articles

The Emperor's New Phones

By Josephine Berry, 31 July 2002

Josephine Berry on new Labour's telecoms policies

Searching the FT's CD-Rom archive for matches between 'Labour' and 'internet' turns up 40 articles from the beginning of this year. Contrast that to the paltry 4 matches for the Conservatives and you begin to see how hard Labour has been working to promote itself as the party for technological development. Indeed the cherie on the cake of educational policy reforms, in the run up to the election, was its revelation of plans to make IT one of its central components. 20% of the lottery money ear-marked for the millennium commission was pledged to be re-directed towards training teachers in IT. The proposed University of Industry - the industrial equivalent to the Open University - was conceived as operating primarily via satellite, cable and interactive technologies. Every child should have their own 'e-mail identity' by the age of 9. And of course most importantly, Internet access would be provided for every school and library in the country.

All of this was given a reality gloss through the 'business sense' of its pre-election deal with BT. Here it was agreed that in return for permitting British Telecom to transmit broadcasting data along its existing network, BT would provide access to every school and library that it passed in the process of laying new cable. Theoretically BT would be encouraged to improve the quality of its network with the increased profits gained through TV broadcasting. But David Blunkett's public announcement of the start of this scheme, scheduled for the beginning of July, failed to materialise because of the failure to consult Oftel. This minor oversight has been resoundingly interpreted as proof of Labour's cooling enthusiasm for its over hasty courtship of BT.

So why is Labour getting cold feet? Perhaps first and foremost this has to do with the radical tilt it would cause in the proverbial playing field in BT's favour. Not only would this be unfair because of BT 's current monster stature within the telecommunications market, but also because it would make a mockery of the competition instigated during the 1980s when the industry was privatised (out of which BT did extremely well). Cable companies, who bought many of their franchises from BT in the first place, are predicted to have made roughly £8 billion worth of 'free investment' into the infrastructure. BT's complaint that the restrictions preventing them from broadcasting over their own networks are unfair fall on understandably deaf ears industry-wide.

An insider at the Cable Communications Association (CCA) speculated that Labour is also being dissuaded by BT's total lack of commitment to the provision of local loops of broad bandwidth cabling to those public institutions whose valuable business they were being offered on a plate. The word from the CCA is, "BT will throw some enormous figures at you - but the bulk of local broad bandwidth provision has been installed by cable companies. BT has focused on its trunk network and provision to big business". Why then support the candidate least likely to commit to this kind of development?

Labour appears gradually to be taking the view that competition within the industry must be fairly maintained if a decent infrastructure is to be established. But commentators are divided on this subject. Bill Thompson, an independent internet advisor to the government, thinks cable companies have had it easy for far too long and adds: "Labour has been clear that the advantage will be withdrawn - partly because it was too generous and partly because the cable companies have not really delivered on what they were offering." Richard Barbrook, head of the Hypermedia Research Centre at Westminster University, has described networks as "natural monopolies", which he sees as effectively deSearching the FT's CD-Rom archive for matches between 'Labour' and 'internet' turns up 40 articles from the beginning of this year. Contrast that to the paltry 4 matches for the Conservatives and you begin to see how hard Labour has been working to promote itself as the party for technological development. Indeed the cherie on the cake of educational policy reforms, in the run up to the election, was its revelation of plans to make IT one of its central components. 20% of the lottery money ear-marked for the millennium commission was pledged to be re-directed towards training teachers in IT. The proposed University of Industry - the industrial equivalent to the Open University - was conceived as operating primarily via satellite, cable and interactive technologies. Every child should have their own 'e-mail identity' by the age of 9. And of course most importantly, Internet access would be provided for every school and library in the country.

All of this was given a reality gloss through the 'business sense' of its pre-election deal with BT. Here it was agreed that in return for permitting British Telecom to transmit broadcasting data along its existing network, BT would provide access to every school and library that it passed in the process of laying new cable. Theoretically BT would be encouraged to improve the quality of its network with the increased profits gained through TV broadcasting. But David Blunkett's public announcement of the start of this scheme, scheduled for the beginning of July, failed to materialise because of the failure to consult Oftel. This minor oversight has been resoundingly interpreted as proof of Labour's cooling enthusiasm for its over hasty courtship of BT.

So why is Labour getting cold feet? Perhaps first and foremost this has to do with the radical tilt it would cause in the proverbial playing field in BT's favour. Not only would this be unfair because of BT 's current monster stature within the telecommunications market, but also because it would make a mockery of the competition instigated during the 1980s when the industry was privatised (out of which BT did extremely well). Cable companies, who bought many of their franchises from BT in the first place, are predicted to have made roughly £8 billion worth of 'free investment' into the infrastructure. BT's complaint that the restrictions preventing them from broadcasting over their own networks are unfair fall on understandably deaf ears industry-wide.

An insider at the Cable Communications Association (CCA) speculated that Labour is also being dissuaded by BT's total lack of commitment to the provision of local loops of broad bandwidth cabling to those public institutions whose valuable business they were being offered on a plate. The word from the CCA is, "BT will throw some enormous figures at you - but the bulk of local broad bandwidth provision has been installed by cable companies. BT has focused on its trunk network and provision to big business". Why then support the candidate least likely to commit to this kind of development?

Labour appears gradually to be taking the view that competition within the industry must be fairly maintained if a decent infrastructure is to be established. But commentators are divided on this subject. Bill Thompson, an independent internet advisor to the government, thinks cable companies have had it easy for far too long and adds: "Labour has been clear that the advantage will be withdrawn - partly because it was too generous and partly because the cable companies have not really delivered on what they were offering." Richard Barbrook, head of the Hypermedia Research Centre at Westminster University, has described networks as "natural monopolies", which he sees as effectively demonstrated by BT's market domination, commenting: "limited competition is useful for BT as it protects their monopoly profits from effective regulation by the state - and their competitors like being able to have their less efficient operations subsidised by BT!" and, whilst rightly sceptical about BT's intentions to invest in the 'Infobahn', concludes gloomily, "Only determined state intervention - including the threat of renationalisation - will get the corporation to upgrade its network".

A view which John Browning - European editor of U.S. Wired - roundly refutes. When asked if the franchise programme was handled badly by the Thatcher government, he counters: "No. They've done as well as anybody in the world at bringing competition and competition brings results. Compare Internet penetration in Britain to just about anywhere else in Europe and Britain does great - precisely because competition makes telecoms cheap and good".

Given that Labour's popularity account is way in the black, it's unlikely that its ill conceived deal with BT, now being quietly ditched, will leave much egg on any political faces. As it transpires, everyone's a winner: Labour and BT scored some pre-election brownie points but luckily common sense has intervened to save the day. No doubt even this 360¡ policy about turn will undergo the alchemical magic of the Labour PR department, where being 'big enough' to confess mistakes can only add to the oh so human fallibility of its political machinery.

Josephine Berry <josie AT metamute.com>