What price broadband?

The UK government is in the throes of releasing a report into broadband and has come to the conclusion that DSL needs to be subsidised to 'stimulate take-up'.
  • Paul Brislen (Unknown Publication)
  • 09 December, 2001 22:00

The UK government is in the throes of releasing a report into broadband and has come to the conclusion that DSL needs to be subsidised to "stimulate take-up".

What nonsense.

The report, from the Broadband Stakeholder Group (BSG), a grouping of telcos and large users, says pricing is a huge issue and that the proposed £50 a month is a "death knell" for the technology. Better to price it at between £20 and £30 to put the UK on a par with South Korea and Singapore, both of which are always held up as shining examples of broadband rollout. South Korea has a penetration rate in the home market of around 60% -- similar to cellphones in New Zealand -- while Singapore isn't too far behind.

While I think the problems are valid and we would do well to point them out, the solution is a tired old interventionist approach that really has no place even being suggested. Haven't we moved away from subsidies and protectionist attitudes, or is that just New Zealand? As I write this the UK government has yet to respond -- and it could well tell the BSG to bugger off -- but it does beg the question of what the solution is to increasing the rate of rollout?

Telecom's general manager of marketing, Kevin Kenrick, says price isn't the issue for new users. He believes we're moving away from the early adopters and their dominance of broadband to a market where mainstream users are in the ascendancy. They don't really give a hoot about the technology itself, they want the service that comes with it. The uptake of broadband in conjunction with the rise of Napster is probably a good example of this: build it and they will come.

Kenrick says we will see a day when Telecom sells services, like a game package or a video on demand, rather than a DSL connection.

In the meantime, Telecom can point to 300% uptake of DSL year on year and ask, why change what isn't broken? There are more than 16,000 customers using either JetStream and JetStart out of a potential user group of one million, meaning it's early days yet.

But is price holding back the uptake? I think it probably is. New Zealand users have a huge jump to make from dial-up to broadband. It takes a lot of persuasion to convince them to move from $30 a month for all-you-can-eat to the $70 or much, much more for JetStream. JetStart is a better price, but users seem evenly divided on whether or not they'll move to it: the numbers for consumer uptake of DSL are equally split between JetStart and JetStream.

This leads us to the broadband chicken and egg demand curve. We need users willing to pay the money to join the service so there's enough uptake to make it worth Telecom's while to reduce the price so that users can take up the service. Of course, having some competition would probably hasten the whole thing, but that would only make us giddy.

As with everything else telecommunications-wise this year, I guess we'll just have to wait until the new regime is implemented. Then some of the other companies might start in and we'll see some serious uptake. As it is, I get the feeling that between TelstraSaturn and Clear merging and the new telco bill and commissioner being appointed it's all a kind of limbo at the moment. Yet another good reason to wait on the new year.

Brislen is IDGNet’s reporter. Send email to Paul Brislen. Send letters for publication in Computerworld to Computerworld Letters.