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Wednesday, 30 November 2011

Fiscal stimulus? £100m of public money for broadband where it's least needed

Yesterday the Chancellor announced £100m of extra money (or at least I assume it's new money) for broadband investment in UK cities.

Of those, Cardiff, Edinburgh, Belfast and London have already been identified. 6 More cities will follow.

Here's a map from July showing areas with best broadband coverage (light grey) and those with the worst (red). The map is from Ofcom, via ISPReview.  (Click to enlarge).

You shouldn't have to ask your old geography teacher to identify the four capitals receiving some of the £100m.

I'll give you a clue, they're all painted grey or light grey, indicating they already have better than 70% availability of "superfast" broadband (roughly faster than 20Mbps actual line speed download, essentially access to BT infinity service).

The red areas have less than 30% availability.  They will share £20m of funding.  Yes, pretty much the rest of rural Britain will share 1/5th of the money set aside for cities.

The business case: tipping the investment equation, or lining BT's pockets?

The reason I'm so angry about yesterday's announcement is that it doesn't, from a policy position, make much sense.  Yes, I understand innovation isn't a zero-sum game.  Spearheads are needed in order to advance; and we all end up benefiting - even the rural notspots.  If all we knew possible was 56kbps dial-up we'd still be left with 56kbps dial-up.

But parts of Britain still are on 56kbps dial-up, and we face a challenge because large telcos don't see a business case for investing in faster broadband outside of the more densely populated towns and cities.

BT's Infinity service needs one of the those new, tall green cabinets springing up in towns and cities within a few hundred metres of each property.  The cabinets cost a small fortune to install.  The business case for installing them relies on each cabinet serving a minimum number of properties.  In more rural areas, the business case just doesn't stack up.

Cities don't need much government help to tip the business case.  I know we're facing continued economic problems, and government money will act as a stimulus, but we've got to do more than just line the pockets of the incumbent telco for laying fibre optics where it's cost-effective to do so

There are three good reasons why investment should be targeted at rural areas:
  1. Rural broadband needs the biggest improvement; some are still left on dial-up, many get 512kbps or less download speed.  The digital economy doesn't just rely on connected cities where businesses can thrive, but also on the connected consumer.  Believe it or not rural dwellers use, and buy from, the internet too!
  2. Rural areas need the biggest subsidy to tip the business case, areas with higher density housing like cities make their own business case.
  3. You can't shepherd innovation so that it happens in predefined areas convenient to the government of the day.  Digital businesses would be free to spring up anywhere with more uniform broadband coverage. 
The history of computer and software industries in the UK has some prominent hotspots with a 30-year history or longer, and not all are major cities.

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