Broadband - Business, Innovation and Skills Committee Contents

Memorandum submitted by Intel Corporation


  Intel Corporation (Intel) welcomes the opportunity to comment on the "Business and Enterprise Committee to inquire into Broadband Speed".

  Intel's response has been developed under our corporate technology neutral position which we have maintained consistently at National, European (CEPT and EC) and Global (ITU) level and as such we believe our value to Governments and Decision Makers is as follows:

    Global Reach and Experience:   Intel has an understanding of effective public policy development gained from helping governments worldwide on digital inclusion, education, health and other programmes

    Industry Leadership:   Intel works with the entire ICT eco-system and has invested significant time and resources in the development of so called 4G wireless technologies, generating innovation and value for money for consumers

    Technology Development:   Intel is at the leading edge of new technology developments and we continue to drive and shape the market in provision of 'more for less' in PCs and new devices like netbooks, mobile internet devices and smartphones

  Our response is not confidential and may be used by the Business and Enterprise Committee without restriction.


  Intel generally remains supportive of the objectives contained in the "Digital Britain (DB) Report" published June 2009 which outlined the Government's plans to "maximise the benefits from the digital revolution" but we remain concerned that the broadband speeds suggested in this, and other, reports are not exactly visionary. We are also concerned that the DB report and those from the Independent Spectrum Broker have an apparent bias towards existing technologies, ie HSPA and its' "evolution" to LTE, rather than fully embracing the possibilities enabled through a more technology neutral approach encompassing more than one technology solution (LTE) which is several years away from initial commercial deployment. Other innovative solutions exist today and the WiMAX technology is one example.

  Intel is pleased to see that the Business and Enterprise Committee are seeking input on the Whether the target for universal access to broadband at a speed of 2Mb/s 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?

  In this response Intel proposes to take each point separately to be able to address these important topics adequately. The headers are as follows—

    — Universal Access 2Mb/s Broadband by 2012

    — Government Levy on Copper Lines to Fund Next Generation Access (NGA)

    — Government's Plans for Next Generation Access (NGA)

    — Broadband Speeds Today; are they meeting Consumers Expectations?

    — The Balance between Competition and Encouraging Investment.


  A key assumption that is being made is that today's technologies and their "evolution" are capable of providing mobile broadband services to a mass-market. Intel does not necessarily agree with this position and the move to OFDM-based technology (WiMAX or LTE) is essential to quality of service once demand for these services grows beyond initial market penetration. It is unclear to Intel when LTE will actually be commercially available and deployed in support of the DB objectives.

  It is clear from the litigation action taken by two of the incumbent Mobile Network Operators (MNOs) that investment in additional spectrum capable of delivering true mobile broadband is not a priority. The focus for the MNOs is to invest in network infrastructure that maximises voice-centric technology coverage (through GSM re-farming and acquisition of the Digital Dividend spectrum) to the detriment of capacity. It is therefore highly unlikely that those UK citizens, who will depend on a wireless solution as part of a Universal Service Commitment (USC), will enjoy data rates comparable to current ADSL speeds and in many instances will receive no broadband at all.

  In fact the MNO public pronouncements state that their existing 3G networks are more than capable of providing mobile broadband and associated services. These statements make false assumptions about the additional load that PCs are placing on their networks. A single 3G cell is incapable of even delivering a service once there are more than 2-3 PCs trying to access the BBC iPlayer service simultaneously. This problem will be exacerbated once mobile devices with PC-like capabilities are available from 2010. A recent comprehensive study[91] carried out by Arc Chart which looked into the performance of 268 wireless carriers in 103 Countries worldwide concluded that the average download speed was just 1Mbit/s. The report also went on to say that In the UK, networks show poor overall download speed for such an advanced market, while across the Channel, French networks have 3G download speeds amongst the best in the world."

  There have been a number of events that have further compounded delay to the release of the 2.6 GHz band via an auction in the UK. Ofcom's original timetable for the auction of 2.6 GHz spectrum was late 2008 and now is likely to be second half of 2010 at the earliest. The UK has had one of the more progressive regulatory administrations in the world. The constant delay in the release of spectrum (2.6 GHz) is seriously endangering the UK's International reputation and will see the UK losing its status as the leading European Country capable of delivering new innovative technology and services which would maximise the benefit for the UK consumer.

