Britain’s mobile network price war has cost us all
Welcome to NotSpot UK. Like the lobsters in the proverbial pot, we barely notice how our mobile networks are degrading, but regular visitors will tell you it gets worse every time.
The Shared Rural Network, the £1bn project to plug the gaps, with its paltry target of two megabits per second (Mbps), is behind target. Even in urban areas, networks appear to have given up the battle.
This doesn’t make sense at first glance. How many industries are guaranteed a tenner a month from us, at least, for every month until we die? Not pubs, now that the younger generations have stopped drinking. Not restaurants, either. Certainly not Netflix.
The reason we’re stuck in a doom loop is the equation of investment and reward. “The rewards of providing network service simply don’t match the value contributed to the economy,” explains Stephen Howard of Communication Chambers. “So we shouldn’t be surprised if there’s not as much of it provided as we would like.”
We’ve noticed.
Unlike other utilities, we acutely feel the quality of our mobile service. Electricity just needs to be available all the time, while water just needs to be clean. With data, the speed and quality of the connection really does matter.
But when operators announce they’re going to beef up their infrastructure, the City clobbers them. “You and I would pay £100 a month for good mobile connectivity. At most we generally pay £15, because of competitive pressures,” explains William Webb, the industry gadfly who at Ofcom two decades ago encouraged the regulator to embrace the auction model.
Today he wants the old strategy he devised to be ripped up. Low prices are great, of course, but when the network becomes a not-work, it’s no bargain at all.
So what can we do to fix it? Webb has joined forces with one of the original architects of the single market for mobile in Europe, Stephen Temple, to develop some alternatives for policy makers.
“What we’re getting is a sub-standard network infrastructure and sub-optimal economic spectrum efficiency,” they write.
Ofcom gets both barrels. Today the regulator pockets the proceeds of auctions and passes them on to the Treasury. Instead it should scrap fees, and get tough on coverage in “notspots”. Ofcom should also replace vague “best effort” commitments from mobile operators with guaranteed minimum universal data speeds, they argue.
No one is spared. The industry needs to get its house in order too, by making better investment decisions. The problem with 5G was that the clever boffins at universities and at equipment makers got carried away. They wanted to push their latest whizz bang lab inventions, and created a very fast but expensive network.
5G even had grand designs for indoor use, where Wi-Fi does the job cheaply and well. The result was that 5G was the answer to a question nobody was asking. But politicians, bureaucrats and regulators demanded ever faster 5G rollout.
Mobile operators would much rather have an efficient system that keeps their costs down, and your bills low. Punters prefer to have a 20 Mbps connection that’s reliably there when you need it, rather than 500 Mbps you see once in a blue moon, and dead air the rest of the time. No one cares which ‘G’ it is, or if it’s Wi-Fi, so long as we’re connecting.
So mandating 5G no longer makes any sense.
“The long term commercial and strategic value of 5G will be determined by whether it becomes more than just a faster version of 4G, and whether it provides solutions to pressing problems,” the National Infrastructure noted last month.
Regulators should cave in to demands from European operators to seize a chunk of big tech’s revenues. Webb compares that to supermarkets wanting to charge JK Rowling for bringing book buyers to its stores: they should be grateful for the footfall.
Some left-field ideas must be embraced too. Ofcom could think about encouraging a national Wi-Fi roaming network, much like students enjoy today with Eduroam, where they can wander from campus to campus in the UK without logging in each time. Webb also thinks Ofcom should encourage novel infrastructure such as tethered balloons to deliver data.
A balloon is roughly five times the cost of a rural site, Webb argues, but offers the capacity of 50 to 100 individual base station sites, meaning far fewer planning battles.
Consolidation could also beef up the supply side. Today, the Ofcom-designed market of four operators sees two of them, Vodafone and Three, as also-rans who claim investments return less than the cost of capital. They want to merge, to create one combined network that’s slightly larger than EE and O2 are today.
The merger is fiercely opposed by trade unions, and has just been bounced into a protracted review by the Competition and Markets Authority. Let’s hope they don’t take too long, and speed it through.
The key difference that the UK enjoys is a vigorous wholesale market with millions choosing to use virtual operators (MVNOs) like Lebara, Tesco and Sky. Cumulatively this adds up to a bigger operator than Three. These virtual operators are better off with three strong networks providing wholesale, rather than four, reckons Enders Analysis.
And with plastic SIM cards being superseded by QR codes, switching will be even easier, giving them further opportunity to grab more of the market.
Ultimately we don’t get the networks we deserve, just the ones we pay for.
