Now if we were having this conversation three years ago, I think it would be a very, very different conversation to the one that we'll have today.  Three years ago industry was very, very uncertain.  Three years ago broadband availability was very limited.  Infrastructure competition or a new wave of infrastructure competition looked as if it was nothing more than a pipe dream and the financial markets wanted little or nothing to do with the telecoms or media or technology sectors.  But what are the facts today?  I just want to kick off with a few slides and a little data if I may and as this slide shows <Slide 2>, now for the first time ever more people in the UK are accessing Internet through broadband than they are through narrowband. <Slide 3> And what you see here is exactly how different technologies are changing and evolving over time, and if you look in the bottom corner of this slide what you see is a number of [recent] technologies, DAB, PVRs, Video on Demand, Wi-Fi and so on, but if you then glance to the top right hand corner you see established mature technologies such as GSM, and the really interesting part is that middle area where you see digital TV already in two-thirds of households but also broadband now surging up that S-curve into the mass adoption phase.  And also something that I find very interesting is if you look at the position since Ofcom's inception. <Slide 4> You really see here how rapidly broadband has changed the landscape.  This is just a period between summer 2003 and summer 2005 and again you can see very, very clearly where the rapid change has happened in our short life.  At the bottom PVRs and digital audio broadcasting but those are changes on very, very low basis.  The really significant change is the one at the top where you've seen this surge in broadband connectivity from 2.2 million to the verge of 9 million today. 

In two years alone broadband connections have quadrupled.  Broadband availability has grown to virtually 100%.  So we've come a very, very long way in a very short space of time.  We are unequivocally in a very different place today than when I stepped through the doors of Riverside House, Ofcom's offices, a little under three years ago.  So we have progressed rapidly but where are we today in the round?  Well, not only are there nearly 9 million broadband connections in the UK but varieties of ADSL cable are now available to around 99.6% of households.  And that puts us at the top of the global tree in relation to the availability rates of current generation broadband.  Consumers with access to ADSL now choose between over 20 broadband ISPs and clearly if they're in a cable covered area they have that option as well.  And data speeds available to consumers are continuing to increase.  <Slide 5> And as you can see here, you see a very, very interesting change in pricing and the relationship with faster or higher bitrate.  The most precipitous falls have come at the higher bitrates with prices really substantially falling in less than a year.  Competition is driving new product launches with a range of ADSL 2-plus launches in the pipeline with the scope to provide bandwidth of up to 20MB per second for something like 50% of homes in the UK. 

