Memorandum submitted by NTL
BROADBAND
COMMUNICATIONS
NTL welcomes the continued interest of the Committee
in the communications sector and in particular the list of issues
being considered surrounding Broadband provisioning within Wales.
A difficult year for the communications sector
It has recently been a very hard time for any
company involved in telecoms, new media, or broadcasting, largely
as a result of factors outside of the control of the Government
or any individual company. The markets have corrected their own
irrational exuberance of the "tech boom' by taking a now
in many ways unduly negative view of the sector. It will take
some further time for equilibrium to be restored.
At this difficult time there are calls for the
Government to take steps to bale out particular companies or even
to fundamentally re-examine policy aims and objectives. In our
view, this is a time when the Government should remain above the
competitive fray. Many of the short-term "fixes' or interventions
being proposed will not actually be of any practical assistance,
and if adopted will harm the chances of a successful recovery
for UK-based companies when global market conditions change. Similarly,
Government policy for the sector remains basically sound, notwithstanding
some of the criticisms we offer below. At any rate, it would be
much worse to suddenly implement ill-judged changes of direction,
which will scare off potential future investors.
Broadband
In the relatively short time it has been available
in the UK, Broadband has generated high expectations amongst potential
customers and policy-makers alike. Some argue that there has been
overhype and under delivery from the industry. We think it is
fairer to say that Broadband has suffered from the "new best
thing' syndrome that affects all technological developments. However,
allied to high expectations is the danger that many form the opinion
that Broadband is some kind of failure. It would be a considerable
pity if this view took hold, particularly at a time when Britain's
take-up of Broadband is doing relatively well.
Right now what we need to inject is some perspective
into the situation. Broadband is not getting a good press in general
at the moment and what is printed is usually a rather bleak picture
and not entirely accurate. However, if you compare figures for
mobile phone and internet take up at a similar stage of its development
as a tool of mass communication, then Broadband is certainly holding
its head above water very comfortably. As the leading provider
of Broadband in Britain, NTL hit and exceeded its target for 2001
of over 100,000 customers and we anticipate the pace quickening
considerably in 2002.
There is however significantly lower overall
demand for higher bandwidth services in Wales than in the UK as
a whole. This is primarily driven by the lower overall levels
of economic activity in Wales and by the lower usage by Welsh
SME's of ICT in general, when compared with their counterparts
in the rest of the UK. However, there are encouraging signs of
an increase in ICT usage amongst Welsh businesses that we believe
will lead, in due course, to an upsurge in demand for higher bandwidth
connectivity. In particular we note the 21% rise in the DTI's
connectivity indicator between 1999 and 2000.
We fully expect the Government to maintain its
high level of commitment to Broadband in 2002. The Government's
Broadband statement in December was very welcome but it failed
to consider, crucially in the current investment climate, what
role tax incentives for consumers can play in aiding take up.
A compelling case can be made to the Treasury and we contend that
the cost of tax incentives to encourage early take up would be
repaid by the increase in economic activity from moving the UK
faster up the Broadband adoption curve.
Addressing anti-competitive behaviour
In much of last year, we have seen powerful
players in the sector describing each other's behaviour as `anti-competitive'.
Separating the rough and tumble of normal commercial behaviour
from genuine abuses of market power is very difficult, but it
has to be done and the genuine abuses promptly curtailed.
The performance of all the regulators in this
regard has been disappointing. The saga of BT's unbundling of
its local loop seems to have ended with most competitors driven
from the battlefield. BT has been given a much-needed breathing
space to sort out its financial priorities and decide that, after
all, it does want to deploy higher bandwidth services. NTL recognises
that complex factors have affected the regulation of this process,
which was never going to be either easy or quick. But it does
highlight the need for OFTEL to have the powers, resources and
the political will to take rapid and resolute action against those
abusing market power. Unfortunately, OFTEL continues to devote
a disproportionate amount of its time and resources to consumer
and social policy matters which ought to be handled either by
the OFT or by the Government itself.
