April 2002

Mounting Problems

It's official: the UK's digital, broadband interactive future is in complete disarray. As Broadband went to press, the country's - and world's first - terrestrial digital broadcaster has been placed into administration. Furthermore, auditors for NTL, the country's largest broadband cable operator, have said publicly for the first time that there are 'questions' over whether the company could continue as a going concern. And since auditors are not known for their ebullience, we can probably guess the answer to most.

This is particularly embarrassing for the UK Government, which has consistently maintained that it wants to position the country in the vanguard of - not just European - but world information economies. On current form, it would be a surprise if the UK was even classified.

Unsurprisingly, the country is not alone in its broadband aspirations, but where it is virtually unique is in its singular belief that market forces alone will precipitate this high-tech communications environment. Well, the market has spoken, and spoken brutally.

While both companies have not helped themselves by pursuing business strategies that have verged on the reckless, it is reasonable to suggest that even had the respective management run them as model's of business prudence, they would still have failed. In the current economic environment, and with no support, their cards were marked along time ago.

In a sop to the industry, earlier this month the UK's ecommerce minister, Douglas Alexander, announced that the Government was releasing £30m for its 'broadband Britain' campaign. This derisory sum equates to approximately 50 pence for every person on the British Isles.

In contrast, other governments are putting money where their mouths are. France is investing £1 billion to aid its information economy, but even this is dwarfed by the £4 billion being spent by the South Korean Government.

Of course, none of this solves the problem of what to do now with ITV Digital and NTL. Can the Government let the backbone of its 'broadband strategy' go belly-up? Of course not. With regards to ITV Digital, it now has two choices: either to let market forces run their course (News International buys the company and - ironically - monopolises UK digital broadcasting) or step in with a rescue package to ensure a competitive market.

The situation with NTL is less clear and a solution, therefore, less obvious. But one thing is certain: unless the Government can instil confidence in the industry about the long-term heath of broadband Britain, those companies willing to throw NTL a lifeline will be few and far between.