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Allow market forces to redress regulatory failure - A budget for IT enabled recovery Part 2

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There has been a chorus of complaints that the government does not have an industry strategy - as though this were to be deplored. I happen to be a Historian by original discipline and wanted to do research into the causes of growth, comparing economic theory with reality. My tutor, Maurice Cowling, set about dissuading me. He said I would find the answers in the real world and come back to Cambridge when I had found them. The attitudes of those who were happy to offer me immediate post-graduate places persuaded me he was correct.

I was then lucky enough to have three challenging years of systems engineering "apprenticeship" with STC and ICL followed by two years at the London Business School and the opportunity to lead the most successful of the industry strategy exercises that was the legacy of Tony Benn's Ministry of Technology. Later I had five years as Corporate Planner for a UK-owned multi-national, including helping organise inputs to the "industrial strategies" of nations around the world. Comparing their approaches to that of the UK did indeed lead me to some firm conclusions.

The most important is that British industry nearly always does best when Whitehall does least. "Planning" is all-too-often a euphemism for protecting the past from the future. An "industry strategy" is a euphemism for giving jobs to economics graduates not wanted by the private sector as investment analysts or corporate planners assisted by consultants touting for future business and lobbyists seeking grants to position their employers. The failure of UK government attempts to pick winners (over the past century !!!) gives no confidence that the Coalition Government can do any better. Even when ministers and officials pick the right race course they choose the wrong horses, train them the wrong way and enter them in the wrong races.

In 1978 - 9, I was part of the policy team (reporting via Ian Lloyd to Sir Keith Joseph) that looked to IT and Communications as the drivers of UK economic recovery. We called for Telecoms Liberalisation and Privatisation, a major government supported awareness campaign (it became IT 82) and a Micro in every school by 1982. I then watched as DTI turned low-cost success into expensive failure, draining enthusiasm with "challenge programmes" and initiatives while hobbling indigenous growth with:

- "investment protection" regulation that routed funding via remote pension funds and trusts while excluding the hands-on "angels" and informed local investors who are at the heart US success,

- "tax avoidance" measures which make growth companies pay tax before they have positive cash flows and reinvestment for growth, let alone to give a return to equity investors

- government procurement routines which actively discriminate against innovative new UK businesses in favour of overseas competitors which can quote their own governments as lead customers.  

Then came the Labour Government destruction of the enthusiasm inspired by the Micros in Schools programme, with mandated teaching on how to use an imported suite of proprietary office software. Finally, DTI and Ofcom set about reversing the Conservative policy of liberalisation leading to an open and competitive market. They may not have talked about reversing privatisation but, unless Ministers take action soon, current BDUK policy will re-create a BT-led cartel akin to that of AT&T and the baby Bells which the OFTEL regime was designed to avoid. 

The time has come to look back at what has worked in the past, (as well as what has never previously worked and is unlikely to do so this time round) and allow market forces to redress the failures of planning and regulation.

The four areas where I would most like to see a commitment to action in the Budget in order to help bring about a market driven, investment led economic recovery without calling for spend that HMG cannot afford are: 

Has BDUK stuffed DCMS ? The Civil Service Staff College Case Study

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My blog on the deal between O2 and Westminster and Kensington Councils provoked interesting reactions. There seems to be agreement that it undermines the previous government's path (still apparently being follow by Ofcom and BDUK) back to a regulated communications infrastructure monopoly, albeit still privatised and overlaid with a candyfloss layer of "unbundled" local access. Just before Christmas a former regulator reminded me that Sir Keith Joseph said that there was only one thing worse than a public sector monopoly - a private sector monopoly. I must ask him whether he is among those who now see a realistic prospect of an "open" market based on international standards for operational as well as technical interoperality. They believe that Ministers and policy advisors appreciate that the competition between fixed and mobile operators to provide ubiquitous broadband access over infrastructures built, owned, managed and operated by a variety of players (from Ambridge Community Broadband to Arqiva, Babcock to BT, E2BN to Everything Everywhere etc.,) is more likely to ensure that the UK has the "best" broadband than any centrally planned and regulated solution, however many expensive consultants have worked on it. Ministers are rarely happy to "direct" officials but they are unlikely support those who stand in the way of market-driven solutions given the mounting risk of mobile melt-down this summer. 

It is, however, in the nature of politicians to interfere with markets - just as it is the nature of dominant players to "rationalise" markets in their own interests. More-over it is probable that a government reshuffle is imminant, as soon as the LibDems have agreed which of their new intake is ready for promotion to replace those who have passed their sell-by dates. If so, one suggestion to minimise the damage of interference is to move telecommunications from DCMS to a new department which brings together DECC and the Department of Transport, tasked to work with Treasury enable the private sector to bring forward the infrastructure investment programmes that are essential to UK economic recovery. The competing view is that it be moved back into BIS/DTI as part of an "industrial strategy" (alias picking winners and turning them into losers with conditional funding programmes and "co-ordination"). The idea of keeping it alongside the much sexier content industries (Culture, Media and Sport), where it has become "contaminated" with their time-consuming, lawyer-driven feuds over ownership and censorship, has no friends among those who have commented to date. 

To that end there is also a suggestion that the "Communications Act" that is in the offing be split between a bill to merge the telecommunications infrastructure responsibilities of Ofcom with those of Ofgem and of CPNI into a combined utilities regulator, (as in Germany) and a much more complex and controversial set of bills to handle the content issues on which their is little or prospect of agreement between the warring factions.

