Labour’s digital plan gets in the way of real progress


All our experience of the development of information technology starts from what the customer might want rather than what the technology might do.

Over the next decade, pressures on public funds will severely restrict spending on Britain’s crumbling infrastructure. We need to look carefully at plans to spend billions on a national network of very high speed internet connections, the main proposal in the recent government report on Digital Britain.

Most of the country – and soon virtually all of it – has access to existing 2MB broadband services through technology which uses ordinary copper phone lines. This is enough for most everyday applications, like e-mail, information search and online shopping.

Modernisation of existing networks already planned by BT and Virgin, respectively the main phone and cable providers, will bring much higher speed access to about half the British population, and many more business users. The issue posed by the Digital Britain report is how this facility should be extended to the rest of the country.

But first, we need to ask why. The report does not distinguish carefully between everyday uses of the internet – such as renewing vehicle excise duty – and the few uses which benefit from or even require very high speed connections.

Ordinary broadband is inadequate for very large data sets, and decidedly clunky if high quality moving images are required. But few people need very large data sets, and they are mostly in universities and financial services businesses. Other uses for very high speed connections are video-conferencing (for business) and movies on demand (for consumers). These are established services whose take-up has been disappointing, although they may become more popular as quality and availability improve.

There is an alternative strategy the Digital Britain report does not consider, which is to wait and see what demand there is. Most people and businesses will have access to high speed internet connections soon, and the base of potential users is large enough to enable entrepreneurs to offer new services. If there is demand, it will be possible to fund further development of the network as a commercial venture – and if there are economic benefits, one could look then at the possibility of subsidy. The case for large scale government intervention is not proven. It is not even made.

The Digital Britain report is the latest example of a project driven by technological possibility rather than economic need or social value. Similar enthusiasms gave us the financial catastrophe of Britain’s advanced gas-cooled nuclear power stations, or more recently the shambles of the National Health Service computerisation project: ambitious schemes such as this tend to incur massive and underestimated costs and yield few of the promised benefits.

The primary problem of digital exclusion is not the few people in remote areas who cannot access decent internet connections but the much larger number of mostly older people who have missed out on the information age altogether. They are dismissed contemptuously in Digital Britain as “self-excluded” but, with a little help, many would benefit from e-mail, home shopping, networking and other straightforward internet uses – a project that would be cheap, yield many social benefits and use only existing technology.

Digital Britain recognises there can be no explicit government subsidy and proposes instead to pay for extended infrastructure by taxing phone use and extending the monopoly spectrum rights of mobile operators. This is the worst aspect of its proposals. Not primarily because of the opportunity cost of giving away valuable spectrum – in 2000 the companies paid £22bn for their existing rights – but for its effect on entrenching existing market structures.

All our experience of the development of information technology is that transformational innovation comes from newcomers rather than established firms, is unpredictable in nature and starts from what the customer might want rather than what the technology might do.

The approach epitomised in Digital Britain only gets in the way.

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