House of Commons Welsh Affairs Committee
Broadband services in Wales
First Report of Session 2012–13
HC 580 Incorporating HC 1367-i-iii, Session 2010-12
House of Commons Welsh Affairs Committee
Broadband services in Wales
First Report of Session 2012–13
Report, together with formal minutes, oral and written evidence
Ordered by the House of Commons to be printed 11 September 2012
HC 580 Incorporating HC 1367-i-iii, Session 2010-12 Published on 17 September 2012 by authority of the House of Commons London: The Stationery Office Limited £0.00
The Welsh Affairs Committee
The Welsh Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Secretary of State for Wales (including relations with the National Assembly for Wales).
Current membership David T.C. Davies MP (Conservative, Monmouth) (Chair) Stuart Andrew MP (Conservative, Pudsey) Guto Bebb MP (Conservative, Aberconwy) Geraint Davies MP (Labour, Swansea West) Jonathan Edwards MP (Plaid Cymru, Carmarthen East and Dinefwr) Nia Griffith MP (Labour, Llanelli) Mrs Siân C. James MP (Labour, Swansea East) Susan Elan Jones MP (Labour, Clwyd South) Karen Lumley MP (Conservative, Redditch) Jessica Morden MP (Labour, Newport East) Mr Robin Walker MP (Conservative, Worcester) Mr Mark Williams MP (Liberal Democrat, Ceredigion)
Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk
Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/welshcom
The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in printed volumes.
Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee is Marek Kubala (Clerk), Anwen Rees (Committee Specialist), Lori Inglis Hall (Senior Committee Assistant), Dabinder Rai (Committee Assistant), Ravi Abhayaratne (Committee Support Assistant) and Jessica Bridges-Palmer (Media Officer).
Contacts All correspondence should be addressed to the Clerk of the Welsh Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 3264; and the Committee’s email address is [email protected]
Broadband services in Wales 1
Contents
Report Page
Summary 3
1 Introduction 5 Background 5 Broadband technology 5 Responsibility for broadband strategy in Wales 5 Our inquiry 6
2 Current Broadband coverage in Wales 7 Introduction 7 “Notspots” and “slowspots” 8 Effect of limited broadband access on businesses and individuals 9 Welsh Government schemes to address notspots 10
3 Superfast broadband or broadband for all? 12 DCMS broadband strategy 12 Super connected cities 13 The Welsh Government’s broadband strategy 13 The right strategy? 13
4 Delivering the Strategy 16 Access to BT’s infrastructure 16 Alternative technologies 17 Mobile 17 Satellite 19
5 Conclusion 20
Conclusions and recommendations 21
2
Broadband services in Wales 3
Summary
Historically, the availability of broadband has been consistently lower in Wales than the rest of the UK. Although that gap has narrowed in recent years latest figures show that the gap between Wales and the UK has widened again. Wales must continue to receive the funding and political leadership to ensure that broadband provision is at the very least in line with the rest of the UK.
In rural areas of Wales the existence of broadband notspots and slowspots has hindered the operations of existing businesses and has deterred new businesses from choosing to locate there—to the cost of the local economy. Eradicating remaining broadband notspots and slowspots in Wales must be a priority for the UK and Welsh Governments.
The UK Government has pledged to provide the UK with the “best broadband in Europe” by providing access to superfast broadband for 90% of the UK by 2015. The Welsh Government’s target is even more stretching and includes a commitment to provide Welsh businesses access to next-generation broadband at a minimum speed of 30 mbps by “the middle of 2016”. Both of these targets are extremely ambitious. The two Governments will deserve great credit if they are achieved.
The UK and Welsh Governments have previously introduced schemes to increase broadband provision in Wales. The impact of these schemes have been mixed—the Welsh Government’s Regional Innovative Broadband Support (RIBS) scheme only provided a minimum download speed of 0.5 mbps, which soon proved inadequate to businesses and consumers. The Broadband Support Scheme which replaced RIBS has also experienced problems. The Welsh Government must ensure that the Broadband Support Scheme reaches as many people as possible, is adequately advertised and that the application process for grants from the scheme is made as easy as possible to complete.
The Governments must ensure that the roll-out of superfast broadband is not undertaken at the expense of ensuring that the needs of those without any broadband service at all are met. The first priority must be to ensure that the needs of the approximately 90,000 homes in Wales which currently do not have access to broadband are addressed as soon as possible. The Government’s ambitions for superfast broadband must not be at the expense of delivering a good broadband service for all.
Broadband services in Wales can only be made available to the most remote parts of Wales through a mix of technologies including mobile. Mobile broadband is the fastest growing means of accessing the internet in Wales and this trend is likely to continue. The delayed Spectrum auction, now planned for 2013, must ensure that 4G mobile services are available to at least 98% of people in Wales.
Satellite broadband is a practical alternative to fixed line and mobile broadband. We received very persuasive evidence that for very difficult-to-reach areas it might be the best solution for Wales as it has been for parts of Scotland. We recommend that Ofcom undertake a study to evaluate whether satellite broadband should be supported more vigorously in Wales.
4 Broadband services in Wales
There is a little over two years for the Government to deliver on its pledge to provide the UK with the best broadband in Europe. For Wales, broadband will become an increasingly important generator of economic success and a means of addressing social exclusion. The task before the Government is therefore significant and if they are to succeed the programmes of both the UK and Welsh Governments must be implemented without delay. We will continue to monitor the broadband strategies of both the UK and Welsh Governments over the course of this Parliament.
Broadband services in Wales 5
1 Introduction
Background 1. In Wales, as throughout the UK, the internet has become central to everyday life. The internet supports a growing volume of business and retail transactions with many state and commercial services delivered to individuals online. Internet access is now considered to be vital by most businesses and people who use it to make transactions, and to download film, music, games and other media, and as a forum for social interaction.
2. As the number of internet users has grown in Wales and across the UK, and the amount of data that is transmitted through the internet has expanded, additional pressure has been placed on the infrastructure that supports it. Initially access to the internet was through a telephone and modem which enabled data to be downloaded through copper telephone lines at speeds of up to one megabit of data per second (mbps). Today information can be sent and downloaded at much greater speed through broadband—a high bandwidth connection to the internet—at speeds ranging from two mpbs up to 100 mbps.1
Broadband technology 3. In the UK broadband is delivered to businesses and households in three main ways. Fixed line broadband is internet access delivered via a connection through a telephone line or cable service. It is the most common method of delivering broadband in the UK and Wales. There are two major suppliers of fixed-line broadband in Wales: BT’s copper telephone network and Virgin Media’s cable network.2 In some areas of Wales, both companies also provide Superfast broadband (or ‘next-generation access’ (NGA)) services through fibre optic cabling which can provide download speeds in excess of 24 megabits per second (mbps).
4. Mobile broadband is delivered through mobile telephone networks which connect consumers to the internet via a mobile device, including a smart phone or tablet, or a “dongle” that plugs into a computer's USB port. Mobile broadband depends on the availability of suitable spectrum and is currently only available in areas that are served by 3G mobile networks.
5. Broadband can also be delivered from satellites positioned in Space to almost any household or business with a satellite receiver.
Responsibility for broadband strategy in Wales 6. The UK and Welsh Governments have recognised that access to broadband is a key enabler of economic growth and of social interaction. Both governments have also stated that significant investment is required to increase broadband services in Wales so that access and download speed in the country is in line with the rest of the UK. In the UK,
1 Two Mega bits per second is considered to be the minimum requirement for an adequate broadband service. 2 Ev 37
6 Broadband services in Wales
Ofcom estimate that 74% of households subscribe to an internet broadband service.3 In Wales, 71% of Welsh households have broadband access although there are significant regional variations within the country, particularly in mountainous and remote areas.
7. Both the UK and Welsh Governments have set targets for increasing broadband coverage in Wales. The UK Government’s national broadband strategy, set out in Britain’s Superfast Broadband Future, states that the UK should, by 2015, have the “best broadband in Europe”. The Government’s target is that, by 2015, 90% of households should have access to broadband.4 The Department for Culture, Media and Sport (DCMS) and its agency, Broadband Delivery UK (BDUK) is responsible for meeting the target.
8. The Welsh Government’s broadband policy was set out in Next Generation Broadband for Wales (NGBW) which contained two main objectives: first, to ensure that all premises in Wales will have access to “basic broadband” by 2013; and second, that all households and businesses will have access to high speed broadband by 2015.5
9. Both Governments recognise that their broadband targets are challenging, particularly in Wales where broadband will have to be delivered to people living in remote and hard to reach areas. The two Governments have stated that they are neutral about which broadband technology (fixed, mobile or satellite) will be used to reach those areas and that commercial competition should determine the solution.
Our inquiry 10. We decided to undertake our inquiry at the mid-point of the of the Government’s broadband roll-out to identify the scale of the challenge in meeting its objectives and to highlight potential problems in delivering them. In particular we examined:
• the current provision of broadband in Wales;
• whether the UK and Welsh Governments’ broadband strategies have the right emphasis between the promotion of “superfast broadband” and achieving universal broadband coverage;
• whether the Governments’ targets for universal broadband coverage by 2015 are realistic; and
• the challenges facing the two governments in delivering their targets.
11. We received written evidence from a number of individuals and organisations and took oral evidence from a number of witnesses including Ministers, rural businesses and representatives of the broadband industry. A full list of those from whom we took oral and written evidence can be found on page 24. We are grateful to everyone who provided oral and written evidence to our inquiry.
3 Ofcom, Communications Report for Wales, 2011. 4 Department for Culture, Media, and Sport, Britain’s Superfast Broadband Future, December 2010 5 Welsh Government, Economic renewal: a new direction, July 2010
Broadband services in Wales 7
2 Current Broadband coverage in Wales
Introduction 12. Historically in Wales the proportion of the population who use the internet has been significantly lower than the rest of the UK. In 2009, our predecessors found evidence of a “digital divide” between Wales and the rest of the United Kingdom.6 They concluded that the divide was a consequence of lower investment in broadband technology in Wales and the challenging topography of the country which made it difficult and uneconomic for commercial companies to lay the infrastructure necessary to provide broadband.
13. In 2010, Ofcom, the independent regulator and competition authority for the UK communications industries, estimated that 71% of households in the UK had access to broadband, but only 64% of Welsh households had broadband. However, by 2011, broadband access in Wales had increased by seven per cent to 71% compared with 74% in the UK as a whole.7 Figures for 2012 showed that the gap between Wales and the UK had widened again to 8%.
Table 1: Take up of communications services in Wales 2012 (2011), %
National Wales urban/rural Wales by region (2011) UK Wales urban rural SE SW North/Mid
total internet 80 (76) 74 (72) 74 (64) 75 (68) 61 67 74
broadband internet (fixed & mobile) 76 (74) 68 (71) 67 (62) 73 (67) 58 66 70 fixed broadband 72 (67) 63 (65) 61 (56) 69 (62) 50 61 63 mobile broadband 13 (17) 16 (16) 18 (15) 8 (12) 18 12 14 Source: Ofcom Communications Report for Wales, 2012.
14. Witnesses told us that the gap between Wales and the rest of the UK had narrowed as a result of substantial investment in fixed line broadband technology. BT told us that since 2004 the company had started its roll-out of a £10 billion next-generation broadband network from South Wales. In addition, BT had undertaken a programme of investment in superfast broadband services in Wales beginning with the upgrade of the Cardiff Central, Taffs Well, Barry, Penarth and Caerphilly exchanges8 with further upgrades to exchanges across the country. 9
6 Welsh Affairs Committee, Thirteenth Report of Session 2008-09, Digital Inclusion, HC 305 7 Although according to Ofcom this figure fell to 68% in 2012. 8 Ev 43 9 Further exchanges were upgraded in 2010 including from the Connah's Quay, Hawarden, Llantrisant, Bridgend, Chepstow, Hengoed, Llanishen, Newtown Llantwit and Llanedeyrn exchanges. In April 2011 BT added Aberkenfig, Blackwood, Buckley, Kenfig Hill, Llanrumney, Maesglas, Newport (Bettws, Malpas area) and Porthcawl to this list
8 Broadband services in Wales
15. Virgin Media has also invested in broadband technology although its reach is smaller than BT’s and its cable network supplies only 24% of premises in Wales, concentrated primarily in the major cities of Cardiff, Newport and Swansea in South Wales.
16. Wales has the highest mobile broadband take-up in UK with 16% of the country's properties having access to mobile broadband, with south east Wales being a “hot-spot” for mobile broadband usage with 18% of households using the technology compared to 15% in England.10
“Notspots” and “slowspots” 17. Despite the progress in increasing broadband coverage in Wales overall, significant variations remain within the country. In November 2010 Ofcom estimated that 70% of people in North/Mid Wales had a broadband connection compared with 66% in south west Wales and only 58% of households in south east Wales.11
18. This variation is compounded by the existence of areas, often small in size, where no fixed or mobile broadband service is available—notspots—or only available at download speeds below 2 mbps—slowspots. Fixed line notspots and slowspots exist where it is difficult to lay the copper telephone lines from exchanges to households and business premises. BT told us that 99.6% of UK premises were connected to exchanges which support the provision of internet services at speeds of at least 512 kbps—but that is just one quarter of the speed deemed to be the minimum standard.
19. In practice, however, broadband access over the copper telephone network is limited to premises situated up to 5 km from an exchange. According to Ofcom, 16% of premises in Wales are situated further than 5 km from an exchange (compared to the UK average of 13%) increasing the incidence of notspots and slowspots. We received evidence that notspots and slowspots exist mainly in rural areas including Ceredigion in West Wales. However, notspots also exist in urban areas of Wales including Llansamlet in Swansea, Treuddyn in North Wales and Merthyr and Blaenau Gwent.12
20. Over a number of years, the availability of broadband has been consistently lower in Wales than the UK average. However, according to Ofcom, that gap has narrowed in recent years following investment by the private sector and through the efforts of the Welsh Government. We are concerned, however, that Ofcom figures for 2012 show that the gap between Wales and the UK has widened again. This demonstrates that it is imperative that Wales continues to receive the funding and political leadership to ensure that broadband provision is at the very least in line with the rest of the UK. We will continue to monitor progress in this area throughout the remainder of this Parliament.
