On the day the iPad is launched in the UK, a guest blog from Brian Williamson of Plum Consulting considers what impact a shift to this type of device, with simpler, more intuitive interfaces and utilising mobile connectivity, could have on internet adoption.

“A report by Plum Consulting for Vodafone examines internet use and barriers to use, market changes and policy possible approach to get more people online. In terms of use the report finds that education, workforce participation and age are key considerations in explaining internet use.

Older US citizens are significantly more likely to use the internet than those in Korea or Europe, whilst those in Northern European Countries are significantly more likely to use the internet than their Southern European counterparts (consistent with the level of economic development and education at the time they were at school).

The following shows that internet adoption in the UK is not too far behind that in Sweden - which has the highest adoption in Europe alongside Denmark.

Evidence of success in relation to existing interventions by government is limited – though the million housewives programme in Korea and efforts to increase internet adoption by young people in Portugal do appear to have had an impact.

On the face of it this evidence, combined with the fact that the rate of adoption growth amongst less educated older people is lower and accounted for to a significant extent by the ageing of younger existing internet users, suggest that getting the final third online may be slow and difficult.

Plum’s research also point to skills, affordability, perceived relevance and fear as factors inhibiting internet and broadband adoption. Whilst different considerations will matter more for different target groups, changes now underway may go a long way to reducing barriers. The emerging combination of touch and gesture based interfaces, ‘apps’ for specific services (complemented by cloud computing), simpler operating systems and more flexible and affordable wireless broadband access packages may help reduce exiting barriers including skill, relevance, fear and cost.

This shift is exemplified by, but will not be limited to, the Apple iPad (pictured below) and associated more flexible wireless tariff plans (which include per MB, daily, weekly and monthly packages without a contract) available in the UK from 28 May 2010. Available data plans will include a five pence per megabyte plan with no contractual commitment – potentially lowering ongoing costs significantly for some.

Over time, more spectrum and next generation mobile technology will lower the cost per megabyte - perhaps five-fold. Tablet devices can also be expected to fall in price (for example the One Laptop per Child initiative plans a $100 tablet by 2012). To be effective interventions designed to get people online should work with the grain of these changes, rather than continuing to focus on teaching the final-third to use PCs and on fixed broadband only initiatives.

Computer scientist Bran Ferren defined technology as ‘stuff that doesn’t work yet’. Perhaps, at last, we are getting beyond technology.”

Brian Williamson is a consultant with Plum Consulting and author of numerous reports, including the BSG’s ‘A Framework for Evaluating the Value of Next Generation Broadband‘.

I spent Monday and Tuesday at CBN’s NextGen 09 conference in Leeds. The conference was well worth the trip, with a series of interesting presentations from excellent speakers interspersed with useful and relevant workshops.

What I found particularly interesting, however, was the number of speakers that referenced issues that the COTS Project is seeking to address. In the Digital Region workshop on Monday Graeme Dent discussed the engagement that South Yorkshire had been having with ISPs to date; this was followed on Tuesday by Stephen Timms talking about the importance of local projects, but also the need to ensure that these investments do not lead to stranded assets, and directly referencing the COTS project and the role of INCA.

During the day, further reference was made to COTS issues by Amy Chalfen of Openreach, and Gabrielle Gauthey’s excellent presentation, which would have been the highlight of the event for many, in part discussed what in essence was France’s approach to COTS. These issues were also discussed throughout the infrastructure-focused breakouts, with presentations from Quintain, Redstone and Rutland Telecom in particular highlighting the challenges facing local networks.

COTS issues are also becoming increasingly apparent in other markets. James Enck over at Eurotelcoblog has highlighted the buyout by Danish incumbent TDC of municipal fibre provider DONG Energy. According to their own press release, DONG have had difficulty engaging with service providers and have consequently struggled to generate a customer base sufficient to ensure a sustainable network. The Swedish approach to COTS issues has been widely discussed and examined here in the UK.

COTS challenges are going to be facing an increasing number of stakeholders as we move forward, and the issues will become more pressing the closer new access networks get to offering services to consumers. While the issues may be technical in nature, at the heart of the challenge are fundamental questions about the nature of the next generation broadband business model, of the relationship between network operators and ISPs, and of the relationship between end users and ISPs.

