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Reaction to new government broadband plan muted

by Scott Bicheno on 7 December 2010, 12:07

Tags: Virgin (NASDAQ:VMED), UK Government

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Meh

The government made a big noise around the speech by media secretary Jeremy Hunt, which unveiled a new plan for making ‘superfast' broadband available everywhere in the country by 2015. The industry has responded as you would expect, considering the amount of promises it has had thrown at it in recent years.

Given the obvious preference of the government to throw public money at BT, we expected Virgin Media to receive the announcement negatively, but the statement we got from them shows a more cautious approach."The government's proposals present a real opportunity to look at the various ways in which next generation internet access can be delivered to remote areas," said the spokesperson.

"We're already trialling superfast broadband over telegraph and electricity poles in Berkshire and Caerphilly and government funds should help encourage a better understanding of the alternative models available. There are some areas which will be economically challenging but, by stimulating commercial investment and working in partnership, we can help deliver nationwide solutions that are genuinely future-proofed."

This is quite a smart response. While the government seems to have a preference for BT, it is opening access to these funds up for public bidding. Virgin is clearly going to do everything by the book to get its fair share of state subsidy and thus, at the very least, put itself in the strongest position to object if BT gets it all.

The ISPA, as reported by ISPreview, was keen to stress that, while it welcomes the plan, the public money needs to be clearly directed to areas where it's not viable for private enterprise to go - i.e. rural communities - and that the current tax regime and access to infrastructure is hindering competition.

Tony Ballard, a digital media specialist lawyer at Harbottle & Lewis, went further, saying the current tax regime makes it difficult to compete with BT in fibre. It seems that BT gets taxed less for installing new fibre than everyone else - nice to know its demands on the public purse are multi-faceted.

"It is a highly complex system,  and although some attempts have been made recently to reduce the disparity, the net effect of the rating system  is  that smaller companies competing with BT in laying  fibre optic cable to  provide superfast broadband in outlying areas (or indeed elsewhere), must  carry  an  enormous handicap," said Ballard, noting we're the only European country to tax optical fibre infrastructure.

"Inevitably, this makes it hard for them to come forward with competitive quotes, thereby leaving BT as preferred bidder and creating conditions conducive to a monopoly position. This cannot be healthy for a developing market."

Opinion was divided among other commentators. "I am particularly pleased to see the government has acknowledged the need to align the funding of the 2Mbps Universal Service Commitment with the next-generation broadband plans as this will help to ensure rural consumers are not always lagging behind the urban population when it comes to new and innovative services which require faster speeds," said Sebastien Lahtinen, co-founder of thinkbroadband.com.

Charlie Davies, analyst at Ovum, said: "There is nothing new in yet another government stating its intention to be the ‘best in broadband'. Many other markets in Europe have cited aggressive development of broadband infrastructure as a key means of achieving differentiation in the global economy. Nor is there any transformational aspect to the announcement of £830 million of public funding to ensure ubiquitous coverage; the market is expected to deliver broadband to two thirds of the country."

 



HEXUS Forums :: 2 Comments

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That is because people are sick of broken promises from Government and now take a stance of, "we'll believe it when we see it"
I think its because people are sick of BT and the poor performance of their systems. Won't be surprised that when fiber optic becomes widespread that BT increase the traffic shaping even more - so you'll have a 40Mb connection that will be no faster in practice for iplayer etc!