Select Committee on Culture, Media and Sport Fourth Report



Government policy

67. The Government is committed to promoting the use of the Internet and particularly higher speed, broadband services throughout the UK. Broadband is defined by the Broadband Stakeholders Group (BSG) as "always on access, at work, at home or on the move provided by fixed line, wireless and satellite technologies to progressively higher bandwidths capable of supporting genuinely new and innovative interactive content, applications and services and the delivery of enhanced public services."[62] This definition side-steps the identification of any particular width of band, the speed at which data can be carried, as official 'broadband'. The ITC defines narrowband as typically 56,000 bits (individual pieces of information) per second, expressed typically as "56 Kb/s"; "middleband" as 500 Kb/s; and "true broadband" as 2,000 Kb/s (2 Mb/s). The US Federal Communications Commission defines "higher speed" Internet services as commencing at 222 Kb/s while the OECD defines broadband as above 256 Kb/s. The UK Government's broadband strategy UK Online: the Broadband Future puts broadband in three categories:

  • higher bandwidth: above 384 Kb/s

  • current generation broadband: above 2 Mb/s

  • next generation broadband: above 10 Mb/s

In the UK, the capacity of connection available for residential households is around 512 Kb/s; although the actual rates received by the customer will depend on who else in the local area is downloading data.[63]

68. The Broadband Stakeholders Group (BSG) sees the establishment of an effective broadband network as enabling the Government to meet its objectives for competitiveness, e-government, digital TV and the delivery of better public services. Citizens and consumers will benefit from improved government services and a wide range of life-enhancing content: passive and interactive entertainment, as well as educational and health care programmes. UK business will also benefit from significant opportunities for investment, innovation and enterprise. The Government's overarching aims are to have the best market for broadband in the G7, and universal Internet access, both by 2005.

69. In December 2001 the Government published its broadband strategy which responded to the first report of the BSG (published on the same day). The Government's strategy is based around the following elements:

  • the intensification of competition in the broadband infrastructure;

  • increasing demand through tax incentives for the provision of broadband connectivity by employers;

  • increasing the development of new content and applications through tax credits available for research and development (although the BSG were interested to know how this might work in practice);

  • encouraging the use of broadband to deliver public services such as education;

  • encouraging the roll out of broadband in rural areas through infrastructure sharing, facilitating satellite roll-out and the effective management and aggregation of public sector procurement of broadband services; the public sector is estimated to spend about £1.7 billion on communications each year.

The Government has announced a £30 million fund for targeted initiatives in the regions. However, none of this fund, for all it might achieve, has yet been spent.

70. The Government describes a process of establishing and reinforcing a virtuous circle: increasing narrowband Internet access (in line with the universal target); encouraging upgrading to broadband; driving new content and applications with this critical mass of users; and encouraging further roll-out on the basis of this "compelling" content. We heard in evidence that there was not yet in prospect a "killer" application that made full use of broadband's technical potential. The most likely driver in the short term may well be entertainment and the prospects of streamed films and other broadcast content on demand. NTL claim that the speed of access is itself the killer application given the frequent delays experienced by narrowband users—a frustrating experience even with flat-rate access. It seems clear that the most popular content will not be made available on digital services, for fear of piracy, until such time as the copyright implications have been resolved. We urge the Government to seek early incorporation of the EU Copyright Directive into UK law.


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.[64]

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.[65] 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.[66] 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 action—taking 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.[67] 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

63   POST Report 170, December 2001 Back

64   Ev 91 Back

65   Ev 75 and 82 Back

66   Ev 75 Back

67   Q 223 Back

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