Broadband Market in the UK - Literature review Example

?Broadband market in the UK I. Introduction Based on broadband and mobile phone coverage in the United Kingdom, is the market for broadband and mobile phone acting justly? If not, what can be done about it? Broadband services started to be available the United Kingdom in 1990s and soon were ultimately viewed as basic necessities (Downing 2011, p. 4). Broadband “refers to ‘always on’ access to data (including the internet) at a speed or bandwidth, greater than dial-up modems” (Downing 2011, p. 4). In the broadband, “a user does not have to dial up their Internet Service Provider (ISP) every time they want to surf the internet and can also make a telephone call or watch television at the same time” (Downing 2011, p. 4). Nevertheless, broadband services “can be accessed from the local telephone exchange (either via copper lines or fibre optic cable), a cable television hub and via wireless and satellite technologies” (Downing 2011, p. 4). Broadband services “is usually described by the amount of data (in bits) that can be transferred” (Downing 2011, p. 4). To give an idea of the required speed that would make data transfer fast and efficient, “a typical email is thousands of bits (kilobits or kb), a music file can be several million bits (megabits or Mb per second---Mbps) and a firm may be several billion bits (gigabits or GB)” (Downing 2011, p. 4). To enjoy a live stream requires a constant speed of 2Mbps and, in 2009, it was estimated that about 2.75 million people in the UK had broadband speed of less than this (Downing 2011, p. 6). Today, broadband services are highly available on mobile phones. Mobile telephony is “a largely deregulated market in the UK” and this may be an explanation why broadband services became increasingly available in mobile phones (Downing 2011, p. 12). II. Broadband and mobile phone availability in the UK As of November 2011, broadband has been available on “nearly all copper telephone line in the UK” (UK Ofcom 2011b, p. 1). However, “14% of residential broadband connections are currently operating below the 2Mbit/s speed that government wishes to make available to virtually all homes by 2015” (Ofcom 2011b, p. 1). The Ofcom 2011b report attributed UK’s inability for a 100% coverage to the household’s inability to upgrade and rewire (p. 1). Nevertheless, residential fixed broadband customers have been using an average of 17GB of data monthly (Ofcom 2011b, p. 2). Citing data from the London Internet Exchange, Ofcom (2012b, p. 2) reported that internet traffic “has increased seven fold in the last five years.” The Ofcom estimated that if demand continues to grow at the same pace, new investments have to made (Ofcom 2011b, p. 2). New technologies are being introduced to deliver up to 80 Mbit/s over copper wires and 300Mbit/s over fibre (Ofcom 2011b, p. 2). In the market, there are at least three kinds of internet speed: the headline or the advertised speed, the average speed and the maximum speed (Ofcom 2011c, p. 3-4). 2G. According to UK Ofcom, as of November 2011, “97% of premises and 66% of the UK landmass can receive a 2G signal outdoors form all four 2G networks.” However, according to the same source, “approximately 900,000 UK premises do not have a choice of all four 2G mobile networks.” The 2G coverage is mostly voice and SMS. The so-called 2G refers to “second generation of mobile telephony systems” (UK Ofcom 2011b, p. 101). The 2G “uses digital transmission to support voice, low-speed data communications, and short messaging services” (UK Ofcom 2011, p. 101). Ofcom calculates that for 2G, 99% of England, 92% of Wales and Northern Ireland and 98% of Scotland have broadband coverage (Downing 2012, p. 13). 3G. Meanwhile only “73% of premises and just 13% of the UK’s land mass receive a signal outdoors from all five 3G networks, with lower coverage in less densely populated areas” (UK Ofcom). Thus, “approximately 7.7 million UK premises do not have a choice of all five 3G mobile networks” (UK Ofcom 2011a). 3G refers to “third generation of mobile systems” (UK Ofcom 2011b, p. 101). 3G “provides high-speed data transmission and support multi-media applications such as video, audio and internet access, alongside conventional voice services” (UK Ofcom 2011a, p. 101). UK Ofcom reported that “the areas of lowest 3G geographic coverage are the highlands of Scotland and mid-Wales, which are both sparely populated with hilly terrain” (UK Ofcom 2011a, paragraph 5). UK 3G mobile broadband coverage is indicated in the figure immediately below. Figure 1 . 3G UK mobile broadband coverage in 2011 Source: Ofcom UK 2011a (1 November) The key obstacle to the expansion of 3G services lies on commercial grounds and Ofcom predicts that 3G coverage will not likely extend beyond the 2G coverage (Downing 2011, p. 15). In particular, a major problem is cost particularly for remote locations and sparsely populated areas (Downing 2011, p. 15). Some of the other problems presenting an obstacle to 100% coverage pertain to technology related to intrinsic nature of cellular technology that prevents a 100% seamless coverage, planning restrictions, and topographical factors (Downing 2011, p. 15). 