What this and other examples reveal is the urgent
need for reform of the way that competition rules are applied
to the sector as a whole. Whether this requires the proposed communications
legislation depends on the extent to which it is considered that
the problems identified flow from failures of management in the
regulatory bodies. NTL considers that the regulators can fairly
claim to be working with inadequate regulatory tools for a fast-moving
sector, and that legislation is therefore required. Equally, a
stronger and more focused set of objectives set out in new legislation
would help. On the other hand, the Government could already make
clear its strategic priorities to the sector regulators if it
chose, and this might indeed be a helpful step. Sector regulators
should be firmly guided by the Government to employ the tools
they already have more effectively and single-mindedly to the
task of delivering effective competition - if need be at the expense
of other areas of activity.
What are the benefits, particularly the economic
benefits, of Broadband services?
— Improving business competitiveness
within the global economy through increased use of new information
and communication technologies (ICTs) with effective access to
markets, information and supply chains. Effective use of ICT enables
both established and new businesses to generate improved growth,
thus providing jobs and income to the local economy.
— Encouraging businesses and public
sector organisations alike to interact through electronic commerce
and electronic document interchange.
— Developing health care applications
and encouraging the take up of successful projects, such as Telemedicine.
— Continuing to make the best use of
ICT for life—long education and training of all members
of society.
— Improving the ICT skills of the existing
and potential workforce.
— Developing telecommuting and teleworking
and encouraging wider take-up of the practices.
— Improving the quality and accessibility
of public services through adoption of ICT applications, for example
Broadband in schools.
Does Wales stand to lose out if Broadband access
is not readily available?
There has been major growth in certain industrial
sectors, notably in manufacturing and assembly. Inward investment
into Wales has been a major success story, and has considerably
enhanced Wales' reputation at a global level. Productivity is
high, unit labour costs are low, we have an adaptable and flexible
workforce, and unemployment rates have reduced significantly.
The National Assembly offers potential for raising the status
of the country on the international arena, and will give Wales
a real voice at the European level. In addition, Wales has developed
a reputation for being a good place to live and work—land
prices and office rents are among the most competitive in Europe,
the natural environment is outstanding, there is a unique national
identity, strong cultural heritage, and excellent leisure and
social facilities. The institutional infrastructure in Wales is
also very strong.
Yet there are major concerns, such as:
— There are still very low economic
activity rates, and high unemployment rates, in certain sectors
and parts of Wales.
— We have a "low wage/low cost"
reputation, with too great a reliance on low value-added sectors,
few managerial/professional positions and relatively low skill
levels.
— Many people outside Wales still see
it as a land of mining and heavy industry.
— GDP per capita is low (the lowest
of any region of Great Britain) and has not improved compared
with the UK and European averages.
— Education and health standards tend
to be lower than the UK average.
— There is a need for improvement/investment
in transport and telecommunications infrastructures.
— There is a high dependence on agriculture
in some areas of Wales, where incomes have been falling rapidly.
— We have too many poorly performing
small companies.
Therefore, even though we have many advantages,
we believe that a transformation of Wales' economic and social
prosperity is necessary, and that this can be assisted greatly
by the effective exploitation of the new information and communication
technologies, which all require Broadband Services.
Transforming the Image of Wales
The "Pathway to Prosperity" document
calls for an end to the "low cost" approach and a transformation
of the Welsh economy into a higher value-added, innovative regional
economy, capable of delivering increased prosperity to people
in all parts of Wales. We already have a good reputation in the
electronics, software, aerospace and automotive industries, which—together
with this strategy and the potential of additional European funding
from 2001—will put us in a strong position to realise our
vision of Wales being a regarded as a world-wide leader in the
transition to an Information Society.
