Fed up with broadband wait, investors JFDI themselves
Delays in government-sponsored broadband delivery are driving frustrated individuals and companies to start doing things for themselves.
Later on today veteran community broadband activist Adrian Wooster will reveal an initiative, BroadwayPartners, to offer attractive tax breaks to rich individuals for their investment in community broadband networks. Wooster can already deliver a number of technically and commercially viable broadband project proposals.
He wants to fund network builds using money invested under HM Revenue & Customs’ Enterprise Investment Scheme (EIS). The EIS is designed to attract venture capital and offers a 20% rebate on investments up to £500,000 a year.
Wooster will be joined shortly by a finance expert currently working in the City. Wooster says the keys to sustainable business plans are risk reduction, cost minimisation and demand aggregation. “There will be minimal dependence on government funding,” he says.
That’s because the government has already decided to work through county-level agencies and funding bodies. Most of them are either in thrall to BT, or not equipped or prepared to deal with village-size networks, judging from their recent calls for expressions of interest in broadband projects.
Why are we waiting?
The UK has been waiting for a new deal on investment in high speed broadband since before the last election. Since the coalition got in, targets have slipped and costs risen without a working system actually being delivered through the agency set up to do just that, Broadband Delivery UK (BDUK).
Br0kenTeleph0n3 is aware of at least one other scheme that is also looking to serve the so-called Final Third of the UK that “market forces” won’t reach without state help. “It is hardly surprising that there will be competition in this space – the opportunities look increasingly attractive,” says a former BT executive, who is now helping the partnership.
The final straw appears to have been the publication of leaked details of the qualification thresholds of BDUK’s proposed procurement framework. These required primary contractors to have turnover of £20m for the past two years and to have installed at least one network of 30,000 subscribers. This is likely to lead to a duopoly of BT and Fujitsu Telecom/Virgin Media.
The leaked document also signalled a slower definition of “superfast”, from 24Mbps download speeds to 15Mbps. According to two readers of this blog, BT has indicated 15Mbps is the lower limit it uses to determine whether its £2.5bn “up to 40Mbps” FTTC (fibre to the cabinet) roll-out is “practical”.
An exhaustive economic model developed by Wik Consult, a German consultancy, for the European Competitive Telecommunications Association, showed that incumbents such as BT will never (rationally) invest in fibre unless they are forced to do so.
The only firms capable of exerting this pressure are cable TV firms with their mix of fibre core networks and co-axial cables to the home. These are invariably faster and more reliable that the incumbents’ FTTC, copper to the home networks.
This largely restricts fibre availability to urban areas, and to where new entrants, with no legacy investment to protect, are prepared to risk the incumbents using their fat margins to undercut entrants’ prices and instil fear, uncertainty and doubt in the newcomer’s ability to deliver, Wik said.
Wik suggested that mobile network operators may be able to compete with incumbents in rural areas by using LTE or Long Term Evolution technology. In Germany Deutsche Telekom is already installing a 100Mbps LTE system in Cologne, with plans for another 100 cities this year, and Vodafone says it is starting LTE trials there too.
To achieve these speeds LTE operators need fast ie fibre backhaul, and this could give firms like Broadway Partners the base load to justify serving rural communities.
Financial innovation (not)
About six weeks ago we asked BDUK’s boss, the department of culture media and sport what consideration it had given to alternative ways to boost the £530m the government has earmarked for Final Third broadband networks. Some ideas we floated to the department were ring-fenced municipal bonds and the creation or at least tolerance of private infrastructure funds. We know they got the email because they acknowledged it. So far they have not replied to the question.
They longer they delay, the less relevant their answer will be.