4G. 4G or fourth generation mobile systems are “designed to provide faster data download and upload speeds on mobile networks” (UK Ofcom 2011, p. 101). As of the moment, the definition of 4g is still “hotly debated” (Tellabs 2012, p. 1). Tellabs (2012, p. 1) explained that the definition is still not clear because of the “breadth of technology” that can be supported by 4G. 4G work on “tablets and laptops, enabling rapid downloads and live television streaming on the go” (Stellard 2012, paragraph 2). UK communications regulation Ofcom has released plans for the auction of 4G services that is believed to have the capability to service 98% of the United Kingdom (Stellard 2012, paragraph 1). The 98% coverage, however, refers to outdoor services because “Indoor coverage is more difficult to achieve” (Stellard 2012, paragraph 14). According to Downing (2011, p. 5), “out of the 10.2 million adults in the UK who have never even used the internet, 4 million (9% of he population) are also considered socially excluded.” Nevertheless, the UK is one of the few countries with “the highest levels of broadband penetration in the world and one of the highest take-up rates of mobile broadband” (Downing 2011, p. 1). There are numerous benefits of internet access. According to Downing (2011, p. 8), from online shopping alone, households enjoy a potential savings of ?560 a year and even those in the lowest 10% of the lowest incomes can save around ?279 a year (Downing 2011, p. 8). The improvement in the educational performance resulting from internet access can lead to a lifetime increase in earnings of approximately ?10.5 billion among children without internet connections today (Downing 2011, p. 8). In addition, “people with good ICT skills earn between 3% and 10% more than people without such skills” (Downing 2011, p. 8). Meanwhile, other than ensuring that all of British society has access to broadband and mobile phone services, there is also a need for ensuring the access of citizens to broadband and mobile services in special situation, such train passengers. In any case, the UK strategy is to deploy networks where they can serve the largest population; once population are served, serve the strategic areas such as malls; and only then must one try to reach other populations like small towns, villages, and rural communities (Ofcom 2012, p. 6). The technical challenge in rails is to eliminate no-spots (Ofcom 2012, p. 6). III. Current efforts to improve broadband and mobile services As early as December 2010, the government of the United Kingdom has allocated no less than ?530 million to “incentivise the deployment of broadband through a variety of technologies with the removal of potential economic and policy barriers.” The UK government is trying to remove barrier to investments in the broadband sector which makes “less commercially attractive” services to rural and “inner city areas” of the United Kingdom (Downing 2011, p. 5). The UK government target is for the UK to have an ultra-fast broadband by 2017 which is defined as faster than 24Mbps or more than the speed required for movie streaming (Downing 2011, p. 10). The goal was even qualified to mean that the target is for 90% of people in each locality to have 25 Mbps broadband access by 2015 (Downing 2011, p. 10). The UK government goal also includes the award of 800Mhz and 2.6GHz spectrum “by auction to allow the development of next generation mobile services (4G)” (Downing 2011, p. 11). In improving broadband services in “areas that the market alone cannot reach,” the central government plans to have a central digital point in every community, mixed-technology approach with “fixed, wireless and satellite” all having a role, issue guidelines to builders and contractor so broadband-ready buildings are constructed and work with local authorities “to reduce the cost of broadband rollout by clarifying existing guidance on street works and micro-trenching (Downing 2011, p. 11). Micro-trenching is a technique “which makes a small incision in the road to insert cables avoiding much of the backfill usually necessary with large trenches” (Downing 2011, p. 11-12). Improving mobile broad services will also improve broadband access. The impetus to improve mobile services is believed ensured with the UK government’s policy of deregulation in the mobile phone industry “because 4th generation services (4G) using 800Mhz can provide mobile broadband to rural areas” (Downing 2011, p. 12). Since only a few months ago, Ofcom, the regulator for the efficient use of spectrum, has been consulting on its approach for the roll-out of 4G mobile services at spectrum 800 Mhz and 2.6 GHz in the UK (Downing 2011, p. 12). The Ofcom’s initiatives for the action were designed to obligate the coverage of at least 95% of the UK population in licensing for the 800 Mhz spectrum (Downing 2011, p. 12). A 95% coverage was targeted because increasing the obliged coverage to 99% is believed to be costly and “can devalue the spectrum” (Downing 2011, p. 12). Efforts for greater broadband and mobile phone access will probably be enhanced as technologies for city-wide Wi-Fi access advance because the technology is very inexpensive (Gunasekaran and Harmantzis 2006, p. 20) IV. Analysis The government decision to allocate ?530 million for the broadband industry is perhaps the best evidence that the market, left