Friday, July 02, 2010

Breaking the broadband policy and investment impasse

A couple of interesting articles illuminating some of the issues presenting barriers to investment in next generation broadband. The first is a blog post by Paul Budde (MD of BuddeComm, an an independent telecommunications research and consultancy organisation), on how to move forward in telecoms and broadband policy. He draws the following six conclusions from current developments and circumstances:
  • Current regulatory regimes have not, or have only partially, delivered what they were intended for. They do not provide the necessary incentives for the changes that are needed.
  • Despite decades of trialing other business models the incumbent telcos generally continue to be utilities-based operators, and as such telecoms infrastructure largely remains a utilities-based national monopoly.
  • Fixed broadband will be critical economic and social infrastructure backbone for any country.
  • Fixed infrastructure technology is pointing towards fibre
  • Some kind of trans-sector development will take place and the economic and social benefits from this will be substantial.
  • Competition in itself should not be the only goal of regulation – a combination of competition and regulation can also deliver effective outcomes
The last three are particularly relevant to the UK's current situation. While recognition of the need to "do something" in relation to broadband is growing, unfortunately we don't yet seem able to come up with a suitable replacement for our previous reliance on the market to deliver both universal service and next generation access. Budde also stresses the need for leadership and vision, in terms of setting out a clear plan and long term goals for broadband policy, above and beyond providing a return for investors (thought that's important too of course). This is something that Australia has done, with is National Broadband Network, as has the US with its National Broadband Plan.

But I don't think the previous UK administration's Digital Britain initiative provided the same focus, conflating as it did broadband policy issues with too many other sometimes only tenuously related areas, such as, broadcasting, regional news and copyright. Broadband's just too important to be lumped in with other issues in this way. We need to do better, learning both from our previous mistakes and the great strides forward being taken elsewhere in the world.

The second article (from Wired, with an interesting commentary from Techdirt here) asserts that US ISPs have focused on appeasing shareholders rather than offering innovation, and that their current posturing in the US broadband policy debate relates much more to lowering their own costs at the same time as squeezing more money out of customers, including some potential new ones in the form of online service providers:
"Where are the major players in the U.S. broadband industry in all of this innovation?...they are jealous of online services that make money from ads...ISPs would love to find a way to be paid for both sides of their networks - from their users and from online services. And they want to get paid from the packets flowing inside their networks, too...They’d rather plot to get themselves some of that sweet money flowing to online services, instead of concentrating on what the country really wants and needs, which is fast, cheap and open internet access. The ISPs would rather be in a world where certain online services are locked only to certain ISPs - like ESPN’s streaming video is now - so that they can have a lock on customers that isn’t dependent on them actually building out the best infrastructure they can."
The article also suggests that ISPs' approaches to innovation lead to Comcast's mechanism for limiting peer-to-peer traffic, which "is the not the kind of innovation that Americans want or need", and suggests what really lies behind ISPs' reluctance to innovate:
"The dirty secret of ISPs is that even as broadband usage on their networks continues to increase 30 to 40 percent a year, their annual costs for shipping data onto and off the net's main pipes continues to fall. The problem isn't the cost of shipping data. The problem is that the large ISPs answer to Wall Street and instead of planning and investing for abundance, they prefer to spend their time thinking of ways to extract more money from customers without having to invest significantly in future-proof infrastructure...It's literally not in telecom executives' best interest to invest in broadband and solid networks. That's why you get companies like Time Warner trying to squeeze customers into limits on the amount of data they can use - not because bandwidth is expensive - but because building a real network is. It's far better, in their minds and for the stock price, to focus on bleeding as much from their current customers using self-serving policies instead of gaining loyalty by making networks that are generous, quick and reliable."
The Techdirt commentary goes on to offer a further warning about any signs of acceptance of the FCC's proposals from ISPs and telcos:
"While I agree it's not nearly as big a deal as the telcos are making it out to be, I still think that supporters of the FCC's move are underestimating what will result, and what kind of loopholes the telcos will gleefully make sure are present. With the recent reports coming out, saying that the telcos are willing to "agree" to legislation on this topic, combined with the fact that they've hired up a ton of ex-high level government officials to help craft any rules, suggests that what comes out in the end will be a lot more "friendly" to the type of short-term Wall Street-driven "innovation" that the telcos want."
The bottom line here seems to be that this is the situation you end up with if you let commercial vested interests get too close to an important debate. Exactly the same problem facing the UK, in fact.

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