10 Ev 67 11 Ev 39 12 Ev 72
Broadband services in Wales 9
Effect of limited broadband access on businesses and individuals 21. In 2011, the Wales Office’s Rural Economy Task Force concluded that the provision of broadband was “integral to economic development in rural Wales” and noted concern that many areas had no access to the service.13 We heard from a number of witnesses who lived in rural areas of Wales about how the lack of high speed internet access had badly affected their business.14 Huw Thomas of the National Farmers Union (NFU) Cymru told us that farmers were now required by the Government to carry out a range of transactions online.15
22. Huw Thomas argued further that:
Government are pushing people down the digital route in terms of communication with government. We have already seen Her Majesty's Revenue and Customs (HMRC) insisting that VAT returns are completed online for businesses with a turnover of more than £100,000. For practical purposes, such as reporting cattle movements, farmers are obliged to report cattle movements to British Cattle Movement Service within three calendar days.16
23. Mr Thomas told us that a significant number of farmers and other businesses were situated in not spots and unable to complete their returns to HMRC through the internet while other businesses were hindered by a slow broadband connection of 0.5 mbps, making the task very time consuming.17
24. The Country Land and Business Association (CLA) argued that all rural businesses had suffered from a lack of broadband access:
Without broadband, rural areas will continue to struggle, this being exacerbated by Government efforts to digitalise most forms of administration, such as the single farm payment and the whole-farm approach. Although the Government’s efforts appear laudable, they also fail to recognise that without broadband connectivity, considerable effort and time is wasted, leading to an economic disadvantage for rural businesses and the rural community. This is very much the case for rural Wales.18
25. Other witnesses told us about other economic and social advantages resulting from wider broadband access. As web-based transactions and information gathering become more integral to successful economies, there were concerns that if Wales did not stay in line with broadband provision in England and Europe there could be a detrimental effect on inward investment and indigenous economic growth. Ben Underwood, Regional Director (Wales), Country Land and Business Association, told us that good broadband access was “absolutely crucial” when businesses were considering whether or not to locate in rural areas:
13 Wales Office, Rural Economy Taskforce, June 2011 14 Ev 72 15 Ev 36 16 Q 2 17 Q 4 18 Ev 53
10 Broadband services in Wales
I have seen that because normally planning is the biggest barrier to these businesses setting up in rural areas, but, increasingly now, broadband is the chief barrier to rural businesses setting up.19
26. Ed Vaizey MP, Parliamentary Under-Secretary of State for Culture, Communications and Creative Industries, Department for Culture, Media and Sport (DCMS), recognised the importance of broadband:
It is an important point to make that getting broadband out to rural areas is not simply a nice thing to do; it is very important for economic growth and lots of businesses, particularly farmers.20
27. All of our witnesses argued that access to Broadband is increasingly important to businesses and individuals in Wales. Broadband is essential, not only for everyday life, but also for economic development. Access to broadband enables businesses to grow and access new markets around the world.
28. While we welcome efforts to improve broadband coverage in Wales, we are concerned that, particularly in rural areas, the existence of broadband notspots and slowspots has hindered existing businesses and has deterred new businesses from choosing to locate there at some cost to the local economy. Eradicating remaining broadband notspots and slowspots in Wales must be a priority for the UK and Welsh Governments.
Welsh Government schemes to address notspots 29. In 2009 the Welsh Government established the Regional Innovative Broadband Support (RIBS) aimed at addressing some of the known slowspots and notspots. The RIBS project was designed to provide 35 areas of Wales, initially deemed unviable by BT, with broadband access at speeds of at least 0.5 mbps. According to the Welsh Government, the project covered 8,500 households and businesses providing access to broadband services for the first time. In 2010, the Welsh Government and BT extended the scheme to address notspots in Beulah and Ystrad Meurig in Ceredigion and Cil-y-Cwm and Llanfynydd in Carmarthenshire.21
30. Although RIBS achieved the aims of the Welsh Government, Abby Hanson, Director, Disconnected Wales, argued that the provision of a minimum of 0.5 mbps was too slow to greatly benefit most internet users and questioned whether the scheme had provided value for money.22
31. Mrs Ann Beynon, Director, BT Wales, argued that RIBS had been successful in meeting its aim of delivering a minimum service for its users and had exceeded the expectations placed on it by the Welsh Government:
19 Q 5 20 Q 122 21 Ev 51 22 Q 21
Broadband services in Wales 11
The amount of public money we received was less than £300,000 for the exchange enablement part of the contract. You have to bear in mind that the contract was for only 0.5 mbps broadband, so we looked at addressing other parts of Wales by providing different technologies, but then that would have meant implicitly speeds above 0.5 mbps and that was not contractually possible...I can see that they are getting basic broadband and now the world has moved on, which is why the RIBS contract came to an end in March [2011] and there is therefore a new procurement.23
32. In 2011, the Welsh Government told us that it had adopted “new approaches to supporting broadband delivery in rural areas reflecting the increasing demands for greater bandwidth than 0.5 mbps”.24 The Government introduced a Broadband Support Scheme, making £2 million available to provide businesses that were unable to access broadband notspots to enable them to obtain a broadband connection using the most appropriate technology available. The scheme provided a grant of up to £1,000 to residents, businesses and third sector organisations for wireless and satellite broadband. By February 2012, 2,038 applications had been approved with a further 230 applications under consideration.25
33. A number of witnesses were concerned that the take up of the £1,000 grants had been slow. We also heard some criticism that the application process was overly complicated. The CLA argued that the scheme had received insufficient publicity but was also concerned that “the scheme is targeted towards the satellite end of the market, given that its primary objective is the eradication of broadband not spots and that the grant only relates to hardware costs, not the actual cost of the service”.26
34. We welcome the efforts by the Welsh Government, working with commercial providers, to bring broadband to areas of Wales for the first time. However, the Welsh Government’s Regional Innovative Broadband Support scheme only provided a minimum download speed of 0.5 mbps, which soon proved inadequate to businesses and consumers.
35. The Broadband Support Scheme has also experienced problems. We call on the Welsh Government to ensure that the Broadband Support Scheme reaches as many people as possible and is adequately advertised and that the application process for grants from the scheme is made as easy as possible to complete.
23 Q 50 24 Ev 72 25 http://wales.gov.uk/newsroom/businessandeconomy/2012/120202bss/;jsessionid=fmHRP5vQRjDmj8ZdGctWX20sm FbPcdDbQv1hqbYGrwyTcrLcQyNV!545803488?lang=en 26 Ev 54
12 Broadband services in Wales
3 Superfast broadband or broadband for all?
DCMS broadband strategy 36. The DCMS has pledged to ensure the whole of the UK, including Wales, has the “best superfast broadband network in Europe by 2015”.27 The Government’s target is that, by 2015, access to broadband at minimum speeds of 2 mbps will be available to all premises, and access to superfast broadband for 90% of the UK.28
37. The UK Government’s strategy assumes that the private sector will supply the infrastructure for superfast broadband to two thirds of premises in the UK. The remaining one third of premises (approximately nine million premises) are mainly located in rural and remote areas, including the mountainous and western parts of Wales, where broadband infrastructure providers do not consider it to be economically feasible to extend superfast fibre optic broadband networks. For this remaining third, the Government has recognised that it will have to subsidise the cost of extending coverage.
38. The UK Government has allocated £830 million of public funding to finance its broadband strategy.29 The £830 million comprises £530 million (made up of £230 million from an under spend of the DCMS digital switchover fund and £300m from the BBC licence fee from 2013–14) by 2015, followed by an additional £300 million by 2017 from the TV licence fee settlement. In addition, the DCMS has provided the Welsh Government and Welsh local authorities with a further £56.9 million to implement local schemes.30 The Minister argued that:
£56.9 million is a substantial allocation to Wales. We can come up with various different statistics that may or may not be treated sceptically, but it is about three times more than you would get under the Barnett Formula. It is about £63 per head of the population, when the English allocation is about £44 per head. We think it is going to address it, but it is a partnership. We would hope that the Welsh Assembly would be able to find resources to match that sum.31
However, the Department recognised that the greater allocation of spending per head in Wales was a consequence of the topography of the country which made it difficult and expensive to extend fibre optic cabling capable of supplying broadband to many areas.32
27 Ev 89 28 Ibid 29 Ev 69 30 Q 125 31 Q 125 32 Q 131
Broadband services in Wales 13
Super connected cities 39. In the Budget of March 2012, the Chancellor of the Exchequer, Rt Hon. George Osborne MP, made available £50m to improve internet access in ten unnamed "smaller cities". Under the plans, cities would bid for “super-connected” status and funding to develop the infrastructure for the provision of superfast broadband (up to 100 mbps) in ten urban areas.33
40. Up to 27 cities were invited to make submissions for the funding, including Cardiff and Swansea. On 19 July 2012, the Government announced that Cardiff’s application for funding had been successful Cardiff. A decision on Swansea’s application for funding had remained under consideration.
41. We welcome the Government’s award of funding to Cardiff to enable it to develop superfast broadband which will bring significant economic benefits to that city. It is vital to the economy of Wales that investment in urban broadband is extended beyond Cardiff and we call on the Wales Office to prioritise support for Swansea’s bid for “super connected” status.
The Welsh Government’s broadband strategy 42. The Welsh Government’s broadband strategy is even more ambitious than the UK Government’s and its stated aim is to develop a broadband infrastructure “capable of delivering fast and ultra-fast broadband services to all premises in Wales”. Under its plans every business in Wales would have access to next-generation broadband at a minimum speed of 30 mbps by “the middle of 2016 and domestic premises by 2020”. 34
43. The Welsh Government argued that its “Open Market Review” would determine where the deployment of next generation broadband networks should be focused and had initially planned to award the first contracts in March 2012.35 However, an announcement was not made until July 2012 when the First Minister announced that the Welsh Government had awarded BT with a contract to deliver broadband to 96% of premises by 2015.36
The right strategy? 44. The DCMS has approximately two and a half years to fulfil its aim of achieving the “best broadband in Europe by 2015”. The Minister recognised the scale of the task:
We have set ourselves a realistic but stretching target, so there is no room for complacency or to allow the programme to slip significantly. We have now allocated all the money in Wales and around the country. We have most local authorities and devolved Governments getting their broadband plans ready for sign-off. It is important as well to emphasise that the best superfast broadband in Europe includes
33 HC Deb, 21 March 2012, cols 799-800 34 Ev 49 35 Ev 40 36 www.bbc.co.uk/news/uk-wales-18904182
14 Broadband services in Wales
a range of targets such as speed, price and competition, and issues like that. I am confident that we will reach that target.37
The Minister further explained why the Government had concentrated its strategy on developing superfast broadband rather than ensuring a universal basic broadband service:
The point about our target is that we took a view quite early on that, if we were going to invest all this money in enabling broadband, it would be good, as far as possible, to future-proof it. Rather than go for a low-level solution, we wanted, where possible, to ensure that it was superfast....We want to ensure, as far as possible, that there are fibre and superfast solutions. If you are going to dig up the roads, you want to do it once.38
45. However, a number of witnesses argued that the two Governments’ priorities were too ambitious and that the focus should be on providing broadband to the estimated 90,000 homes in Wales that did not receive even a basic 2 mbps broadband service. The CLA argued that:
We do not believe that it is realistic to suggest that all businesses in Wales will have access to superfast broadband of speeds of at least 30Mbps by 2016, let alone all households by 2020. Such a policy necessitates the universal infrastructure build of fibre-optic. The real problem is that the set political priority does not match up to practical reality.39
46. Julian MacGougan, Head of Public Policy at Arqiva, argued that:
What we have at the moment in the debate in Cardiff and Westminster is consumers standing outside a Ferrari garage with their noses pressed against the window and both Governments are saying, “You will have all of those soon.” The problem is that some of those consumers are in line to get a Ford Focus. Not only are we not managing their expectations and saying, “You know what? You aren't going to get a Ferrari but we have got something for you and we are going to ring fence the funds and address you separately.” There is also a real problem that the lure of speed diverts too much money towards upgrading most consumers to Ferraris, and there is a real risk that when the pot runs dry some of those people who were in line to get a Ford Focus won't get one because the money won't be there. These will be real Welsh consumers who have nothing now. There is a real risk that they will still have nothing in 2015.40
47. Other witnesses expressed concern that the policies of the Governments in Cardiff and Westminster were dominated by the idea of superfast broadband at the expense of creating access to broadband at slower speeds to businesses and households which currently had none. In September 2012 the Government announced plans to “fast-track the roll-out of superfast broadband”, for example by allowing the installation of broadband street cabinets
37 Q 138 38 Q 139 39 Ev 54 40 Q 66
Broadband services in Wales 15
and other infrastructure without the need for prior approval from the local council (except in Sites of Special Scientific Interest).41
48. The UK Government has pledged to provide the UK with the best broadband in Europe by providing access to superfast broadband for 90% of the UK by 2015. The Welsh Government’s target is even more stretching and includes a commitment to provide Welsh businesses access to next-generation broadband at a minimum speed of 30 mbps by “the middle of 2016”. Both of these targets are extremely ambitious. The two Governments will deserve great credit if they are achieved.
49. We are concerned that too much focus may have been placed on the roll-out of superfast broadband at the expense of ensuring that the needs of those without any broadband service at all are met. The first priority must be to ensure that the needs of the approximately 90,000 homes in Wales which currently do not have access to broadband are addressed as soon as possible. The Government’s ambitions for superfast broadband must not be at the expense of delivering a good broadband service for all.
50. We are concerned that the Welsh Government’s scheme appears already to be behind schedule. The contract for the provider of the scheme was awarded some four months after the planned date. Any further delay to the programme will put the Government’s timetable in jeopardy.
51. We encourage the Welsh Government to examine the UK Government’s plans to enable broadband street cabinets and other infrastructure to be installed without the need for prior approval from the local authority (except in Sites of Special Scientific Interest). The Welsh Government should consider whether these measures are appropriate to Wales.
41 “Fastest broadband in Europe: delivering infrastructure to boost UK businesses”, Department for Culture, Media and Sport press release, 7 September 2012
16 Broadband services in Wales
4 Delivering the Strategy
52. We identified two significant areas that must be addressed for the Governments’ broad band strategies to be delivered successfully.
• Ensuring commercial access to BT’s broadband infrastructure; and
• Enabling competition between the different modes of broadband provision.
