Broadband 'worth an hour's work a week'

A new industry group argues that with fairer pricing, high-speed Internet connectivity could be worth billions to the UK economy

The rollout of broadband networks across the UK will give a massive boost to the country's economy, but the promise is being held back by unfair pricing from BT, according to a new industry group formed by BT competitors.

The Broadband Industry Group (BIG), which was formally launched on Wednesday, claims that a properly regulated broadband market would cause Britain's productivity to rise by 2.5 percent over the next 12 years. This would raise the UK's gross national product £22bn by 2015 -- the equivalent of every UK employee working an extra hour each week.

These positive predictions do contain a catch, though. The members of BIG claim that BT is overcharging for some of its high-speed connectivity products and hampering competition as a result.

"We predict that over the next 20 years broadband will have a similar impact on the economy to that of the introduction of electricity from 1890-1920 -- should current regulation change to encourage more market competition," said Douglas McWilliams, chief executive of the Centre for Economics and Business Research (CEBR), which produced the forecasts.

As ZDNet UK reported last month, the row between BIG and BT centres on the relative pricing of BT's Datastream and IPStream products.

Datastream is sold to other telcos. It lets them offer to ISPs broadband packages that run over the alternative telco's own backbone network but also use BT's last-mile copper connections to reach customer homes or businesses. IPStream, on the other hand, is sold directly to ISPs by BT. Among BIG's founder members are companies such as Cable & Wireless and Energis that buy the Datastream product.

BIG claims that BT is acting unfairly by overcharging for Datastream, thus making its IPStream range more attractive to ISPs. BT was recently forced to cut Datastream prices to match a price cut made to IPStream -- a move that Oftel director general David Edmonds said last week meant the company narrowly managed to avoid being guilty of "a prima facie margin squeeze".

Before the economic benefits forecast by CEBR can be enjoyed, broadband must become a true mass-market product, BIG argues. BT's decision earlier this week to set thousands more broadband trigger levels for rural telephone exchanges should give a major boost to this, although BIG suggests it may do little for wholesale broadband competition.

"The whole industry must keep its eyes on the big picture," said Mary Turner, chief executive of Tiscali, one of BIG's six founder member companies.

"Our objectives must be to develop the UK broadband market to its full potential and, in doing so, ensure that we build a competitive, buoyant and fluid market for the consumer. It is widely recognised that availability does not necessarily mean adoption and therefore only competition will provide the innovation in products and pricing to drive mass market uptake," Turner added.

BIG is made up of Brightview, Cable & Wireless, Centrica, Energis, Freeserve and Tiscali.