BT: To Infinity and Beyond, or not

We, as a country, are failing dismally to provide a proper broadband infrastructure.  While debate rages around whether or not we’ll have HS2 sometime in the dim and distant future, right here right now we are lagging behind in our 21st century cyber infrastructure.

I suppose I ought to declare an interest. I used to work for BT. As a telephone engineer, from 1979 to 1986. And for part of that time I was a full-time Branch Secretary for Westminster branch of the old POEU (Post Office Engineering Union) – long since merged into the CWU.

In those roles I developed an interest in Telecoms Policy, especially as technological changes and privatisation loomed. I wrote some stuff for the old GLC Popular Planning Unit and contributed some articles and speeches on this issue.

My position then is essentially the same as it is now. BT, in providing land-line access to houses and businesses, is essentially a natural monopoly. There are few cases where it’s worth having more than one set of cables, or local distribution networks, in an area.

Moreover the advent of new technologies – especially optical fibre based transmission and computer based switching – require huge investments if we, as a country, are going to benefit from high-speed Internet access for all. I leave aside for the moment the issue of alternative “trunk” (to use an old-fashioned term) transmission – competition here is certainly feasible, but not necessarily desirable.

At the same time what gets transmitted over a high speed broadband network ought to be open to competition. The types of services that can be offered are changing on an almost daily basis and the explosion Internet services is astonishing, far outstripping anything anyone saw coming back in the early 80s.

The logical conclusion is to split the role of network provider (BT) and services providers and give BT a clear remit to create a universal national infrastructure for telecoms. It would only be allowed to charge for installation, line rental and maybe a straight “bandwidth” charge, but in all three cases on the basis of single, national, tariffs – a bit like the old penny post.

Should BT be renationalised to carry out this role? Not necessarily. One option might be to make it a “public interest company” with bonds instead of shares and a regulator (OfComm) setting the bond yields through a process of democratic regulation (something I’ve written about here before). Like Universities, it would remain a private sector organisation but with a limited remit and strongly regulated. Bond holders would see their investment as long-term secure income, as with Government bonds. (Interestingly UK Universities are starting to issue bonds – mine just raised £375 million that way).

To gain access to voice and broadband services users would have a range of competitive offers from providers, more or less as now – except that BT would not be one of them. The consumer would pay BT for “useage” simply based on bandwidth used. That would massively increase consumer power, because they’d be freed from having to have a single contract with a provider for their data or telephony use.

At the moment, instead of this we have a hotch-potch of localised cable systems – a legacy of the Thatcher policy of allowing anyone to dig up our streets and run cables in the 1980s. We have a dreadfully patchy level of high speed broadband access, and many rural areas are suffering from extremely poor connectivity – so much so many are taking it into their own hands to install it.

Anecdotally, the roll-out of high-speed broadband seems to be determined by whether BT will get the business. In my own area (Timperley) we are on the edge of the greater Manchester conurbation but cannot get BT Infinity. This seems to be because many in the area have Sky contracts (dishes for TV, old-fashioned BT lines for telephony and broadband). So BT have little incentive to put in fibre-optic as its likely Sky or Virgin would be the main beneficiaries. If they had a clearer duty to provide, and no competitive reason not to, we see some improvement in the roll-out of a proper universal service.

I find it amazing that small, much poorer, countries like Malta have had optical fibre systems in every home and business for more than a decade and yet in Britain BT are nowhere near Infinity, let alone going beyond!

7 thoughts on “BT: To Infinity and Beyond, or not

  1. “The logical conclusion is to split the role of network provider (BT) and services providers” and set up a “public interest company” – ah yes, where have we heard that before? Given the expensive shambles of Railtrack and now Network Rail one would have thought that someone putting forward such proposals might have made at least a glancing reference to the experience of relevant recent history. If an academic seems unable to learn from history is it any wonder that the politicians and bureaucrats repeat the same mistakes time and time again?
    As it happens I agree with the diagnosis of the problem. Down here in East Kent, despite loads of public relations efforts from the County Council in cahoots with BT, the rollout of decent broadband is taking far too long. We have an “elected dictatorship” at County Hall and the natural monopoly of BT – a toxic combination which probably exists in many other areas.
    What we need to do is look very carefully at options for the regulatory framework – OFCOM would not be the right vehicle in its present form and as currently staffed – and work out how best to achieve the desirable objectives you put forward.

    (who argued with ministers about the framework for railway privatisation and thus a “prophet without honour”)

    1. There are fundamental differences between rail and telecoms which make the comparison invalid. (1) there can be genuine competition over telecoms networks traffic, not so for rail. (2) capital costs, and maintenance costs, are very different : much lower for telecoms infrastructure. (3) Once you’ve installed a fibre optic network, the would be massive spare capacity which could bring in revenues. Rail capacity remains limited (hence high prices, mostly to retain demand). I could go on.

  2. Bravo Zulu- its a shame that the main lobbying groups like the Countryside Alliance for Rural BB can’t think as coherently and that the Treasury’s updates to their Green & Magenta Books fail to look beyond cost (although disingenuous talking about Value) when identifying what is systemically important to the viability of the UK in tomorrows world.

  3. “A proper universal service” sounds a bit radical these days! But clearly good idea – and could such a public interest company have tax exempted bonds? Sorry – maybe it’s all this sunshine!

  4. I am sure you could go on, and doubtless will.

    There is some merit in your (2) though you refer yourself to “new technologies …huge investment” and perhaps (3). But your (1) is just plain wrong – the problem has been that the regulators have made it difficult for competitors to gain access and then maintain services against unfair competition. But think trains to Hull.

    It’s a pity you sidestep the key point which is that it all depends on the regulatory framework – for telecoms this has been inadequate. As an old BT man you might not agree but it seems to me that successive governments gave that company far too easy a ride (as they did British Airways in the aviation sector for what I suspect are broadly the same reasons – an unconscious bias in favour of the “flag carrier” that officials find easy to work with rather than the Bransons of this world).

    I quite like our underlying thinking but much more work needs to be done on regulatory models to meet your objectives.

    1. Hi Paul,

      Thanks for your thoughtful comments. Sorry if my response seemed abrupt, I was in a bit of a rush – it wasn’t intended to be dismissive.

      I will be following this up at some point, but I just wanted to float the central idea, especially as we enter the pre General Election policy formulation period. Your points about regulatory framework is well taken, and I agree that governments have been lax with BT – mainly because having privatised BT in the form they did they couldn’t afford to see it fail.

      The crucial issue for me is how do we ensure a proper, universal and accessible high speed broadband for the UK with some realistic prospect of getting it accepted by at least parts of our political class. I travel a lot internationally and am embarrassed we have such a poor system when we could have had an excellent one 10 years or more ago.

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