Access to BT’s infrastructure 53. Superfast broadband can be delivered in two main ways— fibre deployment (Fibre To The Cabinet) (FTTC) where fibre optic cable is run from the exchange to a street cabinet typically serving approximately 300 premises with existing copper cables connecting the cabinet to those premises; or by running fibre optic cable directly to a customer's premises (Fibre To The Premises) (FTTP).42
54. Much of the fixed broadband infrastructure in Wales is owned by BT. Consequently, Ofcom told us that BT exercised a position of “significant market power” in the fixed broadband market (which it defined as control of copper loops, cable networks and optical fibre at a fixed location but not mobile, fixed-wireless and satellite technologies).43 The Department told us that Ofcom had introduced a number of regulatory measures to open the market to BT’s competitors so that they could pay BT reasonable prices for the use of the infrastructure.44
55. However, a number of witnesses, including Virgin Media, told us that BT had used its market power either to deny its competitors access to its infrastructure (referred to as ducts and poles) or to grant access to the infrastructure but at unreasonable prices. Matt Rogerson, Vigin Media told us that:
It is a tension throughout all the procurement processes across the UK. Basically, the company that is most likely to benefit from hundreds of millions of pounds is in charge of the product. The absence of a decent product will mean that no player other than BT can enter the procurement processes”45
When we put this suggestion to Ann Beynon, BT, she argued that:
We absolutely welcome the concept of opening up our ducts and poles to other providers. That is an ongoing debate between ourselves and Ofcom. We have not agreed the pricing. There is certainly going to be room for manoeuvre on the pricing. We have two trialists working with us at the moment. You must remember that when you do something quite dramatic like using poles and ducts and allowing other people into that infrastructure, which is critical and has to be protected for the
42 Ev 68 43 Ev 38 44 Ev 89 45 Q 45
Broadband services in Wales 17
customers' benefit, you have to do proper trials. Those trials are ongoing. The discussions with Ofcom are ongoing and the engagement with the industry is ongoing. It is going to happen. There is a negotiation and we cannot predict what is going to happen.46
56. BT currently exercises significant market power in the provision of fixed broadband services in Wales. This market power must be regulated effectively because only with effective competition in the provision of broadband will choice be provided to consumers and the market able to operate efficiently to deliver to everyone across the country. While we welcome Ofcom’s efforts to open up the access to BT’s ducts and poles in Wales to other providers, we are concerned that it has not yet gone far enough in ensuring access is available at a reasonable cost. We call on Ofcom to increase its efforts in this area.
Alternative technologies
Mobile 57. The existence of BT’s infrastructure ensures that the majority of the UK and large parts of Wales will be served through fixed line broadband. However, Broadband Delivery UK (BDUK), estimate that following market deployment of superfast broadband in Wales, approximately 65,000 households will still not be able to receive a service at all, and 127,000 households will receive less than 2 mbps.
58. The Government has argued that there would be plenty of scope for these premises to be served by either mobile or satellite technology. Mobile broadband services are currently only available in areas that are served by 3G mobile services. Geographic coverage of 3G services by one or more mobile networks is relatively poor in Wales with 49% of postcode districts receiving 3G coverage from one or more mobile networks, lower than the UK overall (76%) but higher than Scotland (41%) and Northern Ireland (40%). Only 7% of postcode districts in Wales had coverage from four or five network operators.47
59. Providers of mobile broadband argued that delivery of broadband to the final third of premises could be efficiently delivered through mobile technology. The mobile broadband provider Three told us that in some Welsh villages near Aberystwyth mobile technology provided the only broadband service. In Ceredigion Three had increased population coverage from 17% to 72%, in Powys from 24% to 70%, and in Pembrokeshire from 24% to 86%.48 Overall the uptake of mobile broadband in Wales has increased significantly in recent years. In Wales as a whole, 16% of people used mobile broadband as their primary means of accessing the internet.49
46 Q 37 47 Ev 46 48 Ev 61 49 http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12/Wales_CMR_2012.pdf
18 Broadband services in Wales
Spectrum Auction 60. There have been two significant developments that will release more radio spectrum for the deployment of mobile broadband services:
• freeing-up the existing 2G spectrum for 3G use; and
• a new 4G spectrum auction.
61. In January 2011, Ofcom introduced measures to free up the airwaves used by mobile phone operators for 2G services to be available to provide 3G services. The measures are expected to help mobile phone operators to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas.50
62. In March 2011, Ofcom announced the largest ever single auction of spectrum for mobile services in the UK which would provide capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services. The auction, initially expected to take place in 2012 but now planned for 2013, will be for two spectrum bands— 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the “digital dividend”, which is being freed-up as the UK switches from analogue to digital terrestrial TV.51
63. A number of witnesses argued that Ofcom’s original plans for the Spectrum Auction did not provide a sufficient coverage obligation, meaning that a successful bidder would not be obliged to provide 4G services to the whole of Wales. During our inquiry however, Ofcom raised their coverage obligation to 98% of the UK.
64. Further concern was expressed that the auction had been delayed on at least two occasions and that the delay was holding back the roll-out of broadband particularly as other European countries had already held similar auctions and handed out contracts. According to Three this was further evidence that the Government considered mobile broadband to be a ‘complementary’ service to fixed broadband whereas according to that company mobile broadband is the fastest growing part of the broadband sector and is predicted by 2015 to provide more access to the internet than fixed lines.52
65. In August 2012, Ofcom approved Everything Everywhere’s53 application to provide 4G broadband to use its existing 1800 MHz spectrum to deliver 4G superfast mobile broadband services in the UK. That service is expected to be available from the autumn of 2012 ahead of the Spectrum Auction which will enable other operators to launch competing 4G services from 2013 through the release of additional spectrum in the 800 MHz and 2.6 GHz bands.54
50 Ev 37 51 Ev 39 52 Ev 62 53 Everything Everywhere is the parent company of T-Mobile and Orange. 54 Ofcom press release, Ofcom allows Everything Everywhere to use existing spectrum for 4G, 21 August 2012.
Broadband services in Wales 19
Satellite 66. We also considered the potential of satellite broadband provision. Satellite broadband is available almost anywhere in the UK using a satellite dish. The UK Government argued that while satellite might be suitable for some consumers it had several drawbacks— satellite transmissions may be affected by weather conditions or local obstructions including foliage and trees, and the cost of installing and running satellite broadband could be expensive compared with other types of broadband.55 We also heard that satellite broadband generally has a high latency (delay) compared to other broadband and so is potentially unsuitable for certain types of real-time internet services including video conferencing and online gaming.56 Simon Towler, DCMS, argued that:
There are the basic laws of physics around this that put limitations on it [satellite] and say that fibre optic broadband to your premises or to a cabinet will always be better in terms of the performance, but there is a cost trade-off. What we are talking about here is a series of trade-offs of what is doable.57
67. On the other hand, Avanti (a provider of satellite services) argued that the provision of broadband via satellites was the best and most cost effective way to deliver services to users in remote areas of Wales. Avanti told us that it had received a contract from the Scottish Government to supply 2,400 rural homes with satellite broadband and that in Wales, the company had conducted “satellite trials in the village of Felinfach in Brecon for well over a year and which ‘attracted strong approval ratings from all the trial users’”.58
68. The company argued further that following the launch of its new satellite in 2011, costs of subscribing to satellite services were likely to fall in line with market prices. Avanti estimated it will be able to offer satellite broadband for around £15 per month with a one- off installation fee of around £300.59
69. Broadband services in Wales can only be made available to the most remote parts of Wales through a mix of technologies including mobile. Mobile broadband is the fastest growing means of accessing the internet in Wales and this trend is likely to continue. The delayed Spectrum auction, now planned for 2013, must ensure that 4G mobile services are available to at least 98% of people in Wales.
70. Satellite broadband is a practical alternative to fixed line and mobile broadband. Although we received conflicting evidence regarding the performance and cost of satellite broadband, we received very persuasive evidence that for very difficult-to-reach areas it might be the best solution for Wales, as it has been for Scotland. We recommend that Ofcom undertake a study to evaluate whether satellite broadband should be supported more vigorously in Wales.
55 Ev 89 56 Ev 47 57 Q 158 58 Ev 56 59 Ev 48
20 Broadband services in Wales
5 Conclusion
71. There is a little over two years for the Government to deliver on its pledge to provide the UK with the best broadband in Europe. For Wales, broadband will become an increasingly important generator of economic success and a means of addressing social exclusion. The task before the Government is therefore significant and if they are to succeed the programmes of both the UK and Welsh Governments must be implemented without delay.
72. The Government must ensure that its ambition to roll-out superfast broadband does not undermine efforts to ensure that a basic broadband service is available to premises in Wales that currently have no service at all.
73. The Government and Ofcom must ensure that there is a level playing field for broadband providers and competing technologies to ensure that the broadband market in Wales is as competitive as possible. To that end, the Spectrum Auction must proceed without further delay. We will continue to monitor the broadband strategies of both the UK and Welsh Governments over the course of this Parliament.
Broadband services in Wales 21
Conclusions and recommendations
1. Over a number of years, the availability of broadband has been consistently lower in Wales than the UK average. However, according to Ofcom, that gap has narrowed in recent years following investment by the private sector and through the efforts of the Welsh Government. We are concerned, however, that Ofcom figures for 2012 show that the gap between Wales and the UK has widened again. This demonstrates that it is imperative that Wales continues to receive the funding and political leadership to ensure that broadband provision is at the very least in line with the rest of the UK. We will continue to monitor progress in this area throughout the remainder of this Parliament. (Paragraph 20)
2. While we welcome efforts to improve broadband coverage in Wales, we are concerned that, particularly in rural areas, the existence of broadband notspots and slowspots has hindered existing businesses and has deterred new businesses from choosing to locate there at some cost to the local economy. Eradicating remaining broadband notspots and slowspots in Wales must be a priority for the UK and Welsh Governments. (Paragraph 28)
3. We welcome the efforts by the Welsh Government, working with commercial providers, to bring broadband to areas of Wales for the first time. However, the Welsh Government’s Regional Innovative Broadband Support scheme only provided a minimum download speed of 0.5 mbps, which soon proved inadequate to businesses and consumers. (Paragraph 34)
4. The Broadband Support Scheme has also experienced problems. We call on the Welsh Government to ensure that the Broadband Support Scheme reaches as many people as possible and is adequately advertised and that the application process for grants from the scheme is made as easy as possible to complete. (Paragraph 35)
5. We welcome the Government’s award of funding to Cardiff to enable it to develop superfast broadband which will bring significant economic benefits to that city. It is vital to the economy of Wales that investment in urban broadband is extended beyond Cardiff and we call on the Wales Office to prioritise support for Swansea’s bid for “super connected” status. (Paragraph 41)
6. The UK Government has pledged to provide the UK with the best broadband in Europe by providing access to superfast broadband for 90% of the UK by 2015. The Welsh Government’s target is even more stretching and includes a commitment to provide Welsh businesses access to next-generation broadband at a minimum speed of 30 mbps by “the middle of 2016”. Both of these targets are extremely ambitious. The two Governments will deserve great credit if they are achieved. (Paragraph 48)
7. We are concerned that too much focus may have been placed on the roll-out of superfast broadband at the expense of ensuring that the needs of those without any broadband service at all are met. The first priority must be to ensure that the needs of the approximately 90,000 homes in Wales which currently do not have access to broadband are addressed as soon as possible. The Government’s ambitions for
22 Broadband services in Wales
superfast broadband must not be at the expense of delivering a good broadband service for all. (Paragraph 49)
8. We are concerned that the Welsh Government’s scheme appears already to be behind schedule. The contract for the provider of the scheme was awarded some four months after the planned date. Any further delay to the programme will put the Government’s timetable in jeopardy. (Paragraph 50)
9. We encourage the Welsh Government to examine the UK Government’s plans to enable broadband street cabinets and other infrastructure to be installed without the need for prior approval from the local authority (except in Sites of Special Scientific Interest). The Welsh Government should consider whether these measures are appropriate to Wales. (Paragraph 51)
10. BT currently exercises significant market power in the provision of fixed broadband services in Wales. This market power must be regulated effectively because only with effective competition in the provision of broadband will choice be provided to consumers and the market able to operate efficiently to deliver to everyone across the country. While we welcome Ofcom’s efforts to open up the access to BT’s ducts and poles in Wales to other providers, we are concerned that it has not yet gone far enough in ensuring access is available at a reasonable cost. We call on Ofcom to increase its efforts in this area. (Paragraph 56)
11. Broadband services in Wales can only be made available to the most remote parts of Wales through a mix of technologies including mobile. Mobile broadband is the fastest growing means of accessing the internet in Wales and this trend is likely to continue. The delayed Spectrum auction, now planned for 2013, must ensure that 4G mobile services are available to at least 98% of people in Wales. (Paragraph 69)
12. Satellite broadband is a practical alternative to fixed line and mobile broadband. Although we received conflicting evidence regarding the performance and cost of satellite broadband, we received very persuasive evidence that for very difficult-to- reach areas it might be the best solution for Wales, as it has been for Scotland. We recommend that Ofcom undertake a study to evaluate whether satellite broadband should be supported more vigorously in Wales. (Paragraph 70)
13. There is a little over two years for the Government to deliver on its pledge to provide the UK with the best broadband in Europe. For Wales, broadband will become an increasingly important generator of economic success and a means of addressing social exclusion. The task before the Government is therefore significant and if they are to succeed the programmes of both the UK and Welsh Governments must be implemented without delay. (Paragraph 71)
14. The Government must ensure that its ambition to roll-out superfast broadband does not undermine efforts to ensure that a basic broadband service is available to premises in Wales that currently have no service at all. (Paragraph 72)
15. The Government and Ofcom must ensure that there is a level playing field for broadband providers and competing technologies to ensure that the broadband market in Wales is as competitive as possible. To that end, the Spectrum Auction
Broadband services in Wales 23
must proceed without further delay. We will continue to monitor the broadband strategies of both the UK and Welsh Governments over the course of this Parliament. (Paragraph 73)
24 Broadband services in Wales
Formal Minutes
Tuesday 11 September 2012
Members present:
David T.C. Davies, in the Chair
Stuart Andrew Karen Lumley Guto Bebb Jessica Morden Geraint Davies Mr Robin Walker Jonathan Edwards Mr Mark Williams Nia Griffith
Draft Report (Broadband services in Wales), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 73 read and agreed to.
Summary agreed to.
Resolved, That the Report be the First Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.
Written evidence, reported and ordered to be published on 10 May 2011, 7 June 2011, 13 July 2011, 18 October 2011, 8 November 2011, and 17 January 2012, was ordered to be reported to the House for printing with the Report.
