As we start to debate what “superfast” might mean in a broadband context, too often people are returning to the bigger “why” questions: Why do we need to invest at all? where’s the demand?
The technology sector is an example of where Saye’s economic principles tend to trump Adam Smith; where intelligent supply tend’s to find its own demand rather than Smith’s assertion that proven demand being the overriding principle for creating supply. How could we know we all wanted Skype before we had the infrastructure on which someone could develop it, or that Youtube would become the second biggest search engine after Google?
A common rebuttal is that this is dangerous “field of dreams”, “dot.com bubble” thinking but that would be to over simplifying things, although it must be acknowledged that the evidence of daft investments in the sector are rife and nowhere more than in the UK; even today, try saying “boo” to a venture capitalist if you don’t believe me.
Clearly not all things create demand which is why we need smart people thinking about this – smart innovators and not the kind of daft people who genuinely thought that the rules which govern the economics of the internet were fundamentally different from the economics of everything else – re-read “Blown to Bits” by Evans and Wurster if you need a refresher.
Smart people in the technology sector come in two flavours – technically smart and commercially smart – and its really important never to mix them up!!
Technically smart people innovate incrementally – eureka moments rarely happen in reality, with most of the breakthroughs coming from close collaborations and earlier research. Those collaborations are not just with their peers but also with commercial organisations that have the imagination to drive innovation but who need a market to address. IBM, for example, has announced a major new R&D facility in Australia and the Government’s National Broadband Network is cited is as a major influencing factor; IBM can see that the mere existence of the NBN will lead to new opportunities created by innovators free to imagine and with the tools to invest. The R&D money will seek out places with the imagination and the market. For a country which can’t make the case its likely to become a slow lingering death.
Commercially smart people on the other hand don’t just assume that supply will find its own demand unaided, they reach out to the market to understand how it might be most readily consumed. This is arguably the most critical factor which separates successful fibre projects from those which fail.
In the UK we still present superfast broadband as just that – a very quick pipe to the internet. This kind of message will appeal to the perhaps 10% of society, the early adopters, but the rest of the market is likely to wait until someone delivers a service which captures their imagination – the next Skype or Youtube. So when BT and Virgin say superfast broadband is a risky investment which has so far demonstrated low take-up levels, no-one should be surprised – they’ve not given anyone a reason to buy it.
Contrast it with some of the more successful European projects, where take-up can be north of 80%. A common factor among these is a commercial message that engages people and not just the early adopters – they give all kinds of people reasons to take a service. It could be healthcare, better or more local TV, gaming, education – any number of things which smart commercial people left to imagine ought to be able to conjure up. In fact one of the most successful projects I’ve visited makes a point of never mentioning bandwidth and rarely mentions the internet.
The UK is one of the most technically adept and gadget conscious markets in the world. So if someone tells you there is no demand for superfast broadband, look at them with pity and move on – they don’t have the imagination!