The announcement of the Government’s Digital Strategy has been postponed until after the Referendum but some of the elements are emerging. One is the death of Verify, shunned by HMRC’s users as well as by DWP and unfit for use by the NHS. Another is to turn the GDS from the most recent of a series of failed attempts (CITU, Office of the e-Envoy, eGU, TG etc.) to centralise public sector IT under the control of the Office of the President , into a worthy successor of the CCTA, policing standards, procurement and inter-operability and organising world class project planning, procurement and implementation skills for the public sector.
But perhaps the most interesting is the way in which the private sector is to be encouraged to turn the UK from a copper-bound broadband backwater, with quality of service unfit for the modern world, into a mesh of competitive, resilient and secure fibre and wireless networks, competing to offer ubiquitous world-class connectivity (alias universal service). Despite the disbelief of BT and the believers in a return to a regulated telecoms monopoly we look set to see more flesh put on the strategy announced in parallel with the 2015 budget.
The oral evidence given by Sharon White and Ed Vaizey to the DCMS Select Committee enquiry into establishing world class connectivity throughout the UK illustrates how the UK broadband scene, let alone “vision”, has changed over the past year. Sharon Stone was cautious as to the reliability of data on “nominal” investment but the graph in section 7.1 of the Ofcom Written Evidence illustrates how the proportion funded by BT shareholders has fallen since the decision to cut capex a decade ago, to which I referred in my “Dirty Digest” of the Ofcom strategic review.
The graph also shows that I was “over cautious” when I said that BT now accounts for less than half of the converging fixed and mobile telecommunications infrastructure spend in recent years. It looks to be under 20%. More-over it currently appears set to fall further, especially if the EE infrastructure spend remains separate and shared with other mobile operators as a condition of the merger. The calculation is complicated by the different accounting conventions of players, the investment in overlapping fixed and mobile backhaul by players like Arqiva, MBNL, Cornerstone (CTIL), Wireless Infrastructure Group, plus that of US players, like Zayo (hoovering players like Viatel into their global network) and, of course, the rise of the altnets: (B4RN, Callflow, Cityfibre, Gigaclear, Hyperoptic, ITS etc.). It is also complicated by the possibility that BT’s new largest shareholder, Deutsche Telekom, may decide to divest the content operations and use a mix of partnerships and direct investment to make a wholesale attempt to leapfrog the competition.
Given the investment challenges it faces in its home market that appears unlikely, Instead we are likely to see a twin track approach: with G-Fast used to increase FTTC speed and fibre to the premises increasingly used for new build, the replacement of exchange only lines and where the service over FTTC not only seriously inadequate but faces genuine competition. Where significant revenues are at stake because rivals are planning to share new-build dark fibre networks, Deutsche Telekom is more likely to take to tell BT to share than to compete: especially if it is planning to build on, rather than divest, BT’s investment in content.
More immediately interesting were Sharon White’s comments on how she expected the market to evolve over the next decade. She felt that the long-term future would be fibre – with G-Fast as a bridging technology. Meanwhile Ed Vaizey envisaged a “Gigabit Britain” by 2025. There was much discussion with the Select Committee regarding the functional or structural separation of Openreach with a most welcome focus on that which would improve quality of service while encouraging investment. I noted the talk of BT’s “excess profit” of 4 billion (supposedly intended to encourage investment but allegedly used to cross-subsidise Premier league salaries) and the gap between BT’s target rate of return of 10.4% as against Ofcom’s use of a reasonable rate of 8.6%. The rates illustrate why so many players have found attractive business opportunities, using internationally standard fibre and wireless technology (for which equipment and installation prices have been tumbling in recent years) to undercut BT, provided they can get the access and wayleaves to meet the locally unsatisfied needs of business and consumers.
This raises the question of how property owners, such as the 12,000 landlords with which Clutton’s negotiates on behalf of Cornerstone, could and should respond. Is the potential increase in rental from providing a choice of world class connectivity to other tenants worth significantly more than the the fees available from individual fixed or mobile operators? And what about the disruption caused by successive operators wanting access to equipment rooms, risers and rooftops? Hence the joint DPA-Wired Westminster meeting (referred to in my last blog) that I have helped organise for the 19th April to bring together those who wish to begin planning today for 2025 onwards: beginning with fibre to the femtos and small cells needed today to address the not-spots of Central London and tomorrow to support ubiquitous smart devices in homes, offices, shops, streets and even fields across the UK.
Hence the importance of services like Wired Score allied to independent information on the quality of service actually provided, as from Actual Experience . Ed Vaizey’s robust comments to the Select Committee on the failure of the Advertising Standards Authority to take action against adverts based on a quality of service received by under 20% of customers were most welcome. So too were Sharon White’s comments on the need for the independent assessment of the speed and quality of service delivered locally – as opposed to that reported centrally.
We live in interesting times and I recommend watching the select committee hearings, not just reading the transcripts, if you have time.