Broadband - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Question Numbers 180-199)


24 NOVEMBER 2009

  Q180  Mr Oaten: And when will constituents of mine who have slow broadband get quicker broadband?

  Mr Timms: It depends how slow is slow. If they can access a service of 2Mbps at the moment then they may not see very much change by 2012. If they are in the areas—and there are a number of these—that can only get a service at the moment of only 256kBps or 512kBps then they can expect to see a better service by 2012.

  Q181  Mr Oaten: If the Procurement Group has not yet set the criteria is 2012 really realistic?

  Mr Timms: I think so. They have got to work hard on this. This is a big job and it has to be delivered quickly, but I think it is feasible.

  Q182  Mr Oaten: And do service providers say to you that there is a cut-off point at which you need to get this in place if you want to deliver 2012?

  Mr Timms: I have not been presented as yet with deadlines by service providers, but clearly we do need to get a move on and we will.

  Q183  Mr Oaten: The potential to use very small local providers to fill in these gaps, how interested are you in that? We have heard of some examples I think in Cornwall and, I cannot remember, was it Derby? There were some other examples where this was being used and it was great, it was filling in the gaps but in terms of big procurement projects they may fall outside of that. Is there a danger that we could lose these very local solutions?

  Mr Timms: I hope not. We have seen those local solutions providing a very important role in UK broadband since broadband started and the Community Broadband Network brings those initiatives together and I spoke at the conference in Leeds last week that the Community Broadband Network convened. I take my hat off to what they have achieved over the last decade and I think they have a very important contribution to make in the future as well. That is one of the considerations about the size of the packages that the Procurement Group puts out to tender because we do want to make sure we capture the full potential of innovative service providers like those.

  Q184  Mr Oaten: I cannot see how a national procurement system is going to put a package together that would allow a very small local group to be able to compete. I cannot get my head around that, unless you were to define literally packages which broke down into small communities.

  Mr Timms: I would not—and this is a matter for the group when it is in place—envisage there being a national procurement. I would not expect them to say, "Here is one project to procure the services needed for all 10% of the households that do not get it at the moment". I would expect it to be broken down into geographical packages. How large those will be would be a matter for them to determine. The other possibility, of course, is that some of those small local providers might be able to group with others to provide a consortium bid for an area which is larger than the one that they serve.

  Q185  Chairman: Just before I bring in Roger who wants to deal with some of the digital inclusion issues, I just want to roll back a bit and test the underlying hypothesis of all this just a little more rigorously because I still do not see how Government can know better than the market what broadband speeds will be needed in the future. We have just had Ed Richards in and Ed said if he knew that he would be out in the private sector actually making money out of making those judgments himself. The BBC iPlayer needs, what, 0.6, 0.8Mbps? So 2Mbps gives you iPlayer, gives you ITV Player, gives you Sky, and gives you interactive video; it gives all kinds of things. It is more than an order of magnitude better than the old dial-up connections used to have. To get 2Mpbs is a fantastic achievement. Half the country can get access to super-fast broadband now, if it wanted, over cable network. These are fantastic judgments that you are making as ministers from Whitehall double guessing the market when we do not even know what the applications are that are being delivered over the network.

  Mr Timms: What we do know, as you say, is that certainly half the country is going to have next generation broadband. Almost half of the country has it already through Virgin and BT is committed to rolling out to ten million homes. So that is going to happen. I think the question that ministers can answer is, is it acceptable for us to end up in a position where half or two-thirds of the country has access to these services and a third of the country does not?

  Q186  Chairman: But most of the country does not live within commuting distance of a high-speed rail line. Your government is about to build another high-speed rail line—my party is committed to it to—to go up to Birmingham and Edinburgh and that is fantastic; but poor old Worcester loses out, it is nowhere the railway line. You have to take these decisions. A lot of us are too far out from the emergency departments so if you live in certain places you cannot have the same things that all of us have, and is there not a real risk that you can distort the market? We heard in the last evidence session with Ed Richards that Carphone Warehouse suddenly appeared in the broadband market and transformed it and it is added competition and added rollout. We cannot know the future. If we did you and I would not be sitting here taking flak from the media without their making money out of it. So are you really, really sure that you know better than the market?

  Mr Timms: I agree that we need to make these judgments and we have made the judgment that I have set out, which is that it is not acceptable to end up with only two-thirds of the country having these services and the rest of the country not having them.

  Q187  Chairman: Do you know the future of satellite technology? Will satellite actually deliver super-fast broadband across the whole country at some stage in the future?

  Mr Timms: It could do now if everybody had a sufficient satellite dish and were prepared to buy them and so on.

  Q188  Chairman: We had a satellite company in here about two weeks ago and they talked about a second satellite they could afford it. They are there, they are doing it. I do not understand why you know that this is going to be a third. Our witnesses two weeks ago said they had no idea how many would not get it; they had no idea what the applications were; they had no idea how much it would cost and yet you seem to be gifted with this wonderful perfect vision of the future, which, I tell you, for someone who has followed technology over the years we all know that we do not have. There could be some completely new technology coming down the track that none of us know about in this room.

