Digital Britain was published today to much fanfare by the government and media. While it seems that everyone agrees that the basic principles of breaking the digital divide are noble ones, and that the UK has a long way to go to catch up with other parts of the world, the proposals made by Lord Carter seem to have fallen flat with both industry and government.
The main bone of contention is how to pay for increasing digital access. According to Lord Carter’s proposals, broadband providers will be subsidised with an extra £200m per year until 2012 to try and reach the ‘final third’ of the UK which currently doesn’t have access to broadband. This funding will primarily go to BT and Virgin Media, and will come from dipping into the BBC’s pot of money for switching the country over to digital television, and also by taxing consumers with a fixed line to the tune of £6 per year.
This creates an obvious political problem: creating new taxes, no matter how small, will be deeply unpopular after Darling’s last budget. Media outlets ranging from the FT to the Daily Mirror led with this angle, and the Tories have not been pulling any punches with their criticism.
However, to my mind, focusing criticism on taxation policies misses the bigger problem: is fixed line broadband access the best way to cross the digital divide? And are we crippling broadband providers even while we’re subsidising them?
Smart-phones, netbooks, and other devices which access wireless networks are swiftly taking over the way we communicate and work. Most industry analysts predict that there will be a massive increase in data travelling through our wireless networks (the introduction of iPhones alone can increase data traffic six-fold in new markets) and there is real concern that they won’t be able to cope. As a result, given that increasing numbers of people want to work and play on the internet without having to connect to a socket, and there are obvious problems on the horizon with the current wireless infrastructure, why are we subsidising fixed line development?
As opposed to dumping £200m on BT and Virgin Media, the government could much more effectively foster innovation across the sector which will lead to better competition around wifi, 3G, and other, new ways of delivering high-speed wireless internet access. There are many innovative start-ups and new technologies already in this space, and we should give them a level playing field as opposed to focusing on one delivery mechanism for the internet.
From the ISP’s perspective, this focus purely on bandwidth and access is also unsustainable. Viewing broadband simply as a commodity will lead to bidding wars as providers such as BT and Virgin try and undercut each other’s prices while still providing greater speed. Ultimately, they need to be able to innovate around the way they deliver content, the way that they charge for it, and also look at other ways of developing revenue across the whole eco-system (for example, charging the BBC to carry the i-Player since it takes up so much capacity). By focusing subsidies on increasing broadband penetration, the government is effectively tying ISPs into a similar business model for three years to come. This, ultimately, will not serve theirs, or the consumers, best interests.
In short, the report delivered by Lord Carter feels a little old-fashioned. The internet isn’t like plumbing – there’s a great deal more innovation that can happen around developing the infrastructure than just getting the pipes in place.
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