Reflections on what might have been
I noticed somebody on Twitter earlier this week suggest that if people needed broadband and hadn’t got access to it then they should move. If we take this view we depopulate rural areas so that there is no economic infrastructure at all and we sound the death knell for rural communities. It shows a total lack of understanding of what the digital economy means and a level of ignorance about the impact of digital exclusion that defies belief.
Earlier this week my local council announced that it was seeking European funding for wireless infrastructure in the rural “not spots” in the County. I believe that this is the wrong approach, not that I don’t understand the motivation because rural businesses get to the point where anything will do, but I still believe it’s wrong.
There are, I believe, three elements to the proposal which are fundamentally flawed.
The first is the intention to use European funding – State Aid. State Aid requires four basic conditions to be met. The first is that there must be a clear market failure; the second is that any intervention must not distort the market; the third is that any solution cannot be technology specific and the final one is that the eventual solution must be open to the market. I know that State Aid has been granted for some major infrastructure projects in the past, but this is not a major infrastructure project, this is for the provision of very specific services in a very specific area and the two are not the same.
Let us take these one at a time. Firstly, I believe that there is a market failure. However, this is open to challenge in that the incumbent supplier could claim that it was willing to provide services eventually. Now, I know, just as everybody knows, that this is NOT broadband as we all understand it, but in state aid terms, it is and so, should the incumbent be sufficiently threatened by the market failure proposal they could, in my view, challenge it successfully. This argument also undermines the second condition in which the incumbent could argue that a state aided solution would prevent them from making sufficient return on their investment and make it unlikely that any other provider could enter the market. However unlikely this seems it would weaken the ex-ante case for state aid approval. Thirdly, the application for state aid could only specify the provision for broadband services, it cannot specify a wireless or any other solution so to say that one is applying for European funding for a wireless mesh network is nonsense. Finally, the solution must be available for the wider market, in other words you can only provide the infrastructure you must then get service providers to offer services. The kinds of services that can operate over a basic infrastructure such as might get state aid approval limits the revenue potential for any provider with the result that the sustainability of the network is at risk.
The second is the political impact of doing a project that meets the immediate need. The problem with accepting anything is that it ticks somebody else’s box. It means that rural areas have something and so they can be forgotten for a while longer. I experienced this in the mid 2000’s when there was a state aid application for the provision of broadband services to rural not spots in the West Midlands. The resulting service was satellite based, under capacity, under sold and didn’t deliver a true broadband service. The motivation fitted the criteria we see now; anything will do as long as it’s something. What was worse was that it enabled regional bodies to say that there was 100% broadband availability in the region, it ticked a box. The agenda moved on and today there are still poorly served villages and not spots in various parts of the county.
The third is to do with sustainability. A basic internet service will deliver just that, basic internet. The potential for value added services such as VOIP, video conferencing, or IPTV are limited. Whilst I believe firmly that business is the key driver for new broadband services it is residences and entertainment that are the sustaining forces.
My final point is that much as I recognise the desperate need for good broadband services in rural areas I fail to see why rural communities should have to accept a second best solution to their urban counterparts. If we accept that it’s okay to provide 20% of the English population with second rate infrastructure because they are unprofitable, irrespective of the potential for social and economic injustice then surely we are all missing the point, just like the individual who suggested that we all move.