Thursday, April 07, 2011

BDUK’s second wave process – a few questions


A few things have occurred to me in relation to the current BDUK bidding round; chiefly, why do rural areas need to demonstrate demand for NGA broadband?

Given how widespread NGA rollouts are across urban areas, it seems highly likely to me that operators would be extending their services to rural areas if it was cost-effective for them to do so. After all, this is what happened as current generation broadband services rolled out across the country, when all exchanges were eventually enabled (if not unbundled) as a matter of routine, rather than on the basis of demand registration and trigger levels. The difference this time around of course is that NGA upgrade costs are significantly higher than those experienced during the deployment of current generation broadband, with return on investment periods significantly longer as a result.

I don't dispute the importance in principle of demand registration and stimulation activities. They can demonstrate to suppliers that there is significant demand for their services in rural areas. They can also help in relation to state aid approvals, registering demand in the absence of market delivery to help make the case for public intervention. But surely suppliers are fully aware of the pent-up demand for broadband in rural areas already, given the levels of takeup of current generation broadband across both urban and rural areas?

The various rural broadband events I’ve attended over the past few months have demonstrated that it’s more a question of demand containment than stimulation in rural areas, with a great deal of frustration felt by audiences who are still waiting for reliable current generation services. The reasons suppliers aren’t investing in rural areas are the inherent costs in doing so and the resulting likelihood of little or no return, based on the economics of provision and customers' (understandable) pricing expectations. The lack of investment isn't due to doubts about the level of demand?

If it was being proposed that rural populations should have to pay more for their broadband than urban populations (and by more I mean significantly more, as I recognise that folks in rural areas, served by exchanges where BT is the sole operator, like mine, already pay more for their broadband, as well as having less choice/competition than folks in urban areas), then the purpose of demand registration and stimulation would be much more apparent. It would demonstrate to suppliers and investors the extent to which rural areas want broadband (which is, to state the obvious, a lot) and could also indicate the amounts rural communities were prepared to contribute, both collectively and individually.

But such differential pricing isn't being proposed under current policy, and I don’t mean to suggest that it should be either. The scorecard approach being put forward by the government (to describe what having the “best superfast broadband in Europe” actually means) quite rightly covers a range of aspects such as competition, choice and affordability, as well as bandwidths and coverage. From Britain’s Superfast Broadband Future:
“A network that can provide superfast broadband to half the population but nothing to everyone else is not best in Europe; a network that can provide superfast broadband access to everyone, but at prices that few can afford is also not best in Europe; a network that provides superfast broadband that few are interested in using will not be best in Europe.”
My inference from the above (in addition to the fact that the last statement is highly unlikely) is that superfast broadband prices should be directly comparable across rural and urban areas, especially given that there are areas of rural as well as urban deprivation? So, if services are to be as affordable as possible to as many as possible, why single out rural populations to ask them whether they want broadband or not, and if they do want broadband (which we know they do), how much they would be prepared to pay for it?

I don’t for a moment think that it would be fair to suggest that rural populations should pay significantly more than their urban counterparts for broadband, above and beyond the current differences, particularly given the acknowledgement at policy level of the importance of broadband to everyone, rural areas included. The government’s strategy clearly recognises the need to ensure both the universal availability of 2Mbps broadband as well as the widespread availability of NGA, stating that the drive to deliver the former shouldn't be separated from the drive to deliver the latter.

Don't such policy objectives demonstrate in themselves that the demand case is proven?

2 comments:

  1. If the funding was used to provide POPs in rural areas, digital parish pumps, and if VOA tax was reduced for new entrants, new business models would spring up delivering the last mile by fiwi or fibre. (or as we call it the first mile).
    This would provide a far superior service to the rural people, and I for one would be prepared to pay more, as it would deliver quadplay, saving my family and business money.
    If on the other hand councils (like mine in Lancashire) write a procurement process and tender which can only be taken up by BT (like it happened in Cornwall) and if that process delivers me broadband via BET, which will be totally useless and cost a fortune, then I would expect to pay a lot less for it.
    just saying.
    chris

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  2. Not convinced about the demand case being proven - people will write megabytes of blogs and tweets about how important upload capacity is while sitting resolutely on a 448k upstream speed when 832k is available ! Do we believe what they write, or what they buy ?

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