This document summarizes a presentation about digital communications in the UK. It discusses how digital communications have evolved, driven by government investment and private sector build out. This has affected firms' location decisions, innovation, productivity and growth. The presentation shows data on internet penetration, broadband adoption and traffic growth over time. It also discusses the relationship between population density and broadband speeds, and identifies barriers to growth for digital businesses, including poor broadband infrastructure.

1. Digital Communications for a Digital
Economy
Edward Oughton (ejo31@cam.ac.uk)
Cambridge Technology & Innovation Meet Up, Cambridge 2015
EPSRC Programme Grant: EP/I01344X/1

2. Cambridge Meet Up - Clare College - 25rd June 2015
Presentation Outline
• How have digital communications evolved in the UK?
• What has driven investment?
• How has it affected firms:
• Location decisions
• Product, process and organisational innovation
• Productivity and growth

3. Cambridge Meet Up - Clare College - 25rd June 2015

4. Cambridge Meet Up - Clare College - 25rd June 2015

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6. Cambridge Meet Up - Clare College - 25rd June 2015
An Interconnected World

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Hot Political Topic – European Digital Agenda

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Hot Political Topic – European Digital Agenda

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Hot Political Topic - 2009
“The availability of broadband has two components: the
right network today and the right network tomorrow. To
ensure all can access the benefit from the network of
today, we confirm our intention to deliver the Universal
Service Broadband Commitment at 2Mbps by 2012.”
(BIS & DCMS, 2009)

10. Cambridge Meet Up - Clare College - 25rd June 2015
Hot Political Topic - 2014
“…the Government’s investment in
superfast broadband will deliver a
major boost to the UK economy,
offering a net return of £20 for every
£1 invested”
(SQW, 2013)

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Hot Political Topic - 2015

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Two Opposing View Points
To build or not to build

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Jack Dee on the Emergency Services
“I was speaking to a man and
he said:
‘I rang for an ambulance and it
took half an hour to get to me!’”
…that’s because you live
half an hour from the
bloody hospital’

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15. Cambridge Meet Up - Clare College - 25rd June 2015
Internet Penetration in Major OECD Economies
0
10
20
30
40
50
60
70
80
90
100
1990 1995 2000 2005 2010
PercentofPopulation(%)
China France Germany Japan United Kingdom United States ITU (2012)

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Legacy and SFBB Technologies
Superfast Broadband (SFBB)
Legacy Broadband
Premises
Premises
Premises
Premises
CableTV CompanyCentral
Office
OpticalFibre
CoaxialCable
Street Cabinet

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Fixed and Mobile Broadband Technologies
0
10
20
30
40
50
60
70
80
90
DSL broadband Broadband via
cable, fibre,
Ethernet etc
Dial up via a
telephone line or
ISDN
Broadband via
satellite, public
WiFi
Mobile
broadband via
handset
Mobile
broadband via
dongle/card
Mobile
narrowband
connection
(<3G)
Percentageofpopulation
Cities and Urban Areas Towns and Suburbs Rural Areas All Households(ONS,
2012)

18. Cambridge Meet Up - Clare College - 25rd June 2015
Percentage of the premises covered by digital communications
infrastructure by region (Ofcom, 2014d)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed line 2G Mobile 3G Mobile 4G Mobile LLU ADSL
Broadband
NGA
Broadband
Virgin Media
Cable
Broadband
Openreach/
Kcom
Broadband
Proportionofpremisescovered(%)
England Scotland Wales Northern Ireland

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Demand for Digital Connectivity Services
0.0
20.0
40.0
60.0
80.0
100.0
GDP per capita (in 1000s US$)
Percentage of students and pupils in
the population
Percentage of those aged 30-34 who
completed tertiary education
Percentage of households with
personal computers
Percentage of individuals with mobile
cellular telephone
Percentage of households with
Internet access
Percentage of households with fixed-
(wired) broadband
Percentage of enterprises with fixed-
(wired) broadband
Percentage of population using
mobile Internet access regularly
Percentage of population using social
networks
Percentage of enterprises' turnover
from e-commerce
Population density (100s per km)
UK EU 27

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Traffic Growth 2013-18
0
1000
2000
3000
4000
5000
6000
2013 2014 2015 2016 2017 2018
Petabytes
Business - File-sharing
Business - Video
Business - Web & Other Data
Consumer - Online Gaming
Consumer - File-sharing
Consumer - Web & Other Data
Consumer - Video

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Category Indicator 2012 2017
Percent
Change
IP Traffic
IP network traffic per day 57 Petabytes 125 Petabytes 119.3
IP Traffic per month 1.7 Exabytes 3.8 Exabytes 123.5
Annual IP traffic 20.8 Exabytes 45.5 Exabytes 118.8
Internet
Traffic
Internet traffic per day 50 Petabytes 106 Petabytes 112.0
Internet traffic per month 1.5 Exabytes 3.2 Exabytes 113.3
Internet traffic per capita 22 Gibabytes 48 Gigabytes 118.2
Mobile
Traffic
Mobile data traffic per month 39 Petabytes 333 Petabytes 753.8
Mobile as a percentage of all IP traffic 2% 9% 350.0
Mobile as a percentage of total Internet traffic 3% 10% 233.3
Devices
Total networked devices 279 million 460 million 64.9
Networked devices per capita 4.2 per capita 6.8 per capita 61.9
IP traffic from non-PC devices 18% 43% 138.9
IP traffic from PCs 82% 57% -30.5
IP traffic from TVs 16% 19% 18.8
IP traffic from portable devices 2% 21% 950.0
Wi-Fi
Growth
IP Traffic from Fixed/Wi-Fi 49% 53% 8.2
IP Traffic from Fixed/Wired 49% 38% -22.4
Internet traffic from Fixed/Wi-Fi 56% 60% 7.1
Internet traffic from Fixed/Wired 42% 30% -28.6
Broadband
Speed
Evolution
Average broadband speed growth (Mbps) 16.5 Mbps 50 Mbps 203.0
Connections >5Mbps 67% 99% 47.8
Connections >10Mbps 49% 74% 51.0
Connections >50Mbps 11.10% 18.20% 64.0