We are continuing to make progress on the COTS Project through our discussions with stakeholders. As we move forward with our process, we continue to encourage anyone who wishes to be engaged in the work, or who wants to know more about the work, to get in touch.

Peter Shearman, Policy Manager, BSG

Due to the high levels of interest in the COTS Project, we have decided to run an additional kick-off meeting.

This meeting, in Hull on 03 September, will provide those stakeholders that were unable to participate at the first meeting an opportunity to give their views on COTS. It will also be possible to participate remotely: for more information please contact us.

We have had considerable feedback from stakeholders since the kick-off meeting in July, but remain keen to hear further from anyone with an interest in the work. To give us your thoughts, either drop us an email or comment on this blog.

Peter Shearman, Policy Manager, BSG

We recently launched the COTS Project, short-hand for Commercial, Operational and Technical Standards for Independent Local Open Access Networks.

The objective of the project is:

“to work with representatives of independent local and community–led broadband projects, national network operators and major ISPs to develop a low cost standardised approach to enable a wide range of service providers to offer retail services over local or community-led open networks to end users.

As a result of this initiative consumers and small businesses should be able to access a wide choice of service providers, regardless of how the underlying infrastructure is either provisioned or owned. It should be in the interests of all local or community-led projects to be compliant with this approach, as more service providers should mean higher take-up and greater revenue.”

Essentially, we have described this as making open access a reality for consumers, who often face a limited choice of service provider on independent networks. For more on the detail of the work, why we are undertaking it, and how we plan to do it, there is a briefing paper on the BSG website.

The project was launched at a kick-off meeting last Wednesday 29 July (getting the work off the ground in part explains our absence on this blog for the last couple of months). The kick-off meeting demonstrated the high degree of interest in this issue: a full house of over 50 industry representatives participated in a lively exchange, with more unfortunately not able to attend owing to the capacity of the venue. The notes from the kick off meeting are also available on our website.

The meeting highlighted three points for us. First, there is a clear agreement across the full scope of industry players that this issue needs to be addressed. No-one present felt that this wasn’t something we should be looking at; feedback before, during and after has re-iterated that this is a challenge affecting all stakeholders in this field, and that an independent body is required to address it.

Second is that, while there is consensus about the problem, there is more uncertainty about what the potential solution could be. Industry consensus will be difficult to achieve: some are already developing solutions; others have yet to consider what type of solution would work for them. There are many potential requirements, so compromise will be essential.

Despite this, however, the meeting also demonstrated a real willingness to engage and participate in the work, again from stakeholders across the industry. Building on this we intend to establish a steering group to drive the project forward that will be drawn from industry volunteers.

Since the meeting we have had a range of feedback, and we’d like to address two particular issues that have been raised. First, a number have asked about the level of engagement from national ISPs. Although they were generally in listening mode on the day, most of the major communications providers were represented at the meeting and have indicated a strong willingness to engage in the process.

The second issue is that of how we communicate and consult with the wider industry. We are keen to ensure that this is an open and transparent process - we hope that the project will achieve an industry consensus, which can’t happen without the whole industry. We are aware that we did not do as well as we could have with the kick-off event: a lack of live streaming and capacity issues meant that many who wished to take part in the meeting were unable to do so.

We will also improve our efforts to make the project more accessible. We are committed to running a second meeting for those who couldn’t participate in the first meeting (details to be announced shortly), and will make all documentation available online. We will also ensure that we build in to the process regular consultations and a feedback loop with the wider industry, to ensure that the process considers the views of all stakeholders.

Additionally, as part of our next steps we are also continuing to meet with companies and organisations, to gather feedback and thoughts on the work and how to take it forward. We are still gathering views, and are keen to hear from those whom we haven’t yet engaged. If any organisation would like the opportunity to discuss the COTS Project with us, we would encourage you to get in touch.

Over the summer we will also be pulling together a steering group, drawn from across the industry, to take this work forward, as well as appointing an independent chair. Membership of the steering group is open to anyone; again, any organisation that wishes to have representation on the group should get in touch with us.

We will continue to provide regular updates on this project as it develops.

