Following the earlier piece, I thought I’d briefly set out what the economic benefits are that are identified in our ‘A Framework’ report, in order to illustrate where we think value would accrue.

The largest categories of private value in the report are: doing things that we do now, but more efficiently; doing more of what we do now; and doing new things.

Each of these categories of value has the potential to be very significant. We make no attempt to quantify the last two, as it would be difficult (if not impossible) to do so.

Doing things more efficiently we have attempted to quantify. Based on 80% coverage, if 50% of broadband users saved 3% of their time, time savings worth £0.9bn per annum would be achieved (based on a value of leisure time used by government studies).

Note this is only an assumption, for indicative purposes. We would be interested in seeing any evidence that could refine this value, such as more detailed research on the activities consumers do online and how long they spend doing them.

The largest categories of wider economic value were: resilience, adaptability and policy options; and spill-over and virtual agglomeration. Again, these were not quantified as this was not appropriate, but we think these are likely to be significant in value.

The substitution possibilities created by next generation broadband would mean that the economy would be far more resilient and able to adapt to shocks, for example an oil price shock by providing alternative to travel. This also creates an additional range of options available to policy makers, which would be highly valuable in itself.

Virtual agglomeration had been identified as likely to be a big benefit from next generation broadband. Agglomeration refers to the productivity benefits of cities and clusters of activity - London, for example, has a higher productivity level than other areas in the UK. Through virtual agglomeration, next generation broadband could achieve some of the benefits of clusters and cities, and without some of the costs of cities such as congestion and pollution.

We also identified other categories of wider economic benefit, such as: an increase in competition in the economy; network effects as consumers and businesses both in the UK and across the world move to next generation broadband; reduced traffic congestion; the value created by the re-use of land and buildings no longer required by a next generation broadband network; reduced business travel; increased online backup; video distribution; and improved connectivity for SMEs. Some of these we did attempt to quantify, such as a reduction in business travel. For our estimations see section 5 of the report.

That’s the whistlestop tour of the categories of benefits we identified. We are keen to see these categories built on over time. We hope that as evidence emerges we will be able to more accurately populate this framework, to build up a more accurate quantitative picture of the benefit of next generation broadband.

Following the launch of our report ‘A Framework’, I thought it would be worth setting down a few pieces about the benefits highlighted in the report. I’ll start with a general view of the economic impact the report sets out, which although substantial in terms of benefits, may be difficult in practice for investors to capture.

First, a brief note on the methodology. We have taken a bottom-up approach, examining where in the economy specific value could possibly accrue, rather than making general estimations of the impact of next generation broadband on productivity or GDP. For more on this in the report, it is worth looking at the section on ‘pseudo costs and benefits’. We also broke down economic value in to two categories - private value that accrues to investors and consumers, and wider economic value.

The report sets out a wide variety of categories where value would accrue. Some of these benefits would be captured upon deployment; others would take time, require transformations and would accrue in the medium to long term. In addition some of these benefits may be impacted by various policy agendas - for example, the role for next generation broadband in reducing carbon emissions is potentially significant depending on whether a carbon tax was introduced that encouraged substitution for emission-intensive activities.

The report suggests that these benefits are potentially very large, and in the long term likely to be larger than the cost of deploying the network. Particularly, there is likely to be significant private value that will be captured by investors and consumers. This does not mean, however, that the business case is made, and in reality there are difficulties for investors in trying to capture this value.

The report highlights three key constraints on investors’ ability to capture private value. First, to the extent that next generation broadband is an experience good consumers may not be willing to pay a premium for the service until they have experienced it. Second, creating this value may require the transformation of value chains, which may take time and would be disruptive. Third, investors do not yet have accurate knowledge of how much consumers are willing to pay, meaning that there will be difficulty in setting the correct pricing structures in order to maximise how much of the value they are able to capture.

Generally, the report calls for further work that would address these and other uncertainties. Resolving these uncertainties will be key to creating a business case that is acceptable to investors. The BSG is continuing its work programme that will hopefully shed some light on these and other issues. We are keen that further evidence is put forward that can help illuminate these, and would be interested to see any evidence others have to this end.

Our recent report on the value of next generation broadband created a minor debate on itWire in Australia following a good blog article from Stuart Corner. The article captures the essence of our message on next generation broadband deployment from our recent research: it is more important to do this right than to do it now.

The size of the investment required to roll out next generation broadband in any country, the irreversibility of that investment, and the likely importance to that country’s economy and society of superfast broadband mean that the costs of getting it wrong could be significant, and that investment should occur at the most optimal time possible in order to maximise the benefits.

For the UK, our report suggests, the most optimal time is not necessarily now. There are a number of uncertainities for investors that create a large value in waiting, such as a lack of evidence of consumer willingness to pay and the current regulatory uncertainty. Over time, this value will reduce as evidence emerges and some of the uncertainties are resolved - we believe over the next 18 months or so.