  Mr Timms: That is possible. I do not think it is likely. I think that we do have to do some hardheaded economic analysis and Rachel has described what we have done. There is a judgment here, I agree with you, and our judgment is that it is not acceptable to end up with only two-thirds of the country having services to which others are already getting access. If one was to take the position that the Conservative Party currently takes then we will end up with a third of the country, basically rural Britain, not getting next generation broadband any time in the next decade.

  Q189  Chairman: We are getting a fantastic service of over 2Mbps almost all the things you want—BBC iPlayer is available; all except the fastest interactive gaming is available at those 2MB speeds. Get that 2MB delivered properly, at a definition—and we still do not know what it is, by the way -and then why not let the market do the rest of it?

  Mr Timms: If we were sitting here ten years ago, and I may well have been pressed on this in the past, what is wrong with everybody having 9.6kBps? In ten years we have discovered that actually we do need those higher speeds. One can take the view that those demands are not going to carry on increasing but my view is that they will.

  Q190  Chairman: What advantages have the very high speeds brought to South Korea?

  Mr Timms: I have been to South Korea and had this discussion with people there and they would certainly point to substantial economic benefits. By the way, I am not sure that Japan has enjoyed quite such the high scale of benefit that South Korea has, and actually if you look at the comparison of broadband take-up between the UK and Japan there is higher broadband take-up here than there is in Japan. A point that was made to me by the minister.

  Q191  Chairman: A great public policy achievement with more room to go and Roger will talk about more room to go. What I heard about South Korea is that the only impact has been that the movie industry has had to withdraw entirely from South Korea as it is now impossible to control piracy of movies. These very super-fast download speeds mean that Hollywood Studios can no longer make money out of flogging films in South Korea, it has just become a pirate's paradise.

  Mr Timms: If you look at online computer games Korea is the centre worldwide for the development of computer games.

  Q192  Chairman: So when you have masses of public money you tax pensioners to enable people to pay computer games?

  Mr Timms: No, my point about South Korea is that there is a substantial industry developing those games in South Korea which has been enabled because South Korea has such good broadband.

  Q193  Chairman: There are people out there listening to all this who think I am a complete Luddite. I love super-fast broadband and I want everyone to have it as soon as possible. I think it is a fantastic thing and I can see the advantage that it brings commercially and personally. I will move on otherwise I will get obsessive. I will gnaw away at the bone but we just get the same questions and the same answers. I am still not persuaded that you in Government can foresee what is necessary to be done better than the market will deliver it because content will drive demand for broadband.

  Mr Timms: I think it is a simple question: is two-thirds of the country enough or not? If it is not you should not support it; if it is not then you have to support it.

  Chairman: That is very clear, thank you.

  Q194  Roger Berry: Chairman, I do observe market failure on a pretty regular basis and actually think that Government has a role to play.

  Mr Timms: I do agree with that.

  Q195  Roger Berry: Can I come to the 50 pence levy? Minister, do you agree that the 50 pence levy will fall disproportionately on older people, on people on lower incomes, whereas the benefit will be the early adaptors to NGA who are undoubtedly going to be better off?

  Mr Timms: I think that you need to evaluate the levy in the light of what we have seen happening in telecom charges over the last few years. If you look at Ofcom's analysis, an average household's telecommunications bill has fallen by more than 50 pence per month in the last year and—

  Q196  Roger Berry: I am happy to come to that question but that was not the question I asked.

  Mr Timms: What I am attempting to do is to give a justification for the measure that we are proposing.

  Q197  Roger Berry: I was not asking for justification; I was asking do you accept the suggestion that the 50 pence levy will fall disproportionately on older people and on people on lower incomes and that the beneficiaries are going to be those who are better off? A number of people who have given evidence, for example, have observed that as being self-evident and I must confess that when you look at it it would seem difficult to deny, but I thought we would give you the opportunity of commenting on that.

  Mr Timms: I would not entirely agree. We, as you know, have said that there will be a number of exemptions from the levy: people, for example, receiving the pension credit guarantee will not pay the levy, or people on Jobseeker's Allowance; and other very low income households will not be affected. So I think we would be able to design this in a way that does protect those on the lowest incomes whilst also ensuring that we have the resources to—

  Q198  Roger Berry: There would be a policy paper somewhere that would be able to demonstrate that it is not true that this will disproportionately hurt people on lower incomes and benefit people on higher incomes?

  Mr Timms: Those on the lowest incomes will be protected, as I have said.

  Q199  Roger Berry: Yes, any exemption for people on lowest incomes will help them, absolutely. I am just trying to get to what seems to me a pretty important conclusion: is it or is it not true that this will be a regressive way of funding the package because the people it will hit disproportionately are those on low incomes and it will benefit disproportionately people who are better off, even with the exceptions to which you have referred?

  Mr Timms: I think it has been set at a sufficiently low level for that not to be the case.

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