UK needs 'radical' new approach to broadband

The UK's broadband strategy is dogged by the same problems that existed two decades ago and compares unfavourably with other European countries, according to management consultancy

To say the recent British House of Lords select committee broadband report met with a lukewarm reception would be something of an understatement. The industry and external commentators were quick to react, with responses ranging from consternation to confusion.

The report was released a few days before figures showed that the United Kingdom sits in 15th place in the European broadband speed table, a long way from the government's target to achieve pole position by 2015. The inconvenient truth is that there is nothing in this report that makes that target seem any more achievable.

Broadband strategy in the UK is still dogged by many of the same problems that existed 10 or 15 years ago. Issues such as the provision of broadband services in rural and remote areas and fair wholesale access to third party infrastructure have been around since the 1990s. Grandiose statements describing telecoms infrastructure as a strategic asset like road or rail networks are all very well, but this particular asset was transferred to the private sector more than 20 years ago.

Despite what government may wish for from private commercial companies, the economics of providing this service simply do not stack up. With lower population density in rural areas, the high cost of rolling out broadband infrastructure is not met by the volume of demand present in more densely-populated urban areas.

For example, Fujitsu recently withdrew from a tender process for a project aiming to provide 90 per cent of homes and businesses in Cumbria with 25Mbit/s broadband speeds. It was reported that the company wanted access to at least one million premises, and that Fujitsu considered this reach a crucial factor in being able to attract interest from consumer broadband providers such as Sky and Virgin Media. Clearly the company felt that it was unable to guarantee the required economies of scale and therefore terminated its involvement, leaving BT as the only provider left in the process.

Capital cost is a barrier to such projects, and yet broadband providers are investing significant sums in parallel broadband infrastructures which perform essentially the same function in the same geographic areas. This duplication of effort and spend is inefficient, only serving to ramp up costs to those consumers already located in an area with broadband coverage, while ignoring those consumers who are beyond the reach of the broadband network.

It is increasingly difficult for commercial broadband providers to differentiate their offerings based on infrastructure, a realisation made a while ago by the mobile industry. Mobile operators' acceptance that competing on the basis of investment in parallel and overlapping infrastructure is unsustainable has led to collaboration between competitors who now share networks under commercial arrangements. It is worth pointing out that these developments happened independently of the regulator and without obvious government intervention.

By contrast in the broadband industry we are faced with infighting and claims of anti-competitiveness, and watchdog Ofcom is tasked with regulating a market which may well be systemically unbalanced. If the mobile operators' model of infrastructure collaboration could be replicated by broadband providers with an industry-wide scheme, that would be a sign of real, practical progress.

The systemic failure of the free market approach to align with government policy requires some radical new thinking. For example, is it time to consider the merits of a state-run national infrastructure company as the answer to the commercial challenges of providing fast, nationwide broadband? The infrastructure company would be a nationally owned asset, with the regulator ensuring fair and impartial wholesale access to all commercial broadband operators; its objective would be to ensure that the UK has the best, most up-to-date broadband infrastructure.

The latest figures show that the UK's current progress on the rollout of broadband still compares unfavourably with many other European countries. If the government is to meet its own targets, it will need to close the policy black hole between aspiration and execution. Overall, the Lords report feels like a missed opportunity to stimulate productive action in the UK on broadband issues; the sort of big thinking which might pose questions to advance the whole discussion is largely absent. The unavoidable conclusion is that we are still looking at the same problems that were doing the rounds 10 or 15 years ago without presenting any tangible solutions.

Indeed, 2015 is not far away and unless things improve very quickly the government looks set to miss its target of having the best broadband network in Europe by that date. Less talk and more action should be the order of the day. And some of that action needs to be radical.

Harry McDermott is the chief executive of Hudson & Yorke, a management consultancy focused on communications technology