El Gordo\’s latest idea: Let\’s ignore geography

Yes, yes, splurge that tax money all over the countryside as if I, El Gordo, were John Holmes pleasuring my harem!

But I am clear that this transformation must benefit us all, business and consumers alike, in every part of the country. Digital Britain cannot be a two-tier Britain – with those who can take full advantage of being online and those who can\’t.

Do stop being such a fool, please. Fast broadband has technological limitations. These limits are connected with simple geography. You can\’t have an ASDL further than a certain distance from an exchange. Yes, that distance is increasing, but it\’s still a physical world limitation. You can\’t have a mobile connection further than a certain distance from a tower. Yes, that distance is increasing but it\’s still a physical world limitation.

This promise that all shall have high speed broadband simply isn\’t realisable….except at huge and grossly disproportionate cost.

Just like we do not have perfect TV reception all over the country (yes, there are still black spots), we do not have perfect mobile telephone connections all over the country (ditto) and I\’m willing to wager that here are hill farms out there which are still not connected to mains water or sewerage.

Geography is an inescapable part of economic life. Just as with the provision of libraries, swimming pools and restaurants, it just doesn\’t make sense to spend ghastly fortunes on making a specific service available absolutely everywhere.

41 thoughts on “El Gordo\’s latest idea: Let\’s ignore geography”

  1. Read the whole article. It’s a softening up exercise for plundering the public further to pay for state media, extending onto the internet and so on. It’s the odious tosser Stephen Carter’s infamous welfare for wankers scheme, again. Everyone must have an internet to receive the glorious taxpayer funded content that we are to be so generously provided with, whether we like it or not.

    Really, I’m really, really sick to death of all this. I’ve had enough. It just isn’t funny any more. The state is out of control, it’s run by people who are both evil and barmy. I do not want the internet run by the state. It is fine as it is. Go away, Gordon. Just for god’s sake leave well alone for once!

  2. I’m perfectly willing to buy the argument that Internet access is part of the public infrastructure that is essential for commerce, just as having a rail network, roads, or literacy. Subsidising rural broadband via Wimax or rate-adaptive ADSL or whatever seems to me to be reasonable.

    Having said that, the rationale being that one can access direct.gov is utter toss: Using Government web sites is something to be avoided not encouraged.

  3. I’m perfectly willing to buy the argument that Internet access is part of the public infrastructure that is essential for commerce, just as having a rail network, roads, or literacy.

    Rubbish. None of these things, least of all an interent, is essential beyond the desires of some to provide them and some to consume them. The railways in particular need closing and returning to nature.

    Subsidising rural broadband via Wimax or rate-adaptive ADSL or whatever seems to me to be reasonable.

    The same argument used when we invented nationalisation (yes, it was Britain) when we nationalised the Telegraph. It is terrible, it was said, cities are full of telegraph offices and people in tiny rural hamlets are missing out, it was said. And when it’s run by the state it will be more efficient and make a profit, it was said, and it didn’t.

    The facilities available to dwellers in different locations depend on those locations. There are some benefits to living in the countryside (fresh air, freedom, making love in a meadow, the stench of sileage, not living in a pokey flat with neighbours’ stereo booming through the ceiling) that are not available to city dwellers, who get other facilities, such as being close to a telephone exchange and getting broadband, or easily accessible shops, and proximity to work, etc. The whole point of choosing a location is to weigh up the pros and cons. Some things you don’t get in the countryside. Some things you don’t get in the town.

    By subsidising the countryside in this way, we export value from cities to hamlets. People will consider the hamlets more desirable places to live, because they have all the mod cons of the city, without the shitty bits. Then Tarquin and Jemima move out to Bufton-On-The-Wold, and property prices rise (assisted by Tarquin and Jemima supporting legal protection of their rural idyll from property development, leading to housing shortages).

    Which is all a long winded way of saying that all this does is futz up the market, yet again. Which is all the government can do.

    Nobody has a right to high speed streaming porn, any more than a right to a branch railway line or a nice view. You want the facilities that are only commercial viable in densely populated areas, move somewhere densely populated. Don’t make Denzil of Hackney who can’t sleep because his neighbour plays Snoop Dog at 3am pay for it. It’s not being fair. It’s being grossly unfair.

  4. “Rubbish. None of these things, least of all an interent, is essential beyond the desires of some to provide them and some to consume them. The railways in particular need closing and returning to nature.”

    I am ignoring the rest of your post. On the basis of your past rants you are incapable of understanding the existence of essential infrastructure let alone the principles and necessity of eminent domain.

