Universal broadband connectivity alone will not achieve the Government’s goal of digital inclusion

Article by Simplifydigital

“The real challenge is skilling disadvantaged households to use the internet” says Charlie Ponsonby CEO of broadband comparison service Simplifydigital.

Commenting on Digital Britain The Interim Report, Charlie Ponsonby, CEO of http://www.simplifydigital.co.uk says:

“There is definitely a digital divide emerging in the provision of broadband to UK homes, with 40% still not having a broadband service – but bridging the divide will be very difficult, due to the cost of subsidizing the service to those who can’t afford a broadband subscription or a PC, and the challenge of training those who have never accessed the web before.”

A key theme of Lord Carter’s Digital Britain Report is the Government’s commitment to ensure all UK homes are broadband connected, with a 2 Mb/s service by 2012 – the so called Universal Service Commitment.

As families’ daily lives become ever more entwined with the internet both for work and play, this is a laudable aim. Households excluded from the “online club” really will start to feel excluded, particularly as government increasingly uses the internet for the provision of public services. But, as with all grand plans, achieving the objective is going to be fraught with difficulty.

Approximately 60% of UK homes have a broadband connection at home, leaving 39% who are in coverage areas and have no connection; and a further 1% who are currently outside broadband coverage areas.

Clearly the latter two groups need dealing with quite separately. Of the 39% who are physically capable of having a home broadband connection, but currently do not – 16% are classified by Ofcom as “voluntary non ownership” – i.e. they could afford broadband but choose not to get it. The rest of the group is made up of: households who want it but can’t afford it; and households who have a particular reason for not being able to receive a broadband service (e.g they do not currently have a landline installed).

So three challenges emerge if the Government is to realize its ultimate goal of all households actively using the internet via a broadband connection:

1. How do you persuade homes who currently don’t want broadband and have no computer skills (or indeed desire to learn) to get connected and then more importantly learn how to use a PC and the internet?

2. How do you provide broadband access for those who can’t afford it, bearing in mind the cost of providing PC hardware and ongoing broadband and phone line rental subscription costs?

3. How do you provide broadband access to the 1% outside the current coverage without expending huge marginal cost of household connection?

The first challenge is perhaps the toughest.

As Charlie Ponsonby, CEO of the broadband comparison service Simpifydigital notes:

“There are many homes who simply don’t want broadband access – the majority of us have family members who fit that category. For them the challenge will be not providing them with a broadband connection, but the training and incentive that would be required for them to get online and derive value from the broadband service.”

“30% of UK homes still do not own a PC and there are 17 million adults who have little or no experience of using a PC and surfing the web – and have no desire so to do. So for these households the challenge is more about training them to see the benefit and use the internet, rather than a broadband connection per se”

Overcoming the second challenge is also very challenging and potentially hugely expensive.

Having undertaken some form of means testing, major subsidy would be required to provide broadband to the households that can’t afford broadband access. The subsidy would need to cover three areas:

• Cost of hardware – the majority of qualifying households will not own a PC• ongoing subscription cost of the broadband service itself;and potentially • install cost of a land line and ongoing land line rental (unless a mobile broadband solution was provided)

Charlie Ponsonby CEO of broadband comparison service Simplifydigital notes:

“Unlike the universal provision of digital TV, which only requires a subsidy for the upfront cost of the digibox, broadband subsidy is potentially far more expensive, as qualifying homes may need help on the upfront cost of a PC, as well as ongoing subscription costs for broadband and potentially landline rental”

The final challenge of providing broadband to those in rural areas outside the current broadband network coverage, is technically feasible, but potentially extremely costly on a marginal household cost basis.

The three most obvious technical solutions are: an extension of the existing DSL network; extending mobile broadband coverage; and provision of satellite broadband.

Companies like Tariam already provide a satellite broadband service, but it costs over £500 per household to install and costs nearly £40/month. So the margin cost of connecting the 1% of homes who are beyond the current broadband network coverage, would be very significant.

The Government is therefore likely to adopt the same definition of universality as is used for TV, namely that 98.5% coverage of homes is deemed to be universal.

As a result of these myriad potential costs – there is already talk of a broadband tax to pay for universal broadband delivery. So this may be unfortunate news for broadband consumers outside the subsidized schemes.