Broadband - Business, Innovation and Skills Committee Contents

1 Introduction


1.  The United Kingdom has always been a world leader in telecommunications. On 25 July 1837 the first commercial telegraph company began operating between Euston and Camden Town, in London. Within twenty-nine years a global telegraph network crossed oceans and continents forming a world wide web, all of which converged on a small hut in Porthcurno, Cornwall.

2.  In 1866 the first transatlantic telegraph message took 17 hours to complete. Today the same message could be transmitted from the average UK home in a fraction of a second. However, technological change continues to accelerate and once again the United Kingdom faces the question of how best to maintain its position as one of the world leaders in electronic communications.

3.  The development of retail broadband began in the late 1990s, in response to growing demand for faster internet access, which at the time was limited by the conventional telephone network. On conventional networks, data was transmitted as audible signals in a similar manner to fax machines, at connection speeds of up to 56kbps. The innovation of providing broadband over the same copper network was achieved by enabling the network to carry communications signals outside the frequency range used for normal telephone communication. This provided a broader band of frequencies over which data was transmitted, while simultaneously allowing normal telephone conversations to occur over the same cable. This formed the so-called Asymmetric Digital Subscriber line (ADSL) which currently provides a theoretical maximum speed of 24Mbps.

4.  Take-up was initially slow, so in the early 2000s Ofcom began to examine ways to increase competition to the market, in order to drive down costs and increase consumer awareness of broadband.[1] In 2005 Ofcom concluded that there was little chance of competing infrastructures emerging and so split British Telecom (BT) into BT Retail and BT Openreach; a process known as functional separation.[2] In January 2006, Openreach began its management of the network, providing wholesale access to all internet service providers on the same terms as BT Retail.[3]

5.  This regulatory change was successful in increasing competition in the broadband market, which resulted in the driving down of the cost of broadband and an increase in its take-up. By 2009, 63% of households were connected to the internet, placing the United Kingdom eleventh in the world, ahead of the USA. Current trends suggest an uptake of 75% by 2013.[4]

6.  However, the increased demand for broadband highlighted the problem of universality of coverage.[5] Due to the physics of signal transmission over copper cable the speed of a broadband connection diminishes as the length of the cable delivering the service increases. As a result, those living far from communication hubs (telephone exchanges or telecom cabinets) experience slower speeds than those who live closer to the communication hub. This has left some areas, typically rural and suburban locations, unable to access what are considered to be modest speeds.[6]

7.  In terms of broadband speed, concerns have increased about the United Kingdom's position in relation to its international comparators. Japan and Korea, among others, have deployed networks capable of up to 100Mbps connection speed, which compares to the UK's average of 4.1Mbps.[7] These super-high speed networks are termed Next Generation Access (NGA) networks. It has been argued that allowing the United Kingdom to fall behind other countries will have an impact on the UK's competitiveness.[8]

Digital Britain

8.  In July 2009, the Government published the Digital Britain White Paper. It contained the Government's vision for the digital economy and included a series of conclusions and recommendations relating to broadband in the United Kingdom:

  • 11% of the UK broadband users' experienced unacceptably slow connection speeds (below 2Mbps), the Government intends to intervene with £200 million of public money;
  • it is uneconomic for the market to deliver Next Generation Access (NGA) beyond 63% of the population, therefore the Government will subsidise roll-out of NGA in uneconomic, chiefly rural, areas with around £1 billion over seven years taking coverage to 90%;
  • the NGA fund should be raised by a 50 pence levy on fixed telephone lines; and
  • around 40% of Britons with access to broadband currently choose not to be, or cannot afford to be, connected. In response the Government has established the Digital Inclusion Task Force with a budget of £12 million over three years.[9]

Our Inquiry

9.  Following publication of Digital Britain, we announced an inquiry into Broadband speeds. The terms of reference were:

  • Whether the target for universal access to broadband at a speed of 2Mbps by 2012 is ambitious enough;
  • Is the Government right to propose a levy on copper lines to fund Next Generation Access?
  • Will the Government's plans for Next Generation Access Work?
  • If companies are providing the speed of access which they promise to consumers;
  • The extent to which current regulation strikes the right balance between ensuring fair competition and encouraging investment in next generation networks; and
  • Any other views stakeholders think the Committee should be aware of.

10.  We took evidence on two occasions. On 2 November we took evidence from Mr Andrew Heaney, Executive Director of Strategy and Regulation, TalkTalk Group, Mr Aidan Paul, Chief Executive Officer, Vtesse Networks, Dr Timothy Whitley, Group Strategy Director BT Group, BT and Mr David Williams, Chief Executive, Avanti Communications. On 24 November we took evidence from Mr Ed Richards, Chief Executive, Ofcom, and Rt Hon Stephen Timms MP, Minister for Digital Britain, and Ms Rachel Clark, Deputy Director of Broadcasting and Content, Department for Business, Innovation and Skills. We thank all our witnesses, and those individuals and organisations who submitted written evidence. We also want to express our thanks to David Johnson, a POST fellow,[10] who assisted us in our work.

1   Ofcom Strategic Review of Telecommunications Phase I consultation document, April 2004, p 3-40 Back

2   Ofcom Final Statement on the Strategic Review of Telecommunications, and undertaking in lieu of a reference to the Enterprise Act 2002, September 2005, p 1-30 Back

3   The historical development of BT: Back

4   "One in five homes broadband connected by 2010", 28 September 2009,  Back

5   Department for Business, Innovation and Skills, Digital Britain, July 2009, p 54 Back

6   Ev 79 Back

7   Ofcom, UK Broadband Speeds, July 2009, para 1.7 Back

8   Ev 112 Back

9   Department for Business, Innovation and Skills, Digital Britain, June 2009 Back

10   Parliamentary Office of Science and Technology. Back

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Prepared 23 February 2010