After a series of blog articles on how the move to a Thinking Cloud may impact the way the telecommunications market might be structured I wanted to start to consider how the market might be used to unlock investments and start to build some momentum in the UK so we might realistically consider target inclusion in the 2010/1 Fibre to the Home League tables recently posted.
Given the newness of the market idea for telecommunications I fully accept that what follows may be an expression of hope over expectation but it is, I hope, a flow of thought which begins to demonstrate that alternative ways of doing what we’ve always done can begin to unlock new potential. My own philosophy is that when you meet a blockage, first try to remove it; if that’s not possible work around it – never try to work with an obstacle as you’re more likely to compound the problem.
If the traditional broadband operators can’t find a case for investing at a level required by society and the economy then we need to remove the blockages or work around them. What would be damaging would be to accept the blockage as a fact of life and to invest in it. As broadband was deployed the first time around there were local interventions that tried to build confidence in a new market, removing the blocks to investment, and there were others which simply accepted the problem and subsidised network builds. In the former examples, the business case was ultimately made and the long-term cost to the public purse was marginal. The latter, however, tied public funds into sometimes unsustainable projects which only continued as long as the lifeline existed.
The funding requirement for next generation broadband is of an order of magnitude more – its simply not possible to provide small scale funding to prop up a marginal business case and expect high-speed broadband of the kind seen in other countries to appear across the UK. The problem won’t go away by plastering over it and the impact of doing so could make the collapse of the telecoms bubble a decade ago look like a sneeze.
One way of working around the blockage, of finding a new way of doing things, is to use the power of the markets. I first wrote a briefing document on this almost 4 years ago with my colleague Brian Condon but since then we have seen too much turmoil in the financial markets for the similes used then to make it happy reading – but the principles remain true.
When we first considered the shape of a wholesale market for telecommunications the output seemed strange – by simply replacing the occurrences of words like “ducts” with items available in other markets the document made sense. After more time in a dark room with cold towels wrapped around our heads we came to obvious conclusion that it was the structure of the telecoms industry which was wrong and not the concept of an open wholesale market; we’re just so accustomed to a single way of doing things where an incumbent operator and an interventionist regulator dominate the market. But it needn’t be like that.
So how could a wholesale market solve the broadband investment dilemma?
Let’s take the public money currently available for broadband investment. Setting aside any views on whether the 50p tax on phone lines is helpful, I’m assuming for this article its a reality and it will raise something like £150m to 175m each year for the term of the next Government – total fund of up to £1bn. If its spent as a direct injection into broadband infrastructure programmes then the money will achieve very little and the funding will come on stream too slowly to build any momentum - and perhaps most damagingly there is a real risk that it won’t remove or by-pass the investment obstacles so it may become the prop for a broken business case.
In contrast, offering the cash to the nascent market as a “future guaranteed order” for access to homes and businesses for the delivery of government services then the fund is being used to help transform the delivery of public services while also providing the telecommunications industry with the certainty it needs to invest. Rather than releasing £150m of funding each year to prop up projects, offer on the new wholesale market an order for VLAN connections to 1,000,000 homes at £10 per month for the next five years in the geographies demanded by public services and which the markets won’t automatically deliver.
By doing this through the marketplace, the funding is targeted to where its needed, with a public audit trail of delivery, and it mandates standards since membership of the market necessitates them. In taking a contract, a network operator will have a guaranteed demand over and above what they might expect from simply offering faster internet connections; something European projects have been able to take to the bank to secure funding. Anchor tenants in the form of housing associations are not unusual in The Netherlands, for example, but this mechanism allows any public services, central or local, to fulfil the same role. The use of the levy in this way is no more than transition funding to provide network builders with a guaranteed tenant and public services like the NHS with access to infrastructure beyond their current funding streams.
Taking the NHS as the example, they would be able to start offering secure and reliable tele-medicine and independent living technologies enabling people to stay in their homes longer through a nationally agreed framework without additional pressure to them. Imagine adding to the “choose and book” system an option to pick your convalescence after an operation, and opting for “home-based care” automatically provisions a VLAN to your home in parallel to any other services you may have, and by the time you get home the technology is installed and working to help you recover in a more friendly environment and at a lower cost to the public purse.
Similarly in education, enabling the current learning platforms to reach the homes of children through an eGovernment VLAN ensures that that the social impacts of the digital divide are side-stepped while underpinning the safety of our children.
During the transition, public services would need to be remoulded around more flexible delivery of services so that their finances and organisations will be sufficiently restructured they can pick up the on-going (and reduced) cost of delivering tailored services directly to people.
This kind of approach can’t happen without the existence of a wholesale market for telecommunications with its aggregation points allowing widespread delivery of services over a fragmented patchwork of network infrastructures - but I hope it also begins to shine some light on the benefits of such a fundamental change in the way we do things.
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