71. In the UK between 60 and 65 per cent of the population
is now covered by what the Government describes as "affordable"
broadband technology (cable service or ADSL over a copper telephone
connection) although there is some confusion over the definition
of broadband as set out above. Only about 1 per cent of households
have taken up this option. This coverage is concentrated in high
population areas. In rural areas broadband service is available
by satellite but at a cost which is beyond most households. NTL
concede that broadband take up has been slower than they would
have liked but that it compares well with mobile phone and Internet
take up at the same stage of development.
72. The Government, in common with AOL UK, sees the
high level of Internet usage in the UK which is flat-rate as a
significant advantage to the promotion of broadband. We note that
BT saw flat-rate narrowband access as an inhibitor of broadband
market development arguing that many consumers already enjoyed
the benefits of "always on" and were less inclined to
pay more for simply higher speed.
73. The Government describes the UK broadband market
as "arguably" one of the most competitive in Europe
given the dual approach of "unbundling the local loop"
(allowing operators access to BT's local loop between the local
exchange and households) and the requirement for BT to sell wholesale
services to other retail providers. BT has recently made a marked
reduction in its wholesale prices which has been passed on in
large measure by retail providers to consumers. The latest report
of the e-Minister and e-Envoy, as well as comment in Computing
Magazine, were of a significant upturn in demand (in some cases
outstripping the capacity to supply). BT has a target to reach
1 million new customers by June 2003 which would represent a doubling
of the current levels of take up.
74. We heard severe criticism of both BT and the
effectiveness of Oftel in achieving progress with local loop unbundling.
But there is also a fundamental tension between these two strands
of activity in fostering competition. Price cuts sought from BT
in some instances are likely to undercut the prices upon which
the business plans of local loop unbundlers are based. One proposal
from Cable & Wireless was for BT's network business to be
separated from its other services to ensure free and fair competition
between service retailers and to encourage further price reductions
by the newly stand-alone network business.
We recommend that Oftel, and OFCOM when it takes over the responsibilities
of Oftel in due course, should take serious note of criticisms
of its effectiveness in establishing a competitive UK market for
broadband and follow up with remedial actiontaking account
of the proposal to require BT's network to stand on its own as
a distinct business.
75. Undoubtedly the key challenges to the Government's
broadband ambitions are the overall pace of progress, the position
of rural areas, and the unfavourable economics of investing in
infrastructure where there is relatively little demand. When coupled
with the high price of the satellite service that is available
it is clear that, as the BSG says, there is no single answer.
Sir Christopher Bland told us that the more sparsely populated
parts of the UK might not be economic propositions for broadband
roll-out for the next 10 or even 20 years.
Such a situation is clearly unacceptable since it would create
a digital divide between urban and rural areas as well as penalising
investments already made in locating businesses outside of congested
population centres. It is imperative that the Government takes
action to remedy this.
Source: ITC Annual Report, 2001, p19
62 Broadband Stakeholders Group, Report and Strategic
Recommendations, November 2001 Back
POST Report 170, December 2001 Back
Ev 91 Back
Ev 75 and 82 Back
Ev 75 Back
Q 223 Back