Budget broadband promise risks leaving UK with 'third class' service

Alistair Darling's announcement that the government would help deliver broadband at two megabits per second (Mbps) by 2012 for almost every home in Britain, has provoked criticism from analysts and lobby groups.

Darling used his Budget speech to back the vision outlined by Lord Stephen Carter in his Digital Britain interim report.

"This target will allow virtually everyone to experience the benefits of broadband, including the increasing delivery of public services online," says the Budget report.

The costs will be met in part by the £250m surplus funds left over for the BBC's Digital Switchover Help Scheme.

But Ovum analysts said the universal service obligation of 2Mbps "falls short of Gordon Brown’s ambition for infrastructure projects on the scale of the roads and bridges of the past.

"Digital Britain can still deliver, but more ambition is needed," said Matthew Howett, senior analyst and leader of the regulatory service at advisory and consulting firm Ovum.

"Other nations are formulating plans for deploying speeds in excess of 50Mbps, and it is this scale and ambition that was lacking from yesterday’s Budget announcement."

In Australia and Finland, the governments have committed to deploying super-fast broadband at speeds of 100Mbps, and Germany will deploy speeds of up to 50Mbps by 2014. Thu UK government's commitment to 2Mbps will "create a digital divide between countries," said Howett. "Governments in other countries are more ambitious and the UK is comparatively weak."

The Broadband Stakeholder Group (BSG), which brings together telecom suppliers, end users and business pressure groups such as the British Chambers of Commerce and Confederation of British Industry, supported the Chancellor’s moves, as far as they went. But the BSG also warned that the investment could overlook rolling out next generation services to areas outside of cities, which would leave many rural areas behind.

The economic benefit of broadband access "will be smaller and slower to emerge" if the government stalls on next generation broadband, the group warned.

“This is really about the future potential for innovation and productivity growth right across the UK economy," said Antony Walker, chief executive of the BSG.

"The key is to find the intervention sweet spot, just enough but not too much”, said Walker. “The aim should be to provide a sufficient nudge to the market that enables it to deploy more quickly and more extensively that it would do otherwise. The announcement on capital allowances may help to bring forward investment but does not address the challenge of extending availability beyond urban areas."

Simon Webster, head of broadband access at NEC Europe, said the slow speed of 2Mbps would create a nation of "third class broadband citizens" and leave gaping inequalities.

"Globally, we can see three classes of broadband citizen: the first class is in areas like Japan and South Korea, where Fibre to the Home (FTTH) ensures equality of service for all. The second class has widespread access to high speed DSL, which can provide as much as 24Mbps," explained Webster.

"We in Britain fall into the third class, where many service providers are limited to 8Mbps. Both the second and third class broadband citizens are held to ransom by the distance of their homes from the local exchange and there can never be equality until we see ubiquitous FTTH."

Under Carter's plans, more than a quarter of the UK will be excluded from the fibre-optic broadband roll-out, which will hurt "already-struggling rural businesses", according to Top 10 Broadband, a comparison website.

"The government is restricting the growth of small rural businesses by failing to improve broadband coverage in more remote areas; it’s a scandal that so much of the country will be left out of the fibre-optic broadband roll-out," said Jessica McArdle, marketing manager at Top 10 Broadband.

Copyright © 2009 IDG Communications, Inc.

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