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What position will Britain occupy in the coming information era where
national wealth won’t be determined by the number of factory chimneys or
even the size of the City, but by how many trillions of bits are flying
along fibre optic superhighways?

The answer depends very much on how this and subsequent governments
shape the rules for the telecommunications game. In theory, Britain should
be well placed: it has already laid 25 million kilometres of fibre optic
cable (the vast majority of it owned by British Telecom), more per head
than any other nation. But most of the fibre is in trunk cables and the
connection into homes and most businesses is plain old copper wire that
cannot meet the heavy demands of the interactive services planned. And the
cable TV network, which could carry a larger array of interactive services,
still connects only 2.8 per cent of homes. Britain, as BT is fond of pointing
out, has built most of its motorways but has hardly begun the B-roads that
could bring the information revolution to everyone’s doorstep.

Providing those B-roads will be expensive – BT reckons on £15
billion. BT, Mercury and the cable TV companies could all be involved in
setting it up, but they have different ideas about the market conditions
that would allow them to invest.

BT, the biggest player, says it is held back by the ‘unfair asymmetry’
in existing rules. In 1991, the government decided BT could not broadcast
entertainment – a major money-spinner – until 1998 at the earliest, and
possibly 2001. Cable TV companies, on the other hand, were left free to
offer both entertainment and telephone services.

BT is trying to find a way round the regulations. It’s testing a video-on-demand
service that should qualify as monocasting rather than broadcasting because
the company is supplying entertainment only on request. BT also plans to
use its phone lines to offer home shopping later this year, followed within
two years by banking and interactive games. BT is lobbying the government
hard, insisting that Britain will not get the optical network it needs
unless the entertainment market is open to all. ‘Broadcast entertainment
is the only service that there is a certain demand for,’ it says.

The cable companies, however, dismiss complaints about unfair ‘asymmetry’
as whingeing. They are laying cable at a breakneck pace and could reach
13 per cent of homes by 2000. The companies plan to take on BT by linking
their networks to provide interactive services.

But BT points out that cable franchises don’t extend beyond urban areas.
They say that if the government opts for a freer market in 1998, and warns
them beforehand, the company could have a nationwide fibre network by 2000.
Mercury, bound by the same constraints as BT, has not committed itself
to installing fibre into the home, but it will be able to use BT’s fibres
as soon as they are laid.

What will the government decide? The Conser-vatives, with their commitment
to free markets, might be expected to unshackle BT rapidly. But conflicting
interests are at work. Several cable TV companies have Conservative MPs
on their boards.

Peter Brooke, the minister responsible for broadcasting, has repeated
the government’s commitment to existing regulations and to the competition
provided by the burgeoning cable companies.

The Labour Party, however, is not entirely happy with the current regulations.
Jim Cousins, a shadow trade and industry spokesman, says: ‘Telephone systems
are restricted in their involvement with entertainment and data. This could
block the way to long-term competi-tiveness in the products and services
of the future.’

And while BT, Mercury and the cable companies all try to bend the government
their way, there is a joker in the pack. The Astra 1E satellite, due to
be launched early next year, will broadcast up to 270 TV programmes. Although
it cannot provide interactive services, it could mop up the juicy profits
from the entertainment market.