    Any further discussion with you on this topic would be, I suspect, as pointless as discussing nutrition with that fellow in London with the “less passion, less protein, meat, fish beans” sign.

  5. Thanks for that Kay. It appears that you lose, then.

    Let’s just remind ourselves that if infrastructure generates value, it will generate profit. If it generates profit, the private sector will create it willingly. If it cannot generate profit, it is creating less value than it consumes in its creation and maintenance, and is thus a net loss to the economy and thus it would be better not to have built it in the first place. Right?

  6. We live not in a hill farm but a few hundred metres from the mains sewage system. Yet the economics of linking us to it are said to be prohibitive, because of the geography of the location (the sewage would need pumping uphill). Hence we and out neighbours pay privately for a septic tank service – maybe the taxpayer should subsidise that, as it is ‘unfair’ and discriminatory that some people have to pay more than others for their personal ablutions?

    That said, if the government has to spend our money I tend to think that investing in this sort of infrastructure has some point, as it empowers individual people directly and is an enabler for wider creativity (see eg the arguments for scrapping ‘development assistance’ as currently practised and promoting Digital Africa, to let loose Africans’ own energies).

    Which is not to say that every last home in the UK should get this facility; some places are so remote that the whole point of being there is to be remote?

  7. We have had a Universal Service Obligation for telephone lines since the phone was recognised as a part of the economic and social fabric of the country. These proposals are only extending that USO to the delivery of 2mbps data which, funnily enough, just happens to be about the minimum speed needed to watch iPlayer and other Internet TV.

    The whole thing has been horse trading though. ADSL cannot deliver in great swathes of the country and its just not line lengths that are the problem. Some new towns and areas were built using aluminium cable for the telephone lines instead of copper. Aluminium doesn’t support ADSL.

    The solution is the use of 4G broadband radio like WiMAX and its cousin LTE. This might just be economic in areas like Milton Keynes but won’t be in the boonies.

    The mobile operators have seen a bit of an angle here and are trying to trade offering 3G HSPDA+ as a solution in the short term in exchange for getting access to cheaper spectrum at 2.6GHz for true 4G services. They are using this argument and the refarming of 900MHz spectrum to delay and change the planned auction of the 2.6GHz spectrum. (Why wouldn’t they, LTE won’t be available until 2012 and it ain’t an evolution, so their shareholders will be going berserk at the thought of yet another spectrum auction and technology roll out!*).

    The problem with this argument is that HSDPA isn’t man enough for the job and LTE won’t be rolled out in rural areas anyway, at least not in the first 2 or 3 waves as the same economies hold true for LTE as they do for every other technology.

    So it is all down to rent seeking and suckling the tax payers teat. But hey, it will get a few good headlines for Gordon.

    *There is an argument doing the rounds in the mobile industry that LTE will only built in a few city centre hot spots. All the UK mobile networks are part of international groups and the feeling is that there will be better ROI by investing in growing markets overseas rather than poorly paying data services in this country. Industry experts like McKinsey already reckon they are selling data way below cost and the growth in data on their networks is screwing their voice networks and revenues.

  8. We have had a Universal Service Obligation for telephone lines since the phone was recognised as a part of the economic and social fabric of the country.

    The telephone was nationalised because it was a new competitor to the already nationalised telegraph.

  9. @6, so you believe that all economic benefits associated with any innovation, investment or transaction are immediately captured as producer profit, then? That’s an, erm, unconventional approach.

  10. Apostate Guardianista

    the technocrat sees only a uniform grey cheese like substance ready to be pressed obediently into shape

  11. Clearly the government wants us all to have internet access. Technological progress means everyone can have their own Telescreen.

  12. “Thanks for that Kay. It appears that you lose, then.”

    Sigh. I really don’t want to get into this with you. The whole “private sector will do it” stance is nonsense because the private sector didn’t build the railways or the canals or telegraph lines or power pylons on their own. They all required acts of Parliament in order to secure the ability to purchase essential rights or property. You’ve argued that doing that is unfair and shouldn’t be allowed, and merely asserted that if it wasn’t allowed these things would come about anyway.

    If we put your views aside and accept that collective action is sometimes necessary, we come to the question of whether some infrastructure is so beneficial to all that it should be subsidised. Quite clearly we all benefit from widespread literacy. No private organisation could possibly take on the burden of teaching people to read and write merely to create an educated market for their products and services (or, rather, if such a private organisation existed it would be of such proportions to have all the hallmarks of the state).

