Government subsidies 'would harm Broadband Britain'

The UK government should not subsidise the rollout of high-speed Internet services across Britain, as there are no parts of the country that will never be served by broadband.

That is the view of Jan Dawson, Ovum analyst, who believes that those who are calling for government intervention to address the UK's broadband divide are wrong. Such a move, Dawson warns, would be counter-productive in the long-term as it could create an inefficient broadband market that was reliant on subsidy.

In a research note published this week, Dawson points to the current boom in the UK's broadband market as evidence that the government's current strategy -- of letting market forces drive the supply and take-up of high-speed Internet services -- is working.

"The UK government has committed less than $5 (£3) per head to broadband, compared with $25 per head in France, and $95 per head in Japan. And yet, Britain has overtaken France in the last couple of months," wrote Dawson.

The UK achieved one million broadband connections last month and, as ZDNet UK reported on Friday, broadband take-up is thought to be currently running at 34,000 new orders per week.

Despite this success, though, Broadband Britain is far from becoming a reality. Around one in three homes and businesses cannot get affordable broadband as they are located outside the broadband networks of BT, NTL and Telewest.

For this reason, Jeannie Drake -- deputy general secretary for telecoms at the Communications Workers Union -- recently called on the government to pay for high-speed Internet access for the public sector and to fund pilot schemes, demos, education and awareness programmes.

Some in the industry have gone further, and urged the government to subsidise the rollout of broadband to parts of the UK where BT, NTL, Telewest and other telecoms firms claim there is insufficient demand. Others want broadband to be declared a "universal service", forcing telcos to make it available to everyone in Britain.

Dawson does not support such ideas.

"Broadband is already too expensive for some people, and if you make it a universal service the price will rise. With a universal service, customers who are cheap to connect subsidise those who are expensive to connect," Dawson told ZDNet UK News.

"And subsidies would mean the government would have to tax everyone a significant amount, and justify spending the money on broadband in the face of other demands," he explained.

Dawson added that broadband cannot be described as an essential service because only a small proportion of the people who can get it have actually signed up. According to Oftel, around 15 million homes could get broadband, but just an estimated 1.1 million connections have been sold so far.

Keith Todd, chairman of the Broadband Stakeholder Group (BSG), joined Drake in using last month's TMA2002 conference to call for more action on broadband. He urged government, industry and regional bodies to address the issue of broadband coverage and warned that market forces alone will never bring broadband to some parts of the UK.

According to Dawson, though, there are "no areas of the country which can never be served by broadband." He believes that BT's pre-registration scheme will help improve broadband coverage in rural areas, and also feels that satellite broadband has a big part to play.

"Satellite, although more expensive than ADSL, is now twice as much per month rather than 10 times as much, and you can expect that gap to narrow," predicted Dawson.

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