[Adjourned till Tuesday 16 October at 10.15 am
Broadband services in Wales 25
Witnesses
Tuesday 5 July 2011 Page
Huw Thomas, Assembly Adviser, National Farmers Union (Wales), Ben Ev 1 Underwood, Regional Director (Wales), Country Land and Business Association, and Abby Hanson, Director, Disconnected Wales
Ann Beynon OBE, Director, BT Wales, Matt Rogerson, Head of Public Ev 6 Affairs and Policy, Virgin Media, and Graham Leach, General Manager, FibreSpeed
Tuesday 11 October 2011
David Williams, Chief Executive, Avanti, Alastair Davidson, Managing Ev 14 Director, Government, Mobile, and Enterprise, and Julian McGougan, Head of Public Policy and Regulatory Affairs, Arqiva
Phil Sheppard, Director of Network Strategy, and Julie Minns, Head of Ev 19 Public Policy, Three, and Richard Rumbelow, Head of Corporate Affairs, Everything Everywhere
Rhodri Williams, Director, Wales, David Clarkson, Technical Adviser and Ev 23 Project Manager, Competition Technology, and Matthew Conway, Director of Regulatory Development and Nations, Ofcom
Tuesday 22 November 2011
Mr Ed Vaizey MP, Parliamentary Under-Secretary of State (Culture, Ev 28 Communications and Creative Industries), Department for Culture, Media and Sport, and Simon Towler, Head of Spectrum, Broadband and International ICT Policy (Broadband Delivery UK), Department for Culture, Media and Sport
List of printed written evidence
1 National Farmers Union Cymru Ev 36 2 Ofcom Ev 37 3 Country Land and Business Association Ev 52 4 Avanti Communications plc Ev 55 5 Arqiva Ev 56 6 Three Ev 61:Ev 64 7 South East Wales Economic Forum Ev 65 8 British Telecom Ev 67 9 FibreSpeed and Geo Networks Ltd Ev 72 10 Disconnected Wales Ev 79
26 Broadband services in Wales
11 Virgin Media Ev 84 12 Department for Culture, Media and Sport Ev 89 13 Dr Annelie Jane Fitzgerald Ev 92 14 Welsh Government Ev 94:Ev 96:Ev 97 15 Vodafone Ev 97
Broadband services in Wales 27
List of Reports from the Committee during the current Parliament
Session 2010–12 First Special Report Welsh prisoners in the prison estate: follow up: Government HC 398 Response to the Committee’s Ninth Report of Session 2009– 10 Second Special Report Wales and Whitehall: Government Response to the HC 399 Committee’s Eleventh Report of Session 2009–10 Third Special Report Cross-border provision of public services for Wales: follow up: HC 419 Government Response to the Committee’s Tenth Report of Session 2009–10 First Report The implications for Wales of the Government’s proposals on HC 495 constitutional reform Second Report The proposed amendment of Schedule 7 to the Government HC 603 of Wales Act 2006 Third Report The Severn Crossings Toll HC 506 Fourth Special Report The implications for Wales of the Government’s proposals on HC 729 constitutional reform – Government’s Response to the Committee’s First Report of Session 2010–11 Fourth Report The future of the Newport Passport Office HC 590 Fifth Special Report The Severn Crossings Toll: Government Response to the HC 837 Committee’s Third Report of Session 2010–11 Sixth Special Report Proposed Legislative Competence Orders relating to Organ HC 896–I Donation and Cycle Paths Seventh Special Report The proposed amendment of Schedule 7 to the Government HC 918 of Wales Act 2006: Government Response to the Committee’s Second Report of Session 2010–11 Fifth Report S4C HC 614 Sixth Report Pre-appointment hearing with the Government’s preferred HC 1061–I candidate for the Chairman of the S4C Authority Seventh Report Representation of consumer interests in Wales HC 1558–I Eighth Report Inward Investment in Wales HC 854–I
cobber Pack: U PL: COE1 [SO] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 1
Oral evidence
Taken before the Welsh Affairs Committee on Tuesday 5 July 2011
Members present: David T C Davies (Chair)
Stuart Andrew Mrs Siân C. James Guto Bebb Karen Lumley Geraint Davies Mr Robin Walker Jonathan Edwards Mr Mark Williams ______
Examination of Witnesses
Witnesses: Huw Thomas, Assembly Adviser, National Farmers Union (Wales), Ben Underwood, Regional Director (Wales), Country Land and Business Association, and Abby Hanson, Director, Disconnected Wales, gave evidence.
Q1 Chair: Good morning, gentlemen. It is very nice might be difficult. So you are probably looking at to meet you. I am David Davies, Chair of the 2 Mbps just as an indication. Committee. Perhaps you would like to introduce Abby Hanson: One of our colleagues, Rob Boyns, up yourselves and then I will call for questions. in north Wales—in south Clwyd—deals with a lot of Abby Hanson: Abby Hanson, Disconnected Wales. farmers. He is providing wireless solutions and a Huw Thomas: Huw Thomas, NFU Cymru. wireless connection to farmers because some of them Ben Underwood: Ben Underwood, Country Land and are in slowspots/notspots. According to Rob, Business Association—CLA. broadband speed is not so much of an issue; it is just Chair: Thank you very much. Thank you for coming that connectivity does not drop out. I think you will this morning. agree that, if you are halfway through a form and it drops out and you have to start again, that obviously Q2 Karen Lumley: To start off, why do you think causes problems. access to broadband for Welsh homes and businesses Ben Underwood: Certainly, from our perspective, 2 Mbps is the minimum to run a business effectively. should be a Government priority? The most entrepreneurial businesses in Wales are Huw Thomas: From an NFU Cymru perspective, we increasingly being set up in rural areas. The CLA at consider broadband to be crucial to economic and the last count had over 250 different types of rural social well-being in rural areas. We feel that it allows business in our membership. That is everything from access to services which people might not otherwise mail order companies to architects in converted farm be able to access. The data that we have come across buildings and so on. All of these cannot continue to from the Wales Rural Observatory showed that 74% run without improved broadband. We estimate from of farmers considered broadband access to be very our research that about 20% of rural Wales still does important to their business. Farmers are being urged not have that minimum benchmark of 2 Mbps. to market their businesses online more and more, and to market their products online, perhaps if they have Q4 Mrs James: I am surprised about 2 Mbps a diversified tourist enterprise. So it is crucial for that because I have notspots and slowspots in my sort of thing as well. constituency, which is an inner city constituency. I get Another big driver, of course, has been the way that 8 Mbps and I think that is wonderful. The difference Government are pushing people down the digital route between 2 Mbps and 8 Mbps is huge, so is 2 Mbps in terms of communication with government. We have really enough? already seen Her Majesty’s Revenue and Customs Ben Underwood: I reiterate that that is the very basic, insisting that VAT returns are completed online for but you have to realise that some do not get anything businesses with a turnover of more than £100,000. For as things stand and many get 0.5 Mbps or whatever it practical purposes, such as reporting cattle may be. So, no, 2 Mbps is the minimum, but movements, farmers are obliged to report cattle obviously we do welcome the aspirations of the Welsh movements to British Cattle Movement Service within Assembly for 30 Mbps by 2016–20 for houses. three calendar days—not three working days. Q5 Geraint Davies: We have been doing a study on Q3 Chair: Mr Thomas, what would be the speed inward investment in Wales. Further to what you have necessary, though, to fulfil all those obligations? said about the possibility of small businesses locating Huw Thomas: I am not absolutely sure. To access in rural Wales and establishing businesses of great the Government Gateway, Her Majesty’s Revenue and value which have a global reach, how important do Customs or CTS—Cattle Tracing System—online, you think that the failure of Wales to get to where you would need a reasonable speed. I imagine that if we should be quickly enough is in impeding inward you lived in a slowspot, even perhaps on 500 Kbps, it investment and economic growth there? cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 2 Welsh Affairs Committee: Evidence
5 July 2011 Huw Thomas, Ben Underwood and Abby Hanson
Ben Underwood: It is absolutely crucial. I say that we have a clearer picture? Other than the anecdotal because I am speaking to these rural businesses day stuff which we as constituency Members can present in day out. For my sins, last year at the Royal Welsh to you and to the Government, how much clearer are show I stood in the middle of a very busy walkway we? with a map of Wales, asking people if they knew of Abby Hanson: It is down to anecdotal evidence to get notspots. I have to say that map became very colourful to the final, final element very often. Do people with spots when I asked people that. It is absolutely declare themselves or do they just have inertia with crucial. I have seen that because normally planning is regard to gaining access or never gaining access, or the biggest barrier to these businesses setting up in have they gone to other technologies such as mobile rural areas, but, increasingly now, broadband is the to get their access? chief barrier to rural businesses setting up. So Huw Thomas: As NFU, we come across anecdotes absolutely crucial is the answer. from our members. I am afraid I cannot offer you much more than that. However, to give you one Q6 Mr Williams: Mr Underwood, perhaps you could example, Ben alluded to the fact that you had some give a bit more detail about that map and, in quite strange adjacencies really. You might have an particular, paint a picture across the whole country in area where there is good broadband available and terms of the particular difficulties, notspots and speed. immediately next door to it there might be an area In some of the evidence, we were given a rather where there is no broadband. One example is a gloomy map, which suggested that up to 20% of member of ours who farms near Builth Wells. He lives communities across Carmarthenshire, Ceredigion and 200 metres away from his son on adjacent premises. Powys had lines that were unable to support a speed Because they are on different exchanges, the father of 2 Mbps. Give us the bigger picture across Wales cannot get broadband but the son can. It is a source where there are particular problems. of great frustration for our member there. Ben Underwood: This is the thing. Notspots appear in the most unlikely places. I expected, I have to say, Q9 Mr Williams: How are people in those notspots when we undertook this process with the map, that it dealing with the problems—maybe farmers with a would be central Wales perhaps and the more rural cattle movement issue or small businesses doing their remote areas, but it was fairly uniform across the tax returns online? What kind of measures are people whole of the country. There were some very surprising taking to respond to those challenges? notspot areas in the Vale of Glamorgan, south-east Huw Thomas: I suppose there are other ways of Wales and the north-east, where perhaps there are reporting cattle movements. It can be done by larger conurbations and you would expect it to be telephone or through the post, but obviously working better. We are looking at a pan-Wales issue here. to three calendar days, not even three working days, is quite a challenge. Some farmers will use an Q7 Mr Williams: But the bigger concentrations intermediary; they might use an agent or something, obviously are in the farming community. Those are but that incurs a cost then on that business. Similarly, the counties where a large number of small businesses I would imagine for VAT returns they might use an are facing these challenges. I suspect on your map accountant, but that would add cost to their business they will be— as well. Ben Underwood: Yes. It also depended on the people Abby Hanson: On that point, Jonathan Edwards will who put the names on the map. They were generally be familiar with Capel Iwan and Brian Lloyd in Capel farmers, rural landowners and businesses. Generally Iwan. Brian has campaigned for a lot of his village to speaking, the dots were in rural areas, but yes. be enabled. If you look at the top line stats, ADSL Abby Hanson: Could I add other research on to that Max enabled, his exchange would be Velindre or as well? Analysys Mason, who are consulting on Newcastle Emlyn. He can get broadband. However, behalf of the Welsh Government currently, outline an on the ground, they would be getting speeds of less intervention area of 48% of businesses and homes. than 512 Kbps, which is how we define broadband. You will not be able to see this map, but there is a Brian has gone to some extreme lengths and is in whole lot of white across Wales, which is not covered, correspondence with Jonathan, and totally off his own which is mainly rural, outside the cities of Cardiff, bat he is pushing that issue forward. So people have Swansea and Newport. Also, Point Topic, who taken the issue into their own hands and are researched the issue quite thoroughly, have described campaigning. nine of the Welsh local authorities as among the worst local authorities for broadband coverage in the Q10 Stuart Andrew: Can I move on and talk about country, with the bottom five, beaten only by Isle of take-up of broadband? Ofcom figures show that Wales Harris in the Outer Hebrides. The bottom five are: has taken up 64% and in some places, they are even Ceredigion, Powys, Pembrokeshire, the Isle of lower. Why do you think Wales has such low take-up Anglesey, and then Gwynedd just slightly above that. compared with the rest of the UK? Ben Underwood: I think there are a number of Q8 Mr Williams: How successful are we at reasons, but the obvious one is that there needs to identifying those notspots? I know the Assembly have be greater awareness, first, of the broadband enabling done some good work and there were two notspots in scheme. Obviously, we welcome the announcement my patch that have been broadband-enabled now. The yesterday on expanding that. Again, to refer back to county council had a scheme whereby locally we were the Royal Welsh, in two weeks’ time we will be identifying areas of weakness. But, more generally, do meeting a lot of rural businesses there and people who cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 3
5 July 2011 Huw Thomas, Ben Underwood and Abby Hanson are after broadband who will not have heard of the and I know businesses in the Llansamlet area of my opportunities for this. It is educating on the constituency are really concerned because they are opportunities for grants but it is also educating, using reliant on the Skewen exchange. They are tearing their case studies, on the opportunities for rural businesses hair out. They cannot download information, they go that broadband delivers. There are some very good off, and that is in an inner city area. What is possible? work-through examples of that in the scheme. How would a business rely on these things? Abby Hanson: I personally think that the Welsh Q11 Stuart Andrew: Do you think enough is being Government are doing a good job with regard to their done in business to make them aware of the benefits vision. Their vision and the targets set are to be of broadband? commended. Not everybody needs 30 Mbps right Ben Underwood: No, I do not think so. Certainly, away. I would love to have 30 Mbps but I do not I have not had many approaches from the Welsh know what I would do with it. They are working, Government to promote it to our membership. obviously, on a five-year plan. That is going to take a while to roll through. They are currently in dialogue Q12 Stuart Andrew: Is that the same for the rest with providers and they are shortlisting later this year of you? to appoint next year. Alongside dialogue with the Huw Thomas: There is a feeling that perhaps the providers, they are also conducting an open market scheme that the Welsh Assembly Government review, so they are going to the local authorities to get announced about a year ago was not as well publicised a bottom-up feel. Dylan Griffiths up in Gwynedd has as it might have been. Consequently, the take-up on done a lot of work on analysing his area, so that will that might not be as good, although I note that they be bottom-up information fed straight into that have now extended that scheme to places with speeds deployment. of less than 2 Mbps as of this week. Chair: Some Committee members have had to leave for another Committee. They send their apologies for Q13 Stuart Andrew: Finally, what do you think the that. consequences will be of low broadband take-up? Huw Thomas: For some of our members it is going Q17 Jonathan Edwards: I have a speculative to create real difficulty. It is also going to create question. Are the targets slightly behind the times, difficulties for the economy of Wales if broadband is because we know in areas such as Barry they are not more widely taken up. going to have 100 Mbps? Even if the targets, which are fairly ambitious, are achieved, we will still be in Q14 Mrs James: Do you think that the UK and the the slow lane because the technology of course is Welsh Government have been sufficiently ambitious advancing very quickly. We will be using totally with their targets for broadband? different machines in five years’ time from those that Ben Underwood: The targets are ambitious, but I have we currently use for broadband. Is there not a danger to say I seriously question at the moment whether they that, even if we do achieve the targets, we are still are attainable. Having met Edwina Hart last week, I going to be in the slow lane and we are still going to firmly asked her how 30 Mbps was going to be have the same problem? achieved by 2016. I have yet to hear of clear proposals Abby Hanson: Somebody possibly referred to of a public-private partnership where the funds to Cilcennin, which is heralded as a success for the deliver are going to come forward. The broadband previous RIBS project, which was a public-private enabling scheme, as much as we welcome the efforts, partnership with BT and the Welsh Government. You is not going to deliver 30 Mbps to all households and rural businesses, not least because it is funding a lot speak to them at Cilcennin. When that was started, of satellite schemes which, to deliver 30 Mbps, means broadband of 2 Mbps would have been great. On the a monthly payment which most rural businesses face of it, yes, it has been a success, but not everybody cannot afford to pay. To a certain extent it is in that scheme can get 2 Mbps. They have had to short-term thinking. We wait for some transparent and change some of the technology; they are no longer clear evidence of a public-private partnership to go using wireless. The project was completed only 18 with these ambitious targets that they keep telling us months ago and now they are going to have to upgrade about. again. That is why I think the Welsh Government’s headline targets are to be commended. However, the Q15 Mrs James: Does anybody else want to pace of change needs to have a sustainable comment on that? infrastructure. Huw Thomas: I agree with Ben’s assessment. The significant challenge is getting 30 Mbps by 2016. Q18 Mrs James: Do you think RIBS has been cost- Whether that is a realistic target I do not know. It effective? Do you think it has solved problems in as remains to be seen. many areas as it could have? Abby Hanson: Profile is a good thing. Is there such a Q16 Mrs James: With regard to the type of services, thing as a bad press? Has FibreSpeed across north I have already expressed some concern that I have Wales been returning the figures that it was expected these slowspots in my constituency. Despite writing to return? In one way, it raises the profile. However, and writing to BT, I have not really sorted it out yet you could say, and I would agree with Ben, that, if we and I have some very cross BT customers in my deliver infrastructure where there is demand, then you constituency. But I am getting really fast broadband, will obviously see a quicker return. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 4 Welsh Affairs Committee: Evidence
5 July 2011 Huw Thomas, Ben Underwood and Abby Hanson
Mrs James: I have one friend who refuses to take 3G, which we currently have. If you sat on a train photographs. If I send her photographs, she just says, through central Wales now, your 3G would go in and “It takes me so long to download them so don’t out of reception the whole time. 4G, so I understand, bother.” would improve that situation.