    The state clearly needs to arbitrate in the creation of some infrastructure. And needs to directly fund some. The debate ought to be on a consistent approach to this, not on sticking fingers in ears and yelling “never never never”.

  13. @6, in general, yes, but with the caveat that a good which creates positive externalities could create positive value without being able to generate a profit.

  14. “Aluminium doesn’t support ADSL.”

    Nor indeed does the fibre that BT installed being all modern and like. And yet not actually delivering fibre-based broadband.

    Still, none of this enrages me as much as those hippies on Gigha who got millions to fund their infrastructure (e.g. wind turbine) and then had the gall to lecture us all about living a sustainable lifestyle. It’s not bloody sustainable if it requires half a million quid per person, is it?

  15. Kay, let’s not get into compulsory purchase, not least because internet provision has nothing to do with that.

    No private organisation could possibly take on the burden of teaching people to read and write merely to create an educated market for their products and services (or, rather, if such a private organisation existed it would be of such proportions to have all the hallmarks of the state).

    Well, that’s just an assumption. There is no reason why a monolithic organisation is needed for teaching. It’s questionable whether even schools are needed for teaching. I don’t think they are, personally. Certainly there’s no proof that the state needs to do it. In the USA, prior to state schooling literacy was very high, almost universal in some states. If parents are literate, they can teach their children. It’s not hard, despite the claims of professional educators. One startling statistic (from US army recruitment tests during conscription) was that the literacy rate, particularly among blacks, went down after mass factory schooling.

    So I simply dispute your belief in “collective action”. We presume that because it is done this way, it is the only way it can be done. To be anecdotal- in my father’s youth his village had a voluntary ambulance service. Then it was nationalised and the ambulance station closed. A couple months ago, my dying aunt waited three hours for an ambulance. But we insist that only the state can provide this “public good”. O RLY?

    Back to edjication. We currently spend six grand per child, via the state. When Tone came to power, it was under three grand. Allowing for state inefficiency, we can guess that basic private sector schooling could be sold for about two grand per year. Most parents could afford that. So why do we have the state do it? And why the feck is literacy a “common good” anyway? It’s an individual good!

    The state clearly needs to arbitrate in the creation of some infrastructure. And needs to directly fund some.

    I don’t believe you. Those are assumptions which should at least be subjected to testing- I suspect nobody dares because the answer would be that the assumptions would be disproved.

    Now, why does every home in the country need state subsidised streaming porn?

  16. @16 Paul, my reservation about discussing externalities, positive or negative, is that they are often very difficult to quantify (or even qualify). For instance a road might be seen as positive (bringing trade and development to an area) or negative (ruining the quality of life of a peaceful rural community). Which is true, and how to economically quantify those externalities, is rather a matter of opinion.

  17. “There is no reason why a monolithic organisation is needed for teaching.”

    To clarify: I didn’t say that a monolithic organisation would be necessary to provide education. In fact, evidence is that the state is a lousy educator. It should go no further than providing the resources for others to actually do the education.

    “But we insist that only the state can provide this “public good”. O RLY?”

    No. I don’t insist on that. Far from it. I do insist that certain things need to be funded collectively, and sometimes that means national government funding.

    “And why the feck is literacy a “common good” anyway? It’s an individual good!”

    It’s a common good that we can all rely on the ability to write something (“Warning! 20,000 volts!”) and for people to understand it. It may well be an individual good too, but that doesn’t preclude it being a common good.

    “Now, why does every home in the country need state subsidised streaming porn?”

    You seem to be obsessed with porn. Would it be different if it was streaming political discourse? In any case, no-one subsidises my streamed porn: I’m paying for it. There’s a big difference between subsidies being applied in some places in order to be able to purchase a service and being given a service for free.

    The world is moving on to the net and for the common good it is important that we can rely on people being net literate and capable of accessing the net. This allows all kinds of efficiencies elsewhere (such as services being web-only).

    To put this all into perspective for a moment, why are we getting so worked up about this? I’d far rather Gordon Brown hanged for all the things I’m too tired to even type than for this.

  18. @19 Ian, that’s true, but there are some issues where the economics can be quantified.

    For example, if I own a house which is in a state of disrepair, as an eyesore, it will have a negative impact on my neighbours too. If the repairs would cost me more than they would increase the value of my house, then I generally won’t carry them out before trying to sell the house, because it wouldn’t be profitable for me.

    However, it may well be the case that the repairs would increase the value of my neighbours’ houses to such an extent that the repairs create total increased value in excess of my expenditure, all of which should be fairly easy to calculate.

    In that instance, the expenditure would create positive economic value, but wouldn’t generate a profit.