Peter Shearman, Policy Manager, BSG

The Digital Britain Report was finally released on Tuesday, and despite the build up, reactions to it have been mixed and, particularly where the broadband measures are concerned, somewhat confused. (Although given that few journalists would have had time to read the 240 page report before filing their copy, this level of confusion is perhaps excusable.)

The national media have been critical of a ‘broadband tax’ and questioned the logic of whether broadband for all is an appropriate policy goal; the public are confused about what exactly the proposals are; and even rural fibre advocates appear displeased.

Here we will attempt to unravel the ideas set out by Lord Carter. The report sets out two strands to government’s approach to broadband infrastructure.

First, the universal service commitment will ensure that every household has access to a 2Mbps service by 2012. This will be paid for using funds left over from the Digital Switchover Help Scheme, a contribution from the government’s Strategic Investment Fund, and contributions from the private sector and other public organisations.

This will be delivered by a range of solutions: in some cases a simple improvement in home wiring will be sufficient; others may require wireless technologies such as satellite; and others may require new fibre infrastructure.

Second, the Final Third Project aims to ensure next generation broadband coverage to at least 90% of households by 2017. It is called the Final Third Project as cost modelling suggests that the market should deliver next generation broadband to two-thirds of UK households, mainly in the most densely populated areas of the UK. The project would support rollout to the final third of homes unserved by the market.

It seeks to do this by providing a subsidy in those areas where the high costs of deployment make commercial investment difficult. The subsidy should bring the cost of deployment down to the cost in urban areas, at which point the investment should be commercially viable. This will be paid for by a 50p a month levy on all fixed lines (including DSL and cable) that will go into a Next Generation Fund, which would raise around £150m per year. The BSG response to the idea of the Fund is available here.

These two policies (the universal service commitment and the Final Third Project) will work together to ensure that the most appropriate solutions are developed in each case. For example, in the report the government sets out that the universal service commitment may have to use a fibre to the cabinet solution as the most cost-effective and efficient solution for around 420,000 homes - delivering on both the universal service and Final Third goals.

The benefits of ensuring everyone has access to superfast broadband will be substantial: supporting rural businesses, particularly SMEs; strengthening communities; and enabling genuine transformation of public services in areas where it could make the most impact. A failure to act risks leaving behind remote, rural and even some suburban communities as the UK moves into a 21st century global digital economy.

It is important to emphasise that this is not simply about providing next generation broadband in deep rural areas, however. As the map below demonstrates, the benefits would be felt across the UK (the areas in green will likely see investment by the market; those areas in yellow and red are likely to require support from the proposed Next Generation Fund).

This is a challenge that governments around the world are attempting to address, and a variety of solutions have been proposed, usually involving large scale government funding. We feel that this approach is a forward-looking solution in that it is targeted, proportionate, and smart.

It is targeted as the subsidies are aimed at those areas that require them because they are currently unattractive to investors. Blanket subsidies end up subsidising deployments that the market would have made anyway, wasting valuable public resource.

At the same time, the subsidy itself is proportionate, in that it is at the right level to be able to tip the balance in favour of investment in many areas, without crowding out private investment.

Finally, payment through a levy is smart in that it places no further burden on the UK’s already-strained public finances, and the level of the levy, at the price of a cinema ticket a year, is comparatively cheap compared to the level of taxpayer funding found in other markets.

As with all of these ideas, however, the devil will be in the detail. There will be a need to ensure that the proposal doesn’t favour any one operator; that it leads to open access networks; that it is technology neutral; that it is properly targeted at areas that genuinely need subsidy; that it has no negative impact on broadband take-up; and that an appropriate role and remit is set out for the design group charged with structuring the and delivering both the Final Third Project and the universal service commitment. Government will consult on these and other issues in the autumn.

It is perhaps worth considering that ultimately consumers will pay for this investment one way or the other, whether through higher prices for current broadband, through general taxation, or through the proposed levy, which is perhaps more transparent than funding from general taxation.

Many governments have committed to expansive public projects, using significant levels of public funding.
- The Australian government is committed to a A$43bn (£21bn) fibre to the home project to 90% of the population, with 12Mbps to the remaining 10%.
- New Zealand are spending NZ$1.5bn (£0.6bn) of public money on fibre to the home to 75% of the population.
- Singapore have committed public funds of $0.75bn (£0.46bn) to their fibre to the home project.
- In the EU, Finland and Greece have both recently proposed spending significant levels of public money on superfast broadband.

