Relevant Markets of the Future

It is interesting to think of broadband which people like me have already likened to a bridge across infrastructural gaps as being treated as a substitute to transportation, not for purposes of competition  law jurisdiction as my title may suggest, but at least as a competitor for public funding. 

Thus, a post titled "Building railways not broadband is a ‘strategic mistake" quotes a Microsoft personnel as saying that "The UK government is making “a strategic mistake” investing billions of pounds into railways rather than broadband." The said executive has criticized  "the government for not investing into the technologies needed to make mobile working a reality for more, instead sticking with the traditional investments for the commute to work. “The one negative fact about the future is the current and previous governments think we need to build railways instead of broadband infrastructure and networks,” 

I am not sure that the two investments are mutually exclusive for a country like U.K, but certainly one can envisage that the future would be one where mobile work or tele-commuting predominates. One can quite easily stretch one's imagination to a scenario where the broadband becomes more important than the railways when it comes to interacting with co-workers.

In developing countries broadband already compensates for lack of roads, hospitals, schools, work opportunities, social services etc.  My articles on the subject can be seen here.

Public Funding of Incumbent-Centric Broadband Networks

In a post titled, "Incumbents and national Broadband Networks-Broadband Deliver U.K Project" under the label "Broadband Deliver U.K Project" I had written about U.K's Public Accounts Committee's criticism about lack of competition in choice of implementing agency for this project. Another recent news item  talks about PAC's doubts about misuse of public funding. There are allegations of predatory pricing and misguiding/ intimidating customers in local markets.

Fears have been expressed about recreation of BT's monopoly in fixed line broadband. A telling critique goes as follows, " There are many other providers around the country which are delivering future-proof networks today, both in the community sector and the private sector. All of those face the danger of being overbuilt – having their networks overbuilt by BT turning up with state funding. That seems to be entirely the wrong way round.”

This is the point I make in my posts about National Broadband Plans. I believe that public funding of incumbent-centric optic fibre roll outs is a classic case of repeating past mistakes. It goes against competition and will ultimately affect long term growth, innovation and customer service.

Incumbents and National Broadband Networks-Broadband Delivery U.K Project

As I have written earlier, despite our enthusiasm to roll out high speed, fibre based broadband networks, care must be taken not to re-create monopolies. While it may be easier, faster or even cheaper in the short run to rely on the incumbent for such roll outs, in the long run this may prove counterproductive.  The price that we may have to pay for lack of competition and the regulatory burden of ensuring genuine non-discriminatory, open access may literally take us back to the days of fixed line monopolies. There is also a good chance that the none of the  reasons for relying on the incumbent are ultimately validated by the actual roll out experience, in the sense of time and cost savings.

Even when bidding is resorted to, the project and bid design must ensure a level playing field between incumbents and other players. 

A recent news item about the Broadband Delivery U.K Project (BDUK) at  http://www.v3.co.uk/v3-uk/news/2279518/government-rural-broadband-plans-savaged-by-nao-report indicates that  doubts have been raised on this count and  the project has been criticised by the National Audit Office for  favouring British Telecom at the cost of competition and perhaps economy.

The chair of the Public Accounts Committee (PAC) is stated to have said that, 

“The DCMS has not had a good enough grip on its rural broadband programme. In an attempt to reduce public costs and risk, the department has ended up stifling competition,” ….......

"BT has won all 26 contracts so far. It is not much of a competition when you end up with only one supplier actively bidding in a framework, despite nine organisations being interested at the start.”