  Now, more than any time in recent memory, there is an immediate need for economic stimulus as evidenced by the extraordinary actions taken by Administrations in this regard across the world. The cost of delay in the release of the 2.6 GHz band could be enormous. Economists Thomas Hazlett and Roberto Munoz estimate that the net present value to consumer from making additional wireless spectrum available is 10 to 20 times the revenues generated by auctioning that spectrum.[92] Thus, the benefit to consumers from auctioning the 2.6 GHz band could be billions of dollars.

  The cost of delaying these benefits for years, as regrettably has happened in this case, should not be exacerbated by additional delay.

  The UK has one of the highest internet usage rates in the world yet its mobile broadband capabilities fall well short compared to other comparable countries. The DB vision does not appear to address these shortcomings.


  The Next Generation Fund (NGF) for NGA appears to impose higher costs on fixed line operators only. Intel notes that the existing MNOs claim to offer mobile broadband services today yet they are not included as a source for the NGF. According to these MNOs 3G mobile services are expected to play a significant part in delivering the USC and therefore it would seem right and justified to include 3G mobile connections in the revenue generation of the NGF. There needs to be balance across the Industry in this effort to deliver the USC.


  A key policy objective of the Independent Spectrum Broker, as stated by the Government in its interim report had been the "Successful deployment of next generation mobile networks."[93] Throughout the Independent Spectrum Broker Report it highlighted NGN and next generation mobile technologies. Indeed in justifying his preferred solutions the Independent Spectrum Broker stated:

    "The rationale for an integrated approach derives largely from the fact that NGM technologies require large blocks of spectrum (either operated by a single party or multiple parties working collectively with contiguous spectrum) for their potential to be fully realised - blocks of 2 x 10 or (preferably) 2 x 20MHz - and that truly national high capacity networks require spectrum at both low and high frequencies. Addressing these requirements in an integrated way, if that can be achieved quickly, should give operators greater certainty over their future spectrum holdings whilst continuing to support a competitive market outcome. Consequently UK citizens and consumers could be amongst the first in Europe to benefit from the services offered over nationwide NGM networks."[94]

  Therefore the original Independent Spectrum Broker sought to promote the deployment of NGM technologies:

    "… by imposing regional coverage and access obligations on all three 2 x 10MHz blocks of the 800MHz. Each block would carry a basic national coverage obligation at a specified speed (say 2 Mbps) to be achieved by a specific date. Furthermore, each of the licences would carry greater coverage obligations, of perhaps 99% population coverage - as well as access obligations - at a specified speed in a specific geographic area of the UK to achieve near-universal coverage of NGM."

  However the new draft ISB proposal abandons this push for NGM by adopting the lesser, existing 3G performance requirements of "downlink speed in excess of 768kbps in outdoor locations in a lightly loaded cell" and "downlink speed in excess of 1.5Mbps in outdoor locations in a lightly loaded cell" stating "3G HSDPA services have already brought mobile broadband services to a large part of the country. These obligations will enhance and extend this coverage."[95]

  It also ignores any complementarities among bands in the provision of NGM when it fails to impose the reduced 3G service requirements on the 800 MHz spectrum. As stated in the draft proposal regarding Retail Service Obligations "The licensee may provide this service using any spectrum band available to them including arrangements made under spectrum or network share agreements." Therefore the use of the Digital Dividend spectrum, heralded as a key component to deliver broadband to the masses, is not even considered as necessary or relevant in the new proposal in pursuit of this important DB objective.

  While we believe the original Independent Spectrum Broker report overstated the complementaries among bands,[96] with this puzzling flip-flop, the new proposal both delays the deployment of current NGM technologies by delaying the 2.6 GHz auction and abandons its complementarity rationale which provided its primary justification for the delay. It is hard not to conclude that the one consistent effect of both the original Independent Spectrum Broker "preferred solutions" and the still worse new draft proposal is to simply benefit existing incumbent operators to the detriment of UK consumers.

  Intel also notes with interest some recent articles in the press which confirm our view "don't expect LTE any time soon". The following examples of publicly available quotes are contained in the following article entitle "Ericsson: HSPA Key to LTE Transitions[97]".

