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Gov't urged to consider 'spectrum for speed' swap

ISPs should be compensated for a £5bn fibre rollout by being given valuable spectrum, says Nesta
Written by David Meyer, Contributor

ISPs should be given radio spectrum in exchange for rolling out fibre, a quasi-governmental body has suggested.

The lottery-funded National Endowment for Science, Technology and the Arts (Nesta) released a policy briefing on Monday, ahead of the launch of Lord Carter's interim Digital Britain review, in which it called on Carter and the government to consider a "spectrum for speed" swap.

Nesta claims the "radical communications deal would see the government grant telecommunication companies access to valuable radio spectrum in exchange for the installation of super-fast fibre optic cables nationwide".

The briefing's authors, James Meadway and Juan Mateos-Garcia, claimed the universal provision of "super-fast broadband" across the UK would have a baseline cost of around £5bn, but would directly create 600,000 new ICT jobs and add £18bn to the country's gross domestic product. In this way, they claimed, the UK could "emerge from the recession in a far stronger position".

Speaking to ZDNet UK on Tuesday, Meadway said the government and Ofcom should re-examine the auction model that will be used to dispose of UHF spectrum coming free as a result of the digital switchover.

"If you look at what Ofcom's got lined up to get rid of over the next few years, with the recession and revenues from these auctions not being as guaranteed stable as 10 years ago, it is probably better all round for the government to think a bit more creatively about how it uses these assets," Meadway said. "If we're going to emerge from the recession better than we went into it, we have to get things lined up now — short-term stimuli like installing lots of fibre access everywhere."

Meadway did not specify precisely which spectrum was being talked about in Nesta's "spectrum for speed" proposal, but alluded to WiMax, a technology that would benefit from the upcoming 2.6GHz auction.

"There is an interest in using WiMax that would be extremely valuable to the companies," Meadway said, naming BT as a likely benefactor — BT has already said it intends to spend £1.5bn on a partial fibre rollout. "It's becoming clear that auctions are not the best way to hand out licences. If Ofcom took a broader view of its powers, it could think about juggling licences around, and take a wider public interest view rather than a pure competition policy view".

The 2.6GHz auction is currently being delayed by litigation from T-Mobile and O2, although Ofcom insists the bid-application process is still set to kick off in March. T-Mobile's regulatory chief, Robyn Durie, told ZDNet UK on Tuesday that the mobile operator maintained its opposition to the auction taking place before another spectrum issue — that of 2G refarming — was resolved, but said it did not expect Ofcom or the government to agree with Nesta's suggestion.

"We think it's highly unlikely that Ofcom would want to do that, because Ofcom has made it clear it thinks the best way of getting spectrum into the market is to auction it," Durie said. "Giving it away is not something we'd expect Ofcom to do. Spectrum is the one remaining area where the government can direct Ofcom, but we regard it as highly unlikely."

Forrester analyst Ian Fogg said on Tuesday that the main economic benefits of a fibre rollout today would come from physically rolling out the fibre-access networks, rather than from small businesses having faster internet connections.

"The main economic impact would be on the money spent to build the fibre network, in terms of men and materials and so on, rather than fibre bringing higher speeds to UK businesses — unless we end up with 1930s-style, long-term slow growth," Fogg told ZDNet UK. "The impact is about the actual economic stimulus from investing money in building the network."

Fogg described Nesta's proposed swap as "a subsidy, in the form of an asset rather than pounds, for operators to build fibre networks", but questioned whether it would be enough to stimulate a fibre rollout.

"For that, it depends on exactly what the spectrum is, and how much it might cost the operator to utilise it," Fogg said. "It may not prove to be the most effective way of subsidising broadband [investment] because, to utilise the spectrum, the operators would have to spend more money to gain a return."

Fogg also pointed out that a spectrum auction held in the current economic climate would be likely to raise less money than it would in a healthier economic situation, thus making free spectrum a potentially less attractive proposition than it might at first appear.

ZDNet UK has approach Ofcom for its views on the Nesta proposal, but had not received a reply at the time of writing.

Lord Carter's interim Digital Britain report is expected to appear before the end of January, with the final report due around three months later.

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