An article from The Independent Sunday (London, England); 7/11/2004; Robinson, Bill Byline: Bill Robinson Anyone who has a broadband connection knows what benefits it confers, and how quickly it becomes an indispensable part of life. Email has had a revolutionary impact on how we communicate with one another. The office day, for a large proportion of the population, now revolves around the PC in its capacity as an email terminal. The telephone still plays an important role, but email has largely replaced the post. I read many more words on my computer screen than in print during the average office day. But not everyone has a broadband connection and that is a looming policy problem. Broadband is one of those networks that interest economists. The others - telephone, gas, electricity, water, broadcasting, post - all play a central role in our national life. We take it as read that every citizen in the UK must have access to all of these networks at a reasonable price that is broadly the same for every household. When you think about it, that is a remarkable commitment, because it clearly costs a great deal more to connect someone to the water mains if they live in a remote rural location than if they are in the centre of town. And the same is true of all the other networks. Connecting remote areas to any network usually involves digging miles of trenches - a considerable investment that cannot be justified economically by the additional revenue that accrues as a result of adding just one person, or even just one village, to the network. What this means is that if gas or electricity or the telephone were invented today, and run by profit-making companies, we would not see 100 per cent rollout of those facilities. People in remote areas would simply be too expensive to connect. We only have universal coverage of the older networks because society chose to bear the costs of connection collectively. The expense of reaching remote locations was never compared with the extra revenue generated by hooking them up. The networks were simply rolled out, gradually but completely; expense was only a consideration in as much as places off the beaten track were the last to be connected. The interesting feature of broadband is that it is the first new network to come along in the post-privatisation era, and it is being rolled out by profit-driven companies which do compare the costs of connecting new subscribers with the revenue stream they might be expected to bring. These calculations provide a strong commercial incentive to invest in the broadband network covering more densely populated parts of the country. But the costs of providing full rural coverage are vastly in excess of expected revenues. The result is that, without some public intervention, broadband rollout will stall well before it reaches 100 per cent coverage. In my view that is not a sustainable, or an acceptable, long-run outcome. Broadband connection will be to the society of the 21st century what the post was to the 19th century and the telephone to the 20th. Making the investment to connect remote locations to broadband is no more expensive, in proportionate terms, than the investments we chose to make in the past to connect people to the telephone and to supplies of gas, electricity and water, or to beam television programmes into their homes. Sooner or later, we will make similar investments in broadband connections. But how will they be financed? By public borrowing under the Golden Rule? Or by imposing a universal service obligation on broadband operators, and allowing them to put up the charges to urban users to subsidise rural ones? Let the debate begin. Bill Robinson is director of economics at PricewaterhouseCoopers.
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