Broadband Industry Event
Thank you all for coming. It has been a confusing couple of weeks for the industry. First the CEO of Google, Eric Schmidt, was in town, telling…
Thank you all for coming.
It has been a confusing couple of weeks for the industry.
First the CEO of Google, Eric Schmidt, was in town, telling us that it is now vital that businesses and government build their strategies around the internet. That we “put internet first”.
Then we had the rock star, Prince, who informed us that: “the internet is completely over”.
As Secretary of State responsible for broadband as well as the music industry I feel somewhat conflicted. But on this one Eric is right and Prince is wrong.
A clear commitment
I hope you are in no doubt whatsoever about how important the Government considers broadband as a part of our economic infrastructure.
In his very first speech as Chancellor, George Osborne spoke about the urgent need to address Britain’s creaking broadband network.
In his very first speech as Prime Minister, David Cameron spoke about laying the cables of superfast broadband within the next five years as a central Government commitment.
And in my own first speech to the sector, I set out how - despite the economic crisis and huge deficit - we will be pressing on to support investment in the superfast network and to bring the benefits of broadband to everyone in the country.
All of us realise that our broadband network is as fundamental to Britain’s success in the digital era as the railway network was in the industrial age.
All of us share the ambition that, by the end of this Parliament, this country should have the best superfast broadband in Europe and be up there with the very best in the world.
We are dead serious about making this happen.
Let me tell you why.
**The best foundations for growth
In the run up to the general election I had the chance to do a lot of travelling around the country and to speak to a lot of people.
Everywhere I went, worries about the economy were the first thing on people’s minds.
People wondering where the new jobs will come from;
Where the new businesses will come from;
Or where the new growth sectors of the economy will lie.
Shakespeare said “Fear not for the future, weep not for the past.”
If we are to embrace a radically different economic future, we must recognise that a substantial part of the answer to these questions lies with the digital industries:
Industries that already generate 10% of the UK’s Gross Value Added - around £130 billion.
Industries that already employ 6% of the UK’s workforce - more than 1.7 million people.
Industries that have kept growing through the downturn, and that will continue to grow rapidly in the years ahead - by an estimated 4% each year.
But in this economic climate, we simply cannot afford to shackle the development of our highest-potential industries by failing to put the fundamental architecture for growth in place.
That means introducing measures right away to ensure the rapid roll-out of superfast broadband around the country.
What exactly will this mean for jobseekers, for small-business owners, and for our local and national economy?
The Information, Technology and Information Foundation has calculated that a government investment of £5 billion in next generation access would create nearly 300,000 jobs.
NESTA says that universal superfast broadband would create double that number, and add £18 billion to the UK’s GDP.
Some estimates say that in California - an economy roughly the size of the UK - next generation access will generate 2 million new jobs.
We only have to look back at the impact of first generation broadband to see that these are not fanciful figures.
First generation access provided a boost to our economy of some 0.5% to 1% per year, and meant that, over a four year period, employment grew 1% more in communities with broadband than in those without.
It also boosted British productivity. Firms that took up broadband early were 22% more productive than those that didn’t.
Of course we cannot fully predict the economic benefits and innovation that next-generation broadband will bring.
But to quote the great British author, Theodore Hook: “The best way to predict the future is to invent it”.
And I am determined that we start bringing the benefits of superfast broadband to bear on the British economy right away.
But, with this commitment, the Government has far more than just economic benefits in our sights. We are determined to deliver social benefits as well.
Today, there are around 40 million internet users in this country, including 30 million who use it every day.
People with broadband at home now value it more highly than their land line, mobile phone or digital TV. Most say that they couldn’t do without it.
Yet there are still 10 million people in this country who have never used the internet. That’s one adult in every five.
And, of these, four million are not only digitally excluded, but socially or economically excluded too.
These are the people hardest hit by Britain’s digital divide. The people who, every day, are missing out on the massive advantages that the rest of us take for granted:
- Like the consumer savings of more than £550 that we make each year, thanks to online offers and the cheapest deals on everything from energy to home insurance;
- Like the rapid, timely public information we receive on issues such as transport services and the swine flu outbreak;
- Like the seven million jobs that were advertised online last year and the earnings uplift of up to 10 per cent for those who are web-literate - meaning an average lifetime earnings increase of £12,000.
