Are ISPs the problem or the solution to getting broader broadband?

We need fast broadband, and we need it everywhere. But is it harder to do with one company controlling a third of the market?

One of the most exciting things about growing a business in the 21st Century is that thanks to the Internet, you have the ability to reach an infinite audience. In the UK we're particularly good at it. We generate 8 per cent of our GDP, £120 billion, through the Internet.

But of course, to start a business on the Internet, you need have to have access to it first. That's why the Lords Communications Committee report into the Government's plans for Superfast Broadband has struck a chord with so many. Current Government plans are to install 25Mbps high speed broadband across 90 per cent of the UK and a minimum of 2Mbps broadband for everyone by 2015. They hope to achieve this through the Broadband Delivery UK (BDUK) Project. But the Committee's report argues that Government is too focussed on speed, and it needs to change its focus from a 'high-speed' network to a 'high-spec' network. A core part of the concern is the affect the project, and the way it has been run, will have on competition in broadband provision.

According to Ofcom's figures the market is currently split between four key players BT (29.3 per cent), Virgin Media (20.2 per cent), TalkTalk (18.5 per cent), Sky (17.9 per cent) and the rest split up between smaller providers (14.2 per cent). But there are concerns, both at home and from the European Commission, that the BDUK project will serve to exacerbate BT's dominance in the market. Currently only BT is the only provider that has successfully bid for regional funding as part of BDUK, with the nine other interested parties withdrawing due to concerns over costs and the complication involved in providing fibre connections.

The problem of providing ensuring competition in the broadband market is by no means easy, particularly with the historical position of BT. Many other countries across the world are coming face to face with the sheer cost required to invest in this technology, versus the need for competition. As suggested by the Lords report there are a number of changes that could be made to the BDUK project to improve this, including potential open access fibre-optic hubs and public money only being awarded should be dependent on installing fibre to a local level rather than to the cabinet. They also propose "fibre hubs", which would allow neighbourhoods who set up their own networks to retain control rather than being required to hand ownership to BT and could connect the BT exchanges at a set price.

Apart from changes to the BDUK project there are other measures that could be taken to encourage competition that do not involve additional funding to the BDUK project. Ofcom has done good work in getting BT to reduce the cost of wholesale broadband and allow other ISPs access to its local exchanges in areas where BT is the sole provider, and ideally the cost would be reduced further. The Government can also, in light of its goals to deliver a better broadband, reconsider its decision from 2010 to scrap the review into the fibre tax which disadvantages other providers who must pay per metre of "dark fibre" to be lit.

Providing good competition to allow consumer choice is not just important for levels of service, speed and reliability as there are a number of wider issues that mean competition is increasingly important. Running parallel to the discussion over investment in broadband infrastructure we have the net neutrality debate. After many months of discussion ISPs have recently signed up to a voluntary “Open Internet Code of Practice”, which commits to them to providing full and open internet access and not block access to legal services which are bandwidth heavy, such as iPlayer or 4OD in the name of traffic management.

Most of the ISPs operating in the UK have signed up, including the dominant provider BT. Unfortunately Virgin Media, the second largest provider have not, citing issues with the wording of the code. The implementation of a voluntary code of practice relies upon consumers having real choice in their broadband connection, and the option to leave their provider if they do not comply with the code. Were the BDUK project to endanger future prospects for increased competition this would undermine the provision of an open internet.

And increasingly ISPs are being asked to take on more and more issues. While we want them to focus on providing us the best provision ISPs are currently being asked to look into; enforcing the Digital Economy Act and policing Internet users through a system of reports and warning letters; cooperate with the Government consultation looking into implementing 'default on' blocks for adult content; cooperate with the Home Office plans as part of the Communications Data Bill; and all while trying to put into place a better network for their customers who pay them for reliable access and good speeds.

We need to ensure that the UK has good enough Internet infrastructure to support our ambitions and not only compete with Europe, but with the world. The Government needs to decide where ISPs priorities should lie and consider whether it truly wants a broadband network fit for the future.

Sara Kelly is the Policy and Development Manager for the Coalition for a Digital Economy.

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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 70p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits. It's not easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.