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Future of UK broadband hinges on Carter’s Digital Britain report

The long-term future of the British economy may hinge on what communications minister Stephen Carter says next week in his interim report on how to create “Digital Britain”

The long term future of the British economy may hinge on what communications minister Stephen Carter says next week in his interim report on how to create “Digital Britain”.

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There are few UK businesses or consumers who do not use one or more of radio, television, telephones or the internet. According to the Department for Business Enterprise and Regulatory Reform (BERR), together these media add £52bn to GDP. Increasingly they determine how, where and when companies do business, and how citizens spend their leisure time.

In the past fortnight, Labour and Conservative politicians have both suggested this sector could take over from financial services and property as the future economic drivers. The National Endowment for Science, Technology and the Arts (Nesta), a government quango, extrapolated South Korea's experience to suggest universal UK access to high speed broadband would create 600,000 jobs in information and communications technologies in four years, and boost GDP by £18bn.

Stephen Carter will aim to produce actionable recommendations to accelerate the rate of growth, and cement the UK's position as a world leader in the knowledge and learning economy, he said.

The proposed vehicle is a (logically single) high-speed digital national communications network infrastructure that carries telephony, internet and broadcast transmissions in discrete digital data streams.

Two basic problems

Carter faces two basic problems. One is the cost of building the network. The other is to protect the rights of those who put content on the network.

Several factors complicate them. The most pressing is that investment money or credit is hard or impossible to find, thanks to the recession.

Second, other countries are already building their own such networks. This is diverting capital, skills and attention away from Britain. The UK risks becoming an also-ran when the global economy kicks off again, proponents argue.

Third, a converged network means formerly isolated operators, typically television and radio broadcasters and telephone companies, find themselves both competing and cooperating with each other. Regulating these new relationships will be tricky.

Fourth, while there is consensus that content must be protected, there is no agreement on how to do it. Any attempt to legislate without consultation will meet fierce opposition from lawmakers and industry, say experts.

These are issues Carter knows well. Before becoming a minister he served as head of Ofcom, the communications regulatory agency. Before that, he oversaw the collapse of NTL, the cable TV operator that became Virgin Media, under £12bn of debt.

Investor confidence

His most important task now is to give investors confidence. He told the Westminster Media Forum recently: "The biggest prizeis we get to a point whereby we can genuinely start writing business plans for the universal delivery of public services though online and digital [networks]."

He has several levers he can pull. One is to write a universal service obligation (USO) to provide broadband access into every communication licence that Ofcom oversees. BT, which presently enjoys the right and duty to provide basic telephony services to all, would support this, "but only if there is an industry-wide fund to pay for it", a BT spokesman said.

Another is radio frequency spectrum. Ofcom is presently reallocating frequencies as broadcast technologies go digital. Nesta suggests swopping £5bn worth of frequencies for telcos' promise to roll-out universal broadband (at a snail-like 2mbps). Ofcom's annual plan for 2009/10 says: "We think that, in general, a market-based approach to spectrum management is the most suitable way to achieve the best use of this resource." It is unlikely to give up billions the government needs desperately for a promise.

Content owners

Protecting content is hugely contentious. Content owners want to force internet service providers to police illegal downloaders. Spokesmen for ISPs are adamant they will fight to the end against this imposition.

But Carter's main problem is money. The Broadband Stakeholders' Group reported last year it would cost $5bn to run optical fibre to the kerb, but £27bn to run it into the nation's 24 million households. BT and Virgin Media are not well-positioned by themselves to raise that kind of money (see table). Besides, they have already offered to run fibre to urban households. The problem is to provide rural households with high-speed access. Carter could solve this by bringing in other network operators, especially mobile.

Carter hints that public service providers could siphon their budgets to support rural networks. According Eurim, a cross-parliamentary industry body, there are at least 40 private network operators, including National Grid, the electricity distributor. The trick is to tie them to the public grid. Carter may well look to develop relevant interface standards that Ofcom would then regulate.

If Carter gets it right, he could put the UK on an economic fast track. If he doesn't, he will destroy the legacy of Briton Tim Berners-Lee, who almost single-handedly invented the world wide web.

The Carter report is out early next week. We will have full coverage on the website.

Issuer Ranking: Telecoms, Cable, And Satellite Operators In Europe, The Middle East, And Africa
Company Corporate credit rating Business risk profile Financial risk profile
Belgacom S.A. A/Stable/A-1 Strong Modest
Telefonica S.A. A-/Stable/A-2 Strong Modest
France Telecom S.A. A-/Stable/A-2 Strong Modest
Swisscom AG A-/Stable/-- Strong Modest
Telefonica O2 Czech Republic a.s. A-/Stable/-- Strong Modest
TeliaSonera AB A-/Stable/A-2 Strong Modest
Vodafone Group PLC A-/Stable/A-2 Strong Intermediate
Deutsche Telekom AG BBB+/Stable/A-2 Strong Intermediate
Koninklijke KPN N.V. BBB+/Negative/A-2 Satisfactory Intermediate
Telekom Austria AG BBB+/Negative/A-2 Satisfactory Intermediate
BT Group PLC BBB+/Negative/A-2 Satisfactory Intermediate
Telenor ASA BBB+/Negative/A-2 Satisfactory Intermediate
Telecom Italia SpA BBB/Stable/A-2 Strong Intermediate
Vivendi S.A. BBB/Stable/A-2 Satisfactory Intermediate
Portugal Telecom SGPS S.A. BBB-/Stable/A-3 Satisfactory Aggressive
Eutelsat S.A. BB+/Stable/B Strong Aggressive
Inmarsat Investments Ltd. BB/Positive/-- Weak Aggressive
Comstar United TeleSystems (JSC) BB/Stable/-- Weak Aggressive
Cable & Wireless PLC BB-/Positive/B Weak Aggressive
Virgin Media Inc. B+/Positive/-- Weak Highly leveraged
BCM Ireland Finance Ltd. B+/Stable/-- Satisfactory Highly leveraged

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Image: Rex Features

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