A Universal Service Obligation for broadband

The government has reaffirmed a commitment to introduce a Universal Service Obligation for broadband, rejecting an offer by BT Openreach that fell short of that objective.  On the Today programme today, the minister responsible for digital policy, Matt Hancock, seemed to me to be saying that the way to achieve universal coverage was to encourage competition and more diverse providers.  Competition, in its nature, can’t and won’t do that.  Competition depends on firms finding an advantage, and choosing what to do and what not to do.  The basic comparison to make is with the postal service; universal services mean that everyone should get mail delivered, regardless of location, at a specified price.

Earlier this year, Ofcom looked at the technical issues involved in extending broadband services.  Among other things, they noted that none of the main providers would be interested in competitive tendering to administer a UniversalService Obligation.  BT Openreach had proposed  a rollout where a small proportion of households – 0.8% – would be diverted towards satellite links or asked to meet the costs of connection.  That’s a bit like saying that postal services to remote areas will be suspended unless people pay a premium (they already do for parcel deliveries.)  Commercially and economically, it always makes sense to unload costs on to the consumer; after all, people in the Western Isles could pick up their post in Inverness.  That misses the point of having universal services.  The costs of serving remote communities can’t be met without pooling of resources between those communities and others.

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