Ultimately, we still believe the market is best placed to decide when and how investment in next generation broadband should be made. But this doesn’t mean we should be complacent. It is important that the work that is being done continues, including Ofcom’s work to provide regulatory certainty, the Caio review, and the work of the BSG, so that in 18 months’ time we really do have a clearer picture.

We’ve been absent from the blog for a few weeks as we’ve been finalising two new pieces of research that we believe moves the debate around next generation broadband in the UK forward, and putting on our 2008 Conference ‘Beyond Pipe Dreams?’. It’s been a busy time, but now that’s past we have a lot of issues to discuss.

First of all, the conference itself produced a lively and informed debate, with representatives from a wide variety of sectors and a range of speakers including Francesco Caio, head of the governemnt’s review of broadband. To view the presentations from the event see www.broadbanduk.org/beyondpipedreams.

The first of the two reports that we launched at the conference was ‘A Framework for Evaluating the Value of Next Generation Broadband‘. This report examines the incremental economic and social value of next generation broadband over current broadband provision in the UK.

The second report was ‘Models for efficient and effective public sector intervention in next generation broadband access networks‘. This report studies next generation broadband interventions across the world, and first generation interventions in the UK, to determine good practice for interventions in the UK.

These reports contain a lot of issues, which we will discuss in more detail in future blogs. For now, I can strongly recommend both reports if you are interested in the future of broadband in the UK.

by Peter Shearman, Policy Manager, BSG

Digital Region is not alone. Manchester City Council recently agreed to pursue a strategy of intervention to bring next generation broadband (in the form of a fibre to the home network) to Manchester, as part of a wider digital strategy for the city-region.

The plan will see the Oxford Road area used as a test-bed, covering 400 residential properties and 50 businesses, before a phased rollout elsewhere in the area, and was agreed by the Council’s Executive in March (you can read the report here). It aims to see ’significant progress on implementation’ of the initial rollout phase during 2008/09.

On the heels on Digital Region, and with other authorities in the UK examining investment in NGA, Manchester is seeking to be a UK exemplar, providing knowledge and learned experience for other authorities in the UK. It is the lead authority in the DC10plus group on its ‘next generation connectivity’ workstream, and it hopes that its experiences will assist other UK authorities.

It is not just local authorities that can learn from Manchester and others, however, but broadband providers too. In the UK it is often cited that there is a lack of evidence of willingness to pay amongst consumers, and little or no evidence of applications and services that require the bandwidth provided by superfast broadband. Evidence will begin to emerge, however, from projects such as this.

Digital Region, the Ebbsfleet development, Manchester and others that are considering next generation broadband will provide valuable evidence for both public and private organisations, increasing the understanding of the market and allowing better-informed investment decisions.

“If our children were leaving the house, or going to a swimming pool or going to play in the street, we would take all the care possible about their safety - is there proper policing, is there proper safety? When a child goes on to the computer and on to the internet or on to a video game we should be thinking in the same way.”

This was the response from the Prime Minister to the review published last week by psychologist Tanya Byron, setting out recommendations to ensure that children and young people are protected from inappropriate and harmful material on the internet and in video games.

The publication of this landmark review reflects a growing policy emphasis on how web 2.0 should be effectively regulated.

Whilst no one would disagree with the importance of ensuring child protection on the web and on video games, there is a vocal concern from industry that regulation should not inhibit innovation. The new media industry is one of the UK’s most vibrant and is constantly developing new services – the principal users of which are, in many cases, children and young people.

Byron’s report is a considered and ambitious response to this important issue. Whilst many of last week’s headlines focused on her recommendation to extend the range of age classification for video games, a closer read of the 200+ page report (for those of you with the stamina) also reveals an important proposal on how regulation of web 2.0 should be driven forward.

Her solution to this quandary is the establishment of a UK Council on Child Internet Safety to develop a child internet safety strategy, that will cover both illegal and legal (though potentially harmful or inappropriate) activity.

Built on the structure of the existing Home Secretary’s Task Force on Child Protection on the Internet, the Council will be co-chaired by the Home Office and the Department for Children, Schools and Families, involve other relevant government departments and be staffed by a cross-departmental secretariat. It will report directly to the Prime Minister.

The Council will also be supported by an expert advisory group and research sub-group and involve industry through working groups to deliver specific initiatives such as codes of practice.

Byron also strongly recommends that mechanisms should be established by the Council to effectively involve parents, children and young people.

At first glance, this seems like an eminently sensible solution. It draws the relevant stakeholders together and an over-arching strategy would arguably reduce confusion about the array of policy developments individual departments are currently pursuing in this area.

However, it is an ambitious task, and Byron’s recommended deadline of Spring 2009 for both the establishment of the Council and publication of the strategy is a challenging timescale.

It remains unclear at present who will drive forward the development of the strategy, and what regulatory issues it will cover. Elsewhere in her report, Byron throws down a gauntlet to industry to develop codes of practice on areas such as user generated content, improving access to parental control software and safe search features, and better regulation of online advertising.

