Tuesday, 29 November 2011

Spending Charlie's £100Mn - thoughts on the Chancellor's Autumn Statement

On Tuesday, the UK Government released the Chancellor's Autumn Statement, an important statement of policy at a time when a double dip recession seems increasingly likely (if one believes the doom-laden rantings of the popular press, at least).

In amongst the sensible stuff about public sector pay caps (about time, given the upcoming strike action by middle class, home owning unionists masquerading as "working class" activists) were two statements about the digital economy. Just when you thought the lessons of the risible Digital Britain/ Digital Economy policy failures had been learnt, here comes another misguided governmental attempt to interfere in a functioning commercial market.

The concept is to assign £100Mn for two things:
1) Improving mobile coverage in the UK up to 99% of the population
2) Urban broadband fund to create up to 10 “super-connected cities”

This is a laudable goal, but as usual there’s nothing in the document about how this will be implemented. The super-fast thing is unlikely to be practical in the real world in my view, at least not with £100Mn to spend.

I suspect that the plan will be the usual one - the tax payer will offer grants to BT and Virgin that enable them to make the capital investment in marginal exchanges economically viable. The trouble is that in major cities the investment case is not the problem, it’s just technically very hard. For example, I understand that BT can’t upgrade many London boroughs to Infinity because of the architecture of the London exchange. Likewise, if everyone in the major cities started buying Virgin cable at 100MBit/s, their network would collapse - £100Mn won’t solve that either. Thoughts of fibre are pipe dreams (get it?) – even with universal duct access, it costs about $100,000 per urban mile – raise that to $300,000 if there are no ducts.

In mobile, free urban WiFi is the most likely route to enabling fast mobile broadband access. This is available in lots of cities round the world – Edmonton and Helsinki are two that spring to mind. I suspect the consumer benefit will be quite limited, however, as WiFi contention will render the solution useless in a major UK urban area. Major further question on that is how the operating costs will be covered? If the plan is for cellular, then you again face the problem of what £100Mn buys you. Answer – not a lot!

My fundamental point is that any investment needs to enable a transformational change in the competitiveness of the UK technology industry and/ or create societal benefits. For example, rather than gifting the money to incumbents, why don’t they have X-prize type competitions to fund innovative solutions to maximise the performance of copper networks? Urban wireless, facilitated by high speed WiFi or even
white space networks could also be quite exciting because it enables all of the fancy augmented reality technologies (like Auresma/ Autonomy) and new business models, like scvngr and Foursquare. By making access available for free, you may create an ecosystem of entrepreneurial activity to take advantage. Again, white space networks are one option – wifi might also be good enough, provided the operational realities can be accommodated.

The long term economic benefits of creating a technology industry to exploit that new technology feel much more meaningful than enabling super-high speed file sharing for students. Even then, I remain to be convinced that the examples of high speed networks “creating” technology economies in Korea, Japan and Scandinavia demonstrably show causality between the presence of those networks and the success of their industries. Let’s not forget that the UK already has a thriving Internet economy and are have advanced services and advanced demand for those services. We’re the second country to have OnLive, Lovefilm has been streaming as long as Netflix, etc... I’m therefore not sure what such a tiny amount of money is intended to achieve.

Chances of any scenario in which the money isn’t totally squandered in quangos feel fleetingly small.

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