Thursday, 3 August 2017

BT Counters Universal Service Obligation Mandate with Proactive Offer

If you had to choose between the government's proposed universal service obligation mandate and BT proactively building the necessary infrastructure to offer universal broadband, which would you choose? It is an interesting question that MPs and Ofcom now have to wrestle with. Thanks to a new offer by BT, the government may not have to implement the universal service obligation after all.

BT has proposed investing some £600 million in new infrastructure that will provide high-speed broadband to up to 99% of UK households by 2020. Universal access would be available by 2022.

BT defines high-speed broadband as a connection that gets at least 10Mbps. They say approval of their plan would mean most UK households getting broadband through fibre and fixed wireless technologies. Those that could not be reached through traditional infrastructure could be offered satellite broadband.

As an alternative, the government has already proposed the universal service obligation. Should they decide to implement it, every UK household without broadband would be able to request it beginning in 2020. BT would have no choice but to install the necessary infrastructure to meet that request.

Why Make the Offer?

It is a fascinating exercise to try and figure out why BT would make such an expensive offer? Agreeing to spend £600 million is an awfully pricey proposition when you consider that BT already provides high-speed broadband to 95% of UK households. To understand BT's move, it's important to understand how they will come up with the money.

Under the universal service obligation mandate, new broadband customers who get service after making a request could not be charged more than customers already receiving the same service. That would mean BT having to swallow the cost of building infrastructure on a case-by-case basis. Their proposal pays for the infrastructure in a different way.

According to the BBC, all of BT's current customers would pay for the construction through increased monthly bills. Those who eventually get access would then be paying the higher bills as well. From a business standpoint, it just makes better sense for BT to voluntarily create universal broadband access rather than being forced into it.

A Few Concerns

BT's proposal has thus far met with mostly positive reactions. However, there are a couple of concerns. First is the possibility that 10Mbps service would be obsolete before the company finished building the infrastructure. That would mean all of those newly connected households would once again be behind in a game of perpetual catch-up.

The second worry is obviously the higher cost to broadband customers. While the first concern can be addressed through well-planned technology upgrades, there's nothing anyone can do about the second. Someone has to pay to build and maintain the infrastructure. If customers don't pay for it directly, they will have to pay for it through tax contributions to cover government subsidies.

We shall see what the government decides to do with BT's proposal. Either way, universal broadband – even in the hardest to reach places – is the ultimate goal.

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