Q19 Mr Walker: I am interested in what you think Q24 Geraint Davies: You would get universal about the balance of the targets between the top end coverage across Wales with 4G? and providing really high-quality business broadband, Ben Underwood: If you think about people who can and then the bottom end and dealing with notspots, get TV, generally speaking, you can get TV right and closing those off. Do you think enough is being across Wales. I am not a technical expert, but I done to ensure the basic levels of access that people understand that 4G would ensure that effectively those want? who could get TV at their house could also then get Abby Hanson: The Broadband Support Scheme is 4G mobile broadband coverage. designed to mop that up and give people a universal Abby Hanson: It is well worth managing customers’ service of 2 Mbps. It would be interesting to see the expectations with regard to 4G. Professor Steve Lewis take-up of the Broadband Support Scheme following at Cardiff university has researched the area quite Monday’s announcement. There is one thing I am extensively and he is very cautious about upping our interested in with regard to the Welsh deployment. expectations of what 4G can deliver. For example, I How do you define a business? The definition is have to go outside my house to get a mobile signal, anybody who pays business rates, but I am sure Ben let alone data. The construction of buildings as well and Huw would concur that a lot of people would be is an issue. Modern constructions create an effect operating businesses from home and potentially not whereby you cannot get a broadband signal inside. paying business rates. Saying we are going to deliver While mobile is particularly exciting for Wales, 40% X amount of bandwidth for businesses and X amount of businesses do not have a website in Wales. for non-businesses is a bit of a vague spot. However, most businesses, given the small or medium Mr Walker: It is a difficult distinction to make. micro businesses that they are, would have a mobile phone. They would be the lifeblood of the economy in Q20 Chair: Mr Hanson, what was your view of the Wales. Therefore, applications and mobile broadband RIBS scheme? Was it successful in your opinion? technology are going to be a key opportunity for Abby Hanson: It was successful up to a point, as I Wales, however much investment needs to be done. say, raising the profile. Q25 Jonathan Edwards: Can I just come quickly to Q21 Chair: Raising the profile is what you said in the Welsh Government’s Broadband Support Scheme your answer, but surely there was meant to be a lot that was launched last year? You have already touched more to it. A load of adverts would have raised the on it in terms of the Welsh dimension, but I am in profile of broadband. close contact, as Mr Hanson was saying, with the Abby Hanson: If you spoke to the members at Carmarthenshire Community Broadband Partnership. Cilcennin, they would say that a lot of heartache, a lot They seemed to be making some good progress at the of time, effort and frustration have gone into that. beginning of the year but things just seem to have Some of them are satisfied with the scheme and what stalled since the May elections. Do you think that is it delivered, and they have 2 Mbps. However, there because of a deliberate change in Welsh Government are quite a few who are a part of that Cilcennin project policy or is it because of the elections and change which in our modern definitions are a notspot. of portfolios? Abby Hanson: Obviously, there has been a change in Q22 Geraint Davies: I was going to ask you about Government. The community you refer to has some the extent of mobile broadband coverage in Wales. passionate campaigners who are champing at the bit. First, which areas are particularly poorly served by It is those people who make things happen. The that? frustrations are there; they are very real. Part of the Ben Underwood: I have to say I think mobile problem with the Broadband Support Scheme is that coverage across Wales is terribly poor in a lot of areas, people did not know about it, and, secondly, it is the and it is very exciting that 4G may become an process you have to go through. I understand that opportunity in 2012 when we move from analogue to Government are perhaps risk-averse, but perhaps they digital TV. That could go towards solving the mobile need to review the barriers and the process through phone issue and the broadband issue in one. We which people can apply for the Broadband Support understand trials are under way. We have not seen the Scheme. There are a couple of issues with it. The results, but potentially 4G could be a solution for that. Welsh Government say that it was designed for In the meantime, yes, as with complaints about communities. Part of the issue with Capel Iwan is that broadband, equally it is about mobile phone coverage. it was difficult for the communities to apply and get the money via the Broadband Support Scheme. I am Q23 Geraint Davies: There is 4G and indeed there not too sure whether the Welsh Government are is 2G as well, is there not? The view is that this should addressing these issues. solve all our problems. By what time frame is that? Ben Underwood: 2012 is the digital switchover and Q26 Guto Bebb: Just very quickly, Mr Hanson, 2014. It will take two years to do the tests and to could you explain what the difficulties were for the implement the change in frequencies over to 4G from communities in applying for the funding? Was it the cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 5
5 July 2011 Huw Thomas, Ben Underwood and Abby Hanson paperwork or the lack of an individual whom they is what they learned from Cornwall. Having had could talk to? discussions with BT in Wales, which seems to be Abby Hanson: I could forward some of Brian’s champing at the bit, that is something that we need to stories, if you like, around it. It was the paperwork; get on with in Wales. having to pay up front—the actual process whereby communities have to pay up front; and then time Q30 Mr Walker: Given the problems of geography delays. I do not think there was an official SLA, a and given that we are talking about the final third, do standard lead time, but where the return of moneys is you think there is a role for satellite broadband in expected to be 10 days it has sometimes dragged on providing access to those areas or do you think that is into months. It is not really the process; it is the time just a technology which is not up there? it has taken as well, for Brian in particular, to get Huw Thomas: Satellite might offer some sort of that accepted. stop-gap until something else can be done, but there are of course limitations to what satellite can do. The Q27 Chair: What are the likely costs of 4G going to average speed of satellite broadband is about 3.6 be to the consumer? Is there any way of estimating Mbps. that? Do you think they will be significantly more than Chair: That is still more than we are getting, though. current coverage for 3G? Huw Thomas: It is, yes, but as things advance people Ben Underwood: I do not think we are at that stage. might be looking to get higher speeds still in years to Chair: It is too early to say. come. You also have issues such as drop-outs of Ben Underwood: I think so, because the tests are signal, limits to downloads, latency, which makes it ongoing, so I understand, and I do not think there is unsuitable for certain applications, the delaying of any conclusion about whether it is the solution or not. them, and expensive contracts as well. It is more It is an exciting proposition at this stage. expensive than conventional broadband.
Q28 Chair: Do you feel that this is something the Q31 Mr Walker: Presumably, part of the cost is the Welsh Assembly Government can do alone or is it factor of scale and the number of users. Do you have important that it is working with national Government any figures for current usage and the scale of usage to get broadband in the rural parts of Wales? in Wales? Ben Underwood: I have to say we have an Ben Underwood: Of satellite technology? opportunity here with the funds. We have some more Mr Walker: Yes. flexibility with our funds from the Comprehensive Ben Underwood: No, I do not. I have to say for a Spending Review. We have more ambitious targets, period of time we did a deal for CLA members with and a part of devolution is the fact that we can get on a particular contractor installing satellites and it was and be more constructive and efficient in the way we very popular. I do not know a figure, but there is no deliver it. All the tools are there. We need to get on doubt that for bigger bandwidths now the monthly and do it. We have learned from what Cornwall has costs are a lot higher than fibre technologies and so done, and I suppose that is why I come here today to on. say that we are waiting for the action. Abby Hanson: The convergence between mobile and Q32 Mr Walker: I noticed in written evidence we fixed is not to be underappreciated because, given the had from Disconnected Wales it came pretty much at topography or the geography of Wales, to quote Ann the bottom of the list of solutions. Is that largely Beynon of BT Wales, if Wales were flat it would be related to service or price? bigger than England. Mobile operators are just coming Abby Hanson: Service, I would say. The symmetric to the party with regard to this. I went to a broadband and the latency would be a key issue. Price is going event recently and for the first time a representative to depend on the service provider, but it is very much of O2 was there. The appetite is there, but mobile a plaster, just a quick fix. We need to be aware of that. needs to go back over a fibre network. It will need to Ben Underwood: Where possible, with the broadband backhaul over fibre. Step one: what the Welsh enabling scheme, if people can pool funds in a Government is doing with regard to procuring fibre community and deliver a more sustainable technology, will provide a backbone for future technologies, 3G a WiFi system or whatever it may be, that is perhaps and 4G. the way forward, rather than individual satellite projects. Q29 Jonathan Edwards: You mentioned Cornwall. What lessons can we learn from their pilot? Q33 Chair: Would I be simplifying matters a little if Ben Underwood: The key there was the way that the I surmised from this that satellite might be a last ditch public and private partnership worked together. option for certain areas but once you have that, the Obviously, when we get to the crux of the matter here, service is not going to improve beyond the 3 Mbps we are talking about the final third areas where the that you have just suggested? So, if at all possible, economic model does not work for a private it would be better to utilise other options. Is that an infrastructure company to deliver to those dwellings. oversimplification or is it a fair point? Therefore, we need to have a system where public Huw Thomas: The 3.6 Mbps figure I quoted was just funds ensure that can be facilitated, and private funds an average speed at the moment. I am not sure— are used in areas where we can determine the demand Chair: My point is that it reaches a limit fairly aggregation and set up an economic model that works quickly and, beyond that, we are never going to get for the private companies. That partnership working 50 or 100. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 6 Welsh Affairs Committee: Evidence
5 July 2011 Huw Thomas, Ben Underwood and Abby Hanson
Ben Underwood: It becomes uneconomical at that your mobile. That is their main strategy. While we size. You can, theoretically, but it becomes have a good old go at BT, BT’s infrastructure does go uneconomical. right the way through Wales. Chair: It is reasonable as a last ditch approach for the I would just like to echo what Ben and Huw say about most remote areas but not something that is ideal for community projects in rural Wales. If you had most areas. public-private partnerships, they can say, “This is the Ben Underwood: That is spot on, yes. demand”, like the work that Brian has done. “This is how much people can afford to pay”, because cost is Q34 Mrs James: Several of you have mentioned BT an issue. Then they can go to the relevant providers during this hearing—I have mentioned them myself— to say, “This is how much budget we have. This is but there are other providers in Wales. Virgin is how many people we have and they are willing to sign running out superfast broadband across my up for X amount of time.” That, surely, would be a constituency, which I really welcome. But is there not better business proposition, right from the bottom up. room for the other operators as well? Chair: Happily enough, BT and Virgin are in the Abby Hanson: The likes of Virgin are very much room at the moment. It is shaping up to be quite an looking to deepen their customer relationships and not interesting verbal duel in a minute. We will leave it looking to expand their network. Cardiff, Swansea and there, gentlemen. Thank you very much indeed for Newport would be looking at it as a triple play or coming along and giving us evidence today. Feel free quad play provider. By that, I mean they would do to stay behind and listen to what BT and Virgin have your calls, your lines, your broadband and potentially to say in a moment if you wish.
Witnesses: Ann Beynon OBE, Director, BT Wales, Matt Rogerson, Head of Public Affairs and Policy, Virgin Media, and Graham Leach, General Manager, FibreSpeed, gave evidence.
