Memorandum submitted by Avanti Communications Group plc

Broadband Speed

Avanti welcomes the opportunity to contribute to the inquiry into broadband speeds.

Avanti is Europe's first satellite broadband operator. It will launch a satellite next spring to provide broadband at speeds of up to 10Mb all over Europe. Consumers in remote and rural areas of the UK need never be without low cost high quality broadband again.

Our technology emerged as a result of foresight from BIS/DIUS which through BNSC funded the development by Astrium in the UK of the cutting edge new space processors which we use.

Avanti has already worked with government on interim satellite services. Our customers include the Scottish Government and the Department of Enterprise, Trade and Investment in Northern Ireland.

Avanti is listed on the London Stock Exchange with total capital deployed in excess of £200m. It employs more than 70 highly skilled people in the UK and expects to grow its employee base by at least 100% in the next three years. Avanti is creating a high value UK supply chain, with its satellite, major ground components and finance sourced in the UK. It is a prime example of a high technology enterprise creating sustainable UK wealth, employment, tax base and international competitive advantage.

 

Is the target for universal access to broadband at a speed of 2Mbps by 2012 ambitious enough?

 

Avanti supports the target for universal access to broadband at 2Mbps as a floor, not a ceiling since rural consumers should not be disadvantaged relative to urban services if it can be avoided. Based on the Digital Britain report, approximately 11% of the UK population are unable to receive broadband at this minimum speed, an issue which can only be economically overcome by the deployment of satellite broadband services which will provide service at up to 10Mb from spring 2010.

 

Whilst headline speed is currently the chosen measure for broadband capability, our view is that throughput is a more appropriate and effective measure. Customers judge their broadband connections on their ability to use the internet effectively, a perception rather than a finite measure.

 

 

Is the government right to propose a levy on copper lines to fund next generation access?

Avanti agrees that a fund is essential to invest in next generation broadband to provide services at speeds up to 50Mb. We are ambivalent about how this fund should be raised. Without this, a new Digital Chasm will emerge between urban and rural. Satellite can offer speeds of up to 50Mb, and Avanti plans the Hercules system to do this. But the capital markets will not fund this level of future proofing and so some government intervention is required to de-risk the market.

Avanti believes that the fund should be targeted, in the first instance, at customers in areas that cannot get a broadband service at 2Mbps, or those that cannot get any broadband service at all. It seems unwise and unwarranted to invest government money in broadband services in densely populated urban areas first, as the only outcome will be an escalation of the Digital Divide.

 

Will the Government's plans for next generation access work?

Avanti is broadly supportive of the Government's plan, providing emphasis is placed on serving those that have limited or no service first. Avanti's HYLAS satellite, launching in spring 2010 will provide consumers with speeds of 10Mbps. The market will provide more satellite capacity, and Avanti has plans for more satellites, but the capital markets are cautious globally at the moment, so government could accelerate the deployment of satellite solutions by taking some steps to correct this market failure.

The role and charter of the Network Design and Procurement Group (NDPG) requires further clarification for Avanti to comment in depth.

 

 

 

Are companies providing the speed of access that they promise to consumers?

Broadband headline speed is a poor measure of the promises that broadband service providers make to their customers. Speed is a perception and is dependent on a complex range of factors, including network contention, the bandwidth available in the backhaul network and the capability of the server of the site being visited.

Of the factors effecting broadband speed only network contention is within a service provider's control. However, network contention is essential to provide economically viable pricing for consumers. We contend that the industry does not miss-sell to its customers, but perhaps a better job can be done to explain the cost-benefit tradeoffs.

 

To what extent does current regulation strike the right balance between ensuring fair competition and encouraging investment in next generation networks?

The regulatory environment has promoted competition within urban and other areas of high population; however, it has not significantly addressed the needs of rural and remote areas. Avanti is confident that the overwhelming advantages of the new satellite broadband technology will address the needs or rural markets. But more satellite capacity will be needed to complete the job, and although that is planned by Avanti it may not be completed by 2012 subject to market forces. Public intervention could speed this up by correcting capital markets' failures.

30^th September 2009