Virgin Media boss to Osbo: Bung city fibre cash into small biz
ISP boss reckons UK.gov should spend £75m getting offline firms online
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Analysis Virgin Media has said it before and it's saying it again: the cable company wants the UK government to take at least half of Blighty's £150m set aside for urban broadband rollouts and pump it into improving digital skills in small businesses.
This time, in a well-spun missive to Chancellor George Osborne ahead of Budget Day, today, VM's outgoing-boss Neil Berkett urged Britain's thin-lipped occupant of Number 11 to ditch a large amount of the broadband investment plans for major cities around the UK in favour of splashing around £75m on helping little firms to get to grips with the internet.
Virgin Media pointed out to The Register that Berkett was simply chiming along with chirpy Web2.0 darling and soon-to-be Baroness of Soho Martha Lane Fox, who has spearheaded the government's "digital-by-default" agenda to get public services online. An agenda with no provisions in place for the 7 million poor, disabled or elderly Brits who don't have any access to the internet.
Berkett's concerns apparently lie with building "economic growth through the expansion of digital skills across UK businesses" with a particular emphasis on supporting small companies in Blighty.
Using stats produced by Go On UK - a charity vehicle which counts TalkTalk and EE but not Virgin Media as some of its biz partners and has Lane Fox as a board member - Berkett argued in his letter to Osborne that the "most digitally mature" outfits were "three times more likely to have seen growth than those who operate entirely offline".
Berkett then warned that digital technologies were not being fully used by British businesses. He told Osbo:
Only two-thirds have a website and a third sell goods and services online. Both the government's own 'Digital Champion' and e-skills delivery body identify the central barrier to small businesses realising those benefits as a lack of practical, digital skills and shortage of resources to undertake digital training.
Seizing this opportunity to drive the UK's economic recovery will therefore require action from government to support small businesses to better understand and utilise the benefits of digital.
Virgin Media's chief - who will exit the telco once US cable giant Liberty Global swallows the firm this year - reckoned that the divvied up urban broadband cash could help SMEs "boost training and digital capability" among those companies. He noted that the cash could also be funnelled through existing programmes designed to jumpstart small businesses on to the web.
As for government investment in the fattening up of broadband pipes in cities, funds will be dished out to councils which will then select suppliers to bid for contracts to fit high-speed web connections for Brits.
Meanwhile, as for the countryside, the UK gov's £530m subsidy pot to fund new rural broadband connections was finally approved for use by the European Commission late last year, but BT is the only company to have bagged any of the cash. Fujitsu - the only other preferred bidder in the process - pulled out of the race, effectively leaving BT with a virtual monopoly.
The concern among some is that the urban broadband fund will - like the bumpkin cash splurge - eventually end up exclusively in the hands of BT. Which might explain Virgin Media's attempts to get some of that cash siphoned into the government's digital agenda.
Some politicos have had similar sleepless nights about Britain's national telco. Labour peer Lord Stevenson of Balmacara had this to say in Parliament on Monday during a debate about broadband in Britain:
Surely the government's central objective for broadband interventions in both rural and urban UK markets should be to create the conditions in which private-led investment and innovation can flourish. Yet the policy to date has suffered from what seemed to be fundamental weaknesses.
The rural broadband programme... has failed to stimulate private, competing investment and will be awarding £1bn of public subsidy to a single incumbent [BT]. The urban broadband fund risks critically undermining continued investment in broadband capacity by overbuilding existing networks, and not enough has been done... to promote usage.
It must be a real concern that the government have failed through their rural broadband intervention to replicate the conditions of infrastructure-based competition that have served the urban market so well.
Markets that benefit from infrastructure-based competition are better served in terms of innovation and penetration than those in which the incumbent is placed under no pressure to supply better, cheaper products.
Fujitsu has said that it will now chase urban broadband contracts by once again bidding for the government's cash at a local level. But the Japanese tech giant has its own problems to deal with given its "high risk" tag when it comes to pursuing new public-sector contracts. Perhaps it should give up and join Virgin Media by flattering Baroness Lane-Fox instead.
As for a soon-to-be £42m-richer Berkett, he may perhaps be fishing around for an advisory role within government once his tenure at Virgin Media comes to an end. ®
Osbonote
The Register will bring you full coverage of Osborne's Budget Statement later today.
COMMENTS
Good old Virgin...
... will eventually end up exclusively in the hands of BT. Which might explain Virgin Media's attempts to get some of that cash siphoned.....
Let me edit that a little.
Virgin, who can't be arsed to invest in expanding their network are bitching that someone else who is, is getting some extra cash to help them.
There, fixed.
And yes I live in a Village. I can now get 70mb Infinity for almost the same price I can get 1.5mb Virgin ADSL.
Go figure why they won't get my business.
Re: I agree that Virgin should expand their network
"They should expand their coverage and not turn away customers because it may cost a bit to install fiber."
We call it 'fibre' here. But the point is this - they're turning you down as a customer because you'll cost them money. No business that wants to remain a business goes after customers that lose them money.
If you - or the market - were prepared to pay £100 a month for broadband, maybe. But at the current market rates, there's just no money in it. Why invest money in network roll-out that won't make a return for a decade - Virgin would do better to just stick the money in the bank, even at today's interest rates.
No doubt this will attract downvotes a plenty, but it doesn't change the truth of the matter. Why would any business want to outlay £1500 or more on providing service to one customer and then sell them that service at £18 a month? That price continues to decline and the kit depreciation alone is losing the company money faster than you're paying them. There's a pretty good chance that the business will never see that money back - and we don't have to go far back to see proof of this - all the cable companies that went bust in the 90's for exactly that reason. Virgin only make money because they bought those networks at far less than they cost in fire sales. The original investors lost their money - so they're more than a little reluctant to make the same mistake again.
Usual VM pisstake
1) Any SME who needs a website is probably already online
2) How many of them need even 10Mbits connection when most (if not all have their website hosted elsewhere)
3) Most SME's (unless they are the local Pizza/Indian/Chinese/Chippy) don't need to be connect all the time during business hours. They have other things to do like running their business don't you know.
Then there is the current VM network. Where I live I can get Sky* (are you joking), VM, BT or a number of LLU providers. Most of my neighbours are on on VM or their Wireless SSD would have me think so.
In the evening their (porn) downloading slows down to a crawl. LAst time I did a speedtest for one friend they were getting 512Kb. I have FTTC and get 60Mbits to my Modem. There are exactly 5 of us sharing a nice load of fibre. At the moment there is more than enough to go round so the we have one each. Yet VM bombard me with 2-3 mailings a week extolling the virtue of their 'superfast' network. I'd really like to get the Bearded on to visit my local and see how crap their network really is.
*(If I changed to Sky, they can't support FTTC hence my comment)
The people who live in the other half of my Semi use my network in the evenings simply because everyone else in the street is using the VM network to its max and frankly it is pathetic.
They really do need to get their act together and sort out their existing infrastructure.
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