On a per home basis, the UK’s commitment is one of the cheapest of those made across the world, demonstrated below (note: the US intervention is mainly to expand coverage of current generation broadband).

During the height of the economic stimulus discussions late last year superfast broadband networks were touted by many commentators as one of the best infrastructure investments to make - the Keynesian solution for the 21st century.

Now that government has accepted its importance and made a commitment to ensuring coverage of superfast broadband for at least 90% of households, ire has turned towards how it is to be funded.

However, it is not possible to have our cake and it eat it. Funding and investment will ultimately come from us as consumers in one way or another if we are to deliver this critical enabling infrastructure for the entire UK.

Peter Shearman, Policy Manager, BSG

Last week the Communications Consumer Panel published research that found that public support for broadband is strong, with over 80% of respondents believing that it should be everyone’s right to have access to broadband, regardless of where they live. 42% of those questioned who do not have broadband believe access is essential.

This would appear to be an impressive level of support, and reflects UK citizens’ position as the most active broadband population in Europe. However, this week Ofcom offered a slightly different version of events.

According to their research, 30% of adults do not have Internet access at home; 43% of those felt they had no need for it, or felt that Internet access held no interest for them.

Of course, these results are not incompatible, and allowing for questioning bias and other factors support what previous studies have found - digital exclusion is found in those without means and those who feel they have no need (the self-excluded).

There was a renewed emphasis in the Digital Britain Interim Report (iDBR) on increasing take-up of broadband, as part of the government’s commitment to a broadband universal service. So, as the publication of Digital Britain draws ever nearer, what do these studies tell us?

The Ofcom study in particular shows the challenge that lies ahead. When given options for policies that would encourage take-up, such as cheap computers and discounted Internet connections, a third of those with no access said none of the ideas appealed. Broadband simply held no interest for them.

Amongst the remainder, no particular idea stood out, reflecting the broad range of reasons why some don’t have broadband (financial concerns, lack of skills, lack of available infrastructure, no need and so on).

Providing the infrastructure through delivering the broadband universal service commitment is only part of the equation for government. They must also, with the help of other stakeholders, drive usage and take-up of the infrastructure. We wait to see what the final Digital Britain Report has to offer to this debate.

Peter Shearman, Policy Manager, BSG

In yesterday’s Budget, Alastair Darling stated government’s support for the knowledge economy and the communications sector, and set out a number of policies affecting the broadband industry. Broadly, the top-line statements were as follows.

- Government re-iterates its support for the broadband universal service commitment set out in the Digital Britain Interim Report; will consult on using Digital Switchover Help Scheme underspend to fund the policy.

- Government will review the powers and duties of Ofcom “in advance of the Digital Britain Report” so that it can “strike the right balance between delivering competition and encouraging investment”.

- Government’s doubling of the capital cost allowances to 40% could aid up to £10bn on investment in communications infrastructure.

- Government has approved the South Yorkshire Digital Region next generation broadband project.

The BSG has published its response to these measures. While we support the government’s commitment to the broadband universal service commitment, we are concerned that the proposals set out on next generation broadband will not support more widespread investment and coverage than current market commitments.

It is not clear that the one year capital cost allowances increase, while providing a useful stimulus for existing investment commitment, will incentivise next generation broadband deployment given the timescales of investment and deployment, which will take many years (although it may have some limited impact in incentivising Virgin Media to invest, who are planning small expansions to their footprint over the next year).

More importantly, the characteristics of the costs of deployment mean that specific, targeted measures are required in areas where market-led deployment will not reach, rather than a blanket subsidy across all areas including those that are already commercially viable.

However, a potentially more significant development is the review of Ofcom’s powers and duties. Essentially, this would appear to come down to re-focusing Ofcom more towards promoting investment, as opposed to promoting competition. While not necessarily opposing principles (stronger competition should spur investment), there is certainly a balance to be struck, particularly given the scale of the investment required for next generation broadband.

This reflects an issue the BSG raised in January 2004 in its 3rd Annual Report (pp116-121). There was a concern then that the focus on short-term consumer interest could drive static efficiency in the market, at the expense of the dynamic efficiencies of investment.

