Industry 'must pay for super-fast broadband'
The telecoms industry, not the government, will need to stump up the billions of pounds needed to rollout the next generation of super-fast broadband networks across the UK, according to the former boss of Cable & Wireless, who was appointed earlier this year by the Department for Business, Enterprise and Regulatory Reform and the Treasury to look at the UK broadband market.
But Francesco Caio said the government can help reduce the estimated £5.1bn to £28.8bn cost of installing super-fast broadband, by coordinating the digging up of streets so that fibre optic lines can be installed, opening up national infrastructure such as sewers so cables can be laid and relaxing the rules on where overhead wires can be erected.
His recommendations, which the government welcomed, come ahead of the publication of regulator Ofcom's initial thoughts on next generation broadband networks - which will allow consumers to download songs in seconds and movies in minutes - later this month. The regulator is expected to re-open its consultation with the industry by asking what sort of regulatory regime is required to ensure next generation networks are built over the coming decade.
Caio said there has yet to emerge a service that cannot be delivered over current broadband networks but as more and more devices are produced that can access the internet, the need to install networks that can run at much faster speeds will increase. The government needs to keep a watchful eye to ensure investment is made, but does not need to bankroll broadband.
"In my view the case for major intervention now is weak at best," he said. "It is true that the UK has a lower number of homes connected through fibre (optic cables) than other countries, but I think we should take a rather more articulate view of how broadband is used, what there is today and how the system is evolving, as opposed to just counting the number of fibres there are in the ground."
He said next generation networks will be a mixture of fibre-optic cabling, either to individual homes or street-side cabinets, and wireless broadband. BT, which welcomed the review, has already said it plans to spend £1.5bn running fibre optic cabling to the streetside cabinets that ultimately connect 40% - 10 million - of the UK's homes.
Earlier this week, the government's own independent advisory panel, the Broadband Stakeholders Group, estimated that rolling out such fibre optic cabling to all the UK's cabinets would cost £5.1bn, while putting cabling all the way into every home in the UK would cost £28.8bn.
Virgin Media, meanwhile, is already rolling out broadband at up to 50Mb per second - 10 times faster than the average connection - across its cable network which covers half the UK.
Caio said such moves prove that competition, not intervention, is the way to go. The market is also changing so fast - wireless networks today can offer faster broadband speeds than were possible over a fixed-line connection a decade ago - that the government should keep an open mind on what technology gets used.
"My recommendation to the government is don't commit to anything today because the technology is changing," he said. "You might find yourself having committed a lot for something that could have been done by the market".
As a result he said the government should not look to extend the universal service obligation, under which BT must to provide a basic phone line to every UK household, into the provision of fibre optic cabling.
He gave the current state of the broadband market - which covers 99.6% of UK households - a relatively clean bill of health. But he added that current 'bottlenecks' in the system, which reduce the speed of internet access, are appearing in the telecom companies' backbone networks rather than in the 'last mile' connection between telephone exchanges and people's homes, which is where next generation networks will be installed.
As a result he wants Ofcom to demand that the ISPs give their customers more detail of how they manage their internet traffic, especially at peak times. The regulator has already pushed for a voluntary industry code which gives customers more information about the average speed they can expect on their line. But Caio believes some customers may be willing to pay more in order to have dedicated bandwidth, once they fully understand how their line is managed, so they do not see their speed dip at any time of day.
Caio's recommendation that telecoms companies be able to carpet the countryside with overhead cables is likely to alarm some rural communities. But Shriti Vadera, parliamentary under secretary of state for business and competitiveness, said local communities will have to weigh up the benefits of super-fast broadband against the impact of overhead cabling. "It is a matter of ensuring that people have a say," she added.
Business secretary John Hutton added: "We want to create the right conditions for private sector investment and stand ready to play our part in ensuring the UK has a competitive infrastructure in the years to come."