01.12.12
The prospects for superfast broadband
Source: Public Sector Executive Nov/Dec 2012
The Government is putting a lot of emphasis on its broadband strategy, with funding to match. But are some of the predictions regarding take-up and growth overblown? PSE talks to Denis McCauley, director of global technology research at the Economist Intelligence Unit, which has been investigating.
Recent studies into the benefi ts to the economy of investing in the infrastructure necessary for superfast broadband have produced some startling figures: up to 600,000 jobs and £18bn added to GDP within for years, according to one report, and 280,000 new jobs according to another.
The Coalition Government seems persuaded that superfast broadband is going to have a major impact on growth and jobs, and wants the ‘best broadband network in Europe’ by 2015. It is investing hundreds of millions in upgrading the country’s internet infrastructure, with an ambition to provide universal broadband access at 2Mbps or above, and to roll-out superfast broadband access (24Mbps plus) to 90% of UK premises.
In the current spending review period until 2014/15, the Department for Culture, Media and Sport has allocated £530m to stimulate commercial investment to roll out high speed broadband in rural communities and £150m for ‘super-connected cities’ across the UK, on top of that being invested by the private sector and local authorities.
Priorities
The Government’s priorities were criticised by the House of Lords Communication Committee in its report on broadband this summer, which said more emphasis should be placed on good universal access, and less on super-high speeds for some.
But in the Economist Intelligence Unit’s new report, ‘Superfast Britain? Myths and realities about the UK’s broadband future’, the argument is not so much on priorities as on outputs, saying that the job and growth fi gures swirling around are likely over-infl ated, for a number of reasons.
Denis McCauley, who edited the report, told us: “We defi nitely are saying that superfast investment needs to go ahead; but we’ve seen a lot of hopes being raised for windfall returns early, particularly when you think of the G o v e r n m e n t . The economy is in the doldrums, growth projections are anaemic, at least for the next three to fi ve years, and a number of policymakers and experts are hoping for some fairly early returns in the form of job creation, a boost to GDP growth and so on. But we’re saying that is unlikely to be realistic, especially on a three to fi ve year timescale.”
Extrapolation
The Government itself has not come out with precise fi gures on how much it expects superfast broadband to impact on jobs and growth, but it’s clearly been infl uenced by some of the numbers quoted in various reports.
A key problem is that people have looked at the jump in jobs and growth related to a shift from dial-up internet to broadband, and extrapolated from that a similar boost in the upgrading of broadband to superfast – the evidence for which is limited.
A Swedish study looking at superfast broadband roll-out across 290 municipalities from 2007- 10 found a statistically valid link with economic growth, of 0% to 0.2%; impressive in such a short time period, its authors said. But those places never had ‘basic’ broadband, they went straight to superfast – so some of the benefi ts would have accrued anyway with ‘slower’ broadband, which much of the UK already has.
The report quotes Robert Kenny, the founding director of the telecoms consultancy Communications Chambers, saying: “People say broadband is good, which I would certainly agree with, therefore superfast must be proportionally better, and that’s not sensible.”
Innovation
The report adds: “Outside of hightech, it is difficult to find good examples where superfast would in the next four to five years make a striking difference to a firm’s ability to compete.”
Of course, it’s impossible to predict innovation and what could happen if such speeds are made available – but history suggests such benefits would be on a relatively long timescale.
Indeed, in many cases there are vast opportunities to make better use of existing broadband infrastructure, if only people’s behaviour and organisational cultures and skills could take advantage of it. The report quotes a number of specific examples, such as in healthcare and education, but finds that the barriers to digital innovation and efficiency are not broadband speed but working cultures.
On education, it says: “Although some trials being explored around the world – such as models where children watch lectures online for homework and then focus on practical exercises in class – might be eased by faster access, speed alone is unlikely to significantly reshape education.”
On healthcare, there are huge potential benefits of digital innovation, from telemedicine and video consultations to exchanging X-ray imagery. But nearly all of this can be done at today’s speeds without huge infrastructure upgrades.
