Private sector should drive demand for high-speed broadband

The public sector could not and should not drive demand for high-speed...

The public sector could not and should not drive demand for high-speed broadband access, a high level delegation of industry representatives heard today.

Antony Walker, director of the Broadband Stakeholders' Group, told a meeting of Intellect, the IT suppliers' trade body, that the UK enjoyed a high penetration of broadband access (at about 512kbps). Further market growth will depend on stimulating demand, he said, but he ruled out the public sector as the catalyst.

Delivery of public sector services via broadband should be "an after-thought" once the private sector had provided the services that justified building the infrastructure, he said.

The market for high-speed broadband has been the focus of intense private and public sector scrutiny this year, and communications regulator Ofcom is still consulting on its approach.

The government and Ofcom should hold their nerve and watch how the high-speed broadband (HSBB) market develops over the next 12 to 18 months, the meeting concluded.

However, where they could, they should simplify and clarify the regulations that influence market development, such as telephony, internet access, broadcasting and advertising, among others.

It was unclear what new services might be offered, Walker said. But Nigel Hartnell, executive director of FFastFill, a communication services provider to global derivatives traders, suggested they were likely to include moving (video) pictures and transaction applications that required low latency (fast response times).

Walker said banks and other investors were willing to invest in a monopoly HSBB provider, but were more cautious about putting money into a competitive market. Any proposal that took more than a year to become cash-flow positive was hard to sell to them, he said.

Walker said competition for data network business from the mobile network operators and Virgin Media had prompted BT to respond. In July it said it would spend £1.5bn to install fibre to the cabinet that would give about 40% of UK homes at least 2Mbps connections. A BT spokesman said recently that the lay-off of 10,000 staff would not affect the plan.

Walker said network operators faced decreasing marginal rates of return for each new customer added. "The new network has very high fixed costs, so massive early up-take changes the return on investment picture completely," he said.

He pointed to an HSBB project in Holland which enjoyed a 90% take-up because it was offered free, but retained most of its clients when customers were charged the following year.

"I suspect the market will be like the early days of the mobile phone," he said. "We all thought only a few rich people would use them in their cars, but in fact the market took off because small businesses like plumbers and builders realised they could double their businesses if they were always contactable."

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