"Within this parliament we want Britain to have the best superfast broadband network in Europe," culture secretary Jeremy Hunt said, setting out the new government's ambitions with respect to creating a digital economy in the UK.
Let's be clear: his comments are aimed at voters, aka consumers, not businesses. If they can afford it, UK businesses are already well-served with access to dedicated networks anywhere in the country at speeds up to 10 gigabits per second or more. Moreover, they can outsource management of their network at every layer of the ISO network model, if they wish.
But consumerism is driving the market. The network traffic generated by smartphones such as the iPhone and Android is driving investment in high-speed links, especially fibre, in the core or trunk networks.
To avoid congestion, mobile network operators need to get smartphone traffic out of their radio networks, which are physically less efficient, and into a fixed network as soon as possible. In many cases that means running fibre to the cell towers to cope with traffic volumes of between 100Mbps and 10Gbps.
Switch to LTE
As soon as next year, the mobile network operators may start switching to IP-based Long Term Evolution (LTE) technology. This will increase the density of fibre links massively. This is because cell sizes can range from femto (room-sized) to more than 100km radius. Mostly they will fit congruently into existing 2G and 3G GSM cells, but their traffic volumes will require fibre.
"LTE, bring it on," said Virgin Media Business managing director Mark Heraghty, rubbing his hands. He already carries 40% of the mobile networks' backhaul or trunk traffic, and is targeting this market for big growth.
The increase in density of fibre connections due to mobile network capacity requirements is likely to change dramatically the business case of fibre to the home or premises, making it a marginal extra cost, especially in urban areas.
Hunt committed the government to delivering a minimum 2Mbps broadband service, and said he would use money left over from the switch to digital television to pay for some of it. He would also use money set aside for the newly-scrapped Independently Funded News Consortia which were set up to subsidise local news organisations.
Some 18 months ago UK subscribers already enjoyed an average broadband speed of 3.6Mbps. So Hunt is clearly speaking for the "last third" of consumers that are unlikely to receive broadband dial tone if left to pure commercial reality.
He said it was "a scandal" that nearly three million households could not access 2Mbps broadband, and that less than 1% of the country had fibre optic access. The OECD average was 10%, he said.
How much will it cost?
Hunt did not give budget details, nor did he define "superfast". The Broadband Stakeholders Group (BSG) said two years ago it would cost about £30bn to provide every home with optical fibre. More recently, consulting engineers Mott MacDonald estimated the cost at half that.
Virgin Media Business's Heraghty said the former ntl:Telewest company spent £13bn covering about half the country with fibre and coaxial cable for television and more latterly high-speed data communications. That was the economic bit, he said; covering the rest could cost twice that. That would probably require subsidies or an overwhelming public service application.
Chris Holden, president of the FTTH Council Europe, a fibre industry lobby group, welcomed Hunt's statements but calls for definition of the terms. Based on networks in Sweden, The Netherlands, Denmark or Lithuania, "best network" implied that UK also go for fibre to the home, which provides 100Mbps and more, he said.
This will become imperative when 3D television, launched in the UK by Sony this week, becomes common, Holden said. 3DTV requires at least 30Mbps to work effectively, but more homes were running multiple HD TV sets, Wi-Fi-linked smart phones and content-rich apps like iPlayer on PCs. This soon soaked up spare capacity, especially when users want to upload material, he said.
The council has published a document that sets out the business case for fibre to the home/premises, and is currently developing case studies. The document is aimed at municipalities and local governments, network operators, real estate developers, community leaders, private investors and bankers.
Heraghty said Virgin Media will launch its cable TV-based 100Mbps service later this year, and that its 200Mbps trial is going well. "I can't conceive of (a consumer) application now that requires higher speeds," he said.
To cut network building costs Hunt is prepared to break up regulatory barriers. For example, Ofcom's proposal to force BT and other utilities to share their ducts, poles and way-leaves enjoys his support.
Ivor Kendall, who looks after network infrastructure for BT Global Services, welcomed proposals to share BT infrastructure, but said BT wants a reciprocal right of access to competitors' networks.
That will be a sticking point, because it whoever has a direct connection to the subscriber very often has effective control of the account. It also provides much higher margins because they do not have to give up 30% or so to the downstream service provider.
Heraghty said BT enjoys a de facto ubiquity for local access (the bit of the network between the exchange and the subscriber). This is due to its regulated obligation to provide a telephone line to every household that wants one. He will not be drawn on reciprocal rights, but clearly the idea does not appeal. "BT is regulated and we aren't," he said.
Things are more collaborative in trunk networks. "All the fibre network operators already share infrastructure where they have spare capacity," Heraghty said. And there is lots of spare fibre capacity, he says, just not everywhere that wants it.
Hunt could help matters by getting his colleagues in education, health, works and pensions, even the police to stop insisting on having their own networks. Sharing and collaboration at all levels of government are already happening through the Public Service Network and G-cloud initiatives. It is time for the government to hop on the broadband wagon for real.