The government should leave the
roll-out of high speed broadband in the UK to market forces, an
influential report has recommended.
An investigation by Francesco Caio, vice-president of Lehman
Brothers, concluded that
the government need do nothing different in the short term.
However, the report said the government would need to revise
regulations governing telecoms in the medium to long term.
Shriti Vadera, minister for business and competitiveness, said
the government accepted Francesco Caio's recommendations in
principle. It would now form an implementation team to seek ways to
encourage even more competition among suppliers of bandwidth,
access and applications.
The
Department of Business, Enterprise and Regulatory Reform (BERR)
commissioned Caio in February 2008 to look at barriers to
investment in next generation access (NGA) and networks.
Caio said the existing regime had succeeded in making broadband
access available to more than 96% of UK households. More than 60%
had taken it up.
He said there was no "killer app" that made higher speeds
imperative. Nor was Britain presently at a competitive disadvantage
from not providing global access to high speed networks.
The bottleneck was the backhaul or core network, which did need
upgrading, he said. "There's no point changing the size of your tap
if the mains stays the same," he said.
He said speeds and prices of broadband differed around the
country. Population density was crucial to broadband economics, he
said. He hoped a change in the regulations and more transparency
would allow network operators to differentiate products by quality
well as provision of service.
He said he had no fixed view on what is "high speed". "It's a
moving target," he said. "The technology changes so quickly." He
foresaw a market where fibre, cable and wireless technologies would
be available, and customers would choose the one(s) they preferred
based on cost, services and content.
This lay behind his recommendation that the UK does not impose a
universal service obligation on network operators, a move Brussels
is discussing on a continental scale.
Network operators are likely to be disappointed by Caio's report
because public investment in broadband is likely to be scarce.
Caio said competitive pressures has already encouraged new
investment. The mobile networks' introduction of cheaper data
transmissions at speeds up to 384kbit/s and its rapid uptake
spurred Virgin Media to announce in January
plans to upgrade its network to 50Mbits/s using optical
fibre.
In July BT said
it would spend £1.2bn to give one to two megabit/s speeds to 10
million households via existing copper phone wires.
In the medium to longer term, as the "internet of things"
arises, the government and Ofcom would together need to create the
enabling regulatory regime, Caio said.
"This is a massive undertaking," he said. It meant a complete
overhaul of the interconnect regime that governs how messages are
passed from one network to another, and who pays for what.