BBC set to subsidise broadband. Why?

So let me get this straight: the public is going to pay to bring broadband to rural areas while those in urban areas get it for -- well, not nothing, but without taxpayers' support. What's that all about?

So let me get this straight: the public is going to pay to bring broadband to rural areas while those in urban areas get it for -- well, not nothing, but without taxpayers' support. What's that all about?

Let's zoom out a little. Over the last ten or so years, the telecommunications industry has developed technology to bring data to people's home faster than before. We called it broadband. Like the old dial-up, for which there was never any hint of public support, it runs down the phone lines.

But the phone lines are old and cranky, especially outside densely populated urban areas, and don't do this job well. The further you go from population centres, the worse the connection gets. So far so obvious.

Yet instead of building a business model that allows all the population to receive the benefits of re-stringing the copper, rigging up microwave towers, or hanging fibre off any convenient telephone pole, BT and others have been saying that public subsidy is necessary if they're going to bring fast broadband to the rural areas. Which, if we're talking about social need, is arguably just where those benefits are needed.

Meanwhile, BT et al have been raking in profits from supplying high density areas with connectivity, where one piece of fibre can service dozens of users, amortising its cost many times over in pretty short order. This where the payback should arrive for those in less densely populated areas: they get connectivity from the profits generated by those in the towns.

Instead, BT -- a company that reported a profit of just over £1 billion in 2010 and increased its dividend to shareholders -- is going to the government and arguing that taxpayers should subsidise that function.

And it looks like the government is going to do just that by handing £350 million of the BBC licence fee to BT and others for this purpose.

Incidentally, the irony of this won't be lost on telecoms industry watchers. It's the BBC that has been partially but largely instrumental in broadening the attractiveness of broadband by developing innovations like the iPlayer, which provides content for free over those broadband lines. Telecoms operators argue that content providers should be subsidising the networks, which have to shoulder the loads those content providers generate. Its an argument with some merit, especially since most telecoms operators have signally and conspicuously failed to make the transition from bit carriers to content providers.

More importantly, the regulator Ofcom seems to have failed to persuade BT and the rest of the broadband industry to deal with the whole problem by providing broadband everywhere. If you're going to get content providers to subsidise rural broadband, you need to do it systematically, not pick on the BBC to cough up the cash (I wonder why the new Tory-led government decided to do that?).

I'd argue that broadband providers need to change their business models, not expect BBC licence fee money when the going gets slightly tough.

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