Now the second big issue is take-up, where the consumers are actually taking advantage of the benefits and services that broadband availability can offer.  And the UK as you all will know, still lags behind the likes of the US, Japan and Korea.  Although penetration has overtaken Germany and only slightly trails France, we believe that broadband is still in the steep part of its growth curve although we would expect to see some flattening in due course.  But we believe that further growth will come over next year from lower prices driven by the impact of higher speed offers combined with lower entry level pricing.  If you look at relatively more mature markets such as South Korea and Japan this suggests that penetration will peak at around 70-80% of households.  For the UK that would mean around 17.5-18.5 million connections compared to the 8.9 million today.  So there's clearly scope for continued significant growth.  And having said all that there is still an enormous amount for us to achieve and for none of us, is there any room for complacency?  We all want to see broadband in the UK at the top of the world leagues and that is because we believe in the transformative potential of broadband and achieving that is a challenge both for us and for industry, and the key question of course is how we drive forward the next wave of take-up.  We should not lose sight of the fact that around 40% of the population still do not have any Internet access at all.  We should not lose, and I think in this area its very, very useful to differentiate between those that choose not to have Internet access and that those who do want but for a variety of reasons, and we know its typically cost, are unable to have access. <Slide 6> Now this slide illustrates some recent research by the Ofcom Consumer Panel which suggests that around 80% of people, if you're looking at the top bar on the slide, around 80% of people that don't have Internet access are voluntarily excluded, as they sense that they do not believe they want or need access.  So whilst we still need to address the 20% that are excluded for reasons such as cost, convincing that 80% that they are missing out remains a major challenge.  And broadband uptake is of course inextricably linked to PC ownership.  Overall PC penetration seems to be heading towards a plateau of around 70-75% of UK households.  Currently a 67% as this slide shows. <Slide 7> And whilst year on year growth since 2000 has been a healthy 7-11%, this year we've only seen a growth of around 2%.  Now admittedly there will be a surge in the Christmas period but there are signs of concern.  And of course a key factor here is the price of PCs and if you look at the analysis of where that of both access and PC ownership, what you see are very, very few surprises. <Slide 8> You see the skew with low take up and low ownership in the over 65 age group, you see it in the poor, the low income categories less than £12,000 a year, and you see it in the DE social class at the end of the slide.  Really no surprises and a pretty clear challenge.  But one source of optimism that we have, particularly for those excluded by cost, is the expected convergence of PCs and TVs and the growth of what people call thin client home terminals, whether that be through XBox or similar devices or low cost dumb terminals associated with television.  These kinds of developments may well push the potential broadband market out towards 90% of households.  Another factor restricting broadband take up is that some people may believe that broadband is just slightly more expensive way of doing what narrowband does, just simply a faster way of accessing traditional dial-up services such as email and the web.  But the evidence we have is beginning to show that people really are beginning to take advantage of broadband capability.  Broadband subscribers are using the Internet for more data rich activities. <Slide 9>  And again if you look at this data what you see is that of course there is more email and surfing.  With email and surfing there's just slightly more of it among broadband users but there is also clear evidence of much higher use of music, video, messaging, gaming and so on.  And it is this content revolution that is one of the really radical impacts of broadband.  Perhaps the most radical of all is user generated content.  Self generated content is increasingly being distributed globally by broadband networks.  Already 31% of 14-21 year olds in the UK claim to have their own web-blog or Internet site.  Google is about to launch a new service that allows anyone to post their own content on the Internet without having to develop a website.  Online virtual worlds are developing especially through the gaming world and remarkably virtual economies are developing around these virtual worlds.  Fans of online games like Everquest use auction sites to sell their virtual wares, trading virtual possessions and property for use in the virtual world.  The traditional broadcasters are adapting to the possibilities too.  Channel 4 has launched its first dedicated broadband channel, 4-docs, which has at its heart the key idea of giving people a chance to upload their own 4-minute films, opening the broadcast model to user generated content.  And in the public sector government has put at the centre of its agenda ensuring that ICT supports the business transformation of government itself to provide better services, more efficient public services.  The Cabinet Office has published plans for customers to be able to access essential public services via mobile technology and interactive digital television.  These are all examples of the move from traditional distribution and communication models to the interactive networks which broadband enables. 

Now one crucial characteristic of this content of the future is that the viewer, the player, the citizen, the user; they all become part of the creative process themselves.  Part of how content and services are refined, how they are evolved and how they are reinvented.  In much of contemporary management literature you will see this idea of recruiting the consumer to help you design your product or service but in the online world with broadband connectivity and content, it is built into the very being of those who work in that environment and that to me is one of the great examples of where the future of the content economy collides with the future of the broadband world. 

At Ofcom our job is to ensure that innovators, creators and investors can flourish.  An ambition underpinned by commitment to fair and competitive markets.  Already we've sought to address one key aspect of competition, fair competitive access to infrastructure bottlenecks, a central feature of communications networks throughout economic history.  We've sought to establish a new regulatory approach based on clear regulatory principles with our underlying approach to deliver real equality of access to enduring economic bottlenecks.  This means fair competition for competitors to BT.  It means access to the same sort of inputs, the same product, the same price, the same systems, the same development processes as that which BT provides to its own internal customers.  And it means behavioural and organisational change within BT to underpin that product equivalent, tacking the internal incentives, the information flows and the other advantages which have tended to tilt the playing field unfairly against new entrants.  We believe that this will lead to more competition in the broadband market, to more speed, more choice, more innovation.  We believe that in time it will lead to more competition at the wholesale level and this is something as a regulator that we would like to see as it will allow us to reduce regulation at the retail level and in due course in many areas at the wholesale level as well.

