Stephen Timms MP

Broadband Stakeholder Group Conference

There is a lot of prestige associated with broadband, rightly, but it's important we don't lose sight of the purpose of it all. The purpose is to contribute to greater prosperity for all, through improving business productivity, giving consumers access to better information and greater choice, and providing better services - including public services like education and healthcare - and to deliver those benefits to all parts of our society, not just to a few of them.

I met a couple of businesses in Cornwall, where European Union has funded the ACT NOW project to implement broadband with BT, and they illustrated the importance of broadband very well. One was a chain of print shops that has been able to shorten the lead-time on its print jobs from three days to one day by replacing a van that used to carry around artwork with broadband. Turning print jobs around faster is a very valuable contribution to the competitiveness of its business customers. The other company was a web marketing business which had relocated from London to rural Cornwall simply because they knew broadband would be available there - and they have expanded much faster in Cornwall, recruiting additional staff, than they would have been able to in London. And those two companies demonstrated very clearly to me just how potent broadband will be in bringing about the development of the rural economy which all of us want to see.

And beyond this kind of anecdotal evidence, evidence from more rigorous studies is starting to emerge as well - for example from a study of the small town of South Dundas in Ontario, Canada, which has a population of 10,000, which through implementing broadband has reversed a decade of declining employment.

Beyond these important general economic impacts, broadband also promises to deliver a bundle of more specific benefits, including, for example, substantial new opportunities for digital content providers to commercialise new products in the ever-expanding digital space. With our strong media and computer games industries, this is an area where the UK has the potential to benefit greatly.

So, in recognition of all of this, early in 2001 the Government set out an ambitious target for the UK to be the most extensive and competitive market in the G7 by 2005. And we formed the Broadband Stakeholder Group to advise us on how to reach that target. I want to express my thanks today to all those who have contributed voluntarily to the huge amount of work which the Group has taken forward, in so doing making a big contribution to the much better position we find ourselves in today.

The best approach for UK roll out of broadband is to develop a competitive market. We have seen that demonstrated powerfully in mobile communications over the past decade, where we have benefited immensely from the intensity of the competition between the operators, and from the investment and the innovation that that has spurred, including over the past few months in the introduction of 3G mobile. We want to see that same dynamism, and comparable innovation and growth with broadband. We want companies to have the opportunity to compete and win business on their merits. We want a competitive market delivering customer choice, value for money and the innovation we need to realise the economic benefits of broadband throughout the UK.

And what a long way we have come over the past two years. I recall OECD figures that had us in 22nd place behind the Czech Republic. On competitiveness and extensiveness we were fourth and fifth out of the G7 respectively. Even just a year ago we had a million broadband connections, while Germany had three million.

Since then we have made huge progress. 18 months ago prices fell so that from 6th in the G7 we moved up to 3rd best for price. This helped us move over the following year from 4th to 3rd in the overall competitiveness measure.

Six months ago the statistics showed us that we had drawn level with the USA for the availability of broadband, but were still 5th for extensiveness.

Now I can tell you that the latest figures are even better. With broadband availability covering 80% of households we have now overtaken the USA for availability. And for the overall extensiveness measure we have moved up from 5th to equal third - level with the USA and over-taking Germany. Only Japan and Canada among the G7 countries are ahead of us. That is a pretty remarkable transformation in our position, and one reflecting great credit on the industry, and on many individuals in the BSG.

A year ago, we had only just achieved our one-millionth broadband connection. By the end of last month we had over 2.6 million, and the number was rising by some 150,000 per month. Even just this summer it looked as though it would take us until the new year to reach 3 million - now we are pretty confident that it will be before the end of the year, and the gap with Germany has halved since summer last year.

But you need no reminder from me that the national figures, though encouraging, provide little comfort in rural communities that make up the majority of the remaining communities to be connected. But there too we can point to examples of how the market is proving effective and innovative. The demand registration schemes promoted by BT and others have had a positive impact on investment. BT's scheme has led to availability increasing well ahead of predictions made even a few months ago - we have seen remarkable achievements on the part of BT. Some of those who have been excluded by distance on enabled BT exchanges will benefit from the technology enhancement that is extending the broadband reach up to 6 km.

Regional Development Agencies and local authorities have supported private demand registration websites that have led to intervention in many rural areas. EEDA's "Connecting Communities" initiative has been a good example.

Technological development will help us on a range of fronts. Wireless broadband has proved a powerful tool in those rural communities where ADSL will not arrive in an acceptable timescale. Alongside technological advances, we are also seeing the cost of wireless equipment fall, and I expect wireless to be a big element in the next phase of broadband development. We recently concluded a successful auction of fifteen licences in the 3.4 GHz band for fixed wireless broadband, between them covering the whole country, and I hope we shall shortly see services rolled out to sharpen competition and to reach new areas not previously served. Satellite also has a role.

An encouraging sign is that people in these rural areas are not just sitting back in resignation. I salute all those communities around the UK who are working to demonstrate the value of their demand for broadband to infrastructure suppliers. And those who have set up their own solutions. There is a great ferment of innovation and energy at community level. It has been suggested that we have seen nothing like it since the advent of the railways. It is at any rate a powerful and welcome force.

