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Blogs > Quocirca

Digital easing
Rob Bamforth By: Rob Bamforth, Principal Analyst, Quocirca
Published: 13th February 2009
Copyright Quocirca © 2009
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In July 2008, an unexpectedly bold step was taken by a large UK company. Former state monopoly, telecoms incumbent BT unilaterally announced a plan to pump prime the process of moving the UK to a high speed broadband network with a £1.5bn investment. Then, in October 2008 it started a limited pilot of 15,000 users in a couple of areas; Whitchurch near Cardiff and Muswell Hill in London. This was not as large as many had hoped for, but it was a step in the right direction, and BT's plans are for it to extend to 10 million homes, or 40% of users, by 2012.

BT's move was not entirely without self interest: it is after all a quoted and listed company, with several divisions that make money from services that will benefit from a fast universal network—IP telephony, video services etc. But it also has to see a return on its investment in the core infrastructure, for the benefit of its shareholders and to maintain its workforce. Even when it took the investment plunge for '21st century network', or 21CN, placing the open internet protocol IP at the heart, the big justification for BT was the massive cost saving from consolidation and rationalisation of assets and the skills needed to support them.

The returns on core infrastructure are of a much longer, slow burn nature than the quick hits of new products and services, and the level of investment required demands much deeper pockets. So for this move to work, BT's investment has to be underpinned by the regulator and its direct approach needs continued encouragement from the government to ensure bits and bytes keep flowing ever faster and in ever greater quantity. BT itself cannot afford to pussyfoot around either; there is another UK company with high speed broadband infrastructure with national reach, Virgin Media, and other providers too, who will also all expect fair treatment and encouragement for further investment.

Given the current rush to ease the flow of finance through quantitative easing and fiscal stimulation, a similar approach needs to be taken to ensure digital markets flourish freely too. The release of the recent Digital Britain report should, in theory be moving the whole process forwards but, unfortunately, at the current interim stage there is much talk for further evaluation and discussion, but precious little evidence of action.

This may change as the report evolves to its final version, but steps from major telecoms companies like BT and Virgin Media need to be recognised, encouraged and quickly capitalised on. The UK's history with utility provision, and digital infrastructure in particular, has not always been great. The Victorians' welcome tendency to over-engineer in the past has rarely been repeated, and often the opposite is now true. This is a time for both government and Ofcom to take similarly bold steps.

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