Last week I appeared before the House of Lords Select Committee on Superfast Broadband. Before becoming a shadow minister I was on the House of Commons Select Committee on Business Innovation and Skills, so I am familiar with the format of select committees. Still it was pretty intimidating being interrogated by 11 lords, baronesses and bishops. However, I found them extremely polite and clearly determined to get to the bottom of the issues rather than make political points.
I had been asked to appear as an ‘expert’ rather than a politician, based on my experience as head of telecoms technology at Ofcom and the preceding 17 years in the private sector building out telecoms networks on three continents. I therefore resisted the temptation to make political points myself and did not even mention the continued non-appearance of the Communications Green Paper...
There were three main points I wished to emphasise to their lordships and during the 45 minutes I gave evidence I returned to them again and again. Interestingly only one of them has received extensive coverage and that was the most obvious so we will leave it until last.
The first point was the importance of ubiquity. Ten percent of the country cannot get decent broadband and 25 percent are covered by the broadband network but choose not to connect. It is fundamental in network economics that the value of the network increases as a function of the number of people connected to it.
My argument to the lords was that, given the role of broadband as a platform for innovation and communication, the economic and social benefits of getting everyone on the network are, literally, incalculable. It will be the first time in our history that everyone has been able to connect with everyone, and it will bring opportunities for new applications that we can’t really imagine now. That in turn will help stoke the demand for superfast broadband.
So getting universal broadband is absolutely critical, and the government’s delaying of Labour’s universal broadband pledge from 2012 to 2015 has huge consequences.
Failure of 'digital islands'
The second point that I emphasised was standards. Their lordships were concerned that most of the money from BDUK (Broadband Delivery UK) seemed to be going to companies that already ‘owned the middle mile’. They wanted to know how to open it up more to other companies and particularly community groups.
I pointed out that in Scandinavia, villages had built out their own fibre network, indeed in the UK some local communities were looking at doing it too. But the problem was standards for interconnectivity.
If a village did do its own fibre network, and even set up its own ISP, that was all well and good. But what most people want is to be able to access offers from TalkTalk, Virgin Media, Sky and BT Retail, with the bundles, discounts and customer service that go with them.
Isolated ‘digital islands’ have failed time and time again in Scandinavia, continental Europe and also in the UK. And to enable the major ISPs (Internet Service Providers) to interconnect, standard interfaces are essential.
When at Ofcom I worked on Active Line Access, or ALA, an internationally recognised standard for superfast broadband. This standard has been adopted by the UK telecoms standard body, NICC, as well as by Fujitsu as part of its broadband bids. But BT still does not offer it, and that is a barrier to its wider adoption.
Sleepwalking into a monopoly
The third point I wished to make turned out to be the most controversial even though it was the most obvious. If superfast broadband does turn out to be a monopoly or a near monopoly – and BT looks set fair to get all the BDUK funding – then the regulator will have to step in. And one of the options Ofcom will look at is structural separation.
This is not so much an opinion of mine as a regulatory requirement. Where there is ‘significant market power’ the regulator is obliged, by UK and European law to look at remedies, and one of the remedies is structural separation.
I worked for Ofcom during its 2004 Telecoms Strategic Review (TSR), looking at the UK telecoms market. Its final report can be found here.
The very first paragraph refers to structural separation. More recently, Australia and New Zealand have both chosen to structurally separate their incumbent providers, Telstra and Telecom New Zealand. So structural separation is not some kind of threat but a recognised remedy to a market that is not working.
The controversy reflects the acute nature of the remedy, one which no regulator would choose lightly. But I believe it is better for everyone to understand what is at risk if we find ourselves without competition in superfast broadband provision, rather than sleepwalking into a monopoly.
Chi Onwurah is shadow minister for innovation and science, and MP for Newcastle Central.