  19. Some clarifications (in no particular order):

    1) McKinsey are not telecoms industry experts (this is not a critique against McKinsey, just a statement that they are the pure definition of generalist strategy consultants, also the argument attributed to them is not false)
    2) WiMAX is not (necessarily) 4G but 3G
    3) HSDPA would probably do the job just nicely in rural areas in terms of capacity, the problem there being rather about the spectrum band than about the technology itself (higher spectrum bands means shorter propagation). The rationale for using LTE in highly densely populated areas is that that’s where you have capacity constraints (but not coverage)
    4) Fibre doesn’t support ADSL because it’s…fibre and not copper (ADSL is a copper based delivery technology). It however supports fibre. However the fibre that is to be rolled out by BT would support ADSL as the fibre would be rolled out to exchanges from where copper would deliver to homes
    5) It is more than possible to have USO without nationalising
    6) LTE is an evolution of W-CDMA, further it is more than possible to use the same spectrum currently used for 3G for LTE

  20. @21 Paul, I take your example. However, I think the problem with externalities is that there is no limit to what may be counted as an externality. Not so long ago it was widely held that black families moving into a street affected house prices. Less inflammatorily, the choice of what to plant in my garden affects others, and what colour I paint my house. We end up with an infinitude of externalities, and arbitrary judgements about which are significant (or acceptable to declare) and which are not. Ultimately, every market price is set by this infinite sea of externalities. Everything affects everything else.

    It’s particularly troublesome when we only count the externalities we can measure. For instance, we can measure externalities of cost of alcohol- crime, criminal damage, street cleaning etc which tend to be negative. What we can’t meaningfully quantify is the pleasure and entertainment value of alcohol, the sense of community provided by a local pub, the mental illnesses that didn’t occur because lonely people had somewhere to go for company and a chat, and so on.

    On both counts, our attempts to calculate will be incomplete or biased or meaningless. Even with providing internet, what are we going to count? Kay tells us that something unquantifiable called net literacy is a public good. Maybe it is. Somebody else may say the net damages community, causes porn addiction (yes, I’m totally obsessed), causes family breakdown, teenagers forming suicide clubs, playing violent video games that make us stab each other and so on. Perhaps if we could make the full calculation, we’d find the state is subsidising a collateral negative!

  21. @24 Ian B, I’m in broad agreement with that. My intention wasn’t to say that every positive externality should be priced or even to relate it to the issue of broadband, I was only trying to address the question:

    “Let’s just remind ourselves that if infrastructure generates value, it will generate profit. If it cannot generate profit, it is creating less value than it consumes in its creation and maintenance, and is thus a net loss to the economy and thus it would be better not to have built it in the first place. Right?”

    That’s probably true in the vast majority of cases, but in others, transaction costs and free rider problems can result in infrasctructure generating an economic gain but being unable to generate a profit.

    Whether or not we accept that or try to address it is a separate issue.

  22. Emil,

    1) I have no specific connection to McKinsey other than working alongside them occasionally in the past. I can assure you that have some very good telecoms specialists and are also plugged in to MNO’s at board level. Their report on costs of delivering data is as good as you’ll get anywhere
    2) WiMAX 802.16e is a 4G technology. It is OFDMA and designed for data as opposed to 3G/3.5G which are predominantly voice technologies used for data.
    3) I have seen test results of HSDPA in the field that show’s that maybe one person close to the site might get 2mbps peak rates. Move away or add another user and throughput dies. There is much discussion of where LTE will be built. Initially it was believed it would be in city centres in what are referred to as “on the pause” locations where the demand for capacity is high, as you say.

    However, with the growth in 3G dongle sales some believe that many of these are for fixed line substitution and that this trend will grow. If this is the case then LTE may be needed in suburban areas as well, especially areas of high rental density for students and others who move regularly.
    4) Agreed. Fibre is needed to be pushed out to the cabinet/kerb if ADSL rates are to be improved, though.
    5) Indeed. When BT was first privatised and competition allowed there was a formula for new entrants to start contributing to BT’s USO obligation as soon as they reached a certain market share. (Off the top of my head it was 10%, but I am happy to be corrected on that one.)
    6) LTE is an OFDMA air interface in the downlink which is specifically designed for data, it is nothing like CDMA. By evolution I was mainly referring to the fact that operators will have to roll out completely new equipment to sites. Later base station may be software upgradeable to the new standard, but this would mean taking down the existing service. In that respect MNO’s are going to have the cost of a new roll out. Albeit not as much as the 2G and 3G roll out’s.

