Ofcom shows wisdom in broadband judgment

Looking back, Ofcom’s Solomon-like judgment on the vexed subject of broadband access may well seem historic; the origin of a historic marketing opportunity, that is.

At first sight, nothing could be drier than the tussle over who controls the ‘last mile’ or ‘final loop’ of telecoms cable into people’s homes. Currently, it is the exclusive property of BT, through its wholesale (or network) operation. Rivals have complained that this stultifies healthy competition, because BT can bias internal pricing in favour of its own fixed-line and broadband retail operations. Prices remain high, and broadband capacity limited through lack of investment. All this at a time when consumer demand for broadband is mushrooming.

One option for Ofcom – and it certainly threatened to do this – would have been to order the break-up of BT’s retail and wholesale operations, opening the market at a stroke. But this was always a clumsy option: messy for BT, for its shareholders, and most importantly – in view of ‘who benefits?’ – time-consuming and disruptive for the very competition desperately intent on achieving an equitable outcome.

Hopefully, Ofcom’s compromise solution – in effect, machine-gun turrets mounted on BT Chinese walls – means that from next January, when the new regulatory regime comes into force, BT’s broadband rivals will have the commercial confidence to spend money on putting their own equipment into BT exchanges, knowing that they really can control that final link into consumers’ homes (not to mention businesses). Result: considerably enhanced access speeds (for example, 20Mbps as opposed to the current ceiling of 8Mbps) and price tariffs that make the present ones look like extortion.

All very well, you may say: people will, of course, welcome the price cuts; but who needs 20Mbps for e-mail and browsing the Net, which is all that most of us currently do with broadband?

But that’s now. There is good reason for supposing we are perched on a cusp where internet usage is concerned. Just round the corner is not only the mass adoption of internet telephony, but also the far more demanding requirements (measured by Mbps at least) of television- and video-on-demand provision. In other words, the basis of content on the internet is moving from text to video.

This certainly seems to be the thinking at the big internet portals such as AOL, MSN and Yahoo!. For them, superior broadband access raises the possibility of bypassing the TV networks. At the moment, they are highly dependent on these self-same network TV companies for content, and would be foolish to voice their ambitions publicly. But their broader audience range and 24-hour broadcasting framework make the portals an attractive alternative. Indeed, in a small symbolic way, Pepsi-Cola may have mapped out the way when it agreed, this month, to transfer its sponsored music video show from the Warner Bros network in the US to Yahoo!.

Who’s to say that, in the future, people won’t prefer to watch their favourite soap from the lean-forward computer monitor rather than the lean-back TV set? And will we able to tell the physical difference anyway?

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