UK government cans broadband demand aggregation project

Slow processes and poor business case blamed

A UK government initiative predicted to save £200 million (NZ$540 million) on the public sector’s estimated £1 billion broadband cost by using regional aggregation bodies to pool public sector buying power has led to savings of just £3.5m in the year it has been running.

After spending £15m setting up the scheme, the Department of Trade and Industry (DTI) is to stop the funding and close the national aggregation board. The future of the nine regional aggregation bodies — known as Adits — will now be left in the hands of regional development agencies, but some have already closed.

Adit is not an acronym but an old English word meaning entrance or access.

Aggregation has been a significant feature of regional encouragement of broadband use in New Zealand, within and around the Probe project and independent regional initiatives.

New Zealand broadband promoter Simon Riley sees the failure of the project as evidence that demand aggregation does not work other than in a strongly competitive environment.

“In a truly competitive marketplace there may be a marginal business case for applying demand aggregation,” he says. “This is certainly not the case here in New Zealand and even in the UK where LLU has been in force for a number of years. Ofcom [the UK telecomms regulatory agency] is clearly not satisfied with the level of competition in the UK marketplace.”

Probe wasn't even a real demand aggregation project, Riley suggests, because the schools were still given a choice of the Probe provider or someone else; there wasn't a committed customer base. "If a telecommunications provider had asked my advice about bidding for Probe, I'd have said 'Don't go near it'."

UK commentators, however, quoting from a draft government report to the responsible director at the DTI on the plan’s termination, attribute its failure to internal errors as much as a lack of justification for the aggregation strategy.

“Implementation was rushed and became partly counter-productive at the launch stage, with negative impact on subsequent progress," the document says.

The report criticises the government's original business plan for the regional aggregation bodies to become self-sufficient, indeed profitable, through a markup on procurement costs. The business case also relied too heavily on anticipated revenue from high volume “foundation customers”, particularly a National Health Service broadband backbone project known as N3, it says.

UK online publication silicon.com suggests the Adits missed out on N3 contracts because their procurement processes were too slow to keep pace with the health service’s own procurement schedule.

So what is the positive alternative to the demand aggregation model so unsatisfactory in Riley’s eyes? He has been championing bottom-up user-owned infrastructure, known as condominium networks or, in Canada, Mush (Municipal, University, School and Hospital) networks.

Some of the Canadian Mush networks have been set up by users doing the trenching for cables themselves; but more commonly, he says, a joint group of potential user organisations — usually, as the name implies, public institutions — will contract an experienced network builder to do the job, but the users retain ownership of the network.

The idea was given a boost by Bill St Arnaud, from Canadian advanced internet developer Canarie, who spoke at a Tuanz broadband symposium in Hastings earlier this year.

“I read [Associate Communications Minister] David Cunliffe’s body language when Bill was speaking and it was like ‘Why hasn’t anyone told me this earlier?’" Riley says. "I’m reasonably certain he’d be a champion."

It appears Riley "read" the minister correctly. "I'm very interested to see what the potential for condominium fuibre might be in New Zealand," Cunliffe says, and he has instructed officials to prepare a report on the subject. This should be available "before Christmas", he says.

"From the competition point of view, the more providers there are the better," Cunliffe says. "This government is in favour of both facilities-based and inter-modal [between different media] competition. There is no God-given right for the large telcos to provide everything."

Riley acknowledges, though, that even a community-owned network needs an “anchor tenant” willing to commit to and invest in the network at an early stage.

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