Blimey Naughton, blimey

Working on the assumption that the governors of Ruritania (who sign themselves J Hunt and E Vaizey, by the way) are honest but simple folks, we delve deeper into their vapourings in search of a definition of \”superfast\”. On this, they are strangely evasive, but essentially they appear to mean broadband speeds ranging from 2Mbps (megabits per second) – which is marginally better than smoke signals but will be available to even the humblest yokel in the land – to as much as perhaps 100Mbps in favoured urban locations, in which frappuccinos and other delicacies are available. If such heights can be attained by 2015, the aforementioned governors assure their readers that Ruritania will lead Europe.

Right, so building out broadband to every woodshed in Britain is going to cost some dough and our rulers are suggesting that that dough get allocated where it does the most good. If we spend, just as an example, £1,000 in an urban area then we can supply 100 Mbps to 50 hipsters. The same £1,000 spent in the sticks provides one 2Mbps connection to a yokel\’s coon cat.

Not that I say that those figures are accurate but you get the sort of picture, yes?

What should we compare and contrast this with?

Both of these US states have cities called Kansas City and in both of them Google is signing up customers for what any informed person would call real broadband, namely a connection running at 1,000Mbps. It uses fibre-optic cables to give gigabit (1,000Mbps) connection speeds to subscribers. For $70 a month on a 12-month contract, Google promises them up to 1,000Mbps upload and download speeds, plus a terabyte (1,000 gigabytes) of free online storage. Alternatively, for a one-off $300 connection fee, Google offers them 5Mbps download and 1Mbps upload free for seven years.

My, that is good. How on earth are they managing that?

Since Google is not a registered charity, you may ask why it\’s doing this. The first reason is simply that it can, because ever since the collapse of the first internet boom, Google has been acquiring, at knockdown prices, the bandwidth capacity (the \”dark fibre\”) installed by the telephone companies at the height of the bubble.

Oh. That\’s interesting. You mean that things are different when you pick up a sunk asset at a fraction of installation cost?

Why, fancy that. Using something that exists being a different financial equation than building something anew? Learn something new every day don\’t you?

The second reason for the Kansas City projects is that, under its new chief executive, Larry Page, Google appears to have acquired a new appetite for radical strategic moves. Page knows that once consumers have access to real – as opposed to Ruritanian – broadband then their behaviour changes radically. Not only do they spend more time online (which obviously benefits Google), but they also use the net for nearly everything, which also benefits Google and is why phone companies, cable TV firms, broadcasters, publishers and their captive regulators fear the internet. If Google Fiber (as they call it in the US) catches on, then a swath of powerful industries is in for a very rocky ride.

And – who knows? – one day news of these developments may reach the rulers of Ruritania. Provided that they manage to get their \”superfast\” connections up and running.

And then we get the piece of cretinism.

We\’ve just shown that Google is doing this for their own commercial reasons. Private actors think that they can make money by installing this infrastructure.

At which point therefore we must subsidise that infrastructure with public money.

What? If it\’s privately profitable then no subsidy is required.

And if it\’s not privately profitable then we probably shouldn\’t subsidise it: not unless there is some rather strong public goods argument we shouldn\’t at least.

It\’s out old friend again, ignorance away from ones\’ knowledge base. A tech guru is trying to talk about the economics of tech. And not knowing any economics (nor, it seems, finance) isn\’t getting it right.

You cannot compare the costs of building a service on orphan assets with the costs of building those assets in the first place. And if something is rivately profitable then it does not need public subsidy. Finally, the argument in favour of public subsidy is not that something might be nice to have. There has to be a reason why, some public goods argument say, why some should be taxed to provide a benefit to others.

13 thoughts on “Blimey Naughton, blimey”

  1. Isn’t it “private actor can make money from this by buying up existing infrastructure for a fraction of its install cost”? Looks like whoever built the infrastructure lost enough money to go broke on the deal.

    So if you want it some subsidy is there, whether that’s from the public purse or from a failed investment.

    Incidentally, I’ve heard it’s overinvestment in wires and such that makes our international phone calls cost on the order of 1% of what they cost just 20 years ago. There’s more wire than voice and data to send down that wire.

  2. I doubt that having 1 gigabit broadband makes much difference to how much people use Google’s services. If you’re running at 4-5mbps, even video at 720p resolution will hardly be buffered.

    Google just does odd stuff sometimes. They play around with stuff just to see where it can go (e.g. Google Glass). They know that you’ve got to experiment to find new markets.

