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Gov's £1Bn BB Investment Criticised

Posted: 17th Sep, 2003 By: MarkJ
The Broadband4Britain campaign has criticised the governments £1 Billion investment of public sector funds in hi-speed access. The group fears that the structure of the investment may, in the long-term, fail to establish affordable and sustainable services:

Will £1 Billion of Public Money Manage to Bridge the UK Digital Divide?

Broadband4Britain, the UK’s broadband pressure group, has today called on the Government to pause and reflect on one of its cornerstone broadband policies as emerging details point to deep flaws. £1 Billion of public money, intended to stimulate the supply of broadband to commercially unattractive areas, may in the long-term fail to establish affordable and sustainable services. Rural Britain’s best chance of a broadband future could be about to be squandered.

Andy Williams, campaign manager for Broadband4Britain explains: “The aggregation of public sector demand is a good idea in principle, and we certainly don’t object to the Government spending money to support the roll-out of rural broadband. However since this is the only market intervention that we can expect from central government in the next three years, we would like to ensure that the money is spent effectively, and that the investment has real and sustainable long-term benefits. Having spoken to many stakeholders, we have real fears that those benefits aren’t going to materialise.”

A number of potential flaws beset the current implementation plans for public sector broadband demand aggregation, and they can best be encapsulated in two broad questions. Firstly, in what concrete ways will the current policy strive to accelerate the delivery of broadband services to the private sector in rural and remote areas? Secondly, how does the current policy support open and fair competition in these areas?

Antony Walker, CEO of the Broadband Stakeholder Group (BSG), shares some of these concerns: "The aggregation of public sector demand for broadband is a one-off opportunity to extend the availability of broadband to rural areas. It is absolutely critical that we get this right for the future competitiveness of UK plc. The questions raised by Broadband4Britain deserve a detailed and considered response from the DTI," he said.

The current policy’s impact on the development of competition in rural broadband markets concerns many. Practical and legal issues have been highlighted.

“In certain cases, an agreement under which the government gives a supplier exclusivity in order to promote the deployment of broadband services could constitute illegal state aid and violate EU procurement laws. The Government should also be concerned about whether such agreements might undermine the development of a competitive market for broadband services. Each Regional Aggregation Body will need to assess its procurement plans to determine whether they comply with state aid rules and government policy favouring the promotion of competition,” states Michael Ryan, head of the European Telecomms Practice and partner at international law firm Arnold Porter.

Over the next three years the UK Government is set to spend £1 Billion, placing orders with private sector network operators to wire-up the UK’s public sector to broadband. As confirmed in recent comments by Steven Timms, e-Commerce minister and Alun Michael, rural affairs minister, this policy is a keystone in the Government’s strategy to bridge the UK’s digital divide, which continues to disadvantage millions of small businesses, and thousands of communties across the UK.

The underpinning logic is that all communities, however small, are near to hospitals, schools, libraries, local authority buildings and so on. By synchronising the process of broadband-enabling these locations, sizeable contracts can be awarded to network operators. It is assumed that in providing these services, the operators will be obliged to build new broadband infrastructure, which in turn will benefit the private sector by accelerating the availability of affordable broadband services.

But just how will this assumption be translated into a reality? Broadband4Britain has formulated some detailed questions in an attempt to sponsor a more open and informed debate. We call on the Government, and the Department of Trade and Industry in particular, to pause in their implementation and discuss these issues fully and frankly.

The Questions

Question 1
Are there any contractual terms or inducements within the policy to ensure that network operators DO build new, scalable and future-proof infrastructure for broadband services in commercially unattractive areas?

Question 2
Having supported one network operator to build new broadband infrastructure in a given region, hasn’t the Government effectively raised huge barriers to entry for any other operator looking to deliver competing services in that area?

Outside of urban locations, public sector demand forms a very significant percentage, and perhaps the lion’s share, of broadband demand. If this demand is locked into a contract with one operator, what is the chance of competitive supply of broadband supply in that area?

Will public sector money be creating a local monopoly?

Question 4
New guidlines from Brussels state that public money should only finance ‘open infrastructure’. That is, facilities that are available to all operators and service providers. Does current policy conform to this rule?

Question 5
What guarantees are DTI seeking from its suppliers that new broadband infrastructure built under this policy can be used by not-for profit community broadband networks for low-cost backhaul of Internet traffic?

Question 6
In the situation where new broadband infrastructure is built to service a particular public sector requirement, what scope is there for the public sector customer to switch suppliers (for reasons of underperformance or similar) without a repeat investment?
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