Superfast broadband project: A legacy monopoly

XLN Telecom CEO Christian Nellemann examines whether the interests of small businesses are being lost in the increasingly complex national superfast broadband project.

The first day of September 2013 saw BT disconnect its remaining dial up internet customers. In 2010 (which is the last time figures were available) Ofcom reported that 800,000 customers were still using it. Amazing as this may seem (I’m sure we all remember the days of Matrix-like noises as a modem connected to the world wide web and the children shouted at you because they couldn’t use the phone), it should simply be another step toward the complete rollout of superfast broadband services. But unfortunately it’s not quite that simple.

First let’s get a few definitions straight. Traditional broadband was the service that followed dial up. It was much faster and relied on an ADSL connection – a new technology that not only provided speeds around 250 times as fast, but also allowed one phone line to be used for both internet and voice with no disruption (this was due to it routing the internet data along a different frequency).

This was then followed by ADSL2+ which offered slightly faster speeds but still relied on the same copper backbone. And it’s the copper backbone that limits speeds and internet reliability. There’s a maximum broadband load that copper can sustain and it’s also limited by the distance between the user and the exchange – anymore than a couple of miles of copper and performance can degrade. The government realised that in order for the UK’s businesses to compete internationally and fuel economic recovery it needed to move beyond copper broadband to superfast broadband. Superfast broadband is based on fibre optics; thin glass cables that can sustain huge amounts of traffic using infra red signals beamed off the glass. Once in place they can future-proof UK internet connectivity indefinitely.

Government ambitions

So what’s the problem? Superfast broadband sounds great right? Well my answer to that would be yes it does, but unfortunately it’s a little more complicated and here’s why.

The government has set itself the ambition that the UK ‘should have the best superfast broadband network in Europe by 2015′ and it should cover 100 per cent of the UK. Because the required infrastructure relies on a new fibre backbone it did not have to grant the entire project to BT. However BT ended up as the only one left in the race as all the other providers dropped out (the government changed the rules of procurement which meant BT was the only one that could viably fulfil the contract criteria). Unfortunately BT then announced it could only provide 90 per cent UK coverage. So far £1.2 billion of state subsidy has been handed over to BT for the superfast broadband rollout and 26 contracts have been signed with local authorities. All 26 are provided by BT. These figures mean that 77p in every pound spent on the project, is now being invested in return for only 90 per cent coverage. And to rub salt in the wound, BT refuses to reveal where the black spots will be.

The SME picture

Worryingly, SMEs already seem to be struggling with their internet connections. A recent survey we carried out revealed that only 56 per cent are satisfied with their internet speed and of those who don’t have access to superfast broadband (two thirds) 57 per cent would be likely to upgrade to it when it comes to their area. Just a quarter (24 per cent) of small businesses surveyed said they currently have access to a fibre connection. This indicates that the superfast broadband rollout is crucial to UK SMEs and therefore our economic recovery. Can the government afford for BT to a) maintain a monopoly on fibre services and b) withhold vital information on where won’t benefit from superfast connectivity? We don’t think so.

SMEs need a fast, reliable internet connection. Our survey also revealed that it’s considered by most to be their most important utility: one used to carry out a number of vital business services, from banking and customer services to marketing and sales. That’s before you start to consider the proliferation of cloud services. How many businesses use Google Apps and cloud storage for example? Not many start-ups can afford to shell out capital expenditure on expensive computer hardware and rely on their internet connection for access to vital online applications like email and storage. BT’s refusal to reveal which ten per cent won’t have access to the service is unfair to SMEs currently running businesses, those planning to set one up or expand, and those who get stuck without broadband fast enough for them to carry out day-to-day business activities.

What you can do

So what are your options as an SME? Firstly you can keep an eye on the rollout. While BT won’t confirm the areas that won’t get superfast broadband, it has provided a map which you can enter your postcode into to ascertain the suitability of your local telephone exchange for fibre. It has also published a list of areas with estimated dates of roll out. These resources can only give you estimations but do reveal where fibre can definitely not be accessed. And that’s the problem with a monopoly. If BT revealed the ten per cent that will go without superfast connectivity then other providers could get involved and offer fibre services in those areas. They currently cannot which means SMEs just have to grin and bear it.

If you’re one of these businesses, in the capital or anywhere else, then there are a few things you can do. The most successful approach so far seems to be to join forces with other local SMEs and contact your council and MP with your superfast broadband concerns. Multiple voices are more powerful, especially from an SME perspective. It’s also worth contacting your internet provider and getting the latest update from them. This may result in an inconclusive answer regarding the date of a fibre roll out but at least if you register your interest then they can keep a record of demand and can notify you straight away when fibre’s available.

Another option to bear in mind is 4G. This is the new mobile spectrum that EE, Vodafone and O2 are now offering which offers extremely fast broadband connectivity (it won’t reach the upper limits of fibre but can offer up to four times the speed of a standard copper based broadband connection).

Final thoughts

SMEs are lifeblood of the UK economy. Our superfast broadband rollout should not be monopolised by one provider and the government needs to understand that opening it up to competition will provide a better level of service and make it more cost effective for SMEs. BT doesn’t understand the needs of SMEs as it’s as far removed from them as it possibly could be. Other providers with records of supplying SMEs with quality broadband services should be tasked with providing superfast internet connectivity as that in turn will give the UK’s small and medium business sector the boost it so badly needs.

Further reading on broadband

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Christian Nellemann

Christian Nellemann is founder of small business telecoms supplier XLN and two-time winner of EY's Entrepreneur of the Year award.

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