    Very few rural businesses need more than 2mbps. You either need to be big (so probably not rural) or doing something specialised like video production.

  3. At the moment my 2mb service in the boonies is crap. It’s crap because of all the stuff that people are trying to stream while the Olympics is on (I think).

    Companies are trying to get people to stream more stuff, but the infrastructure isn’t going to take the load. So, we need an infrastructure upgrade.

    Question is, who funds it? Personally, I’d prefer it to be the companies who stand to make money from their streaming operations. But I’m a tecchie, what’s your opinion Tim? How do we get the infrastructure?

  4. The motivation for the spending is this bit: ” If such heights can be attained by 2015, the aforementioned governors assure their readers that Ruritania will lead Europe.”

    They want something to crow about.

  5. Well I think The Scott Trust Ltd should fund it – releasing funds by closing its antique newspapers. May I take it that we’re all agreed?

  6. Oh, so if broadband give s50 times as much info/service per second I will spend more time online?!? I don’t think so. Even Stephen Hawking would not want 50 times the amount of data that I feel that I need to download.
    Secondly pretending to justify a complaint that the UK is providing faster high-speed broadband in cities than mid-Wales by exampling Google’s provision in two cities is – well, I shall not say “moronic” because that would be an insult to those “otherwise intellectually abled”, so “it does not meet the ethical standards that I am professionally required to observe”

  7. @Tim N,

    The issue isn’t that rural businesses need high speed broadband, its that rural areas need diversity.

    In this part of Ruritania (North Dorset) we struggle to get 1mbps. One of the landowners build a business center that hasn’t been used because there isn’t a decent internet connection.

    Even the nearest town, Blandford, suffers and there are reports that new businesses are setting up in Bournemouth rather than out here. In the early days of the Internet there was much talk of it helping rural areas, the opposite appears to happening and it is driving urban migration.
    R

  8. SimonF,

    In this part of Ruritania (North Dorset) we struggle to get 1mbps. One of the landowners build a business center that hasn’t been used because there isn’t a decent internet connection.

    Even the nearest town, Blandford, suffers and there are reports that new businesses are setting up in Bournemouth rather than out here. In the early days of the Internet there was much talk of it helping rural areas, the opposite appears to happening and it is driving urban migration.

    Get together and hire a company like Rutland Telecom to install a Fibre-to-the-cabinet (FTTC) connection if BT don’t think it’s viable. One village had the job done for about £40K and went up from 0.5mbps to 32mbps.

  9. Funnily enough I looked in to that a couple of years ago. We are ribbon developments and the tulle density is quite low. Further more the exhange also needs an upgrade.

    We are currently looking at radio based solutions WiMax isn’t bad and LTE has some potential but needs to be in fixed mode not mobile.

  10. @ Simon F
    Siberia is quite good at that (given their population density and their technological talent it is not surprising). I haven’t been there since 1995 but even that long ago the Siberian Institute of Mines was ahead of the UK in mobile telecoms which are economically far superior to fixed lines in low-population-density areas. I assume that my contact has retired by now but many of his junior lecturers should still be there.

  11. Even the nearest town, Blandford, suffers

    Get rid of the Royal School of Signals and it will be all right. Honest. Effective rule of both thumbs if not of nature – and beware correlation rather than causation – but any MoD Signals establishment within 5 miles halves the maximum possible broadband speed. The effect on 3G is more pronounced but less predictable.

  12. SE,

    That’s an interesting observation about MoD Signals. Its 20 years since I left the Corps, so before broadband, but I wouldn’t be surprised as I know there used to be a problem with voice lines on some exchanges near military establishments.

    Its not just a last mile problem here. As I understood it BT needs more fiber to the main exchange in Blandford and then to upgrade capacity to satellite exchanges in the country. At one meeting I went to it was suggested that if the district council and NHS could sign up to a 10 year deal with BT that would give them the economic conditions to invest more but it was outside Govt procurement rules. I don’t know where they stand now because my offer to get involved (free consultancy from a telecoms consultant) wasn’t even answered.

    And yes I know this is BT trying it on, that’s what you get in this failed market.

  13. Very few rural businesses need more than 2mbps.

    And nobody needs more than 640K, and there’s a worldwide demand for about 5 computers.

    Streaming video eats up large amounts of bandwidth, and the trend towards video on demand means you can’t multicast it. Video in place of phone will become normal when the infrastructure is widespread enough to support it well.

    Some kind of true 3D display will increase the amount of data by a load.

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