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Devil's Advocate: Is competition always the answer?
Especially when there's a lot at stake, like the UK's broadband future...

By Martin Brampton

Published: Tuesday 13 November 2001

In his latest challenge to widely accepted wisdom, Martin Brampton, director at consultancy Black Sheep Research, questions the modern business mantra that competition is some kind of panacea for all society's ills...

Is our contemporary obsession with the cure-all of competition truly rational? Even where it does not exist, we seem to have to pretend that it does. As I make train journeys between York and London, the crew makes announcements in flowery language that comes straight from the superficially glamorous world of the airlines.

Invariably, I am now thanked for choosing to travel with GNER. Now, this is rather odd. With a need to travel between my home in Yorkshire and business commitments in London, I really cannot choose to make the journey with Great Western or ScotRail. The idea that there is competition between them is pure illusion.

Does that mean we should try harder to introduce competition? Before we try to answer that question, consider a different example, one that is much closer to our concerns in IT. Digital communications have become vital, especially since the internet transformed the general public into digital consumers. Nearly all our digital links rely fundamentally on buried copper wires that belong to our old friend British Telecom. And many doubt we are making the best use of this vital asset.

The Spitting Image version of Margaret Thatcher had a solution. She suggested BT be privatised. When told it had already been privatised, her answer was simple: "Well, privatise it again!" And that turns out to be remarkably prescient. Now there are at least two organisations, Earthlease and WestLB, that would like to acquire ownership of BT's network of copper wires. They would then lease the circuits back to whichever operator made the best offer. That's about as near as you can get to privatising it again.

But is it wise to rely on competition to ensure that progressive use is made of this basic facility? If we go back a few years, the major technological advance in telephony was ISDN. At least, it should have been a major advance. The old-fashioned analogue phone line had become a barrier, limiting access to the core network, which has now been digital for many years. ISDN extended all the advanced capabilities of the modern telephone network to the consumer. We would now have a far superior telephone system if BT had embarked on a programme to make ISDN attractive to everyone and to eliminate analogue lines as quickly as possible.

Instead, BT was anxious to protect its revenues from leased digital circuits, and kept ISDN a premium priced offering. It still is. By contrast, the German telephone system was modernised to provide extensive digital capabilities. Was this achieved through competition? No, it was done while Deutsche Telekom was a public utility in a rigidly regulated environment.

Now we have similar issues with broadband. Low-cost technology exists to make high-speed digital links available to everyone who has access to a copper wire connection. This facility is hugely attractive, especially for small and medium-sized enterprises, or branch offices of large companies. Consumer demand is not far behind. Yet progress is painfully slow. BT remains tied to expensive, over-engineered solutions and premium pricing, still protecting its revenue from leased lines.

It is not clear that any form of competition can be introduced to deliver rapid progress towards modern, low cost communications technology. We are fortunate in having the valuable resource of a national telephone network, but we need to find ways to use it for our mutual benefit.

Problems of this kind are directly relevant to the World Trade Organisation. Quite apart from the ethical considerations that are being raised, there are serious questions about the usefulness of forcing every part of our society into a single economic model. Perhaps we should be redefining competition to include competition between radically different forms of ownership and management that can be chosen to match the great diversity of problems that face us.

** Martin Brampton is a director and founder of Black Sheep Research (http://www.black-sheep-research.co.uk ), an independent consultancy providing research, writing and speaking services on a wide range of business and technology subjects. Martin was previously a director at Bloor Research, and has worked with IT as a user and analyst for over 20 years. He is a frequent contributor to silicon.com's weekly Behind the Headlines TV programme and can be contacted at silicon@black-sheep-research.co.uk.