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Data Downloaded versus Average Fixed Bandwidth
0
20
40
60
80
100
120
0 10 20 30 40 50 60 70 80
Averagedatadownloadedpermonth(GB)
Average fixed broadband speed (Mbit/s)

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OECD (2014) Fixed (wired) broadband subscriptions per 100
inhabitants, by technology (June 2014)
0
5
10
15
20
25
30
35
40
45
50
DSL Cable Fibre/LAN (1) Other
OECD average

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The Technological Limitations
BT Exchange Locations Virgin Media Cable Areas

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Changes in connection speed by technology between
2010 and 2014
0
10
20
30
40
50
All connections ADSL Cable FTTx
Speed(Mbit/s)
Nov/Dec-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14

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OECD (2014) Wireless Broadband Subscriptions per 100 Inhabitants by
Technology in June 2014
0
25
50
75
100
125
150
Satellite Terrestrial fixed wireless Standard mobile broadband subscriptions Dedicated mobile data subscriptions

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The Relationship Between Average Speed and Density
0.0
5.0
10.0
15.0
20.0
25.0
0.00 50.00 100.00 150.00 200.00 250.00
AverageSyncSpeed(Mbps)
Population Density (Per Hectare)
Average Speed Poly. (Average Speed)n = 7124

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Mobile Model Parameters and Posterior Distribution
*p<0.05
aVariance is the estimated parameter
Results rounded to 2 decimal places
Variable Model Parameter Mean
Constant
β0 -1.17
Service-sector employment
β1 0.52*
Percentage of medium and large businesses
β2 0.15*
Population density
β3 0.04*
Median age
β4 -0.87*
Ethnicity (p.non-white)
β5 0.06*
GVA per capita
β6 0.15
Level 2 Variancea (n=10) σ2
j 0.00
Level 1 Variancea (n=173) σ2
ij 0.02

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Mobile Model Parameters and Posterior Distribution
*p<0.05
aVariance is the estimated parameter
Results rounded to 2 decimal places
Variable Model Parameter Mean
Constant
β0 -1.17
Service-sector employment
β1 +++
Percentage of medium and large businesses
β2 +
Population density
β3 +
Median age
β4 - - -
Ethnicity (p.non-white)
β5 +
GVA per capita
β6 +
Level 2 Variancea (n=10) σ2
j 0.00
Level 1 Variancea (n=173) σ2
ij 0.02

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How important are the following factors for the specific location in
which your digital business is based?
0% 20% 40% 60% 80% 100%
Support from local universities/research institutions
Local sector expertise (e.g. gaming, AI)
Access to finance
Strong transport infrastructure
Access to market/customer base
Personal reasons (e.g. family, relationships etc.)
Strong community of digital tech companies
Lifestyle/quality of life
Supply of skilled workers
Strong technical infrastructure (e.g. broadband)
Percent of respondents
Not at all important Quite important Very important

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Do you regard any of the following as key barriers to growth for your
company?
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
Poor transport infrastructure
Lack of formal advice and mentoring
Region not attractive to talent
Limited supply of property
Poor technical infrastructure
Overall economic climate
Government policy
Limited access to finance
Lack of supply of talent from universities
Percentage of respondents (n=1183)

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Percentage of firms regarding poor technical infrastructure (e.g.
broadband) as a barrier to growth:
0.00% 10.00% 20.00% 30.00% 40.00%
Bournemouth and Poole
Northumberland and Tyne and Wear
Edinburgh, City of
East Yorkshire and Northern Lincolnshire
Oxfordshire
Birmingham
Greater Manchester
South Wales
Gloucestershire, Wiltshire, and Bristol/Bath area
Northern Ireland
South Yorkshire
Cambridgeshire CC
Liverpool
Inner London
Norfolk
Brighton and Hove
Percentage of respondents (n=1104)

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
South Wales
Inner London
East Anglia
Northumberland and Tyne and Wear
Berkshire, Buckinghamshire, and Oxfordshire
Northern Ireland
Gloucestershire, Wiltshire and, Bristol/Bath area
South Yorkshire
Dorset and Somerset
West Midlands
Surrey, East, and West Sussex
Greater Manchester
Eastern Scotland
Merseyside
East Yorkshire and Northern Lincolnshire
Percentage of respondents who stated 'very important' (n=1179)
How important are the following factors for the specific location in which your
digital business is based? (responses stating 'very important')
Strong community of digital tech companies Supply of skilled workers
Lifestyle/Quality of life Support from local universities/research institutions
Access to finance Access to market/customer base
Strong transport infrastructure Strong technical infrastructure (e.g. broadband)
Local sector expertise (e.g. gaming, AI) Personal reasons (e.g. family, relationships etc.)

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Conclusions
• Despite the hyperbole, the outlook is positive
• Data usage data – valuable
• Focus on 10 Mbit/s target
• Density is king:
• …but not too much or you’ll end up like London!
• Tackling the SME issue
• Broadband severely impacts on the competitiveness of different places

41. Digital Communications for a Digital Economy
Questions?
Mr. Edward Oughton – Ejo31@cam.ac.uk