That’s why David Cameron has appointed Martha Lane Fox to be the new ‘UK Digital Champion’ - with the task of closing the digital divide and getting the whole of the country online.
But Martha also has an additional role, working with Francis Maude as part of the Government’s Efficiency and Reform programme.
And that is to challenge government departments and the wider public sector to “think internet first” and make much faster progress in getting services online.
**Getting government services online
**Right now, the government is battling to bring down the greatest peacetime budget deficit this country has ever faced.
In this incredibly tough environment, we can simply no longer afford to ignore the massive cost savings of communicating and interacting with people online.
On average, each of us has three or four interactions with the Government each month. By getting just one of these done online - rather than by phone, on paper, or face-to-face - we can make savings of at least £1 billion every year.
Tax returns are the perfect example. They are now almost 100 per cent digital and a great model for how key services can be delivered more cheaply and efficiently.
Parents can now also apply for their children’s school places online - something that Martha has challenged all local authorities to make an online-only service in the next few years.
That’s why Martha and I will be working closely with Francis over the next few months to support the faster migration of Government services online as a way of signalling our commitment to this agenda, and to help drive take up of new broadband services.
We will report on our progress early next year.
**The government’s role
So broadband and next generation access are absolutely vital to the government’s agenda.
Let me now be clear about the role the government will play.
As George Osborne said in the emergency budget: “A genuine and long-lasting economic recovery must have its foundations in the private sector”. When it comes to superfast broadband, there is no question that the market must lead the way.
That’s why I strongly welcome Virgin Media’s announcement that they will start to roll out a 100Mbps service by the end of the year - available to about half of homes in the UK.
And why I also strongly welcome BT’s announcement of an extra £1 billion investment in infrastructure upgrades - extending its optical fibre roll out to reach two-thirds of the UK by 2015.
But we have always recognised that government must do its part as well:
- To ensure that superfast broadband is available to the third of the population that the market may otherwise struggle to reach;
- To drive private sector investment by making the regulatory changes that will bring down the cost of roll-out;
- To drive demand by using Government services as a vehicle to speed take up.
And we are ready to take radical decisions to make that happen.
Last month, I announced that we were supporting a universal service level of 2 Meg as the very minimum that should be available.
I have looked at the provision the Government had made to achieve this by 2012. And I’m afraid that I am not convinced that there is sufficient funding in place.
So, while we will keep working towards that date, we have set ourselves a more realistic target of achieving universal 2 Mbps access within the lifetime of this Parliament.
But I also announced something else:
Our plans to establish a series of Rural Market Testing Projects.
Our aim is to use these to discover exactly what needs to be done to make superfast broadband commercially viable in rural communities as well as urban areas, and to understand what kind of Government support will be necessary.
Right now I am working with my staff to pick out the best locations for these projects - the ones that will allow us to test out different types of solution in different types of rural and remote areas.
I have asked for the procurement process to start in the autumn, so that the first projects will be in place by this time next year.
I also announced last month that we want to cut the costs of investing in superfast broadband networks by opening up access to the existing infrastructure of telecoms and utilities companies.
Today, we published our latest thinking on this - the challenges and opportunities, the risks and rewards.
Now we want you to take a look and tell us what you think.
What kind of changes could we make to the legislative framework, or what other kind of regulatory support could we provide?
How best can we leverage the investment already made in public sector networks to bring down the cost to business?
Should we make it a requirement for utilities companies like Thames Water, for example, to lay empty fibre pipes every time they dig up the roads to avoid having to go to the same expense again?
**To make this process work best for you, we need you to be as bold and as ambitious as possible.
Tell us exactly what you believe needs to be done to make investing in superfast broadband cheaper and more attractive, and to speed up the roll out of next generation access nationwide.
We will be happy to listen. And we will be happy to consider the action that you want.
Based on your feedback, we will come back in September with a clear plan for the legislative change that we need, and a clear timetable for making it happen.