Broadband think-tank warns new business models needed before next generation broadband roll out
The government’s leading advisory group has warned that before ‘next generation’ services are launched the business model behind broadband will need to change.
The Broadband Stakeholders Group released findings earlier this week that suggested the £16bn required to build fibre connections to 80% of UK homes would lead to a positive social and economic gain for the country. The figures used were based on America, where fibre roll out is more advanced, and now the BSG is working on refining its cost-benefit analysis with UK figures, although these, it warns, are much harder to get hold of.
Although the group predicts the £16bn will be recouped, CEO Antony Walker, points out that no decisions should be taken by investors for at least a year because there are so many uncertainties.
“Consumers are ultimately going to pay for this, otherwise investors will not invest,” he argues. “So, we’re going to need new business models or increased prices for improved broadband access. We could see bundling of services where broadband and content providers team up and revenue share to make the big investment in fibre to the home worthwhile.”
Walker agrees that the main problem with the current broadband model is that video, music and gaming entertainment are causing a massive surge in demand for bandwidth yet the ISPs providing that bandwidth do not share in the proceeds from increased consumption. Hence the need for new business models to become clearer before the BSG would advise investors back a fibre roll out.
“An obvious market for next generation broadband is going to be high definition television,” he says. “It’s needs a fast connection but it’s also very intolerant of packet loss. It’s an important part of next generation broadband, it’s not just about speed, it’s about beating the quality of an ADSL connection which we think people will pay extra for at the same time as broadband and content or equipment providers will team up to offer bundled services.”
Hence Walker is quick to point out that although BT has come under criticism for only testing fibre at 10Mbps in a trial at Ebbsfleet, it will undoubtedly be a lot better than a 10Mbps ADSL connection. Although many eyes will look to BT to roll out next generation fibre to the living room, Walker’s positioning of investor confidence as being key underlines the group’s belief that other companies will be involved.
“BT will be a key player,” he predicts. “It’s not likely to be the only player as you obviously have Virgin Media but then you also have some really interesting players on a local like such as H2O putting in fibre in Bournemouth and Dundee. Despite interesting local level work like this, our main advice is for investors to wait for the new business model to emerge. There’s a lot of talk that this will mean us falling further behind and we should act now but I think you have to be more cautious. Places like Japan and South Korea have got very fast fibre but that was because of government decisions more than a decade ago, we have a very high proportion of broadband lines in the UK compared to many countries, so I think it’s wrong to say we’ve somehow fallen behind just because of Japanese and Korean connections.”
The BSG is now working on a more detailed cost-benefit analysis of rolling out fibre to 80% of UK homes which might give a clearer picture for potential investors. Nevertheless, the group’s main advice remains the same: no decisions should be made for at least another year.
