Rural Broadband – What next?

Widespread rural broadband will remain a distant possibility as long as the government, OFCOM, and broadband providers are forced to battle each other amidst subsidies and regulator inefficiencies.

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The countryside on-line
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Dominique Lazanski
On 8 September 2011 16:31

Over the last few days several news stories have called into question the way that rural broadband is rolling out in the UK.  

First, the mobile spectrum auction is now being delayed by OFCOM and second, Orange (as well as TalkTalk) announced a slight reduction in cost for rural broadband users. Buried among these two announcements is the fact that Fujitsu is still waiting to invest nearly £2 billion in laying fibre for the wholesale market.

So what is really going on when it comes to rolling out rural broadband?

The debate around rural broadband can be rather dull unless you are interested in infrastructure and regulation. Both issues often induce sleepiness to even the most interested parties. However, the rollout of rural broadband is an issue that the Coalition Government has staked their digital reputation on.  

As it stands right now, the government has agreed to give funds of £530 million, re-allocated from TV license fees, to build out physical broadband infrastructure in rural areas. This means the laying of new fibre to areas that don’t already have them. The problem with this, however, is twofold.

First, BT still owns much of the ducts and poles through which fibre will be laid. They have yet to negotiate a ‘reasonable fee’ for usage of those ducts and poles by other providers in order to lay fibre alongside BT fibre.  The expensive alternative would be to build a second set of ducts and poles at a huge cost – and a cost which could be used for fibre infrastructure instead.

If BT doesn’t come to an agreement with infrastructure ‘rental’ fees we will see the bulk of the government money going to – you guessed it – BT. This would effectively make the market monopolised by BT. Virgin Media, among others, raised this issue before. The irony in all of this is that the government does not need to subsidise rural broadband at all.

With investors like Fujitsu ready to create the infrastructure, the best thing for the government to do is, basically, get out the way.  OFCOM, as the regulator, should ensure a competitive market by removing the monopolistic movements of BT and allow for investment to take place by industry. But it seems that even OFCOM is delaying negotiation on ducts and poles and now the mobile spectrum auction.

The other component to the rural broadband debate is the spectrum auction and how to bring rural broadband through mobile rather than fixed lines.  The spectrum auction, slated to take place in January 2012, has now been delayed by OFCOM.

The delay is for good reason in that the reallocation of spectrum would benefit the mobile operator Three at the detriment of other companies like O2 who are limited by caps on the amount of spectrum they can attain. Caps on spectrum purchasing are actually an attempt to skew the market by OFCOM. What needs to happen – and what should have happened – is for OFCOM to make the auction open to all with limited. Now, however, due to potential law suits, OFCOM has decided to delay releasing the spectrum auction guidance which means an overall delay to the auction. This means a delay to rural mobile broadband overall.

So this is where we are with the UK rural broadband.  We have rural broadband subsidies imposed by the government in order to ensure the rollout of fixed line broadband – but at the risk of promoting BT as the sole provider of broadband infrastructure because of BT’s failure to negotiate rental fees with other companies who are willing to lay fibre. And we have a delay in the mobile auction which, potentially, could roll out rural broadband quicker than laying fibre due to the fact that OFCOM didn’t address issues with the spectrum auction in the first place.

And then there are other issues.

If Fujitsu were allowed to lay more fibre both mobile and fixed broadband would benefit from the increase infrastructure capacity.  And this would increase fibre in the market for wholesale and retail broadband thereby spurring on competition and possible new entrants to the market too.

But all of this is a distant possibility as the government, OFCOM, and broadband providers have to continue to battle each other in the environment created by government subsidies and regulator inefficiencies.  

We will be lucky to see any big increase in infrastructure development until the end of this government’s term. At least Orange is offering cheaper prices to rural broadband customers now in spite of what the government is trying to do; a small step towards promoting market competition in an environment that is burdened by government intervention.

Dominique Lazanski spent over 10 years in the Internet industry in Silicon Valley and works for the TaxPayers' Alliance in the United Kingdom. She tweets at @dml

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