We are living in uncertain times – the cosy assumptions of the post-war, post-industrial consensus appears shattered and no longer fit for purpose. Scotland, like everywhere else, is grappling with deeply profound questions of the society and economy in which we currently live; and the one in which we want to live. This tumult is being enabled and accelerated through technology – in particular expectations of near-pervasive connectivity. Scotland has many well documented topographical challenges that make providing that connectivity difficult but – make no mistake – if we are seriously to exploit the opportunities of the 21st century we absolutely need the infrastructure that delivers the pervasiveness so many have come to expect and demand.
Do we want remote communities to remain viable, and limit the brain drain to cities?
Who would not agree that high-speed connectivity – regardless of medium – is as crucial to our future development as rail and road were to previous centuries? In Victorian times, politicians and leading industrialists made big bets on such infrastructure because the socio-economic benefits were seen as essential to a modernising economy. Where is such a vision in 2017? Evidence in the UK over the last 10 years points to incumbents interested in maintaining their pre-eminence, margin and market share and politicians too timid to upset them.
The telecom labs continue to develop and innovate the speeds and capacities available (5G anyone?), but we seem stuck with a profoundly incrementalistic commercial and industrial model that seems incapable of providing full coverage to everyone. And yet better, affordable and more pervasive connectivity seems a crucial enabler to solve the challenges of the 21st century – particularly those associated with housing, pollution and transport. Do we want remote communities to remain viable, and limit the brain drain to cities? Want to enable greater video based interaction between, say, patient and doctor; tutor and student that could dramatically save time and costs? Want to allow more people to work effectively from home or set up a business in their home town rather than get in their cars or public transport? Hmm, thought so.
Strategically, the telecoms market is trapped in a world of financial engineering where scale and the marginal tinkering with regulatory cost accounting models provides a very shallow well of innovation. Huge, vertically integrated telco’s just don’t seem likely to be the ones with the agility to deliver what the 21st century needs. There investors want stable low-risk returns, and that’s exactly what they’re getting. Like it or not, telecom connectivity is an essential utility and governments and markets need to wake up to it.
There are gradual signs of recognition and acceleration of this process. Over the years, many Telcos have adopted models whereby elements of their network estate have been sourced from or outsourced to 3rd parties. In the UK the creation of MBNL, and Cornerstone acknowledge that some of the most costly and essential elements of the network stack are no longer a source of competitive differentiation. Of course, the networks need to be managed and optimised really well, but it’s more a matter of operational hygiene than one that’s going to win you more customers. Here in Scotland, players such as Wireless Infrastructure Group (WIG) and CityFibre are doing just that – focusing on wholesale service provision where their investments in network are off-set by the aggregated demand of multiple service providers and customers. It can be done, and they are doing it. This process of separation – from retail to wholesale, active and passive – needs to be accelerated to drive greater efficiency in the wholesale sector and aggregate demand sufficiently at the margins to enable the hardest to reach parts to get access and deliver greater capacity in areas of highest usage.
Telcos need to focus on efficient network provision and allow their retail arms and other service providers to innovate around customer needs.
A vertically integrated behemoth telco will never make the economic case to reach areas with a low population density, whereas a flourishing service provider sector, targeting segments and locales coupled with specific interventions from the public sector just might. Telcos need to focus on efficient network provision and allow their retail arms and other service providers to innovate around customer needs. The integration of the two is stifling market penetration and genuine pervasive access.
Radical times call for radical solutions, and all stakeholders need to focus on the long term benefits of a better connected society. Brexit makes the necessity of Scotland becoming a world-class connected nation all the more pressing. One unintended consequence of leaving the EU could be greater freedom to make public sector market interventions. However the solutions to pervasive high-speed connectivity is an urgent priority for all stakeholders not just governments, incumbents or entrepreneurs. They need to come together like the railway builders once did – to deliver a national infrastructure that benefits everyone and one that is fit for the 21st century.