If your local council has a choice between receiving an upfront payment plus profit share for getting ubiquitous broadband by the time of the Olympics and bidding for an unknown share of £100 million (which will be shared with at least ten others, not received before late 2012 and matched from funds they have not got), what would you expect them to do? Given that their choices, unlike those made by Central Government, are open to public scrutiny, what would you think of them if they spent your money participating in another Whitehall inspired procurement paperchase instead of trying to copy Westminster and Kensington?
The deal looks to be a true win-win.
How many other urban areas have the potential for similarly attractive win-win deals?
How many rural areas could benefit from similar approaches as the fixed and mobile broadband markets converge?
Is it proof that market forces can indeed overcome regulatory failure and change the nature of the game when the will and the imagination are there?
I suspect that what has changed to make such a deal attractive to a mobile operator was the traffic volumes during the Royal Wedding followed by the speed of the transition to smartphones. The traffic forecasts for 2012 may already have been exceeded. the mobile operators can no longer wait for the delayed 4G license auctions. They have to get "fibre to the femto" (or at least to the micro-cell) before their networks collapse under the weight of social media and internet browsing traffic over mobiles (smart-phones, tablets etc. not just netbooks and laptops). This now looks set to overtake that over fixed connections by next summer. It may have done so in London during the Christmas sales, as it did during the Royal Wedding and routinely does in other parts of world. We should not forget that, outside North America and Europe, the majority of Internet Traffic already originates from mobiles.
Is the FT correct? Will the Westminster and Kensington deal set the tone for a series of auctions in which "mobile" operators will seek to outbid the "fixed" operators, let alone each other, for access to council owned infrastructures in order to provide "ubiquitous broadband"?
If so, the value of the packages on offer (including to help cover the cost of switching from fixed to mobile ICT systems for running council services without the back office overheads) is likely to dwarf the £100 million announced for "Superconnected Cities" announced in the Autumn statement. But more importantly, the approach enables an administrative transformation of Local Government on positive cash-flow, without the need for up-front investment. Meanwhile, however, Central Government appears about to be paralysed as the dinosaur suppliers of the past go to the courts to resist change.
So who stands to lose most?
In the short term the answer appears to be BDUK and Ofcom
BDUK because it will be overtaken by market developments unless it stops seeking to recreate a centrally planned and regulated market. Its "deficit funding" approach for disadvantaged areas is not necessarily wrong. Its attempt to impose standard procurement frameworks is. Its "one-size only" rural model fits no-one well and has already got in the way of bringing in alternative sources of funding to reduce the "deficit". Its urban model looks set to do likewise - and needs a short order rethink.
Ofcom because it looks to be stuck preserving past deals and is faced with a delayed 4G auction will which raises much less than it would have done last year - because the mobile operators will have spent their budgets on upgrading the networks of those local authorities and utility providers who have responded to their need to move fast and given them access in return for slashing their own communications costs.
I am unsure how much the fixed line providers will lose, if anything. The volumes of traffic to be trunked over their fibre networks will soar. Fibre to the femto may also be a more profitable business than fibre to home, provided the existing customer base can be retained by bundling domestic broadband with ubiqitous wifi access. BT is already the UKs largest provider of wifi, 2.8 million hotspots and rising, on the back of such a package.
I suspect the most visible losers will be those in the candy-floss layer of resellers, lured in by the dead-end policy of local loop unbundling. The future will lie with "competition in the local loop", as envisaged by the previous Conservative Government. That vision was for former telecoms (fixed and mobile) and broadcast (wireless and cable) competing to provide broadcast quality, real time video services to the home, across the UK, by 2002.
We are ten years late - but have added an ubiquity that we did not envisage when that policy was set.
Now that "vision" is about to become reality, we to also look again at the mainstream HMG IT, Communications and Cybersecurity Strategies. Like the Defence Review they can be seen as rearguard actions to defend the institutions of the past against change. The mindsets of those who produced them assumed a world of fixed line communications infrastructures with mobile as an add-on. But we have crossed the watershed into a world of ubiquity in which with mobile is the default - and FTTC means "fibre to the cell" rather than "fibre to the cabinet" [albeit the cells will have to be smaller, hence my preference for FTTF ("fibre to the femto") or FTTM ("fibre to the micro-cell")].
Hence also the pressures to switch-on and interogate the "trusted computing" chipsets so that the devices used for access can be identified and traced as they move from cell to cell before the cost and complexity of information security spirals even further out of control. Hence also the new round of privacy conferences obsessing over location services.
Recession is a time of real change, when we can no longer afford to throw money at problems. We have to think instead.
BDUK and Ofcom are not the only ones who got stuffed for Christmas.