Health is a good example. For a variety of geographic
and demographic reasons, Wales has pockets where overall health
standards are very low—much worse than the average for the
UK as a whole. Although more and more resources are being made
available for the Health services, demand is continuing to outstrip
supply. In addition to being a major drain on scarce resources,
and having its own adverse social implications, this has a significant
impact on overall economic activity rates, which in turn depresses
economic prosperity as demonstrated by GDP per capita. Whilst
technology per se can never be a panacea, Telemedicine applications
can provide opportunities for tackling spiralling costs and for
enhancing the quality of patient care and treatment.
Remote diagnosis and consultation processes,
e.g. via the use of video-conferencing, can not only reduce travelling
time and costs in rural areas, but also speed up the process of
treatment. Better access to information—patients' records/family
histories, latest research results, etc.—can be beneficial
for both patients and the medical profession. There are many key
issues which have to be resolved in this field, of course, not
least of which are the important topics of confidentiality and
liability, but there is growing recognition that the potential
of the new technologies must be exploited if we are to make real
progress in improving standards of health.
Lack of sustainability
Several innovative projects and initiatives,
which impact on "quality of life", e.g. in the fields
of Health/TeleMedicine, Transport, Teleworking, etc, have been
launched in Wales. Indeed, Wales has been amongst the leaders
in these areas. The main problem faced by many of these initiatives,
however, has been lack of funding, which has prevented their development
into widespread, sustainable applications. Therefore, one way
of convincing the people of Wales that the quality of their lives
can be improved via the new technologies is to roll-out best practices,
and build sustainable initiatives, particularly in applications
such as TeleMedicine and Transport.
What action is needed locally?
The Wales Information Society (WIS) report "E-ssential
for Business", published in May 1998, summarised the results
of a survey of Welsh companies' usage and uptake of ICTs, compared
with similar studies in five leading-edge countries: the UK, France,
Germany, Japan and the USA. In many ways, the results of the survey
were most encouraging. For example, the survey showed that, overall,
Welsh companies have a very positive attitude towards the Information
Society, and levels of usage and uptake of ICTs are among the
highest of any of the surveyed countries. However to match a positive
attitude what is also needed is:
1. An education campaign designed to inform
SME's and consumers more widely of the benefits of Broadband.
An important element is the practical application of Broadband.
2. Independent advice from centres of excellence
to provide impartial advice and for SME's to receive relevant
case studies to their businesses.
How does the availability and cost of Broadband
services in Wales differ from that in other parts of the UK?
Within Wales, NTL's operations focuses on the
mainly industrial South Wales and the key urban areas of Cardiff,
Swansea and Newport. Within these areas the network passes some
300,000 homes, of which 142,000 are customers. The Network was
built to deliver Broadband services and is predominantly a fibre-optic
based network which allows for considerable amounts of data to
travel at very high speeds.
The company provides three core services of
internet, telephone and multi-channel television and of the 142,000
residential customers in Wales, 9,000 have Broadband services.
Our Residential Broadband service comprises two speeds - 128k
at £14.99 per month and 512k at £24.99 per month. Over
50,000 customers use NTL as their Internet Service Provider (ISP).
Our Business Broadband service offering comprises
Asymmetrical Digital Subscriber Line (ADSL) for our off net customers
which is provided via a BT line at £90 per month for the
512k and £125 per month for the 1020k bandwidth with an installation
charge of £260. The customer pays BT for line rental, but
call charges are billed by NTL. On net customers are provided
with a Cable Modem service for 512k and 1020k bandwidth for the
same rental and an installation charge of £220 and are billed
for both line rental (£12/mth) and call charges. These are
bundled services and for ADSL it is a condition that outward call
are routed via ourselves, whilst for Cable Modem it is a condition
that the customer takes our telephone line as well. These prices
are common across the UK.
Alternatives to Broadband
We tend to use the term "Broadband"
to describe a service capability that embraces an "always-on"
very high speed two-way access to the Internet. Our Broadband
cable is one technology that can provide this Broadband capability.
