While the UK continues to struggle with the productivity puzzle, reports suggest that the economy is lagging behind its European peers and the recovery is not reflecting in labour productivity trends. Given this context, the debate on the UK’s Broadband Delivery plan becomes even more significant. There is enough evidence that broadband has a positive impact on the economy, as a study by the European Commission establishes, broadband positively impacts Gross Value Added by 0.89% for advanced European countries. Positive impacts are experienced by the entire gamut of stakeholders: consumers benefit from the expanding internet economy, enterprises reduce marketing costs due to mushrooming social media networks while improving efficiency and innovation, and workers enhance their knowledge and skills via easy access to diverse information online. To leverage any of these advantages, both consumers and enterprises require internet of sufficient quality, therein lies the importance of the concept of broadband speed as it is an easy measure of internet quality. Let us, first, understand some implications of broadband speed as defined by various providers.
In a shocking example, a broadband survey conducted by Ofcom in 2010 found that for DSL services advertising speeds “up to” 20 Mbps, only 2% of customers received speeds of 14-20 Mbps, 32% got speeds in the 8-14 Mbps range, while the majority got less than 8Mbps.
A recent report on the Huffington Post compared national average broadband speeds in Q4 2015 across the globe. The UK ranked 18th with an average speed of 10.9 Mbps which was less than half that of South Korea. Though the UK has high internet penetration rates, improving broadband speeds and declining costs, the following graphic clearly shows that there is still much to be desired.
Source: Statista Chart of the Day, 2015, www.statista.com.
The government’s Broadband Delivery the UK plan is meant to address this very issue. The defined goal is to achieve at least 24 Mbps of “superfast” broadband speed for 95% and 2 Mbps for the remaining 5% by 2017. More recently the government also stated its ambition of achieving 100 Mbps, however, there was no fixed timeline or plan associated with this target. To put into perspective the government’s definition of “superfast”, i.e. 24 Mbps, let us compare with the targets and achievements of other high-ranked countries.
Evidently the UK’s Broadband Delivery target falls behind competing nations. One of the key reasons for high broadband speeds in Asia and Eastern Europe is the availability of fibre networks, which UK has been slower in implementing. Thus, a critical first move for the UK would be to increase competitiveness in the fibre space. Further, it is important to prioritise business, education clusters and industrial areas within or outside cities.
A recent survey by FSB has found that only 15% of SMEs are satisfied with their broadband service, of which 45,000 SMEs are still on dial-up services, while 94% said that a reliable internet is key requirement for small businesses. The volatility in services makes it critical that the government issues an adequate broadband speed floor universally, though 2 Mbps is barely sufficient for basic functions like email. FSB has recommended a floor of 10 Mbps to 100% in the next two years which is welcome and should be encouraged with prime focus on areas with the least satisfying networks and high economic activity.
An important lesson that can be learnt from the Korean government is that it balances higher supply in broadband with greater demand from consumers. Since 1999, the Korean government introduced network certification programme requiring all internet-installed building to be certified as Class 1, 2, 3, Premium based on broadband speed, thus increasing customer awareness. Moreover, the government introduced the “Ten Million People Internet Education Project (2000-2002)” for at least one-fourth of its population to ensure that the ageing labour force and consumer base was able to benefit from the Korea’s broadband achievements.
With a fast changing internet landscape, it is only a matter of time that the government-defined “superfast” broadband speed of 24 Mbps is considered too slow by competing economies. As the internet and digital sectors spearhead the next generation of economic growth, it is critical that the government shows the right vision in reviewing its broadband policy.