the economics of broadband(a very broad view)

David HarringtonCMA

NextGen 10Birmingham, 22-23 Nov 10

I am NOT descended from

John Maynard Keynes

J K Galbraith

Adam Smith

or Milton Friedman

But it seems to me that:• Hosts of reasons why the large suppliers

aren't in a hurry to provide universal service;

• Hosts of plausible excuses;

• Which are carefully listened to by government;

• Who are strapped for cash;

• And are thus stuck between Keynes and a hard place

excuses, excuses….• BT doing enough to avoid charge  of foot-dragging; • yet not so much that it closes the door to public

subsidies;  • delicate balancing act - fits well with need to compete

within Virgin’s footprint; • keeps costs and skills within bounds;• keeps investors happy;• enough in reserve to snap up opportunities like

Cornwall and ambush promising community projects; • Openreach nicely positioned to become a quasi-

monopolistic utility. 

there’s more….

• “The technology isn’t ready” (ISDN, ADSL?)

• “There are no investors” (ISDN, ADSL?)

• “There’s no demand” (ISDN, ADSL?)

• “Demand is uncertain”: “Significant risk”: “Financial climate unstable”

the customers’ view

• Death of linear (long, slow, lingering? ½ future traffic on net will be HDTV to residential users)

• YouView launches first consumer product in 1H2011

• Connected TV market to reach 1Bn users by 2014

• CE manufacturers are all shipping TV's that suck bandwidth in 2011

• HbbTV, Youview in Europe and Hybridcast in Japan – all broadband chompers

But:• Price of entry to ad-supported content

market: £20M initial investment (technology). £5M opex

• Need 20M vidstreams per month to break even (only BBC and Google at moment)

• Subs model more viable than PPV

• We have yet to integrate (T)VoD with e-commerce, product placement, red button TV, etc.

Some questions for the session

• Is flat-rate charging model dying?• Is a multi-tier QoS on the ‘net inevitable?• Will OTT suppliers have to pay for access to the

networks?• Is community broadband scalable to achieve RoI

for content providers?• Is the public-private balance right for the times?• When will it become obvious that demand has got

so far ahead of supply that catch-up will mean that FTTC becomes a legacy technology?