The public sector could not and should not drive demand for
high-speed broadband access, a high level delegation of
industry representatives heard today.
Antony Walker, director of the Broadband Stakeholders' Group,
told a meeting of Intellect, the IT suppliers' trade body, that the
UK enjoyed a high penetration of broadband access (at about
512kbps). Further market growth will depend on stimulating demand,
he said, but he ruled out the public sector as the catalyst.
Delivery of public sector services via broadband should be "an
after-thought" once the private sector had provided the services
that justified building the infrastructure, he said.
The market for high-speed broadband has been the focus of
intense private and public sector scrutiny this year, and
communications regulator Ofcom is still consulting on its
approach.
The government and Ofcom should hold their nerve and watch how
the
high-speed broadband (HSBB) market develops over the next 12 to
18 months, the meeting concluded.
However, where they could, they should simplify and clarify the
regulations that influence market development, such as telephony,
internet access, broadcasting and advertising, among others.
It was unclear what new services might be offered, Walker said.
But Nigel Hartnell, executive director of FFastFill, a
communication services provider to global derivatives traders,
suggested they were likely to include moving (video) pictures and
transaction applications that required low latency (fast response
times).
Walker said banks and other investors were willing to invest in
a monopoly HSBB provider, but were more cautious about putting
money into a competitive market. Any proposal that took more than a
year to become cash-flow positive was hard to sell to them, he
said.
Walker said competition for data network business from the
mobile network operators and Virgin Media had prompted BT to
respond. In July it said it would spend £1.5bn to install fibre to
the cabinet that would give about 40% of UK homes at least 2Mbps
connections. A BT spokesman said recently that the lay-off of
10,000 staff would not affect the plan.
Walker said network operators faced decreasing marginal rates of
return for each new customer added. "The new network has very high
fixed costs, so massive early up-take changes the return on
investment picture completely," he said.
He pointed to an HSBB project in Holland which enjoyed a 90%
take-up because it was offered free, but retained most of its
clients when customers were charged the following year.
"I suspect the market will be like the early days of the mobile
phone," he said. "We all thought only a few rich people would use
them in their cars, but in fact the market took off because small
businesses like plumbers and builders realised they could double
their businesses if they were always contactable."