But there are other technologies including ADSL, Satellite systems
and wireless line-of-sight technologies.
Wales is characterised by urban centres, small
towns and villages and very sparsely populated rural areas. Urban
centres are attractive economically for all the technology options
for Broadband. Most urban centres are well served with connection
to complementary cable modem services from NTL and Telewest and
competitive ADSL services from BT. At a technology level both
technologies are equally capable of delivering an always-on high
speed two-way connection to the Internet. Both free up the telephone
line for normal telephone usage. Any difference in the quality
of service is down to how the service provider has implemented
the technology.
Whilst we consider Cable Modems and ADSL broadly
comparable in what they can deliver today in terms of high speed
access to the Internet we view our Broadband cable as having a
much more potential for the future on a like for like investment.
Our Broadband cable network is based on a modern hybrid fibre/coaxial
cable design. In the areas where we have our Network we have more
fibre optic cable much closer to the customer than exists with
the BT copper wire telephone network built many decades ago.
Line of sight wireless technologies are another
means of delivery of Broadband services. The particular strength
of a wireless based delivery system is the relatively low infrastructure
investment. It bypasses the burden of digging up the streets.
One of the issues that has slowed up the growth of these wireless
local loop systems is the relatively high cost of the Broadband
customer premises equipment. NTL has worked with a small UK manufacturer
called Ogier Electronics to develop a low cost Broadband wireless
unit. This has been achieved by using a common technology with
cable modem systems. Thus we have been able to leverage the huge
world wide scale economies of cable modem technology and at the
same time considerably simplify the design of the wireless unit.
We have termed the technology "WHAM" for Wireless High
speed Access Modem. The original technical trials were carried
out in Wales to prove the concept. Very reliable high speed Broadband
links were achieved over the entire period of the trial through
one of the wettest of the recent winters. This gave NTL the confidence
to place an order with the UK manufacturer to take the technology
into a trial commercial deployment in London. This first commercial
pilot is intended to economically plug gaps in our cable network
and is completely "plug and play" compatible with our
cable modem network. In the same way that there are gaps in our
cable network (where we have not built for whatever reason) so
a wireless local loop system will have gaps where there is not
a line of sight between the base station and the customer premises.
All of the terrestrial based technologies (Cable
Modems, ADSL and Wireless local loop) can serve the semi urban
areas but become progressively more uneconomic as the demographics
move towards the rural situation. The reason is that a double
effect occurs. First the distances involved push up the cost of
implementation. Second there are less and less people to share
that cost as a service area extends into more rural areas.
In the rural areas, the most effective technology
to deliver Broadband is satellite technology. The great strength
of satellite technology is that it can cover large areas very
easily. A geostationary satellite can view a third of the globe.
However there are two sides to this coin. Its very strength is
also its weakness when it comes to providing two-way communications
to large numbers of customers (as opposed to pure broadcasting).
Its large visibility precludes very intensive re-use of the frequency
spectrum. In contrast a cable modem technology re-uses its available
frequency spectrum street-by-street and town-by-town. It can support
the huge numbers of customers that are likely to want Broadband
services in large cities and towns. Similarly for ADSL technology.
This is why the satellite and the Cable modem/ADSL technologies
are complementary. Where you have a very high density of people
you have the two wireline based technologies that can intensively
re-use their frequency spectrum to support huge numbers of subscribers.
Where they become uneconomic, you have the satellite technology
to scoop up the relatively fewer people who are widely dispersed
geographically.
Thus the NTL view is that a good basis for Wales
is a mix of technologies including Cable Modems, ADSL, wireless
local loop and satellites. To the extent that a competitive choice
can be provided for Welsh homes and businesses so service providers
will improve their Broadband offerings not just on price but on
quality of service.
Ian Jeffers
MD NTL: Home—Scotland, Wales & N.I.
February 2002
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