    — HSPA is not only an evolutionary step to LTE; it is also a long-term interim technology that will allow Telstra to postpone large-scale LTE deployments.

    — Thanks to the capabilities of HSPA, Telstra plans to use LTE only in high-traffic zones and plans to stick with HSPA for the foreseeable future in lower-capacity areas, according to Telstra's executive director of wireless engineering and operations, Mike Wright.

    — Ultimately, Ericsson finds itself both touting the virtues of 4G mobile broadband while pointing out that HSPA can allow carriers to take their sweet time transitioning to it.

Broadband Speeds Today; are they meeting Consumers' Expectations?

  Intel is aware of an increasing number of press articles complaining about the user experience on today's mobile broadband networks where the user expectations are not realised by the apparent promises given by the MNOs.

  The way in which consumers are using more and more date-centric devices which require large broadband capacities is changing the fundamental dynamics of the network and stretching existing networks capabilities to the limit. A great example of this is the iPhone where the average iPhone owner can also use 10 times the network capacity used by the average smartphone user. The average smartphone user is using network capacity already significantly higher than that of a normal voice user. Owners of the iPhone 3GS (the newest model) "have probably increased their usage by about 100 percent ".[98]

  AT&T (who have exclusive rights at the moment for iPhone) in the US acknowledge this "It's been a challenging year for us, overnight we're seeing a radical shift in how people are using their phones, there's just no parallel for the demand".[99] Intel understands that the majority of the ~$18 billion that AT&T will spend this year on its networks will be diverted into upgrades and expansions to meet the surging demands for data capacity.

  The company has also delayed bandwidth rich features like multimedia messaging, or text messages containing pictures, audio or video. It is also postponing "tethering," which allows the iPhone to share its Internet connection with a computer, a standard feature on many rival smartphones. AT&T says however it has no intention of capping how much data iPhone owners use.

  What is important to realise is that the MNOs receive their greatest revenue stream (the "cash cow" as T-Mobile put it in a recent article) from voice and this exponential increase in data demand is questioning the business model and therefore sucking capacity from the network which is needed for high-value voice. The result is dropped calls, poor irregular service, delayed text and voice messages and glacial download speeds as cellular networks strain to meet the demand ultimately resulting in outraged customers. See "Customers Angered as iPhones Overload AT&T"[100] in New York Times published 2 September 2009.

  Globally, mobile data traffic is expected to double every year through 2013, according to Cisco Systems "Whether an iPhone, a Storm or a Gphone, the world is changing. We're just starting to scratch the surface of these issues that AT&T is facing".[101]

  The reality to actual broadband speeds is startling as a recent article published this week "Vodafone rebrands, but UK mobile broadband claims disappoint"[102] states -

    — A new survey indicates that UK mobile broadband providers are delivering, on average, just 24% of the speeds they advertise.

    — According to comparison site Broadband Expert, which tested 3,342 mobile broadband connections, the average download speed was 1.1Mbps compared to the average advertised maximum speed of 4.5Mbps. In fact, Vodafone delivered the fastest actual speed, averaging 1.3Mbps, but was also the most over-confident in its advertising, promising 7.2Mbps.

    — The real world speeds did not vary greatly between carriers, although T-Mobile was the lowest at 900Kbps (20% of its advertised speed, also 7.2Mbps, compared to Vodafone's 18% score). 3UK achieved the highest percentage of advertised speeds—delivering 1.2Mbps while advertising just 3.6Mbps.

    — Rob Webber, Broadband Expert's commercial director, said in a statement: "Advertising unrealistic speeds will not help the long-term growth of mobile broadband or the reputation of the providers if customers feel they are being misled."

  This is just the "tip of the iceberg" and Governments need to understand the limitations of existing networks, embrace/enable innovation, and implement a truly visionary broadband digital world (wired and wireless).

  Splitting out the middle of the 2.6 GHz spectrum for a separate auction might be a practical way of delivering a wireless broadband network to market in time to meet the requirements contained in the Digital Britain Report but that auction needs to be structured in such a way as to encourage new entrants. One approach, which we understand has been recommended by the Independent Spectrum Broker, would be for the available spectrum to be auctioned as a single block. This would encourage a new entrant to the market, while discouraging blocking by the incumbent mobile operators.


