Friday, January 26, 2007

Convergence Conversation at Intellect: Where Next for Broadband?

Jan 25th we had the Intellect convergence conversation IX on broadband, attended as always by a stellar group of participants. Here are some interesting thoughts that came out of it:

Where will demand for broadband come from?

  • even if it comes from just people wanting to view entertainment content, it's worth looking at as there are potential benefits to society from there
  • more direct benefits could be reaped by corporates driving more and more teleworking / home-working which has potentially a big environment and productivity impact.
  • a number of people may not even be aware that they are using the broadband / internet in some future applications - they may be using educational, telemedicine, entertainment devices, which unbeknownst to them, are using broadband data-pipes.

    (In fact the idea of "internet" and even "computer" may disappear, like the "motors" have disappeared, simply by becoming ubiquitous - as everything becomes connected and has a chip for computing ability)

An interesting rider on this is the view that one of the biggest barriers preventing further adoption, especially for older age groups is the computer. There is potentially a market for a pure browsing device with a hugely simplified set of instructions - which allow basic communication, browsing and other human functionalities with easy tools.

However, with all these expectations, there is still an act of faith required for businesses to invest today, into what would be clearly a huge investment into next generation access networks. Taking into account that this could take up to 10 years for a complete roll out, this clearly presents a need for somebody to drive the funding decision in order for the industry and the economy to ensure it doesn't miss out on the benefits of next generation access.

Clearly, once the network is in place, the ongoing revenues which are collected via metered or other forms of content access can be shared by content / service providers with the ISPs/ Telcos. However the immediate of upfront investment is one that the content industry cannot underwrite.

An additional trigger is on the horizon - the 2012 Olympics. Which also have other pressures, such as the need to broadcast it in hi-def. This means that there could be a spill over effect if terrestrial TV cannot handle the requirements, it may spill over to the next generation broadband providers to deliver the HD TV.

Creating a huge bipolarity is the other end of the adoption curve where some 40% continue to be affected, as I noted in yesterday’s post. Interestingly it was brought out that a large share of this population don’t have bank accounts, for example. So lack of broadband may no be the only socio-economic challenge here!

Although there is a clear case for the government to step into a potential market failure and fund part or all of this investment gap, it would be dangerous to confuse public with private funding, as it would skew the market and adversely impact a bunch of existing providers.

The role of wireless in next generation access is another real question but it really didn’t get addressed in the conversation as sadly, we ran out of time. But may be another Convergence Conversation on the role of Wireless in Next Generation Access will take care of that!

Thursday, January 25, 2007

Broadband UK - more bandwidth or more coverage?

Although commonly, most people associate broadband with a fatter pipe and higher speeds, one of the real differences, as I've said before, is that it drops the marginal cost of Broadband to Zero. Thereby creating a real incentive for exploration – which leads to information, learning, discovery and entertainment (The always-on aspect of broadband also takes away the deterrent of the “dial up” effort). In essence, always on broadband pushes people into the "Information Society". Leading to much higher consumption of online services – both government and private. This has an impact on overall costs for the economy as these are much cheaper to deliver online than physically. Online banking is a good example of private services which save time and cost for buyer and seller. Online payment and collection of council taxes or license fees are examples of government services which save time and money for individuals and society as a whole.

This is a very relevant issue in the UK today as there is an emergent bipolarity with respect to the future of broadband. On the one hand, the large, vocal and influential content industry in the UK is lobbying hard for next generation access - which is loosely translated into higher bandwidth - going from the current 8 MB to 24, 50 or even 100 MB over time, being delivered to homes. Of course, there are countries which are actively driving towards Fibre-to-the-home environments.

On the other hand, there is still some 40% of UK homes which are not broadband homes yet. I'm still looking for data on the exact Internet habits of the lowest end of the adoption ladder, but it should be a key concern for the industry and the economy. For the industry (access, content and online services), it will mean a lost market in the short term and an impending regulatory drag in the long term since sooner or later the government will need to legislate to bring this group into the "information society". For the economy it translates to a cost - since both private and public services can be more efficiently delivered over broadband. Not to mention the less measurable impact of a more aware society, faster dissemination of important news and the longer term impact on education, health etc.

So which should be the primary focus for Ofcom and the Government at large?

The Ofcom already has a public discussion paper out on Next Generation Access - which can be found on the BSG website and also, on the Ofcom website in which addition has the executive summary. The paper suggests that Ofcom is indeed concerned with providing clarity on the regulatory regime for next generation access. This is a very important and worthwhile objective - regulatory stability is one of the key drivers of investment. The Ofcom paper also underlines that it does not consider providing incentives for specific organizations to invest to be its remit. Overall the paper makes very relevant starting points about the issues around next generation access. 2 areas seem to have been underserved in the paper though.

The first, a "sin of commission" is that the Ofcom actively stays away from defining a specific bandwidth target - prefering to stick with a softer definition of "capable of delivering sustained bandwidths significantly in excess of those currently widely available using existing local access infrastructures or technologies." It suggests that the next generation access can only be defined basis the next generation of services. This is putting the cart before the horse. Waiting for the next generation of cars to be built in order to define what the next generation of roads should be. Although this is an early stage of the discussion, having a specific number would be a better starting point for people to react specifically.

The second, a "sin of ommission" is that the Ofcom largely sticks with bandwidth as the main distinction between current and next generation access technologies. While this is an important factor, it is by no means the only one. Discussion points around other aspects of future access networks could include areas such as symmetry, security, interoperability with other networks (such as mobile, or home-networks), ease of metering, implementation of more advanced protocols etc.

To be honest, apart from Video on demand (read: how quickly a movie can be downloaded) and immersive games, there seems little by way of really compelling content or services propositions out there which would necessitate having hugely more bandwidth. Of course, this could change once people become familiar with such high-bandwidth access. Live television is another area, with many people pushing for HD TV over IP. However at this stage, this certainly falls into the category of an national indulgance - given the penetration of HDTV, the profile of users and providers, and the availability of alternative platforms already.

Which brings me back to the other end of the debate. The cost of a disconnected (40%) body of citizens. The PWC Report on Cost-Benefit for Broadband Connectivity done for the EU suggests that there is a net benefit over costs per person to the tune of 176 Euros, in 2007. Roughly translated for the 24 million people that the 40% represent , this would mean 4.3 billion Euros or close to 3 billion Pounds. Whether or not you agree with the exact numbers of this report, which can be found here, the huge benefits for education, egovernment, information and content services, and the overall potential quality of life improvement is unquestionable, as is the significant savings for delivering essential information based services.

It's worth noting here, that in terms of accessibility, some 99.8 % of the UK's population can now access broadband - as their local exchanges support it. This is now not a technical or network problem, as much as a marketing and educational challenge.

The worst case scenario could be an ever widening digital divide, with some people enjoying speeds upwards of 20MB and some still not convinced to connect. The longer term economic and social aspects of this could be quite serious for the UK.