effectively the benefits of Broadband Britain to as wide a market as possible. The recent advertising by BT Wholesale is a welcome first step in this process.
Such challenges also apply to other members of the industry. All players must work to bring costs down and aggressively market the benefits of broadband. Both the cable companies and BT are making progress on this agenda and I pay tribute to their work, which has now taken us well beyond 300,000 broadband homes. If they can build further on what they’ve achieved so far, the next 300,000 will be much, much easier.
The challenge to government
But Government must also play its role. And so we have put forward a major package of measures:
Fiscal measures to help with the cost of broadband services
In the Pre Budget Report, the Chancellor confirmed that recent tax measures to stimulate ICT take-up by small businesses and home working are of direct relevance to broadband. We are working with the industry to raise awareness of the rules and help people take full advantage.
Promoting broadband
Messages to the consumer in the past have too often been confused, and focused on technology not benefits. We need a concerted campaign in partnership with the industry. Among the Government’s contributions will be our £66 million UK online for business programme, through which we will spread the broadband message to businesses.
Enabling Community Access
As recommended by the Broadband Stakeholders Group, we will be piloting the concept of what the group described as BroadPlace – bringing teleworking and other broadband facilities into the heart of communities.
Stimulating content
In the public sector, Broadband content has the potential to add value to education, health services or art and culture. We intend to stimulate the market for online content for teaching and learning, introduce broadband support services for health professionals, and develop Culture Online to offer children and adults tailored access to the nation’s arts and cultural resources.
We will identify the scope for improved marketing of existing support to the sector, and work with the Digital Content Forum to raise awareness and market the R&D tax credit.
We will also work in partnership with the digital content sector and other interested parties to stimulate pilots, which test different commercial models around broadband content.
Stimulating rollout
Around 35% of the country’s households still have no access to broadband services. Measures to boost demand must go hand-in-hand with measures to stimulate supply.
First, industry needs to leverage its investment effectively. The primary cost of rollout lies in primary infrastructure. To ensure that the cost of rollout is minimised, we want to encourage infrastructure sharing by telecommunications companies. We will push the industry to come forward with specific proposals on how to do this.
Second, we will cut the red tape holding back deployment of satellite broadband services. Satellite offers the potential to provide ubiquitous coverage throughout the country, and therefore their development must be strongly supported. We are going to introduce a fast-track, on-line licensing regime, and review planning regulations for satellite terminals.
Third, we will study how we can use public sector purchasing of broadband services more effectively. The public sector currently spends around £1.7 billion on communications – a figure likely to rise as we move towards electronic government. But this expenditure is piecemeal and uncoordinated.
The Office of Government Commerce have been discussing with all stakeholders how we might co-ordinate this buying power, and the effects it will have on the market.
Work in the Regions
Our work to develop the UK broadband market is not confined to Whitehall. We have asked the devolved administrations and RDAs to extend broadband access in their regions – giving them £30 million to help. They are coming up with excellent plans and we will use some of this money to establish on a pilot basis in one region initially a Broadband Brokerage Service. This will allow companies, public sector organisations, communities and individuals to register their interest in pursuing broadband, and then broker aggregated solutions once a pattern of demand for a particular area has reached critical mass.
Conclusion
As I have said before, there is no magic bullet. We are proposing a multi-faceted set of initiatives to tackle a multi-faceted set of challenges. The initiatives I have set out here, plus those included in our detailed strategy, lay the groundwork. They represent the next steps in our work to develop the UK’s Broadband market.
The challenge is great but so too is the potential. Just a few days after receiving the patent for his invention, Alexander Graham Bell wrote to his father, telling him:
“The day is coming when telegraph wires will be laid on to houses just like water or gas – and friends will converse with each other without leaving home”
If definitive proof was ever needed of the man’s vision then this is it.
Clearly, he knew from the outset how important the telephone would be. Clearly he knew from the outset how widespread the telephone’s reach would be.
But the real proof of his genius is in his use of language: “...telegraph wires will be laid on to houses just like water or gas”. Not like water pipes or gas pipes. But like water or gas. From day one, he knew that the pipes would not be the stars of the show. Neither will the wires, nor the cables, satellites or fibre optics. Instead he spoke of the water and the gas: the content, new services, and benefits to the public. He knew that this was the true value of his invention.
This is as true today as it was in the time of Alexander Graham Bell.
We need more infrastructure, affordable services and greater availability. But we must always remember that what inspires our efforts and drives our work forward is not the pipes and the plumbing but the services and the content. The liberating potential of this enabling technology. The enhanced opportunities for education. For health and for business. For government and for entertainment. That is the opportunity. Working together, I believe it can be our achievement.
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