This builds on the vast array of work the industry has already taken to set common standards on issues that are important to their consumer. One example of which is the Good Practice Principles on Audiovisual Content, which were facilitated by the Broadband Stakeholder group (www.audiovisualcontent.org).

However, looking forward, could further regulatory proposals emerge under the strategy as a whole? Would this regulation be developed under a self or co regulatory model? And who will police and enforce these standards?

It has to be recognised that Byron has done an admiral job in pulling a wide array of issues together in her review. When it comes down to a more detailed look at how child internet safety will be regulated, however, there is still a very long road to travel.

By Pamela Learmonth, Policy Manager, BSG

While discussing something broadband related (strange how I keep talking about broadband with people), I was pointed in the direction of the PlusNet blog, which I hadn’t come across before.

This particular entry discussed the costs incurred by ISPs, depending on their choice of wholesale product, peering arrangements with other providers, costs incurred using transit providers and other factors.

I found this whole blog particularly fascinating, as it is not usual to find an ISP that is this open about their business (a number of their other entries are well worth a read, particularly this one on the impact of the iPlayer on their streaming traffic).

What the entry does highlight very well is the unsustainable nature of all-you-can-eat broadband price plans. Increasing traffic is increasing costs, and ISPs will need to raise revenues to cover these. It is likely that this will push ISPs towards bitcaps, and this could become an area of competition.

However broadband pricing develops, what is important is that the price of a service, and what that service provides, is clear and transparent for consumers. The Ofcom Consumer Panel and Ofcom are already looking at current marketing of broadband speeds. If competition moves away from speed to factors like bitcaps, it will still be important for consumers that the industry continues to work towards greater clarity, accuracy and transparency in its marketing.

Peter Shearman, Policy Manager, BSG

In a previous post I explored what the topics of discussion would be at the government’s Convergence Think Tank, and suggested that next generation access (NGA) would probably be a key secondary issue to public service broadcasting (PSB).

At the seminar yesterday, NGA was indeed discussed. It was interesting to see, particularly for someone fairly new to the debate, the level of interest and desire for NGA among the broadcasting world.

This isn’t surprising, of course, as it opens up a lot of avenues for them, but I was struck by one presenter’s firm conclusion that the PSB debate was the wrong focus for the future of the industry, and that superfast broadband was the most important next step. His view wasn’t necessarily shared by all in the room, but he wasn’t the only presenter to mention the importance of NGA.

Broadcasters aren’t the only industry who see benefit in NGA, and are clamouring for greater bandwidth. A key issue, though, is how will it be paid for. There is demand from industries and consumers, but is there a willingness to pay? This is a big question, and currently there is little hard evidence for investors to go on that suggest a return for their money would be likely.

The BSG’s ongoing research into the economic and social value of NGA has drawn on emerging evidence from the US, where Verizon have subscribers paying a premium for faster access over fibre. But until more is known about consumer willingness to pay, the business case for NGA will be difficult to make.

Peter Shearman, Policy Manager, BSG

Many of you will have noticed the adverts currently being run by a particular ISP, which focus on the superior speed of its fibre-based network.

This campaign taps in to the importance consumers appear to place on speed – as is demonstrated by a recent BBC Online readers’ debate about Next Generation Access.

However, while headline speeds are obviously important to consumers, particularly when they are not receiving what they feel they are paying for, download speed is not the only important characteristic of a broadband service. There are other characteristics of an NGA network that will provide value to users.

For example, although demand for faster downstream speed is uncertain, there is more certainty about the need for greater upstream speed given the increase in user-generated content. ADSL and ADSL2+ technologies, however, allow a median upstream speed of less than 1mbps. Users would almost certainly benefit from a greater upstream speed.

NGA is about more than just increased headline download speeds.

NGA is commonly now being defined by a set of attributes relating to, for example, improved quality of service, consistency of bandwidth across users and time, less interference, lower latency, and greater symmetry between upstream and downstream speeds. These characteristics, and others, would improve the Internet experience and provide value to users.

Faster downstream speeds are certainly not the only benefits from moving to an NGA network. It is important that the benefits of the other, less-discussed characteristics are captured in the debate, as these will make an important contribution to the enhanced user experience that NGA networks will provide.

Peter Shearman, Policy Manager, BSG

The government recently announced an independent review of next generation broadband, to be led by former Cable and Wireless CEO Francesco Caio.

The BSG welcomes the review. The terms of the review build on a number of the issues we highlighted in the Pipe Dreams report, and will complement ongoing work by the BSG.

We have long called for government to review such issues as the non-domestic rating of fibre, and are pleased that this and other issues are now being seriously examined.

While the review will not by itself bring about NGA in the UK, what the announcement has done is give momentum to the issue.

From the BSG’s perspective, what is important is that this momentum is made use of fully to create the right conditions for timely and efficient market investment in NGA.

Peter Shearman, Policy Manager, BSG