Alun Michael, the Rural Affairs Minister, and I set up the Rural Broadband Unit to make our response to the challenge of rural broadband more coherent. We wanted better co-ordination between our Departments and to help bring a focus to rural broadband, including among the Regional Development Agencies who are all deeply concerned both about broadband and rural development. The Unit has been doing some excellent work and with Alun Michael I want it to help speed things up, make the best use of resources and sharpen the focus of supply- and demand-side players.

I recently announced our intention (together with Defra) to support RuralNet and The Phone Coop in a two-year project to improve the delivery of support for community schemes. I have often heard from successful community enterprises that finding a reliable and coherent source of good quality advice can be very 'hit and miss'. This development should help to deliver the experience of successful social enterprises for the benefit of communities around the UK. I hope we will see community activists linked up and supported with central resources.

And I hope that equipment and service players, who will benefit from successful community action on broadband, will offer their support too.

There is another very important Government lever I want to highlight. Last November in his speech to the "e-Summit" at Westminster, the Prime Minister announced that we plan to bring together demand for broadband services across Education, Health, the criminal justice system and other public services worth £1 billion over three years.

Nine out of ten rural households are within just 2 km of a primary school, and every single primary school will have at least 2 Mbits/s two-way broadband by 2006. Six out of ten rural households are within the same distance of a secondary school that will have at least 8 Mbit/s two-ways.

I was the Minister for Schools before moving to DTI and it does not require too much imagination to see how big an impact on learning broadband can have. With the Curriculum Online programme now going forward with the support of the BBC, there is a growing wealth of superb material available online and we can see the prospect of young people increasingly being able to follow a wider range of courses, and being able to work at a speed which suits them best. The opportunities are immense.

Over 90% of libraries already have broadband. What I would like to see is every public library becoming a wi-fi hotspot, so that students, with others, will be able to go into their local library with their wireless-enabled laptop. Increasingly, all laptops will be wireless enabled. The Rural Broadband Unit is working with Resource, the library resources agency, to see how we can deliver it.

What I want to ensure is that we use Government's investment in as intelligent a way as possible - planning our procurement of course so that we secure the best value for money for the public sector, but also so that we make the maximum contribution in rolling out broadband to those areas where the commercial case is the hardest to make at present. And I think we have come up with the way to do that.

By the end of next month, we shall have set up a Regional Aggregation Body - or RAB - in each of the English regions. Each of them will bring together the public sector demand for broadband in their region - initially from schools and the health service, and the Department of Education and Skills and the Department of Health have signed up to be the anchor clients for the RABs. I would expect that other departments with more modest requirements for broadband are also likely to join in. The RABs will then go out to the market and seek bids from service providers to meet not the separate requirements from each of the Departments, but the aggregated demand from all of them. Substantial, assured long term demand from the Government dramatically lowers the risk to investors and changes the business model for broadband fundamentally in rural areas. It will make it much more attractive to telecoms companies to make the capital investment to provide broadband backhaul in new areas. It means that there will be sufficient demand to justify investments from the service providers in many more places than would be the case if each department proceeded on its own.

There are a number of key advantages from the fact that we will be doing the aggregation at the regional level. It means we can complement the very strong commitment to extending broadband access among the Regional Development Agencies, who will be supporting the RABs. It also means we will see a variety of approaches being developed, will be able to benchmark the RABs against each other - and we will be able to take the best ideas from the best performing RABs and spread them as best practice among the others. We shall be using the market as a powerful lever for improving private sector performance within a framework managed in the public interest by the public sector.

Broadband makes what the Internet has promised for so long a reality for individual consumers. But for broadband to really take hold in our lives, more needs to be done to stimulate compelling content. The technology alone is not persuasive; consumers have to see a marked difference from their current experience. Downloading images faster may not do it for me, but talking to friends while both of us surf a holiday website, view its video clips and plan our next winter break just might. Content and delivery have to match my lifestyle if I am to buy it.

The major existing content providers, such as the BBC and the big Hollywood studios, will have a major part to play. All the big ISPs around the world need to think in a strategic way about what will drive broadband adoption. The UK is also rich in smaller companies with great potential as broadband content developers. We have been looking at the market barriers to content developers realising their potential, and looking at possible solutions.

We are seeing some great use of the web by the public sector. A broadband experiment by Telewest in Birmingham last year demonstrated the very high level of demand for good quality online information from the National Health Service. NHS Direct Online gets half a million hits a month. Increasingly I believe we will see public sector agencies providing content that will drive up broadband take up.

We have seen dramatic progress in the past year - still not far enough, but there is now the real prospect of breaking 90% availability next year. That will usher in a third phase of broadband. Some markets are much more advanced than us. In South Korea, the leading country for Broadband that I hope to visit next year, penetration is at least 5 years ahead of Europe, and the infrastructure already delivers much higher speeds.

We can expect an increasing demand for higher-speed services in the UK too. I welcome the higher speeds that NTL, Telewest and now others offer. In due course, we will need to push on to 5 and 10 Mbit/s? We are going to see more and more high value added applications, and delivery through an increasing array of broadband-enabled devices. A critical success factor is whether the UK can develop the next generation networks to carry this volume of data fast enough to keep up with demand.

We have made great progress and all of us can take pride in that, but there is a great deal more to do. I look forward to working with the industry to maintain the spectacular progress we have seen in the past year and extend it into the future.

Thank you very much.