CMA demands government push broadband

The British military machine may be firing on all cylinders, but the future of the UK e-economy is not looking so bright. A...

The British military machine may be firing on all cylinders, but the future of the UK e-economy is not looking so bright. A widely leaked OECD report last month placed the UK 11th out of 13 in the league of broadband penetration.

Last week brought further bad news about the availability of fixed and wireless bandwidth - the fuel of the digital economy.

The messenger was the Communications Management Association, which polled 562 user organisations in its annual survey.

Called Communications Market 2001, the survey discovered an alarming mismatch between high demand for broadband and stalling levels of supply.

An increased number of big businesses - 71% compared to 45% last year - reported that the lack of broadband services in the local loop was inhibiting their business, according to the survey.

A further 89% of respondents said that British Telecom should be forced to speed up the delivery of ADSL, the "always-on" technology being rolled out to local exchanges for home use.

The CMA report sits badly with the government's ambition of being the world's number one e-economy by 2005.

The government's recently convened Broadband Stakeholders Group responded to the OECD survey by admitting that it would be a tough call to reach seventh position - and that would only be if everything went to plan.

The group was originally formed by the government to resolve the disputes over the timeframe for rolling out ADSL.

Evidence of the appetite for broadband in the form of ADSL contradicts the arguments from both the Broadband Stakeholders Group and BT's chief executive officer Peter Bonfield.

Bonfield has responded to complaints about BT's tardiness in rolling out broadband by claiming there is no demand for ADSL in the UK market.

Last week BT stated that 60% of UK homes have access to ADSL and that 1,000 exchanges have been upgraded to deliver the "always-on" broadband.

"We are ready, willing and able but there is no demand. We are desperate here, waiting for the orders," reiterated one spokeswoman for the company.

But not everyone is convinced by these arguments. Alan Boxer, managing director of e-centre, told CW360: "There's a lot of incipient demand, but people can get away with saying 'there's no demand', because there's no infrastructure to facilitate it."

Boxer suggested that the current focus on delivering ADSL into homes and the local community by BT and the government is misguided: "It is irrelevant and has no impact on B2B usage" he said.

David Harrington, the director general of the CMA, called on the government to intervene. "The CMA has long urged the government to seize either the chicken or the egg in order to let demand grow. The free market cannot solve this one; it requires intervention."

Harrington suggested that two forms of action might be appropriate: one would be to ensure that the telecoms watchdog Oftel is "a little more rigorous" in its policing duties of competition in the market, including ADSL.

Another possibility would be to persuade the Treasury of the desirability of tax incentives for both user and supplier.

While companies wait in vain for ADSL, the CMA survey revealed that many enterprises are pinning their hopes on mobile broadband to plug the gap. Demand for 128kbps or more to the handset "is growing inexorably", reported deputy director of the CMA, Mark Smith. Of the survey's respondents, 75% wanted 64kbps, "and right now", while a further 12% expect to use 2mbps over the coming year.

However, the 38kbps capability of the interim technology, GPRS, has not convinced the majority of business users, with 83% saying they do not consider it a worthwhile migration option. And while 3G is expected to be at least three years away, 60% of the CMA respondents believe it will offer an alternative to fixed broadband access.

With GPRS apparently failing to deliver and vendors expecting major teething problems with the roll-out of its successor, 3G, analysts are warning of a serious gap between user expectation and what the technology can deliver.

"If users are wanting 2mbps and more, they are doomed to disappointment," warned Katrina Bond, senior analyst with telecoms consultancy Analysys. "You can do an awful lot in terms of access to e-mail and intranets with what is available now," she commented.

The upside of the CMA report is that investment in ICT is holding up and that investment in e-business continues to grow, even if the main motivation for the latter is to shore up a defensive strategy of "achieving cost reductions and improving services".

These findings will be the subject of fierce debate and discussion at the annual CMA conference in Brighton from 29 to 31 October.

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