Friday, 22 January 2010
We have been here before. BT claimed in the first wave of broadband that large swathes of the country were not deemed to be viable for exchange enablement. That was proven, in no uncertain terms, to be untrue. Firstly, the claim was that most of those exchanges were rural and therefore insufficient demand was cited, yet the truth is that demand is now proven to be higher in rural areas. Secondly, when BT's bluff was called in Yorkshire and public money was provided to enable the final 20+ exchanges (and upgrade the middle mile to fibre for future-proofing) on the proviso that it was repaid if the unviable argument was disproven, BT ended up repaying a substantial proportion of the monies (I was told a six zero figure). Thirdly, the profits from ADSL broadband are undeniable. If it wasn't making money, we wouldn't have broadband on offer for £6.99/month etc. It isn't a loss leader, it's profitable.
I was made privy to many FTTH financing figures in the U.S. (actual not hypothetical). The non-viable nature of FTTH was nowhere in sight based on an ARPU lower than that which consumers are currently paying for inferior services.
So, is there market failure for FTTH? Or next gen? (whatever that currently means as the UK govt is ignorantly calling a USO of 2Mbps 'superfast').
I think there is no proof WHATSOEVER that there is or will be market failure for FTTH. However, before someone decides to spend the broadband fund on some other needy cause (of which this country has many), let's just ponder one thing.
Define market failure. If market failure means that the telcos deem that they will make insufficient profit in an area, does that mean that a community project, run as a sustainable commercial concern, can also not make money? Surely, the whole point is that whilst there are slimmer margins available in certain areas, a community project can tread that finer line and still deliver a sustainable (read: profitable) network where a telco cannot or will not because of shareholder interest, higher costs etc.
What we require in the UK are networks which offer best value, especially bearing in mind that a true 'community' network will connect ever single sector in that community, including those who use public funds to pay for their communications eg hospitals, schools, councils, etc etc, thereby passing the savings to the taxpayer (and Treasury).
In order to give best value and foster competition and innovation, these networks need to be:
a) open access - allowing competition to offer a wide variety of CHOICE to the end users, whoever they are, public, private, consumer, health, councils etc
b) community-owned and run - creating local jobs and optimising the blue pound principle not paying out to increasingly foreign-owned businesses or those whoa re investing more outside the UK than within
c) run on a sustainable commercial level to ensure that these networks, which will have a lifespan of at least 50 years, are still sustainable when our next generation takes over running them
However, a community project will struggle to self-fund something which needs to pay back over, for instance, 20 years. Many people do not stay resident in a community now for anywhere near that long in this transitory, socially mobile age. Businesses struggle to see long-term futures now we have lost manufacturing, farming is battling to stay afloat, and so on. Finding internal investment will be difficult.
Yet, it is precisely those projects which will deliver the aims and objectives of Digital Britain and which need to be funded. The so-called Final Third should be the first third to be funded, and the funding should go into recreating what we have managed before so efficiently and effectively - local and regional infrastructure projects, owned and run by those whose direct interest is affected - the community. We did it with water, power, railways - successfully, until we decided in a moment or three of glory to nationalise them.
Market failure? Think again.