What price Broadband?

October 11, 2010
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

Most news about broadband tells about consumers: how many households are connected, at what speed, and how many peer-to-peer connections are open at any moment in time. But not every internet connection is to YouTube and not every internet user is at home.

Access to superfast broadband brings benefits to businesses large and small, enabling them to exploit new market opportunities and more efficient operating models. In straitened times, being fortunate enough to have a fast internet connection can be the difference between survival and failure.

So it is gratifying that the Ofcom document published this week, “Review of the wholesale local access market”, draws attention to the fact that providing high-speed networks is about much more than downloading or streaming videos and music.

According to Ofcom, the construction of “next generation access” (NGA) networks over the past two years has brought superfast broadband to almost half of all households in the UK. While that is commendable, connecting a large number of homes in urban areas will always be easier to achieve, not to mention commercially more viable, than linking rural businesses to the internet.

The result is that industrial estates, local stores and professionals working from home struggle to access the broadband benefits that are taken for granted in town. There are distribution centres in Kent, for example, that are well connected to the motorway network but must make do with broadband speeds below 2 Mbps. For these businesses, optimising the available bandwidth resource is an essential skill.

It’s not the cost of the fibre optic cables that makes the provision of high-speed infrastructure to outlying areas prohibitively expensive, it’s the investment associated with digging up the roads.

Ofcom’s announcement that the cable ducts and telephone poles owned by BT must be shared with competitors, where possible, is therefore a welcome development. After all, BT and the Post Office before it has had 130 years in which to connect every town and hamlet in the country. The decision has been too long coming and now it is imminent it must be rapidly implemented. If the government’s plan to open up the gas, sewage and electricity pipes to NGA services comes to fruition, the economic benefits could be even more significant.

Another bandwidth bottleneck came to light this week when the Ryder Cup overran the weekend into a working day. As Colin Montgomerie’s golfers surged to victory, statistics from communications services company Star showed that network traffic from its 3,500 business customers increased by 50% over the lunchtime period on Monday.

According to Star COO John Adey, “Major sporting events have the tendency to increase the demand on the network traffic, as employees are expecting to follow their favourite sports online.”

Although the peaks for this week were above normal, broadband use over the noon to 2 pm period on any business day is typically 18% greater than the average for the rest of the day. “UK SMEs are funding their employees’ lunchtime surfing habits to the tune of over £23 million per year,” says Adey.

He predicts that these costs are set to rise as ISPs move to cap bandwidth usage and introduce differential pricing for volumes above an agreed figure: “Companies will be forced to take a closer look at how their bandwidth is being used, in order to ensure that they are not sizing their capacity around non-business usage.”

Although many companies set acceptable use policies (AUP) for the workforce, it can be hard to differentiate between the use of video conferencing and internet TV for business purposes and time spent watching sport, catch-up TV or other entertainment during working hours.

Adey believes that the move away from “all-you-can-eat” broadband pricing schemes and towards additional charges for high bandwidth users will be a bitter pill for companies and consumers to swallow.

“In a society where we have embraced the viewpoint that anything internet-oriented should be free, it will be hard to accept higher pricing for internet access,” he says, “Next-generation services require investment to provide the infrastructure and the tools to deliver them efficiently. Someone has to foot the bill.”

It is not only at work that the so-called “metered internet” threatens to make online activities more expensive. As Apple and most other consumer electronics manufacturers prepare to bring connected TV to the home, ISPs are taking a nervous look at the capacity of their networks and considering charging for bandwidth usage.

Consumers understand that TV must be paid for in one way or another. Reluctantly or not, many viewers hand over a monthly payment to Sky or Virgin for their selected package. Most people pay their licence fee for the BBC and even advertising-supported “free to air” channels have their cost, albeit incorporated into the price of the products and services that are sold.

What no one is ready for, at least for the moment, is a bill for TV viewing that is related directly to the number of hours watched. Just as with gas and electricity, the future of broadband could be summed up as, “The more you use, the more you pay.”

Consider the implications for the upcoming world of connected TV. There would, perhaps, be a small “allowance”, of say 50 Gbytes, which would be included in your broadband subscription. Beyond that, each byte would be a chargeable extra. Should a football match go into extra time, every viewer might find an additional 50p added to the bill. Penalty shoot-outs would be a bonanza for ISPs.

As the 2012 Olympiad approaches, an employer faced with metered broadband usage might decide that it would be cheaper to disconnect every workstation for the duration of the event.

Star Senior Product Manager, David Palmer, has an alternative proposal. “Instead of allowing every employee to access major sporting events at their desk, which can mean tens or even hundreds of high-bandwidth connections consuming the available corporate bandwidth, employers should consider setting aside a dedicated area with a large screen display,” he suggests.

The idea might have merit, particularly with the advent of 3D coverage, and when potential bandwidth savings are included it might even work out cheaper in the long run. Desktop viewing of non-work video might be banned at the same time, as part of an AUP, and peer pressure would discourage staff from spending a disproportionate amount of time away from their desk.

It could be a good time to invest in companies specialising in home cinema installation.