Now the prospects today are pretty encouraging.  <Slide 10> BSkyB, Easynet intend to extend their footprint to 1,000 exchanges.  FT and Wanadoo have a target to exchange to 500.  Carphone Warehouse have now entered the market and plan to un-bundle 1,000 exchanges by 2008.  Now, if that all sounds a little abstruse to you the numbers that don't really mean anything, well remember that 1,000 exchanges equates to roughly 70% of the UK population.

So 1,000 exchanges equates to roughly 70% of the UK population, this is a potential step change in the level of competition and the interests in the round of a healthy broadband based content economy.  So in our view, in current generation broadband the prospects are good.  We have to turn our minds now to next generation access to next generation networks where the future problems and challenges will also lie.  The opportunities and the role of content seem to me to be enormous.  Our role in many ways is far from the main event.  The main event is private and public sectors having the opportunity like never before to take advantage of the benefits that broadband can offer.  Distance learning, government services, healthcare, entertainment, e-commerce and a host of other services.  I think the one that is very, very clear is that lines will be blurred industries will be reclassified.  You have to look no further than music to see  the power of what is happening.  The music industry has had to adjust its entire business model to accommodate the digital revolution.  Digital music and broadband connectivity seem to me to be one of the great technology double acts of our time.  And if you think about something like retail banking, what is retail banking for the broadband population today?  Its nothing to do with shops on a high street, its nothing to do with bank clerks behind windows, it's a broadband information and transaction experience with marketing content and design at its core.  It is broadband networks and content re-making our idea of a previously stable business model.  In the public sector there are equally significant opportunities.  In education with the commitment to broadband access to every school.  In health broadband and connectivity driving productivity in the NHS.  In politics through greater engagement.  There are some wonderful examples of some fantastically exciting projects, ranging from what the DTI and DfES are doing in skills and learning, across many of the RDAs and in local councils and including many great institutions, ranging from the BBC through to the Royal Shakespeare Company, both of whom have pioneered the use of broadband as the spine of a new service.  All of these things, the change and opportunity in the private and public sectors represent a profound force upon the UK economy.  So let me just finish with what I see as some of the key challenges that we face.  You may see different ones and we can discuss them.

The first is digital rights management where we see technology rather than regulation as the most likely way forward.  We need to strike a balance here between the rights of consumers and the need to protect against piracy and illegal peer-to-peer sharing.  Secondly, the digital divide, I touched upon this earlier and in some ways it's a well rehearsed topic.  Let me add a different dimension to it.  A new type of digital divide may well also emerge between those who can receive high speed next generation services and those that cannot. And this is one reason why we will want to consider the economic case for next generation access as well as today's broadband.  Third, content public service broadcasting and public services.  We need to decide what model of public service broadcasting, what scale of public sector interaction is appropriate for the digital age.  We need to consider whether the broadcasters are the right or indeed the only vehicles for achieving the purposes of what has become known as public service broadcasting in the broadband.  We need to constantly renew our efforts to identify ways in which public services can harness the opportunities created.  Ways in which we can raise productivity but also enhance public satisfaction in public services.  And finally, the digital dividend, how do we best use the digital dividend produced by the release of the spectrum released by the digital switch over programme.  Now why do I raise this when it seems to be an issue primarily to do with television?  Well that cleared spectrum offers us the chance to launch a wide range of different services, new mobile services with high quality video and interactive media delivered to handheld devices, wireless broadband services with high speed data and voice, a wider coverage for broadband advance services in remote and rural areas.  Here at Ofcom we want to continue to work to ensure fair and competitive communications market and to try and tackle some of the issues that I've raised this morning.  In doing so we want to remember, we need to remember, that our job is not only to regulate current markets but also to prepare for the future.  <Slide 11>  We will remain mindful of enormous change that broadband is creating.  We will keep at the forefront of our mind one thing that is crystal clear, that amidst all this change there are huge opportunities for the creative community and that content will remain crucial although it will be created, designed packaged and distributed in very different ways to those of the past and even of the present.  For the content investors, innovators and creators in both public and private sectors the challenge is far greater.  For the future is very, very uncertain and highly unpredictable but in our view it is unequivocally also a future that is full of promise.  Thank you very much.

End of speech