alone, is unable to promote a situation in which broadband services and mobile telephone services can be improved. Yet, at the same time, when considered that one of the major concerns of government investment in the broadband industry is precisely to remove the “potential economic and policy barriers,” the market’s perceived inability to promote a situation where broadband services are greatly improved, has to be qualified. This is because the same evidence can be cited as an indication that current government policies may be impinging the advancement of the mobile and broadband industry: government may have intervened too much or inappropriately in the broadband industry and the intervention may be the reason why the broadband industry may have developed inconsistently with its potential in the United Kingdom. We must hasten to qualify, however, that based on the on Emma Downing report of 2011, the UK continues to be one of the nations with the most advanced mobile and broadband services worldwide. However, UK is on 18th on the list of the world’s countries with highest broadband and internet access (Downing 2011, p. 23-24). The other top ones ahead of the UK are South Korea, Hong Kong, Japan, Iceland, Switzerland, Luxembourg, Singapore, Malta, Netherlands, United Arab Emirates, Qatar, Sweden, and Denmark (Downing 2011, p. 24). Yet, the UK ranking is believed likely to improve over the next few years if UK’s fibre-optics program advances (Downing 2011, p. 24). According to Downing (2011, p. 23), “the UK is now at 6.2Mbps average speed.” South Korea became on top of the list of countries with the highest broadband and mobile phone penetration because her government pushed a 1,000Mbps connection for all residents (Downing 2011, p. 24). The European benchmark today is to have access of above 30Mbps by 2020 and for 50% or more of the households to have an internet connection of above 100 Mbps by 2020 (Downing 2011, p. 25) The concern for superfast broadband falls in line with the goal of the UK government to enhance competitiveness of UK firms as well enable British society to be “grow and recover from the recession” (BIS Department 2010, p. 7). The Royal Academy of Engineering (2009, p. 6) has pointed out that “ubiquitous broadband access is a prerequisite for a modern knowledge-based economy.” Further, the Royal Academy of Engineering emphasized that the UK must be at the forefront of global broadband connectivity (2010, p. 6). V. Conclusion and recommendations Based on the foregoing, what appears to be suggested is that despite the weaknesses or lack of capability of the market to ensure 100% internet and mobile telephone access, it remains appropriate to say that market actions on the broadband and telephone access remains just. Perhaps the strongest proof of this is that even with a liberalised market for telephone and broadband services, the market has ensured internet and mobile access for the majority of the UK population. While it is true that a significant minority continues to have no access to fast broadband services, access will probably be worse if government alone is relied on for ensuring 100% broadband and telephone services. 100% broadband and telephone access are not being realised because some localities have a low population that prevents the justification of a large spending for too small revenues. In addition, terrain factors produce difficulties that make broadband and telephone infrastructure too costly for the business to be viable. Thus, a sound decision is to allow a certain percentage of the population to be reached by the market while making up for the shortfall through state investments. In other words, both the state and the market must complement each other in improving society’s access to broadband services and mobile phones. References BIS Department, 2010. Britain’s superfast broadband future. London: Department for Business, Innovation, and Skills. Downing, E., 2011. UK broadband---policy and coverage. Standard Note SN05970. London: Science and Environment Section, House of Commons of Library. Gunasekaran, V. and Harmantzis, F., 2006. Financial assessment of citywide Wi-Fi/WiMax Deployment. Accessed 26 July 2012 from http://howe.stevens.edu/fileadmin/Files/publications/Financials_of_WiFiwiMax.pdf Tellabs, 2012. 4G: The what, why and when. White Paper. United Kingdom: Tellabs. Accessed 27 July 2012 from http://www.tellabs.com/resources/papers/tlab_4g-whatwhywhen.pdf UK Ofcom, 2011a. Ofcom UK publishes new interactive map of mobile broadband coverage. 1 November 2011. Accessed 20 July 2012 from http://www.ispreview.co.uk/story/2011/11/01/ofcom-uk-publishes-new-interactive-map-of-mobile-broadband-coverage.html UK Ofcom, 2011b. Ofcom infrastructure report: The first communication infrastructure report. 1 November. London: Ofcom. UK Ofcom, 2011c. UK fixed-line broadband performance, November 2011. London: Ofcom. UK Ofcom, 2012. Rail ‘Not-spots’ - Technical solutions & practical problems. January Report. London: Ofcom. Royal Academy of Engineering, 2009. ICT for the UK’s future. London: The Royal Academy of Engineering. Stellard, K., 2012. 4G broadband: UK roll-out ‘not until 2013.’ 24 July. Accessed 26 July 2012 from http://uk.news.yahoo.com/4g-broadband-uk-roll-not-until-2013-122229788.html Read More