The announcement of this review could be a sign that this argument has found support amongst senior policymakers.

Peter Shearman, Policy Manager, BSG

In an extraordinary announcement this morning, the Australian government have announced that they will spend up to A$43bn ($31bn, £21bn) on a new National Broadband Network, providing FTTH to 90% of Australian premises. The final 10% will be served using wireless technologies, capable of 12Mbps.

This scheme replaces the original FTTN project that the government had been developing since coming to power in late 2007. This plan, which had seen a number of bids submitted by industry, has been terminated. This was said to be partly due to the pressures brought by the global economic downturn on the value for money that Australian tax payers could achieve.

The Australian government will create a new company to carry out this project, in which it will be the majority shareholder. Private investment is anticipated. The new company will provide wholesale access (no retail services), and will be operated on a commercial basis. The government intends to sell down its stake in the company once the network has been constructed and operational for five years.

It is expected that the network will take 8 years to build and create 25,000 jobs. Some quick calculations suggest that the cost will be c£2,700 for each of Australia’s 7.8m households, although without more detail it is difficult to provide accurate costs per home passed or home connected.

Our cost modelling report suggested that providing point-to-point FTTH to 90% of UK households would cost about £21bn - about the same cost of the Australian proposal, but covering 22.5m homes, rather than Australia’s 7.7m.

This difference could be explained through the quite different geography and population density in Australia, and the fact that the network would presumably be an overlay to the existing network that didn’t make use of existing assets. However, the cost still appears on the high side.

The announcement has been welcomed by both the incumbent Telstra and its competitors. However, there are sure to be many challenging debates that will need to be held. The telecoms landscape in Australia is likely to change significantly as a result of this project and the regulatory reforms announced alongside the FTTH investment.

As before with the FTTN proposal, this is only the beginning of a process that has many hurdles to clear yet.

Peter Shearman, Policy Manager, BSG

Leonard Waverman, of the London Business School, recently published the Connectivity Scorecard 2009, a follow-up to a 2008 scorecard he produced.

The scorecard is one of the more comprehensive efforts to benchmark performance, given its global nature and its composite metrics that provide a more useful view of connectivity within a country. Interestingly, the US comes out on top, followed by the Scandinavian countries, the Netherlands, and, also interestingly, the UK.

The UK is able to rank highly because the index is based on usage and skills as well as infrastructure, with different scores and weighting for government, consumers and business. So, while we are behind in terms of consumer infrastructure development, we are ahead on usage, particularly by businesses.

We do, however, score fairly lowly on government infrastructure and usage, which will be of concern given Digital Britain’s focus on moving government services online, enabled by a broadband universal service commitment. A country report is available on the scorecard’s website.

The scorecard provides a more useful and holistic view of a country’s performance than other examples such as the OECD league tables, which are often based on one or two specific measures and normally based on infrastructure comparison, rather than usage and skills. However, as always with such an index, data quality can be an issue, and the range of sources available for measuring each country against a specific metric will be limited and vary in reliability.

In Pipe Dreams we called for international benchmarking of the UK’s broadband performance; the need for this was re-iterated by the Caio Review. This scorecard isn’t perfect, but is one of the best efforts out there. The approach should certainly be of interest to public and regulatory policymakers as the UK’s NGA debate continues.

Peter Shearman, Policy Manager, BSG

Last Monday saw snow bring the majority of England to a standstill, and disrupted many businesses. But the ability to work from home remotely meant that the disruption for some was less than it otherwise might have been.

ISP PlusNet have produced data showing that the amount of VPN and other associated traffic on their network on Monday was double what it usually is, reflecting the amount of remote working taking place. While the FSB estimated that UK business lost up to £1bn in lost productivity, BT estimate that small businesses recovered £333m of that through flexible working arrangements.

Our work last year on the value of next generation broadband suggested that additional remote working opportunities would bring a variety of benefits to the economy and society - social benefits through better work-life balance and less need for travel; economic benefits in terms of increased productivity. We also included the benefits of remote working in disaster situations, such as flu pandemics.

However, we didn’t factor in snow. We might have to go back and revise our estimates if the cold snap continues.

Peter Shearman, Policy Manager, BSG