Q35 Chair: Once again, thank you very much indeed demographics. Whereas we are investing more in fibre all of you for coming along. Feel free to introduce than any other telco in Europe—£2.5 billion in an yourselves, although some of us are already quite well adverse market, in a very competitive market, and it known to each other. In fact, I was thinking that is our investment that underpins the whole of the perhaps I should have put Graham Leach in the industry—we have to be honest and say that, without middle. a public-private sector partnership in areas that are Ann Beynon: Shall I start as the rose in the middle? hard to reach like Wales, then we are going to get My name is Ann Beynon. I am the BT Director for parts that are going to be disadvantaged and that Wales, Cyfarwyddwraig BT yng Nghymru. Diolch am would be a terrible shame. y croeso. Graham Leach: Could I just say where we have had Graham Leach: I am Graham Leach. I am the some success with private sector investment? Of General Manager of FibreSpeed, the network which course, FibreSpeed is partly funded by private money. runs across north Wales. Also, because FibreSpeed is an open access network, Matt Rogerson: My name is Matt Rogerson. I am the Welsh Government invested in the backhaul fibre, Head of Public Affairs and Policy at Virgin Media and which the previous witnesses said was a prerequisite I have been working very closely on this whole issue. for ensuring that there was some further deployment. Chair: Welcome all of you. It is so nice of you to We have found now that small service providers are come before the Welsh Affairs Select Committee. We coming in and investing off the FibreSpeed network do appreciate your realisation that we might have a to cover a number of notspots. As an example, one role to play in securing broadband across the whole service provider has invested £500,000 of private of Wales. money to run off the FibreSpeed network to start to cover notspots in north Wales. That was only Q36 Geraint Davies: I want to open up by simply something that FibreSpeed was asked to look at about asking what the key factors are that currently prevent six months ago and already we are starting to cover private sector investment in the final third of the a lot of notspots with wireless connectivity which is country. privately funded. I believe that having the Welsh Ann Beynon: In terms of BT’s existing investment Government investing in a substantial open access in Wales in superfast broadband, we already have 31 backhaul network will enable other providers to come exchanges announced, which will be 280,000 or in to give that last third of investment. 300,000 Welsh people. That is part of our overall UK Ann Beynon: Could I respond on the open access rollout, which will get to five million people now with issue? We need to be clear here what we mean by the announced programme. By 2015, 66% of the UK open access. It has been agreed with the UK will have superfast broadband. That means speeds Government and Ofcom that BT should provide the delivered over fibre up to 40 Mbps. main access network for the UK industry. We did that With regard to the rest of Wales, we believe we will by creating Openreach, which is a standalone separate be lucky to get 30% of Wales covered by commercial entity within BT, hermetically sealed from the rest of deployment. That is because of the social economic the business. That allows every single commercial situation in Wales. It is the cost as well because of the retailer to come to BT Openreach and ask for services cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 7
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach on an equal basis. That has created competition, which Q40 Chair: Lastly from me because I was going to means that when you have a BT open access network ask these questions later on, I see lots of adverts all it is genuinely open access with published prices and the time for people advertising superfast broadband understood technical interfaces that are consistent. speeds, but I know that most of them, apart from the That is why we bring with us TalkTalk, Sky, major ones on the Virgin network or the ones that are ISPs, and the little ISPs at a community basis. You offering wireless, are coming off the BT are not going to get those major players into the infrastructure. Is it possible for another provider, using FibreSpeed network, with all due respect. BT infrastructure, to supply faster broadband to a house or business than the broadband that BT is Q37 Chair: Ms Beynon, you have very cleverly supplying? anticipated some future questions. Happily, it was one Ann Beynon: No. What happens is that we provide a that I was going to ask. You will obviously know that basic infrastructure, and when BT Retail contract with there has been some suggestion that BT have not been the customer we give that customer an indication of quite as open in providing open access as some of the exactly what kind of speed our customers can expect people wanting the access might hope, and even that to have. Not all the providers do that and they BT’s charges for this are around four times their mistakenly give the impression to the customer that possible costs are. I am not an expert and I imagine they will get the “up to” speed, which is not correct. there is more to it than this, but I can imagine a man We do not do that. We provide a baseline speed. We coming along to a duct and going in there and fixing inform all our customers on a wholesale basis what up some wires. I cannot really see how it would have that speed is. The only way you can make a difference cost BT anything at all. Perhaps you can enlighten me. is the contention. How many customers share a Ann Beynon: I think you are referring to the ongoing particular line could make a difference to the speed. discussion on access to poles and ducts. We absolutely That is a commercial decision— welcome the concept of opening up our ducts and Chair: But that would be the same no matter which poles to other providers. That is an ongoing debate provider was providing. between ourselves and Ofcom. We have not agreed Ann Beynon: That is a commercial decision of the the pricing. There is certainly going to be room for retailer. Retailers can choose different contention manoeuvre on the pricing. We have two trialists rates. That is their choice. That is the only thing that working with us at the moment. You must remember could make a difference. that when you do something quite dramatic like using poles and ducts and allowing other people into that Q41 Geraint Davies: I know we have gone down the infrastructure, which is critical and has to be protected path some way, but we have already mentioned the for the customers’ benefit, you have to do proper main problems in terms of Wales, namely, the rural trials. Those trials are ongoing. The discussions with nature and the geography and this sort of thing. But I Ofcom are ongoing and the engagement with the was just wondering whether the UK’s broadband industry is ongoing. It is going to happen. There is a strategy adequately addressed these problems, to what negotiation and we cannot predict what is going to extent the Welsh Government can supplement that and happen. what the private contractors are doing. Maybe Matt could come in on this. Matt Rogerson: Q38 Chair: When do you think that negotiation will Absolutely. If I could just step back in terms of the barriers as well and the problems you end? have in Wales, clearly you have the geographical Ann Beynon: It is currently ongoing. We would hope challenges. But even if you had the flattest country on by the autumn. It is difficult to tell because it is a earth, you would have the problem of civil negotiation. There are trials and we need to see what engineering, which accounts for about 80% of the cost the results are. But all the pressure is on to get that of building a broadband network. If you want to talk sorted. to a company that knows how much it costs to build a broadband network, speak to Cable because we went Q39 Chair: Obviously, the engineers who need bankrupt a number of times. What you have to do then access to these poles and ducts and things are not is try and negate that 80% as much as possible. We going to be able to do that until there is a final strongly believe that, to do that, you need an agreement in place, so it is going to delay things infrastructure market in that rural area, in the majority slightly, perhaps only by a few months, if there is an of Wales, to be honest. You need access, for example, agreement by the end of October. to electricity infrastructure, BT infrastructure, and to Ann Beynon: Yes. But, at the end of the day, even if water and sewage infrastructure. there is access to poles and ducts, there is still a whole What you do then is move away from an exchange raft of products that BT offers on a wholesale basis, model, which is good for telephones but not very good through Openreach and also through BT Wholesale, for broadband, and you move instead to a point-to- which is currently there now and can be accessed. It point fibre model, which is the sort of technical is not limiting the amount of activity. In addition, you architecture that Fujitsu are looking to propose in should remember that, in terms of the cost of duct and Wales. In doing that, you can have a much more pole, the actual cost we charge is less than 10% of a pragmatic approach in how you get from A to B. You total business case cost. To say that people cannot can use the infrastructure along the routes and you build a business case is not correct because our can pay infrastructure suppliers like BT or electricity element of that cost is very insignificant. companies, give them a revenue stream and solve the cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 8 Welsh Affairs Committee: Evidence
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach issue of notspots and low broadband speeds for the aid process they are using which is applicable to long term, not just for the next couple of years. SMEs. To make it clear, BT would not be able to apply for money under that scheme because of de Q42 Guto Bebb: This is a very open question but I minimis. There is a limit of €200,000. Any company, am sure the Chairman would be very grateful if you whether it is the retail end or the wholesale could make your answers brief to the first one. It is a beneficiary, cannot accept more than €200,000 under question for all three of you basically. How do you that scheme. That is why BT is not participating. I see your company’s role in ensuring that superfast just wanted to make that clear. It is not because we do broadband is rolled out throughout Wales? not think it is a great idea. We think it is a great idea Ann Beynon: I have to be fairly guarded because of as a stop-gap, but this wireless end user thing is a the ongoing procurement that the Welsh Government stop-gap. It is not going to give you the legacy support is undertaking at the moment. But our view, you need. It is not going to give you that future path— absolutely positively, is that Wales needs as much the legacy you need for Wales. It is not future-proof. fibre as possible. It is not good enough to provide You absolutely need fibre and you need to move wireless. Wireless is not going to provide 30 Mbps on towards fixed fibre. We know in our labs that that fibre a reasonable basis. Ten to 12 Mbps is more reasonable already goes up to 100 Mbps and it will go even and there is evidence to that effect. Again, in terms of further. Fibre will absolutely give you massive the European tables, it is the fibre that counts when bandwidth. It is an investment in the ground for we are considering where we are in the European Wales; it is there for perpetuity. It is absolutely what league. Our approach would be as much fibre as Wales needs. possible for as much of Wales as possible. There will Graham Leach: Provided it can be done in a inevitably be a small element of infill, and, as we reasonable time frame. That is the issue. mention in our testimony, we are currently trialling Matt Rogerson: I would just pick up and say that with Everything Everywhere a new technology—4G, Wales should invest in aerial rather than the ground. which was mentioned previously, and will be much Going back to what Virgin Media does, we have better than the current 3G available in Wales. It will 300,000 homes on our network in south Wales. We allow you to share a network for both mobile and are rolling out a 100 Mbps broadband service to areas wireless. That is going to be the way forward, because like Barry, Cardiff and urban areas across south what you do not want in rural Wales is so many masts Wales. Of all the ISPs that are operating at the all over Snowdonia that it looks like a hedgehog, to moment in Wales, Virgin Media has the best incentive be honest with you. to expand our services throughout the rest of Wales. I Graham Leach: I would disagree slightly with Ann. disagree with the witness in the last session that we The main part of the investment where the Welsh want to stay on our network in the south of Wales. We Government should put its money is in the backhaul: very much see growth through the rest of Wales as large fibre networks which connect strategic points to a target. provide an open access network from which service Whether we build that network ourselves or whether providers can lay both fibre and wireless. We have we are an anchor tenant on a network that is built seen now in the last few months a significant take-up through the rest of Wales is a debate. We would prefer of wireless technology off the FibreSpeed network in to be an anchor tenant rather than build our own north Wales, which is beginning to serve rural network. But to be an anchor tenant and provide the communities now. That is important. We heard from sort of quad play services that we want, at 100 Mbps the previous witnesses that aiming for 30 Mbps is fine today, we are trialling a 1.5 Gb connection at in five or six years’ time, but before all this fibre is Shoreditch in East London. That is the way forward. rolled out what are those communities going to do? To provide those sorts of services going forward you The initiative of the Welsh Government to expand the do need a fibre-rich network and that does not mean broadband scheme yesterday was welcomed. If those 10% or 20%. It does not mean Fibre To The Cabinet. applications can be processed faster, we can set up It means primarily point-to-point fibre. You have to more wireless technology, more infrastructure across examine how you can reduce the cost of getting that north Wales, and we could light up, with wireless point-to-point fibre to as much of Wales as possible to technology, some of the more rural areas of north maximise taxpayer value for money. Wales in the next 12 months of the Welsh Government’s investment in the high capacity fibre Q43 Chair: You are rolling that out at the moment, backhaul that they have already made.1 are you? Are there going to be more people on Virgin Ann Beynon: There is already BT fibre across the in the next 12 or 24 months? whole of Wales. It is there now; it exists. There is an Matt Rogerson: What we have been doing now is issue about the end user scheme. It is being awarded proof of concepts. In Crumlin in Caerphilly, we under a system called “de minimis.” That is the state recently undertook a trial where we worked with Surf Telecoms, which is a subsidiary of Western Power. We 1 Note by witness: The FibreSpeed backhaul network across north Wales is owned by the Welsh Government. The took a fibre, wrapped it around the infrastructure of network is now being used as a ‘backbone’ to enable wireless Surf Telecoms from our head end, which is where we service providers to extend services to rural areas. play out our TV service and our broadband Expanding the broadband support scheme and speeding up connections, 14 km over to Crumlin. Then across that the approval process for applications, will enable more wireless connectivity to be rolled-out, and will thereby make piece of fibre we were able to provide our cable the most of the Welsh Government’s existing investment in services using what is called RFoG technology, which the FibreSpeed network. basically is two lasers that sit each end of a piece of cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 9
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach
fibre. We were able to provide that, and on the same Under the current BT PIA reference offer, the cost of piece of fibre another provider such as BT or TalkTalk each pole drop to each house is around £20, and I would also be able to provide a service. We were have seen analysis that suggests it should be more trying to ascertain how the relationship would work around the scale of £2.50. So there you see the with other electricity companies, how the technology difference between £2.50 and £20. If you add that up works, and whether it was possible? across every property in Wales to which this network Once we had proved that concept, we have been would go, you see how the economics shift quite talking to a number of players in the industry about quickly. how you can get that fibre-rich point-to-point network Graham Leach: The key is access to the BT poles out there. As we said earlier, PIA is a crucial element and ducts infrastructure at the right price. One of the of that, as is access to electricity infrastructure and big concerns from the Welsh Government perspective, other infrastructure. That is being worked through at I believe—it should be a concern from the Welsh the moment. I do not know whether it is being worked Government perspective—is that the current through at the right time. I would argue that the procurement is being done before the BT pricing of infrastructure element should have been worked poles and duct infrastructure has been fixed, which through before the procurement process started, but means that it is significantly more expensive for other that is another debate. players bidding against BT in the Digital Wales Ann Beynon: Can I mention the date? There is absolutely no problem as far as BT is concerned in programme to build the infrastructure than it is for BT. getting this done by 2015. I am not involved, and FibreSpeed is not involved, in the Digital Wales procurement because we are already Q44 Mr Williams: With the Crumlin example, to a Government intervention project so we cannot bid what extent does that actually prove cost-effective into it. But the industry believes that the Digital Wales compared with other ways of getting the fibre? procurement cannot be finalised until the final pricing Matt Rogerson: It was less about the cost. Primarily, for BT poles and duct infrastructure has been we did that to make sure there was no disturbance to produced, otherwise we believe the Welsh the services on that piece of cable, that it worked and Government may not get full value for money in that that customers there were able to get 50 Mbps and a competition. full TV service. In terms of the cost, that would itself Matt Rogerson: I should say this is not a tension rely on the relationship between the network provider which is unique to Wales. It is a tension throughout and the Distribution Network Operator or the all the procurement processes across the UK. electricity company. On whether they are allowed to Basically, the company that is most likely to benefit make money from doing that sort of activity, that in from hundreds of millions of pounds is in charge of itself is something the Government are looking at in the product. The absence of a decent product will terms of whether they are allowed to make money or mean that no player other than BT can enter whether it goes back into the general pot, which in procurement processes. Until that fundamental tension turn would mean that you as an electricity consumer is resolved, I cannot see how a competitive would pay less for your electricity. The electricity procurement process will happen. companies want to work out whether they can gain a Chair: I think we had better let Ann Beynon come revenue stream from adding this service to the suite back on that. of services they already provide. Ann Beynon: I have said earlier, it is 10% of the total cost to any supplier. So if you cannot construct a Q45 Jonathan Edwards: We have already had a business case on that basis, that is a bit sad. It is true brief discussion about the importance of BT’s ducts to say that pricing is not fixed. You are assuming a and poles from a BT perspective. Addressing this to pricing mechanism that has not been agreed. There is the other two witnesses, why is gaining access to that going to be flexibility on pricing. There is a discussion network so important, and, if you were to get access that is live, and that is going to go on. To suggest the at reasonable prices that were sustainable for your Welsh Government should wait until that decision is businesses, what would be the outcome in terms of unfair. You might as well say let’s wait until the superfast broadband delivery in the final third? spectrum auction; let’s wait for something else. Wales Matt Rogerson: I have already mentioned the 80% needs to get on with this. We already have Cornwall figure. I think that holds. It might be even higher in up and running and we should be finished by 2014. Wales. Physical Infrastructure Access (PIA) forms part of the suite of tools that you have in the rural Northern Ireland is done and dusted. Wales needs to areas, which, as I say, are the electricity company, get on with it. Wales could be the first fully enabled sewage and BT PIA. It is not just the challenge of fibre nation in Europe if it got on with it. So I do not getting a piece of fibre out to your community and see that argument for keeping Wales back by using then getting it round the houses. It is elements of the spurious delaying tactics, I’m sorry. PIA price such as pole drops. If you have a street with Graham Leach: I am not sure that it is a spurious telegraph poles along it—and we trialled in Crumlin delaying tactic. As my colleague from Virgin Media the approach that certainly Fujitsu talked about in the has said, this is a wider industry tension about whether past—if you get a piece of fibre to that pole, you then other players are able to bid on a level playing field drop a fibre from that pole to a house, which then for BDUK funding to roll out these next generation connects the house and the broadband connection goes access networks, which are vital to Wales and in there. elsewhere in the UK. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 10 Welsh Affairs Committee: Evidence