  23. @25 and @26 pretty much say it all, regarding the economics and the telecoms sides respectively.

    (& I almost choked on my coffee on reading that McKinsey don’t have serious telecoms specialists…)

  24. “I think it’s a very poor show that no-one has ever dug a canal to service my part of town.”

    What you need is a rope and Gordon Brown. Gordon is very good at digging himself into a hole. If you just pull him along slowly using the rope, he’ll make you a canal.

  25. @25 Paul yes, sorry, I wasn’t trying to imply opinions you don’t hold, I went off a bit general as is my wont.

    I see your point, however I think the problem in the real world once we get beyond first-line economic considerations- that is, can the product sell to customers at a profit- we simply land in the unknown and nobody can make the calculation of economic benefit with any certainty, although we can certainly see that could happen in theory. So the awarding of subsidy is an impossible calculation.

    I think we particularly need to consider Bastiat’s “that which is unseen”, on two levels. Firstly the obvious one that the subsidy is depressing other economic activity generally, so we would somehow have to show that the economic benefit of the e.g. railway line to the commnities serves actually outweighs the subsidy.

    But there is a second issue of economic transfer- that is the economic benefit is likely to be at least partially at the expense of other economic activity in the nation directly, that is the economic benefit has simply transferred from one location to another with no net benefit at all, though one can be measured locally.

    For example, if we build a railway line to a coastal destination, they attract holidaymakers. However, those holidaymakers have been transferred from other locations who suffer a loss as great as the one gained by our new line. Property prices rise in the new place, and fall in the old one, cancelling most of our net benefit.

  26. Hmm.

    Interesting, isn’t it. The fact that country dwellers have roads, the buses on them, railways, telephones, electricity, sometimes gas, water, sewerage, post etc etc that are subsidised by city dwellers is thought to be an argument for forcing city dwellers to subsidise their internet connections.

  27. “Property prices rise in the new place, and fall in the old one, cancelling most of our net benefit”

    The cake is a fixed size delusion.

  28. Brian.

    Hmmm

    Country dweller subsidise city dwellers by not taking up space in their particular hell-holes.

    We all pay the same taxes, we’re all entitled to the same basic facilities.

    Get used to it.

  29. GeoffH-

    The cake is a fixed size delusion.

    No, not that at all. The cake can be made smaller or bigger depending what you do. If you actually create value, it gets bigger. If you’re the government, most of what you do destroys value, making it smaller. The issue I’m discussing is whether the subsidised service is actually generating value, or just transferring it from place to place, or even destroying it.

    We all pay the same taxes, we’re all entitled to the same basic facilities.

    No, no you’re not. You may be “entitled” to the same amount being spent on you. In which case, you’re not entitled to a greater subsidy than anyone else. You want to live in the back of beyond, pay for somebody to run 10 miles of cable to your ramshackle shed, instead of expecting somebody else to pay for it for you.

  30. And apparently this new universal human right is so vital to existence that the government are going to start denying it to naughty people at whim.

    So, we all need, cannot live without, 2Mb/s. Except filesharers, who can be throttled down to dial-up speeds, presumably. How will they live?!

  31. “No, no you’re not.”

    Oh yes, we are. You want to live in a hell hole of a city, don’t expect me to subsidise your metro system. Or your Opera House. Or the extra policing you need, etc, etc.

    I don’t get a poorer health service than you because, perhaps, you pay higher taxes.

    Get that sour plum out of your mouth before commenting any more.

  32. @the great Simpleton 26

    Mobile Operators already understand that they sell services below cost? Where can I see this McKinsey report?

  33. Oh yes, we are. You want to live in a hell hole of a city, don’t expect me to subsidise your metro system. Or your Opera House. Or the extra policing you need, etc, etc.

    The correlation between policing levels and crime rates is so consistent over such a long period that it’s now irrefutable that policing causes crime. You’re lucky you have so few.

  34. GeoffH: “You want to live in a hell hole of a city, don’t expect me to subsidise your metro system.”

    I don’t think you should. You cover the cost of your transport and communication infrastructure, I’ll cover mine and then nobody has any cause for complaint.

  35. @the great simpleton 36

    I would be grateful email gary dot taylor at my-office dot co dot uk

    thanks,
    Gary

  36. Agree with all you say, but it misses the point of Brown’s announcement.

    It’s true, Brown has no concrete funded plan to bring about universal broadband, but like many, many New Labour initiatives this doesn’t matter to them. It’s all to do scoring points, trying to grab votes, and making Brown look good in the short term.

    Within a week he will have moved on to the next headline grabbing iniative.

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