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Economy / Jobs

If you live in Sheffield you probably can't read this

Sheffield sucks: let’s not beat around the bush here. I mean, yeah, okay, the steel was good while it lasted, but we all know that’s over. There are two significant movies substantially set in Sheffield. One’s about naked miners, the other sees it destroyed by nuclear fire. That says something, doesn’t it? The place is a dump.

Okay, I don’t actually think that (to my shame, I’ve never been there). But I feel on relatively safe ground being mean about the (no doubt glorious) Yorkshire city because this is an online publication. And something about Sheffield that genuinely does suck is its internet access.

There are a number of different ways of measuring how good a city’s broadband connection is. You can look at the average speed of the connection between your computer and the local exchange:

Or you look at the percentage receiving less than a certain speed:

Then again, you might want to look at the percentage of those who have access to superfast broadband, which connects using fibre optic cables rather than phone lines, and consequently allows things like video streaming:

Whichever way you look at it, though, certain trends become clear. When it comes to the internet, some cities (Belfast, Bristol, Nottingham) are much more connected than others (Glasgow, Sheffield).

Over the last month two different organisations have highlighted the economic implications of this gulf. The City Growth Commission’s “Connected Cities” report mostly attracted headlines for its ambitious transport plans, but it also described “broadband variability” as a concern that needed addressing.  Meanwhile, “The Fourth Utility”, a report published by the Federation of Small Businesses, found that 14 per cent of businesses described crappy broadband to be “their main barrier to growth”. (Amazingly, 45,000 businesses still rely on dial-up.)

It’s worth remembering that these figures are averages. The main determinant of broadband speeds is the quality of “last mile” infrastructure – that is, the links between users and the local telephone exchange. That means there are almost certainly wider disparities within cities than there are between them. Not everyone in Bristol is cheerfully bingeing on Orange is the New Black on Netflix; not everyone in Sheffield is watching websites load a pixel at a time.

Nonetheless, it’s worth asking: why are some places so much better connected than others?

As it turns out, it’s not so much one problem as three.

1) The investment incentives are all wrong.

It’s easy to persuade companies to invest in links between cities: these are in great demand, so those investments will be profitable. But the bottleneck is in the last mile – the twigs of the network, rather than its trunk. This requires a lot of different cables, each connecting to a relatively small pool of users. Investing in those just isn’t that profitable: if you’re an ISP, why would you bother?

Normally the reason why you’d bother is “because if you don’t, your competitors will”. The only problem is…

2) The market is deeply uncompetitive

In 2007, just five companies held 82 per cent of the broadband market. Five years later, just four of them held 87 per cent. Competition is weak, and it’s getting weaker.

That means there’s very little incentive to invest. Don’t like the service you’re getting? Tough. Where else you gonna go?

Oh, and…

3) European law isn’t helping

The government is allowed to invest in digital infrastructure if it can demonstrate that no private company is going to do so – but EU rules on state aid prevent it from building public infrastructure to compete if private investment is already there. And, in the case of the broadband market, the service providers are investing – just, not very fast.

This is not a theoretical problem. In 2011, the British government launched its “Superconnected Cities” policy, a £150m scheme championed by chancellor George Osborne, which was meant to create superfast broadband in 22 different British cities. BT and Virgin Media promptly got the ‘ump and lodged legal objections, alleging that this amounted to anti-competitive behaviour.

They won. With just a hint of smugness, a Virgin spokesperson told Tech Week Europe:

“Where companies are already investing in world class connections, government has recognised public money should not be used to build more networks.”

So, the government abandoned its plans to invest in infrastructure, and is now instead distributing the money as vouchers with which small companies can buy better internet connections. Which most of them can’t, because Virgin, BT et al haven’t got round to building them yet.

It’d be oversimplifying things to say there was any direct correlation between broadband speeds and economic growth: London remains an economic giant despite being in the middle of the pack. It’s worth noting, too, that there are areas that used to dream of having Sheffield’s broadband speeds. Here are its figures compared to those you can get in the UK’s biggest blackspot, the Isles of Scilly:

But what is clear is that there’s a growing consensus that

a) future economic growth will require investment in superfast broadband in all parts of Britain’s cities, not just those where it’s immediately profitable; and

b) the current crop of internet service providers is taking its sweet time about obliging.

In one of its less-noticed recommendations, the City Growth Commission called on the government to commission a major review to work out how to change all this. Your move, minister.
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