As the EIU report puts it: “If technology is not the barrier to a larger role for telemedicine, what is? The biggest challenge, according to experts, is getting doctors to change how they work – a very slow process.”
Lessons from the home
Although more than half of homes are in areas that could take advantage of superfast speeds, only about 8% have paid to do so, at least so far. The report notes: “This relatively slow uptake appears to be due to the fact that while consumers are happy to pay for the switch from slow access to broadband, their willingness to pay a further premium for superfast is more questionable.”
We asked McCauley whether there are any lessons in that for the wider economy and for businesses.
He said: “Price has something to do with it. Now to some extent that’s probably inevitable given the prices we’re looking at, and given that we’re still in the fairly early stages, and given that one of the points we’re making elsewhere in the report is that a lot of services and applications can actually be accessed and done over existing speeds. The one benefit which everyone seems to agree with is HD video, so if anything is going to be a catalyst for faster adoption of superfast speeds, particularly on the home front with consumers, it’s going to be that.”
He concluded: “We tried to get as much of a balance of views as we could, and probably the majority of people we talked to were more optimistic than us.
“A lot of people pointed out that we don’t know yet how we’re going to use it or what it’s going to be like until we have it.
“That has been the case in previous generations of access. Today it’s impossible to think that we can actually go back and use dial-up access or have 500kb speeds.”
EU green light for Government superfast scheme
The EU has finally given the UK the goahead for the plans to roll out superfast broadband in rural areas via the BDUK scheme.
The European Commission had competition concerns over the way funding was being assigned, and what it saw as in-built advantages for BT.
The total funding amounts to the £530m from DCMS and £300m from other central funds, to deploy superfast broadband to areas not covered by BT’s commercially-driven ‘Infinity’ fibre scheme, which will cover about twothirds of the UK.
But on November 20, culture secretary Maria Miller (pictured above), who replaced Jeremy Hunt in the September reshuffle, said: “Finally getting the green light from Brussels will mean a huge boost for the British economy. Superfast broadband is essential to creating growth, jobs and prosperity and the delay has caused frustration within Government.
“Today’s announcement means that we can crack on with delivering broadband plans, boosting growth and jobs around the country.
“Britain is in a global race today. To succeed in that race we must have the infrastructure to match our aspiration, providing people who work hard with the tools they need to get on and prosper; this green light will benefit both businesses and communities across the UK.
“Our broadband plans are hugely ambitious – to connect 90% of homes to superfast broadband and ensuring the rest have access to at least 2Mbps. The Government will not allow parts of our country to miss out on the digital age.”
BT said: “We are pleased to hear the European Commission has approved the use of state funds for BDUK projects. This decision is very welcome as it will give an important boost to plans to bring fibre broadband to rural parts of the UK. We can now commence work in areas where we have contracts in place and it should also make it easier for those counties who are yet to sign deals with the private sector. It is now full speed ahead.”
DCMS gave this update on local authorities’ superfast broadband procurement processes: “The projects which will be affected first by this clearance, and whose residents will be the first to connect to superfast broadband, are Wales and Surrey. Projects in Cumbria, Rutland and Herefordshire and Gloucestershire are expected to follow shortly afterwards.
“Cambridgeshire, Oxfordshire and Highlands & Islands are still progressing their procurements. North Yorkshire’s project began implementation in July as it already has state aid approval. Lancashire’s project has completed procurement and is currently awaiting the Commission’s decision on its own separate notification of state aid.
“A further eight projects are currently undertaking their procurements using the Broadband Delivery Framework (Norfolk, Suffolk, Wiltshire, Devon & Somerset, Northamptonshire, Kent & Medway, Lincolnshire and Hampshire). The first four of these launched their invitations to tender at the beginning of July and are now nearing the point of agreeing a contract with their supplier. Shropshire will launch its procurement [at the end of November].
“All the remaining rural broadband projects are expected to complete their procurements by summer 2013.”
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