Broadband - What can we learn from the UK?

What can Australia learn from the UK experience of broadband, and that government’s approach?

To start with, the UK is spending vastly less than Australia.  The Cameron Government announced in December 2010 that it will spend £530 million (or A$1.23 billion) to promote the deployment of “superfast” broadband in the UK.  This is around $20 for each citizen of the UK – compared to $1600 for each man, women and child in Australia.  

But other aspects of the policy are just as interesting.  For example, the UK is taking a staged approach.  The first commitment is that virtually all homes in the UK will have access to a minimum level of service of 2Mbps by 2015. 

In Australia, by contrast, many homes which today are in a broadband blackspot will be waiting well beyond 2015 before the NBN is rolled out past their door.

After the initial commitment is met, the Cameron strategy is to promote “superfast” broadband - defined as more than 24Mbps.  These contrasts with the Gillard Government’s approach of reaching for a hugely ambitious goal of 100 Mbps – with no clear idea of what applications actually require that speed.

The UK approach is that delivering broadband is first and foremost a matter for private sector.  The Government should intervene only where there is market failure. 

In the UK this failure is considered to exist for the “final third” of premises.  These commercially less attractive areas include rural and some inner city areas.

For the first two thirds of homes, upgraded speeds are being delivered by British Telecom (using a mix of ADSL, fibre to the node and fibre to the home) and Virgin (which owns a cable network).  BT has committed that approximately two thirds of UK homes will receive fibre to the node (offering up to 40 Mbps) or fibre to the home (offering up to 100 Mbps) by 2015.

In Australia as in the UK it is uncontentious that significant parts of the market will never be served commercially – and therefore public sector funding is required.

But what is intensely contentious is Labor’s approach of pushing the private sector out of the way everywhere - by funding a ubiquitous publicly owned fibre network.  Labor is even paying Telstra to withdraw their existing cable networks from service – even though they pass nearly one third of households and can readily be upgraded to deliver 100 Mbps.

The UK policy recognises fibre as important – both fibre to the node and fibre to the premises.  However the Cameron Government explicitly rejects picking technologies; it also notes that other technologies including wireless and satellite should be part of the mix.

Where public funding is provided, the funds are being put in the hands of communities and local authorities “by putting people who will eventually use the infrastructure in a position to shape it”.

Funds from the £530 million are initially to be spent in four project schemes in rural areas (such as Cumbria), where the market will be tested on a case by case basis.  This will provide experience to inform delivery in further areas where the market alone cannot reach. 

A key design approach is to deliver “a central digital point” in communities; in turn the local community will be responsible for extending the network to individual homes.  A mixed technology approach will be taken, and local authorities will have a key role.

This approach is more flexible, and more responsive to local needs, than Labor’s one-size-fits-all, centrally controlled approach.

In summary, the UK approach is: let the private sector and competition deliver; target Government investment to areas where there is market failure, and; tailored approaches to reflect the needs of local communities.

By contrast in Australia we have: extravagant cost; command and control government intervention; overbuilding of existing infrastructure; the elimination of the private sector, and a one-size-fits all approach.

A final and important point arising from the experience of the UK, concerns take up of superfast broadband services.  An August 2011 report from the UK communications regulator, Ofcom, estimated that 57 percent of homes were able to receive superfast services.  However, that same report indicated that only two per cent of the population subscribed to and received superfast broadband.  In other words, less than four percent of those who had access to superfast broadband actually subscribed to it.

The UK’s experience suggests that consumer demand, for superfast broadband is limited; this does not bode well for the Rudd-Gillard Government’s vastly expensive NBN experiment.

Paul Fletcher’s Broadband Briefing is an occasional email briefing note on various aspects of the broadband policy debate.  Paul is the Liberal Member for Bradfield, a former senior executive at Optus, and author of Wired Brown Land: Telstra’s Battle for Broadband (New South Books, 2009.)