SA must choose its own broadband path
Lord Stephen Carter, former minister of communications, technology and broadcasting in the UK, is in SA this week. Duncan McLeod asked him what lessons SA can learn from other countries as it tries to expand broadband services to the rural and underserviced parts of the country.
Lord Stephen Carter has enjoyed a storied career. He was the founding CEO of Ofcom, the powerful British media, telecoms and broadcasting regulator. He also served as the Downing Street chief of staff under former prime minister Gordon Brown and is now president and MD for Europe, the Middle East & Africa at telecoms equipment giant Alcatel-Lucent. What follows is a shortened and edited transcript of his interview this week with TechCentral editor Duncan McLeod.
Duncan McLeod: SA’s communications minister Dina Pule has said she wants 80% of Africans to have access to the Internet by 2020. In the SA context, what is the best way of achieving this?
Stephen Carter: Well, 2020 is far enough away for people to be able to make predictions without it being immediately evident how you deliver it. When I am doing business planning, I know to a reasonable degree of certainty what’s going to happen in 12 months. I can realistically plan for three years and I might strategically plan for five. That takes you to 2017. 2020 is what I’d call aspirational planning. I think aspirational planning should be part of the role of public policy.
Whether it should be 2020 or 2018 or 2025, we can debate that, but I think that having some target that’s out there, that is beyond normal business planning timelines, is sensible.
But why do you want to do it? I think there are really three reasons why a country needs to have a public policy in this area. These are not in order of importance. One is what I call social equity. Your children will be better educated than my children if I don’t have connectivity. Your health provision and health awareness will be better than mine if I don’t have connectivity. Your opportunities for jobs will be better than mine if I don’t have connectivity.
At a profound level, connectivity is a contributor to social equity, social cohesion and social fairness.
At a second level, you need it because it is now the ultimate industry horizontal. Pretty much in every business I come across, they have a network or IT director. Whether it’s a small business or a large business, connectivity really makes business work. It allows you to transmit information, make decisions, operate in multiple time zones, deliver service opportunities to your customers, keep up to date, plan and reduce costs. And so, if you’re planning a country’s economy, if you do not have competitive connectivity infrastructure, you’ll lose out because companies and individuals will make decisions about where they are based and where they expand based on connectivity infrastructure in the way they used to do with transport.
The third reason you need it is it’s a very efficient multiplier. It’s a bit like leveraged capital. If you have connectivity at the right scale and quality, your ability to get an economic multiplier effect is greater than your competitor.
For any country in today’s world that doesn’t regard this as second only to economic policy, they’re missing a trick.
I also believe broadband policy is actually quite a domestic thing. Communications policy is determined by quite local circumstances. It’s significantly influenced by history, by geographical topology and population density and distribution, and by local cultures and conventions.
In the UK, in the context of this discussion, one of the biggest things it has going for it is it has 60m people living in a tiny location. This means that population densities are very high. Loop lengths are short when you are looking at copper infrastructure and it’s had a very competitive regulatory regime that’s driven significant competitive entry of service providers. That is a market reality that is quite significantly different to SA’s in terms of history, topology and market competition.
So, you can’t write a broadband policy for one based on the circumstances of the other. SA can learn from it but you can’t drop it onto the country. Broadband policy has to be a very domestic thing.
Finally, technology comes in cycles. Depending on when you buy into technology, you have a different view on when you buy into the next technology. If you have countries that have made significant investments in 3G technology, they’re unlikely to make significant investments in 4G technology until they’re extracted a reasonable return on their capital employed. So, you’re seeing the speed of next-generation technology deployment vary.
Who is doing it well and how do we transfer that to SA? We are seeing very different responses, but you have to have aspirational planning. But you have to recognise your own history and where it comes from and it probably requires some form of public intervention. Does that public intervention mean money, or can it be in the form of policy intervention in the way you allocate spectrum or you price wholesale regulation or you allocate licences? I genuinely don’t think there is one textbook lift-and-drop approach to this.
McLeod: What role can the digital dividend spectrum that will be freed up when SA moves from analogue to digital terrestrial television play in delivering broadband to more South Africans, especially in underserviced areas. Operators often warn it’s too expensive to deliver broadband to outlying areas, but can this be done through infrastructure sharing and the latest 4G/LTE technology?
Carter: The level of sophistication and awareness, both politically and in policy terms, about the importance of connectivity is of an order of magnitude different compared to when 3G was being deployed. There is a very high awareness and this allows for more coordinated planning around spectrum allocation and allocation of the dividend.
When 3G spectrum was licensed around 1999 and 2000, people were talking about convergence. It was for the nerds and cognoscenti. Today, in 2012, the convergence of what was previously called broadcasting and what was previously called telecoms is a reality. This allows governments and policy makers to make better decisions, whereas they were previously made in silos. Now, I think, around the world, we have to make real decisions about whether we want broadcasting capacity or telecoms capacity.
Network sharing is the other big change. Partly, that’s just maturity. Network coverage is still a big plus. I may choose one network over another if I think it gives me better reliability, but the industry has moved to a point where they’re willing to accept sharing, even at the active electronics level, because they know their ability to differentiate is at the service level.
Do you actually need to own all the network layers? If you look at the economic returns as the world moves from voice to data, if my economic rent on data is going to be lower than my economic rent on voice, then by definition I can’t afford to have the same capital investment. So, why build two, three or four networks?
In the early days of the airline industry, they’d advertise network benefits. They’d advertise the planes they had, featuring chisel-jawed pilots in front of big maps of the world with arrows saying we fly to all these places. Now, what do they do? They advertise massages, better food, better beds and in-cabin entertainment. The network benefits have homogenised. This almost always happens over time in network-based industries. In airlines, you’ve seen mergers, consolidation, code-sharing and alliances, but still separate service brands.
McLeod: There’s been a lot of interest in the approach taken by the Australian government, which has bought the last-mile infrastructure into homes owned by incumbent operator Telstra. The Australians are building a fibre access network that will reach into 93% of Australian homes. Could that model be applied in a market like SA’s?
Carter: In comparison with other markets, there was a very dominant provider in Australia. So, competitive demands for wholesale access at prices that would allow for scaled competition were loud.
We had a similar reality in the UK. The decision I took when I was a regulator was that structural separation was not needed, that you could achieve an equivalence of access that would match structural separation through operational separation. That ended up with a separate division of BT [formerly British Telecom] called BT Openreach. But ownership of the asset remained with BT, although it had a separate regulatory regime, separate board and separate wholesale prices.
The Australians have taken it to the next stage. But it has 20m people in a big country, with a lower competitive dynamic in the market, and a historical regulatory environment that, on balance, favoured the incumbent. On top of that, you also have to look at politics and policy [in Australia]. The [Liberal-National John] Howard government was coming to an election and you had a new, insurgent opposition, and that cocktail produced an opportunity for debate around broadband policies. It became what the politicians call a retail political issue.
It became as important as the price of gasoline and housing provision and access to water. It became a populist issue. This required significant state intervention. Could you take that and apply it to SA? I don’t know enough [about the SA context] to know, but you have to recognise these are very topical domestic issues and SA needs to fashion a solution for itself.
SA can look to Australia, Singapore, Mexico, Qatar and the UK and then determine what the lessons are and what the right mixture is. You can also learn from other people’s mistakes. That’s the advantage of being a fast follower rather than a first mover. — (c) 2012 NewsCentral Media