Convergence Conversation

Carphone Warehouse are committing resources to campaign against the proposed 50p levy to support some investment in improving the nations connectivity.  It is also devoting resources against the proposed 3 strikes policy being put about by Mandelson.  While the latter position I can support,  I do not understand why those resources were not targeted at changing the EU Telecoms package from where any legitimacy for such proposals will draw legal justification.  Putting that aside,  the very public opposition to the 50p levy does need to be looked at a bit more carefully.

Nobody suggests the proposed 50p levy is perfect.  Its imperfections are many but the lack of a practical alternative, be it a small tax on bandwidth consumed (nobody counts it accurately) or a tax on all Broadband connections -(- Mobile operators have already paid £22.4bn in spectrum fees, and pre-paid mobile broadband is problematic) means the 50p is limited to phone lines because it is comparatively easy to implement.  The Government could sacrifice some general taxation but Digital Britain is not in basket case status so nothing doing.  I must declare some interest.  I did submit a USO design to the Digital Britain which mentioned a 50p levy on all broadband connections to fund digital divide activities,  but any relationship will be purely accidental.

The 50p levy is not such a bad idea that Carphone Warehouse should have a sudden urge for doing public good.  Carphone are concerned that £1bn (over circa 5 years) spent in rural networks will somehow slow private investment in fiber in urban areas and distort the market.  It will stop the market working its magic for rural areas which to date nodoy has shown any interest in!  Furthermore it is wasteful because Carphone customers are showing no propensity to pay more for services on networks configured to deliver the very minimum browsing experience.  How can you even check this if your only selling connectivity configured to do the very minimum?

Carphone Warehouse have a real problem with these fiber rollouts.  They purchased a company called Opal Networks and used it to create a presence in 2,000 of BT's  5,500 exchanges giving access to 80%+ customers.  This was to gain access to favourable prices for BT components pushed through by Ofcom.  They have done exceptionally well exploiting this regulatory gift and are now hoping to sell Talk Talk Broadband soon.  But there is a problem!

BT's announcement to invest in fiber to the curb,  means BT will be putting new cabinets in your street,  bypassing the exchanges where Carphone have a presence. But more than that BT do not have to share those cabinets (space or ducts) but only re-sell the service.  As Ofcom made clear in its review of next generation networks in August,  this change could undermine those who have invested in LLU assets.  The roll-out of FTTC cabinets will be in the very areas where 'old' Broadband take up has been the highest.  The extent to which the assets are stranded is dependent upon the roll out of FTTC and the level of  take up.  Admitting there is demand for next generation broadband is admitting that you must invest millions more in your infrastructure. This does not read well in a for sale prospectus.

Carphones must know that their very public campaigning against public investment of any sort of  next generation broadband  would draw peoples attention to the fact they have no plans to invest in any fiber themselves,  any investment will cause there own assets to be bypassed.  It is odd that Andrew Heaney their representative is appearing at all these House of Commons events on NGA, basically stating that Carphones investment in and proposed sale of Talk Talk Broadband assumes next generation broadband will never happen,  or happens really slowly.  It is a strange for sale sign. Customers know your limits!  You will never want enough of our service to need an upgrade; not one that requires investment in some 90,00 physical locations!  At least nobody can accuse their Director of Strategy of not drawing our attention to the fact that Carphones LLU assets be  worth progressively less as NGA rolls out and any public investment will reduce that value further.  So public investment of any sort  even in rural areas is not appreciated,  until Talk Talk Broadband is packaged and sold !     

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