  By assuming a market view driven by incumbent mobile operators (MNOs), the Digital Britain Report contains proposals which appear anti-competitive since they give the impression that the existing technologies (3G, HSDPA) deployed plus their "evolution" ("Long Term Evolution", LTE) will enable broadband services in the timescales envisioned by the Government (2012) but we believe that this position will actually delay innovation in the UK market. One opportunity that could be severely affected are the London Olympics, where the opportunity for an event to act as a show-case for British innovation and a visionary worldwide lead could be lost forever if the report's recommendations are followed which disadvantage truly innovative broadband technologies, ie WiMAX which is commercially available today and deployed in US, Russia, Japan and S. Korea to name but a few notable deployments.

  The 2012 Olympics provides the UK with a once in a lifetime opportunity to showcase the UK both in terms of sporting achievements as well as the technology and services we are able to offer the world. By 2012 devices will be available which will do even more than a PC can do today, combined with location-awareness to enable many different applications and services for the consumer. These services and devices will require true mobile broadband (not 3G). The IOC rules state that technical infrastructure must be in place two years before the actual event, which gives us a deadline of summer 2010 to put a 4G network in place for 2012. WiMAX is the only guaranteed 4G mobile broadband technology that can deliver against this timeframe. Spectrum will also need to be auctioned ideally early 2010 in order to have a fighting chance of having a network in place in time for the IOC deadline. The Russia "Yota" network example below demonstrates what can be achieved in a short space of time with WiMAX.

  LTE is not the only OFDM based (sometimes referred to as 4G) wireless technology. In fact WiMAX, which is also OFDM based, is deployed already throughout the world. "Clear" (a 2.6 GHz Operator) in the US is rolling out a WiMAX network at between 1/10th and 1/20th the cost of a similar 2G/3G network. The subscribers get super fast internet download speeds of up to 4Mbps and plenty of capacity all for a standard "all you can eat" price. A similar network is being built in Russia by Yota who will have provided full coverage in the cities of Moscow and St. Petersburg in less than 18 months. The average traffic per user is 10GB per month which is about 100 times higher than an average 3G subscriber.

  WiMAX is not only years ahead of LTE it has a lower cost structure (LTE has embedded Intellectual Property costs) which means that the cost to the consumer will be lower and therefore it fosters faster adoption of 4G by the population. The Independent Spectrum Broker Report which we expect BIS to broadly adopt its recommendation appears to take the view that LTE is already the dominant technology. WiMAX is here today and its absence from the UK is directly attributed to the continued and unnecessary spectrum auction delays. Based on the litigation, against the Ofcom plan to release 2.6 GHz, initiated in May 2008 by T-Mobile and subsequently O2 it is evident that the objective is to delay spectrum release and avoid competition from new technologies that are commercially available today.

  Delay in spectrum release should be avoided at all costs and a market-forces approach should continue to be the key objective of UK policy and spectrum regulations.

25 September 2009

91   The Mobile Broadband Performance of Carrier Networks, September 2009 by Arc Chart. Back

92   Thomas W. Hazlett and Roberto E. Munoz, " A Welfare Analysis of Spectrum Allocation Policies," Manhattan Institute for Policy Research, June 10, 2004, p. 17. Back

93   Digital Britain Final Report June 2009. Back

94   Report from the Independent Spectrum Broker: findings and policy proposals; Final Report 12 May 2009. Back

95   A proposal from the Independent Spectrum Broker; Draft - 25 August 2009. Back

96   As Intel charged in its 20 July letter: "However, the complementarities of auctioning these bands simultaneously appear overstated. The relatively small amount of Digital Dividend spectrum available would not accommodate the larger channel sizes needed for next generation mobile networks. Indeed, the most important complementarity of the Digital Dividend spectrum with other bands may come, not from its propagation characteristics, but the additional capacity it could provide existing voice and low bandwidth data networks with minimal network redesign." Back

97 16 September 2009. Back

98   Chetan Sharma, Independent Wireless Analyst. Back

99   John Donovan, CTO AT&T. Back

100   The New York Times Back

101   The New York Times Back

102 23 September 2009. Back

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