But if such changes are to help expedite infrastructure construction on the scale needed to help regenerate the UK economy, they need to accompanied by a stripping away of the layers of financial services legislation that discourage long-term, private sector investment in the UK. We have to permit a recreation of the variety of investment vehicles that funded the construction of the Victorian and Edwardian infrastructures on which we still depend.

Hence the policy studies framework that the executive of the Conservative Technology Forum will be reviewing in a couple of weeks time. I would, however, be remiss if I concluded this blog entry without including the Civil Service Staff College Case Study sent to me by a very senior former public servant. I fear that it neatly summarises the dilemma currently faced by DCMS officials. Hence the need for new thinking.

Will 2012 be the Year that convergence finally happens?

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The rise of the smart-phone as the global social networking and on-line browsing device of choice has expedited the convergence  of fixed and mobile communications into "ubiquitous broadband" - even in the UK (which went from leader to laggard during the dead-end decade of local loop unbundling). Hence the driving force behind deals which upstage BDUK Broadband policy like that of O2 and Kensington and Westminster  in much that same way that BSkyB upstaged IBA Satellite policy, two decades ago.   

Meanwhile the fragmentation of debate over privacy, surveillance, on-line safety and cyberwarfare continues to complicate the spread of cost-effective information security by design - as opposed to coating that which is inherently insecure with layers of expensive and ineffectual scareware. Will that change as more businesses realise that using the identity chips already embedded in PCs and mobile phones enables identification of the physical device with which they are communicating? The routines are not totally spoof-proof (nothing ever is), but they do enable better, faster, less obtrusive security at lower cost. They also restrict anonymity to those willing to pay for the privilege. I look forward to seeing a converged debate flushing out the hidden agendas of those who wish to see this happen, those who do not, those who wish use all to be uniquely identifiable and those who wish to have multiple on-line personas with different attributes which they can manage separately.  

Did Westminster and Kensington stuff BDUK for Christmas?

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Shortly before Christmas the FT carried news that O2 had beaten Sky and Virgin to win a  contract to provide wifi to Westminster in time for the Olympics. The article speculated that this could provide a model for other councils. The recommendation of the Officers to Kensington (which will share the deal) indicates that the cost of the consultants who helped negotiate the deal was £9,000. It does not state the cost of legal advice but I am told this was not much more. I commented on the expertise of the small consultancies advising Local Authorities compared to the competance of the big names advising Central Government when the Country Alliance wrongly blamed councils for delay in spending the sums allocated to help bring forward investment in rural broadband caused by the latter. I had not realised quite what good value some of those used by local government were. 

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 Digital Economy (emergency) Act?

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Last night, at the Convergence Conversation (Digital Economy Bill, Swan or Albatross) there was surprisingly unanimity across Telcos, ISPs and even Content producers that the agreement of the LibDems and Conservatives to the rushed compromise over the Bill had been a mistake. Their aim had been to get the Act out of the way so that the new government could concentrate on sorting out Public Finances before the IMF did it for them - but it was likely to backfire on all concerned. 

Will Google do what Government will not? - Utopia

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The Convergence Conversation has just sent me a splendid clip in which the Mayors of the communities that have come together in the UTOPIA consortium (in Utah) ask Google to use them for one of its pilots. There is actually a pair of clips. The second summarises what the communities have already done to clear the obstacles to roll out. 

Has the Digital Economy (Prohibition) Act killed public wifi?

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Peter Scargill, National IT Chairman of the Federation of Small Businesses has said that members providing wifi in pubs, restaurants, guesthouses and hotels have already started switching off their facilities.  Zdnet warned this would happen. commented on Government's "Digital Schizophrenia". Others expressed similar concerns.  It looks as though they were all too right.

A challenging universal broadband (16 Mbps) target at last

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A mnaifesto commitment is a manifesto commitment. How much policy is based on the rationalisation of unwise ministerial soundbites. £12 billion of NHS spend was committed on the basis of 10 minutes at Number 10 and Many (perhaps even most) hospital and GPs systems arev not yet back to where they were before. Whether on not 2 megabytes is a misprint for 2 megabits it is the correct vision for 2012. We should welcome it and work out how to help deliver it, at affordable cost, reliably snd securely and get the other parties to at least match that level of commitment,

How does public and private sector network security compare?

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One of my readers has queried the accuracy of my comments on allegations that the cost of connecting schools to broadband is increased by CESG requirements. I did not know - hence the wording. My attempt to check the accuracy raised, however, an even more interesting question. At issue appear to be interpretations of the Code of Connection Level 3. This covers on-line access to databases where data leakage could cause substantial individual harm: such as those of HMRC and DWP for taxes and benefits. But would such a leak do more harm than one from your bank? If not, why should they need to use separate networks?    

Labour trump Tories on Broadband: game over or just beginning?

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In a surprisingly detailed speach yesterday the Prime Minister apparently leapfrogged two of the three Conservative commitments on broadband. Do read the full text. He linked the Government agendas on cutting the cost of public service delivery, social inclusion and universal broadband and said that government must plan and lead because the market had failed. Today Ofcom delivered the coup de grace, by stating that BT must open its ducts to its competitors thus addressing the third Conservative commitment. Does that mean that the game is over or just beginning?      

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