Lord Carter’s Digital Britain and ‘broadband tax’

17 June 2009

Months of speculation and debate came to a head on Tuesday following the publication of Lord Carter’s ‘Digital Britain’, a report which promised to tackle a few hot potatoes, albeit high-speed streaming digital ones.

Press coverage trying to predict the main themes of the report before its publication has been controversial, to say the least.

The Guardian’s assertion that the report would recommend a ‘top-slicing’ of the BBC’s licence fee to create documentary programming specifically for broadcast on the web actually turned out to be more focused on propping up local news providers.

The Telegraph, meanwhile, tried to predict the report’s approach to online piracy with an article on how teens sharing music files online could be criminalised, predicting the report’s suggestions for better policing of digital piracy.

Taxing issue

Undeniably, the biggest area of interest has been around the push for faster broadband access. While newspaper reports first suggested that many of the far-off communities and off-shore islands that don’t have 2Mbps broadband don’t actually want it, coverage has now changed tack by focusing on the cost of supplying all these narrowband homes with faster broadband.

But while the media has focused on the new 50p a month broadband ‘tax’ set to be added to everyone’s bill, very few have focused on why a cash solution is needed in the first place.

Why are we being asked to pay for faster broadband?

The phenomenal growth of video-on-demand services from a number of mainstream and not-so-mainstream broadcasters represents a real milestone in digital business.

We are, at last, seeing the move towards the much heralded and much delayed world of ubiquitous broadband internet access (anyone recalling Boo.com will know what we’re talking about here). We’re now in a world where users have access to truly unlimited on-demand media and unprecedented end-user choice and control.

Or are we?

Broadband uptake has been rapid, achieving over 50 per cent adoption in less than 10 years – no mean feat given that the VCR and mobile phone took 14 and 15 years respectively to bed down. But with more than 65 per cent of the UK now with broadband access, could the industry be ill-prepared for the future demands of the ‘always on’ internet generation?

Since the days of narrowband dial-up, the business model of consumer ISPs has been based on the over-selling of capacity on the basis that most users are unlikely to use their connection to its maximum capacity for most of the time.

This wasn’t an unfair assumption in the early days of simple web browsing and media streaming. Most people used their internet connection sporadically, and when they did, it was for small data transactions. Narrowband speeds put most of us off streaming video, file downloads and uploads. But that’s all changed thanks to the revolution currently going on in online video.

So what’s changed?

Peer-to-peer (P2P) services have always been a contentious issue for the ISP industry. P2P services break away from the traditional client-server model - where a user asks a central server for a given resource which duly sends it back - and creates a network where each computer that downloads a file also offers that file for others to download. This effectively spreads the burden of serving the files across a distributed network with plenty of spare upload capacity.

Copyright issues aside, in many ways P2P is a vastly superior distribution model. Users who wish to download a file don’t have to contend with the availability of a single source for their files. Content providers don’t have to provide such a large hosting platform or foot the bills for all of the bandwidth. This has not gone unnoticed by the BBC, who were one of the first to offer a P2P version of their video player content with a higher quality - and therefore file size - than the streamed version.

But the growth of on-demand services – such as Channel 4’s 4OD service – has given the ISP market a bit of a jolt. UK households, not just serial film and music downloaders, are downloading and streaming much more media than they used to.

There’s now much greater availability, greater choice, and greater convenience (ergo greater supply). Anyone who has studied economics will tell you, it therefore follows that demand will increase to match that increased supply.

‘All you can eat’ indigestion

The problem is capacity. Cable TV owners are safe at present as they have alternative networks, namely fibre optics which have the capacity to provide cable TV to UK households.

BT, on the other hand, faces a greater challenge. Owning the majority of the national telecommunications infrastructure, they provide most of the capacity to most ISPs in the UK. These ISPs are effectively acting as re-sellers of BTs bandwidth with the addition of ‘added value’ services like email provision. These ISPs purchase a certain amount of bandwidth from BT to service the needs of their customers.

If we liken the current ‘unlimited access’ broadband model to an ‘all you can eat’ all-day buffet in pizza restaurant, it’s based on a not unreasonable assumption that the average customer will eat an average amount of food over an average period of time.

But as with any offer of this kind, it’s a calculated move based on consumer habits. Some will take full advantage of the limitless bounty before them and wolf down as much as they can. But these gluttons will invariably be balanced out by those who follow their friends and merely peck away at the odd morsel because they’re not big consumers of pizza anyway.

Problems occur, however, when you begin offering those same consumers Michelin star quality food. What would happen to the cost of providing that buffet if everybody doubled their appetite overnight and decided to stay at the buffet all day? Supplies quickly run out, operational resources strain to account for the new demand - and crucially - profit margins collapse.

The same can be said of the consumer broadband market in the UK. On-demand media access, P2P distribution, and an ever-growing demand for online services is steadily filling in the dips of demand and filling up the broadband pipes across the globe, thus resulting in additional costs for ISPs as they are forced to buy additional bandwidth to satisfy the increased demand.

Sadly, this increased demand can only result in increased costs or, like the days of narrowband, a form of metered access with restrictions on supply.

So what are our options?

At Cimex, we’re doing everything we can to make sure that our rich media services are optimised at source, in that we’re ensuring best practice approaches are adopted whenever we integrate video into a website. As constantly reminded by our Search Engine Optimisation (SEO) teams, websites must do all they can to ensure that search engine spiders are exposed to ‘efficient’ code, but web users must also be given as optimal an experience as possible when it comes to downloading a site and its rich media features.

Aside from efforts in technical optimisation or cutting end-user consumption levels, its seems a cold hard investment of cash into the network is the only real option.

The government appears to be working with ISPs to develop a solution that will meet consumer demand without recourse to vast price rises or penalties for ‘unfair use’. But before the new levvy was suggested, just how many ISPs really thought about taking the brave - and costly - step of re-evaluating their business from the ground up and shaping their service provision to meet the ever-expanding demand for bandwidth in our increasingly digital lives?

Even once the funding is in place, who’ll be first to blink and invest the £millions it’ll take to renew the country’s network? Or rather, will anyone blink at all in the next 12 months, given the current economic climate?

While all these recommendations are mulled over, there could be an interim solution - albeit a slightly ‘dark’ one.

Back in 2005, news reports alleged that a well known internet brand was looking to buy ‘dark fiber’ – ie unused fibre-optic networks - to reduce the cost of bandwidth fees for its own network. Like a fast access fairy godmother, such organisations could begin to open up great swathes of unused bandwidth, either as a consumer facing package or as a white label service to existing ISPs. Of course, this assumes these dark fibre networks exist in the first place, but it’s worth exploring if they do.

In the meantime, it’ll be interesting to see what impact any increase in cost has on broadband customers. Rather than actively reducing the amount of media they consume, will they instead gravitate towards networks that promise not to penalise heavy users who go over their monthly limit? Or will they simply lean back and take solace in the fact that we’re all, as a nation, sharing the cost of increased broadband speeds?

The public’s reaction to a new ‘tax’ - and any assertions that it represents a forerunner to an indirect ‘PC license’ in light of falling TV viewing figures - will certainly be one to watch.

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