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach
Q46 Jonathan Edwards: We know there is a Fibre To The Cabinet solutions undoubtedly give an discussion between BT and Ofcom about this whole incremental improvement in the performance of issue. Are other stakeholders engaged in this process? broadband. Unfortunately, the problem with Wales Ann Beynon: In the trials, yes, absolutely. We are and a lot of areas across the UK is, to start with, that inviting trialists to join us to work out how this the nature of the telephone system means that the wire works best. is copper. Copper is not a good conductor of broadband signals. If you have seen a graph of copper Q47 Guto Bebb: I am not seeking to continue the signals, it goes down very sharply. Eddie “The Eagle” argument, but you used the term just now “fully fibre Edwards would have fun on that. But, also, the issue enabled”. But the evidence BT presented said that, is, in terms of line lengths, that the further you are with public financing, you could extend fibre away from an exchange, even an exchange that now connections to 85% or 90% of Wales. My concern as has fibre going through it, you find that the benefit is an MP representing a fairly rural constituency is tiny. What you need is as much Fibre To The Home where the 10% to 15% of houses or properties or as possible—perhaps Ann could confirm what businesses which are not so linked by fibre would be percentage of that 90% will be Fibre To The Home— located. so that you make sure that the speeds are gig plus Ann Beynon: The reason why there needs to be one from day one and there is an upgrade path not just for supplier to do the whole of Wales is so that that can the next five or 10 years but the next 20 to 30 years. be planned. It is almost impossible to predict where those spots would be. It is probably likely they will Q48 Chair: We are going to have to be a little more be very rural areas. concise to get through this. Ms Beynon, in terms of Guto Bebb: It would be rural areas. British Telecom’s record of projects with the Ann Beynon: I would imagine so. Without having Government, what is your assessment of the RIBS done detailed planning, it would be difficult to tell. It project? What was the total amount, if I may ask, of is a question of balancing the rollout against the cost. public funds that BT received for that and how many If people had unlimited budgets you could do the people saw an improvement in their broadband speed whole of Wales, but one has to be realistic. In terms as a result? of the available money there, you have to accept there Ann Beynon: We mentioned in our evidence the is a small element of what we would call infill. But number that saw a benefit from the scheme. my point would be that you need to get the fibre to Chair: Was it 20,000? 90% plus. That is the priority. If you look at what is Ann Beynon: No, no. being proposed by FibreSpeed, part of Wales has already been taken out because they are saying that Q49 Chair: That was for the additional scheme. 40% of north Wales can be done by wireless. I do not Remind me. Refresh my memory. I saw there were think 40% of north Wales should be done by wireless 2,000 on the additional scheme, which has just started because that immediately reduces that percentage you and is running in conjunction. are so concerned about. You need to have fibre out in Ann Beynon: That is not the RIBS contract, is it, to north Wales on the same basis as in Carmarthenshire. Why should north Wales be worse off? which you are referring? I agree when you say it a challenge, but the E&E Chair: No. (Everything Everywhere) solution I mentioned earlier Ann Beynon: Thirty-five exchanges have benefited. on will help. There are other things that will help. The original contract was for 35 exchanges. Satellite has a small part to play. There is also copper- Chair: 8,500 people, I am told. based technology that can be used in extremis. There Ann Beynon: There we are. is a whole raft of things. There is also the possibility that one could work with the farming unions, for Q50 Chair: How much public money did you example, and have them help us do some of the receive? digging. That is something we are looking at. We have Ann Beynon: In the end, the amount of public money not decided yet how it would work, but on greenfield we received was less than £300,000 for the exchange sites that is what we’d do. We would give the enablement part of the contract. I cannot really developer the kit, “This is the spec for that site”, and disclose in detail the rest of the contractual they will put the infrastructure in for us. That could information, but we also undertook those 10 notspots. happen. So there are all kinds of things for that last You have to bear in mind that the contract was for 10% that we should not discount. We should try and only 0.5 Mbps broadband, so we looked at addressing be innovative and think of new ways of doing this. other parts of Wales by providing different The other thing we need to do is get community ISPs technologies, but then that would have meant involved. Again, the only way you can get community implicitly speeds above 0.5 Mbps and that was not ISPs involved for people like Disconnected Wales contractually possible. In terms of keeping to the would be to have this competition-ready, BT-based contract spec, we did extremely well. We did an infrastructure because that makes it easier for them to additional 10 notspots, which was 50/50 funded: 50% intervene and get on board. of the funding came from BT and 50% from the Welsh Graham Leach: I disagree with some of that. Government. The cost per head for the Welsh Matt Rogerson: It would be interesting to know of Government for those people was extremely low, I that 90% what percentage is Fibre To The Home and would suggest. I can see that they are getting basic what percentage is Fibre To The Cabinet, because broadband and now the world has moved on, which cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 11
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach is why the RIBS contract came to an end in March Wales and it is not just doing the same as has been and there is therefore a new procurement. done elsewhere around the country. It is doing something that is very different and world-leading. I Q51 Mr Williams: What is your assessment of the agree with Ann that BT has an open access obligation. number of notspots remaining? The open access fibre provides a platform over which Ann Beynon: It is difficult to tell. One has to be providers can provide not just an IP-based technology careful—until you do actual surveys, you do not but also RFoG technology or any other technology know. I would not like to put a number on it, to be they want to provide over that service. What you buy fair. It would be wrong to guess. All I would say is instead of a service is a frequency over which you that you need to solve them by having a proper rolled- provide that service so that would be truly out programme across the whole of Wales, not by transformational in the context of Wales. addressing them one by one, otherwise you will have Ann Beynon: Can I just mention that, whereas Virgin a kind of a hotchpotch effect. Media can buy BT network, BT cannot buy Virgin Media network? It is not reciprocal. Q52 Mr Williams: Do you think that was a Matt Rogerson: I have a couple of points to add there. miscalculation when the RIBS scheme was initiated? The first is that we work with a number of large ISPs Ann Beynon: I do not think so. You have to go back who are BT’s rivals, providing them with capacity quite a long time. When RIBS was created, 0.5 Mbps across the country. The second point, which Ann was deemed to be pretty adequate; what most people skirted around when she talked about Ofcom asking talked about as being broadband was 0.5 Mbps. them to open up their infrastructure, is that the reason Having done that and given an additional 8,000 people for that is because BT is dominant in the wholesale that capability and another 1,000 through the notspot local access market and the obligation on BT to access work, that was doing a job that was fit for purpose at the infrastructure, just as the obligation on BT to the time. We certainly fulfilled more than our provide services to other providers is because they are obligations because we had no contractual obligation dominant and it is competition law and nothing else. to address the notspots. We chose with the Welsh It is not through them doing it of their own free will. Government to do that as an additional piece of work. Ann Beynon: I do not think that is quite fair. We have welcomed competition all along. The reason why we Q53 Mr Williams: I do not denigrate that and we have the most competitive market in the UK and are talked before about some communities in my area that continually reducing prices is because we have have specifically benefited. You mentioned £300,000 embraced competition. We have over 400 service on the contract that BT received. Is it a matter of providers using the BT network, so that is pretty open. regret that, of a pot of £2 million put forward by the That is quite good business. We should all be Assembly on this bit onwards, only £600,000 was celebrating that. But, also, I would just like to mention spent? this on rollout. Our rollout at the moment is Ann Beynon: You are making the assumption that the significant. It is as much fibre as they have in Welsh Government paid the same amount for the Singapore now every quarter. We have to industrialise original contract. the process, so there is a risk if you do not have an industrialised process that is proven, particularly as Q54 Mr Walker: Just coming back to the Crumlin we face challenging times towards 2015. My trial, how big an opportunity do you see that as being argument would be that we can show in BT we know to compete effectively, and roll out the existing BT how to do it. We have the people, we have them infrastructure, and what sort of time period do you see trained, and we have the track record to show that it that being available? can be done. Matt Rogerson: Ann is absolutely right that the Welsh Graham Leach: Can I just say that BT and Virgin Assembly is approaching this in the right way in terms Media can buy FibreSpeed fibre and products because of a contiguous area of the country being available for we are truly open access? We will allow people to buy a provider to come in there. In proving that it works, dark fibre; that is unlit fibre. What that means is that we are keen to work with network providers. As I say, at the moment there are two projects running which we are not necessarily going to build it ourselves, but are linking Dublin through to north Wales. Those with that sort of technology of jumping from projects will bring the opportunity for data centres and electricity pylons through to the BT PIA, through to for expansion of business parks in north Wales, sewage, you could see that providing a particularly on Anglesey where the new nuclear site transformational network in Wales with a lot of Fibre has been announced. Without FibreSpeed and without To The Home—the majority Fibre To The Home. The the access to FibreSpeed’s dark fibre product, those rest are sub-loop unbundled, wireless or satellite projects would not have been able to get off the technologies. ground.
Q55 Mr Williams: Is that something which is five Q56 Guto Bebb: Just to go back to Matt. If it is years or one year down the line? possible, in terms of the use of the utility Matt Rogerson: Fujitsu are bidding for the funding in infrastructure and some of the work in south Wales, Wales. Obviously, I similarly cannot discuss the are there any regulatory or legislative issues that you elements of their bid, but what I have seen from their have to deal with in terms of using that infrastructure? bid so far is that it is very ambitious, that it would Matt Rogerson: There are. One of the key elements drive a step change in broadband provision across was making sure that it was safe. There is a technical cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Ev 12 Welsh Affairs Committee: Evidence
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach technique called hot gloving, which sounds like a Matt Rogerson: There are two points to be made Seventies record but it is not. Checking that that there. One is that the issue of standards is a big one, works with communications providers as well as but it is not insurmountable. There is a group at the electricity companies, working out whether the moment looking at how you can come up with an priority is the electricity supplier or the broadband alternative set of standards to use dark fibre. The other supplier, and then looking at whether electricity is that BT is obliged to provide it as part of its state companies are allowed to make money from this aid obligations from the European Commission. That activity are all clouding this taking off in a big way. is all I would say. To be fair to the electricity companies, they are trying to work out whether this is going to be an Q58 Chair: Ms Beynon, may I ask something? I industrialised process or a series of trials. If you get have had quite a lot of complaints in Monmouthshire, to a position such as in Wales where you have a particularly outside Chepstow, that broadband speeds procurement for the whole of Wales, you can see that are not as good as people have been led to believe. I that is an industrialised process and you see then that have heard that BT offers some sort of clever gizmo there would be an opportunity for the electricity that fits on to the thing that the telephone plugs into. companies to create that revenue stream and work Can you tell me something about that? Should we not with the network provider to develop that product. So be advertising this more widely because I cannot even I do not think the barriers are insurmountable, and express candidly what it is that I am talking about they are being worked through at the moment, but here? there are still some there. Ann Beynon: You are absolutely right. It is called an I-Plate. Q57 Chair: That brings us quite close to the end of Chair: What are they called? our session today. You have answered a lot of the Ann Beynon: They are called an I-Plate, which is the questions that we had down here. Does anyone else vanilla term for it, but the BT retail version is called wish to come in on anything or make any closing BT Accelerator. Any BT Retail customer can ask for comments? a free I-Plate and you simply put it on the socket that Ann Beynon: Can I make an additional comment? I comes into the house. It takes away the interference. just wanted to try and address this issue of dark fibre, Things like mobile phones and TV sets can cause if I may. interference on the system so it cleans away the Chair: I am not absolutely certain what the difference interference. It does not always work but in many between dark and light fibre is. instances it has worked. There are instances of new Ann Beynon: I thought so. That is why I wanted to technology coming out all the time that create explain. There is a quotation from Ofcom that dark additional signals which cause interference, so it fibre is ‘unworkable and unnecessarily expensive’. cleans the signal and helps. The problem you have is that all major providers put a lot of investment in their product set to make sure Q59 Chair: Mr Rogerson, if I may be a bit parochial, that it interfaces easily with the BT open access can you tell me when your superfast fibres are coming infrastructure. That is quite an expense for any up to Monmouthshire? I am sure many constituents company because you need to build billing systems would be interested to know. and make sure the technology fits. It is like having a Matt Rogerson: I will take the request away, take it gauge on a railway where the railway provider agrees to our planners and see what I come back to the with the train companies what that gauge is. They Committee with. know, therefore, that is the gauge you are running on. Chair: Thank you very much. Are there any further If you are asking all those providers I mentioned questions? earlier on—Sky, TalkTalk and so on—to use dark fibre, they would have to reinvent all of those Q60 Guto Bebb: In terms of the open access and the interfaces. It is a massive cost. That is why you do FibreSpeed service, did you specify how many people not get those kinds of companies using dark fibre and have taken advantage of that to sell on to other that is the problem. You have a huge investment in an businesses in north Wales? infrastructure that is extremely difficult to access Graham Leach: We have 12 service providers now, unless you create bespoke access technologies. That many of whom are small businesses which have is why we do not think it is a good idea. grown up in north Wales as a result of FibreSpeed It also means that you need to make sure that, if you being there. This is one of the attractions of an open have a fibre asset, it has to be managed, which is why access network. I would just say, of course, that the you have Openreach and Wholesale managing our FibreSpeed network is owned by the Welsh fibre in that way. So they consult with industry and Government. The Welsh Government have invested a they talk with industry. If we bring in new products significant amount of money in building FibreSpeed. on that network, we talk to them, they know what to That asset of fibre, points of presence on the business expect, and there are no surprises for them. It is an parks, the tower infrastructure which is now providing industry-wide process, which means dark fibre does wireless notspots, the cable that has been laid down not have a role to play. into Pwllheli, and the coverage of Anglesey, is all Graham Leach: Many other network providers owned by the Welsh Government, and a challenge for provide dark fibre, and, as I say, dark fibre has enabled the Welsh Government is what it does with that asset these two major sub-sea projects, which will benefit because it is going to be available for the next 40 the economy of north Wales. years. That is the life of the fibre and the cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:20] Job: 013975 Unit: PG01 Source: /MILES/PKU/INPUT/013975/013975_o001_kathy_corrected transcript 5 July 2011.xml
Welsh Affairs Committee: Evidence Ev 13
5 July 2011 Ann Beynon OBE, Matt Rogerson and Graham Leach infrastructure. The Welsh Government needs to think investment in FibreSpeed as part of the overall quite clearly about whether it is going to build another broadband rollout over the next five or six years. network over the top as part of its Digital Wales Chair: Thank you all very much indeed for coming programme or how it is going to maximise its current in. I enjoyed refereeing that. Thank you. cobber Pack: U PL: COE1 [SE] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 14 Welsh Affairs Committee: Evidence
Tuesday 11 October 2011
Members present: David T C Davies (Chair)
Stuart Andrew Mrs Siân C James Guto Bebb Jessica Morden Geraint Davies Mr Robin Walker Jonathan Edwards Mr Mark Williams ______
Examination of Witnesses
Witnesses: David Williams, Chief Executive, Avanti, Alastair Davidson, Managing Director, Government, Mobile, and Enterprise, and Julian McGougan, Head of Public Policy and Regulatory Affairs, Arqiva, gave evidence.
