Independent review says UK on track to be a leading internet economy
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Released 12 Sep 2008
The UK's competitive telecoms market can deliver the next generation access (NGA)
in broadband, and maintain the country's position as a leading online economy,
but the Government and Ofcom need to be vigilant and play an active leadership
role. Francesco Caio sets out his recommendations today for how the Government
should do that.
Next generation access represents the next major step forward in the
evolution of broadband, to deliver faster services to homes and small and
medium-sized businesses. It will be important to British businesses making the
most of new opportunities arising from rapidly developing technology and is
essential for the UK's future economic success.
The review, jointly commissioned in February this year by the Department for
Business and HM Treasury examined barriers to investment in NGA. Mr Caio has
reported promising signs of investment by major players such as Virgin Media and
BT, and, at a more local level, by communities experimenting with new deployment
Unveiling his report "The next phase of broadband UK; action now for long
term success" today, Francesco Caio said: "The UK and its consumers and
businesses benefit from a competitive broadband industry and a rich choice of
digital communications and entertainment platforms.
"Although demand for bandwidth and Internet traffic continues to exhibit
strong growth, there is little evidence that in the short term the UK is going
to suffer from the lack of an extensive next generation access network. I have
therefore concluded that the case for a public intervention at this time is weak
at best. But it is the right time to create the conditions that will deliver a
competitive NGA infrastructure in the next five years"
The report has recommended an active role for the Government in monitoring
development of the new networks and supporting their rollout through measures to
lower costs without distorting the market. These include:
* Supporting the development of local access networks by helping them
organise and develop common standards;
* Allowing NGA to be delivered over new overhead lines, by relaxing rules
that currently prevent this;
* Working with the construction industry to ensure all new homes have next
generation broadband; and
* Supporting Ofcom to ensure spectrum auctions take place soon.
Mr Caio added: "The government needs to play its part across a number of
areas in supporting development of NGA. It cannot afford to be complacent."
Business Secretary John Hutton said:
"I am grateful to Francesco Caio for conducting this review. This technology
will touch almost every part of the economy; it is a vital tool for the future,
supporting innovation and economic success.
"We will consider his recommendations as we plan how to make sure the UK
remains one of the world's leading Internet economies. It is reassuring to have
evidence of timely investment being made by a broad range of players.
"We want to create the right conditions for private sector investment and
stand ready to play our part in ensuring the UK has a competitive infrastructure
in the years to come."
Mr Caio's review was conducted through discussion with over eighty
organisations and companies, and considered three key questions:
* Is the delay in the development of NGA causing a competitive disadvantage
for UK businesses and families?
* Can the market deliver an investment in NGA on its own, or should the
Government intervene now to get the rollout of NGA started?
* Is there a role for the Government to play in the development of NGA
infrastructure - and, if so, what?
The specific recommendations for Government include:
* Launching ten specific initiatives that do not distort the market, but
provide some further momentum and remove obstacles to the deployment of NGA;
* Establishing a structured, permanent benchmarking process to monitor the
development of NGA in the UK in relation to other countries; and
* Investing time and resources to identify remedies to adopt in case the
market fails to deliver the required NGA investments.
Over the last ten years, massive investment by companies has led to a rapid
development in broadband services. In 1997 less than 10% of the population had
ever used the Internet. By the end of last year, 70% of the population were
Internet users and more than half of homes had broadband.
As businesses and consumers increasingly demand a more powerful and seamless
broadband experience, the next decade could see technology develop at just as
fast a rate. The Government is committed to helping to ensure that companies are
able to continue to build on the UK's world-leading position.
Government will consider the report's findings and respond in due course.
1. Francesco Caio's report: "The next phase of broadband UK; action now for
long term success" is available at
2. Francesco Caio is a vice chairman of Lehman Brothers Europe. He is also
chairman of the European Advisory Board. Francesco joined the Firm in September
2006. Prior to this, he was chief executive officer of Cable & Wireless from
2003. In 2000, he founded Netscalibur, the European business telecommunications
and internet service provider, and from 1997 to 2000, was chief executive of
Merloni Elettrodomestici, one of the European leaders in domestic appliances. In
1996, he was appointed chief executive of Olivetti having previously led its
telecommunications and multimedia divisions. Francesco led the creation of
Omnitel Pronto, Italy's second largest mobile phone company before its
acquisition by Vodafone, and was its first chief executive officer from 1994 to
1996. He has also worked at McKinsey in London as a consultant for the
technology, telecommunications and media industries. Francesco is a member of
the International Advisory Board of Bocconi University in Milan. He has been a
non-executive director of a number of public companies including Equant in
Amsterdam (1998-2000), Merloni Elettrodomestici in Fabriano (Italy, 2000-2004)
and Motorola Corporation in Chicago (2000-2003), where he was also a member of
the Technology and Innovation Board Committee.
3. Users spend an average of 34.4 hours online per month, at home or work,
compared to an average of 24 hours in Europe and 31.4 hours in the US.
4. The UK has the largest online retail market in Europe, with sales worth
£46.6bn in 2007, comprising 15% of overall retail sales.
5. The UK also has the highest level of internet advertising per head in the
G7, and internet advertising spend in the UK makes up a far higher proportion of
total advertising spend compared to other G7 countries.
6. Consumers are using more online services as part of their everyday lives;
according to APACS; for example, 21m UK consumers currently use online banking.
7. In parallel to commissioning Francesco Caio's review, the Broadband
Stakeholders Group was asked to examine the economics of fibre deployment,
specifically whether deployment of fibre to the premises will be viable without
a first-step of deploying fibre to the cabinet. A copy of the report is
8. The Broadband Stakeholder Group is the UK government's leading advisory
group on broadband and was established in 2001 to tackle the strategic issues
affecting the broadband value chain by facilitating cross-sector collaboration.
More recently, the BSG has focused on the debate surrounding next generation
broadband in the UK. Its aim, between 2007- 2009, is to work with stakeholders
to create the right conditions in the UK to enable efficient investment in next
generation broadband services and to ensure their timely and widespread
availability for the benefit of UK citizens, businesses and public sector.
9. The Department for Business Enterprise and Regulatory Reform helps UK
business succeed in an increasingly competitive world. It promotes business
growth and a strong enterprise economy, leads the better regulation agenda and
champions free and fair markets. It is the shareholder in a number of
Government-owned assets and it works to secure, clean and competitively priced
About the Author
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Article Published/Sorted/Amended on Scopulus 2008-09-20 07:42:12 in Business Articles