Q61 Chair: Good morning. Thank you very much video conferencing or gaming, or to upload printing indeed for coming along to see us today. My name is publications rapidly, things like that, we think you David Davies. I am the Chair of the Welsh Affairs need a fixed or terrestrial network at an affordable Select Committee. Could you give us an introduction price. We have done a lot of investigation and found very briefly and then I will ask Stuart Andrew to start that there are about 90,000 premises in Wales that off with a few questions? cannot receive a 2 Mbps service today. We would David Williams: I am David Williams. I am the Chief highlight 2 Mbps per second, like David, because we Executive and founder of Avanti Communications. think 2 Mbps is a reasonable level of service that We have one telecommunication satellite in the sky everybody should have. That is the kind of service currently providing broadband services to Wales and you need to do everyday things, whether it is other countries and two more satellites on the way. schooling and education, entertainment or business Alastair Davidson: I am Alastair Davidson, Managing applications. 90,000 premises cannot get that today, Director of the Government, Mobile and Enterprise and what we are here to tell you about today is how sectors at Arqiva. We run the television and radio we think that could be supplied at an affordable price broadcasting networks for the UK and provide a range to all of those customers. Perhaps we will come on to of managed services to the police, fire and ambulance it through the questions, but we would like to tell you customers, with a range of other Government about the trials we have done of a fixed wireless customers, satellite uplinking, and we also run some access to solve that problem. of the TV and radio multiplexes. Julian McGougan: I am Julian McGougan. I am Q63 Stuart Andrew: Of those 90,000 houses, Head of Public Policy and Regulatory Affairs at presumably most are in rural areas? Arqiva. I work in the corporate centre across all the Alastair Davidson: Yes; the majority of those will be business units. in rural areas. The typical problem you have—and it could be a house, a small business or a farmer—is Q62 Stuart Andrew: Could you start by describing where premises are more than 3 km away from a what the current provision of broadband services is in BT exchange, then it becomes quite difficult Wales, particularly looking at the difference between technologically to provide those high-speed services the provision in rural and urban areas? We have had at that distance over the copper connections. evidence from the NFU, for example, who are obviously concerned about access in the rural areas. Q64 Chair: Can I just put you on the spot, because David Williams: We have live broadband services you have painted quite a good picture there? The available in Wales today. Avanti is a wholesale service criticisms seem to be that, number one, it is costly. provider. We have a number of customers who are Could you give us the vaguest indication of what it telecoms companies who buy from Avanti and then would cost somebody to have the basic package? sell on to consumers. Any consumer in Wales today Secondly, there is a slight delay—latency—which can buy a broadband service on Avanti’s satellite at prevents you from watching television or gaming. speeds of up to 10 Mbps. 2 Mbps is the typical Thirdly, you have to be able to “see” the satellite, and service. It is available, it is reasonably good value for this may not be possible in all instances, for example, money and it works pretty well. We have quite a few whether or not weather and cloud cover affect it. Can customers already in Wales. We only launched our you deal quickly with those? first satellite a few months ago, but customers are David Williams: Sure. In terms of cost, consumers can already signing up and using it happily. I cannot speak get from our service providers a 2 Mbps broadband for other technologies and plans, but there should be service for as little as £25 a month. It is a little bit nobody in Wales who does not have broadband. It is more expensive than ADSL costs in the middle of available today. London perhaps, but only by a few pounds. In terms Alastair Davidson: I guess we would have a slightly of latency, this is something which competitors different view. Our view is based on the affordability normally throw at the satellite industry, and what you of the service and also the full functionality of the need to understand is that every technology has its service. To be able to use fast real-time services like disadvantages. Fibre is impossibly expensive to build cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 15
11 October 2011 David Williams, Alastair Davidson and Julian McGougan to rural areas. Fixed wireless networks do not exist. I Q65 Jessica Morden: For Wales, what do you think have been financing telecoms projects for 20 years the priority should be? Obviously, you have given us and I have heard them come and go, but none has ever your opinion. Should it be universal access or been built to large scale anywhere in the world. My provision for superfast broadband? satellite network does exist today and you can have David Williams: Probably universal access is the service today. On the latency issue, you add about 250 logical first step, but there are other regions that have to 500 milliseconds for a signal to go up and down on already done this. Avanti participated in a project run a satellite versus across a telephone line in the ground by the Scottish Government a few years ago. The or a wireless transmission; that is true. It does not Scottish Government set down challenging matter if you are sending or receiving e-mail or requirements in terms of service level agreements for browsing. I watched the Rugby World Cup games at a 2 Mbps service, which included the use of the weekend across my HYLAS 1 satellite in my gym, applications like Skype. Our satellites are being used so you can watch streaming television pictures. You for voice and video communications, for example, in can do anything that you do across any other Scotland. 3,000 people registered with the Scottish terrestrial telecoms line. The only application where Government as being in need of a 2 Mbps service. latency can cause a genuine difference in service Avanti was handed that register of users, and within quality is when teenagers are playing those murderous six months they were all installed, including many consumers on the outlying islands in Shetland and the computer games on their Xbox. Hebrides over the winter. We managed to install Jonathan Edwards: That’s shocking. services for 3,000 consumers in a six-month period David Williams: If a teenager or Mr Edwards would over the winter. like to slaughter other people on Call of Duty, you can It is not difficult to get 2 Mbps broadband services find a quarter or half a second difference in reaction into the hands of the most rural consumers, and it is times, but the Microsoft Xbox system aggregates important that everyone has 2 Mbps before users into latency pools, so you end up playing against Government get engaged in doing anything else. But, people with similar latency. That is the only more importantly, I would like to make the point that application where there is legitimately a couple of 100 Government crowd out the private sector. Wales in milliseconds difference at least. But, on the flip side, particular, has a heritage of promising or hinting or we have Government customers who are using our debating the notion of a large-scale Government satellites to pilot unmanned aerial vehicles which are subsidy. When private companies are expecting that engaged in real war fighting applications. So if the Government will, at some point in the future, Department of Defence in America is willing to use subsidise installations, those private companies do not our satellite capacity to control and command drones invest. If I knew that there was going to be no that are fighting wars, perhaps Mr Edwards could get Government subsidy at all in Wales for the next 10 used to the latency on Call of Duty. years, I and my service providers would invest to Alastair Davidson: I am happy to expand on that. I make sure that everybody in Wales got a 2 Mbps agree with Mr Williams that there is a role for all the service at the lowest possible price. As it stands today, technologies here. The key for us is making sure that my customers—the end user consumers—have to pay they are available to consumers at an affordable price perhaps £200 or £300 for an installation, and my point and delivering the right functionality. You just service providers will not invest in subsidising that need to be a little careful of sweeping statements down because they think there is the possibility that about murderous games. In my family, my children the Government is going to subsidise that. use Skype to talk to each other about their homework. Government needs either to make a decision and I talk to my elderly parents at the weekend using an spend some money or make a decision to not spend application called FaceTime. These are very money, but do it quickly. respectable normal applications and they do require a degree of human interaction that would not work Q66 Jessica Morden: Do you think the UK and the with latency. Welsh Governments’ targets for universal broadband David Williams: Wrong. coverage are ambitious enough? What is your view? Alastair Davidson: My answer would be no. A lot of Alastair Davidson: Moving on from there, it is the debate we are hearing is about how you can roll important that we look at the problem of broadband out superfast to as many people as possible as quickly in its entire context in Wales. I understand that the as possible. We come from the world of television and BDUK funds have been used for an intervention radio, where Ofcom has asked us to provide universal across something like 600,000 premises, or between coverage to consumers. We come from a heritage 540,000 and 600,000 premises, and we understand where we believe that people do have the right to get that a lot of the funds are being used to provide a basic level of service, and in our view you would superfast broadband where it is economic to increase roll out or have affordable broadband services to as the amount of fibre provided. Our view is that some many consumers as possible. Perhaps in David’s case of those funds should be earmarked for those people the subsidy could be used to support the installation in outlying rural areas who cannot get the minimum cost, but there is a danger that you increase the digital level of service. Our estimates are that you could divide by pushing fibre as far as it gets and then you solve the broadband notspot problem in Wales for have a cliff edge, and those people who will never get about £30 million, which is a small proportion of the superfast broadband have nothing because you have funds available. spent all the money on fibre. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 16 Welsh Affairs Committee: Evidence
11 October 2011 David Williams, Alastair Davidson and Julian McGougan
Julian McGougan: There is a real risk, if I might add opportunities, we are all going to have to pull together to that, if we know there is something we are not and work together? Is it a matter that satellite would going to get. It would just be utterly impractical to be best in Monmouth and in an inner city area like deliver superfast to them, and the funds are not Swansea cable is the best thing? How could we available. What we need to do is address that market. address those differentials? As Alastair said, there are 90,000 homes in Wales that Alastair Davidson: You can use market forces to do not get 2 Mbps now. All of those will get nothing. select the right products. We are not here to promote Some of those will get broadband dribbling in at 300 a single product today, but what would be helpful Kbps or 500 Kbps. A lot of you will know that from would be to have the right policy objectives and the your postbags. The problem we have at the moment right criteria for the evaluation of the procurements. is that the debate, both in Cardiff and Westminster, is Things like universal coverage of a minimum level of dominated by the idea of superfast, superfast, service need to be high up the list of criteria for the superfast. The idea is that anything that is less than procurement. When you come to spectrum, for that is somehow not worth having, whereas you heard example, which can be an enabler to provide services, in your first evidence session from the NFU, the CLA I think it needs to be high on the list of UK and from Disconnected Wales, that, if you have Government policy objectives to ensure that spectrum nothing, 2 Mbps is something well worth having. If is available and mandated to reach all of the rural you are a farmer struggling on 300 Kbps, then 2 Mbps areas, because then you have all the enablers you need is not only worth having, but if it is reliably and you can leave market forces in the procurement. received—and, as some of those witnesses made clear, We can slog it out over function and price points with it was the reliability of the connection that was more the people doing the procurement. When you talk to important to them than the absolute speed; you do not our colleagues from Ofcom later, they have made need much bandwidth to fill out a VAT return—it great strides in pushing forward mandated roll-out of would be very useful if you knew the connection was spectrum beyond the old 3G licences, which were going to hold till the end of the page and you did 85%. They are now talking about 95%. I would give not have to start all over again. These sorts of things them the challenge: why not go further? Why not push really matter. it out to 99%, and then you get this mixed economy What we have at the moment in the debate in Cardiff of different products and solutions but you have the and Westminster is consumers standing outside a best choice when you do your procurement? Ferrari garage with their noses pressed against the window and both Governments are saying, “You will Q68 Mrs James: Do you think the consumer have all of those soon.” The problem is that some of understands that? Do you think that is confusing for those consumers are in line to get a Ford Focus. Not the consumer, because we have the big boys in it, the only are we not managing their expectations and BTs, the Virgins, etc? How does the consumer grasp saying, “You know what? You aren’t going to get a that perhaps BT is not the best opportunity for them? Ferrari but we have got something for you and we are David Williams: I think the consumer is confused, but going to ring fence the funds and address you I think Government is confused as well. I think the separately.” There is also a real problem that the lure debate on broadband has been hijacked by companies of speed diverts too much money towards upgrading that sit before you and ask you for something. They most consumers to Ferraris, and there is a real risk ask you for money, subsidy and free resources for that when the pot runs dry some of those people who spectrum, and you are not engineers or specialists and were in line to get a Ford Focus won’t get one because so you have to inquire and figure out what all this the money won’t be there. These will be real Welsh means. The debate has been hijacked by people who consumers who have nothing now. There is a real risk tell you that we must all have 20, 30, 50, 100 Mbps that they will still have nothing in 2015, but their services. It is completely preposterous when there are friends two miles down the road will have the Ferrari people in Britain today who cannot get access to basic they were promised. educational services and basic information about Chair: That is a good analogy. We like analogies employment. A member of my own family was saved like that. last year by a very simple telephone call that we made to NHS Direct, the information for which I got on the Q67 Mrs James: I want to look a little bit more internet. There are people in Britain today that do not closely at the coverage and speed and the aspirations have access to basic services. It is ridiculous that we of the 2 Mbps, which covered the point that I wanted waste our time talking about whether the Government, to highlight. I happen to have very fast speeds because which, let’s face facts, is not rich at the moment, I am within 3 km of the exchange, but, once you go should be spending money laying fibre. The down beneath that 2 Mbps, you are cut adrift, because Government should be making sure quickly that every you can’t download your films, you can’t get on to single family in the UK, particularly low-income the games that you want to play, and there are still far families, has access to basic broadband at 2 Mbps. I too many people in Wales who do not even have that have plenty of customers in Britain who are buying a 2 Mbps. We have talked about copper wire, cable, 10 Mbps service from me, but they will pay £45 to wireless, satellite, and the combination of things that £50 for that. At minimum, every household in the UK needs to happen. How do you see yourselves all needs a 2 Mbps service, and at £20 to £25, that is working together to create that, or do you see that as beyond the reach of some low-income families. My a function of Government, or somebody else leading suggestion would be that Government focus on getting on it, because, if we want to maximise the a 2 Mbps service into the hands of every household cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 17
11 October 2011 David Williams, Alastair Davidson and Julian McGougan in Britain, and, if there are low-income families that We have been saying to Ofcom consistently on the 4G cannot afford £20 to £25 a month, let us prioritise our that they should learn from the mistake of 3G, spending there. especially as data is now far more important than ever was when the 3G licences were auctioned, when, Q69 Geraint Davies: Following on from that, we are frankly, those who got the licences had to work out expecting the spectrum auction in November. To what what the consumers were going to do with the data. extent do people feel that these coverage obligations Now we know. With 4G it is faster and more reliable. are in any sense in conflict with a market-led Data is what it is all about and that is what consumers approach, or do you see it as people thinking it is want. It is essential that that is available universally, complementary? What is the balance? as 1G and 2G were, so make it a 99% coverage David Williams: It is not an issue for me. Every obligation. You do not have to have that coverage technology has a strength and a weakness. My great obligation on all of the licences. Provided it has strength is that satellites cover 100% of the territory. enough spectrum attached to it, one of the licences Satellites do not have quite as much throughput as a will do, which is what Ofcom has proposed, but that cable, for example, but, then again, they are cheaper. 99%, taking us back to where we were with the 1G You have to balance all the strengths and and 2G, was when, ironically, phones meant rather opportunities. For me, universal coverage is largely less to consumers than they do now. irrelevant; we already do that. What is important is The other thing we have said very clearly to Ofcom that Government prioritise making sure that every consistently on this is: measure that coverage family has a basic broadband service. Avanti does not obligation by nation, look at the disparities of 3G need subsidy for that. I would rather the Government coverage between Wales and England and Scotland get out of the way and stop talking about subsidy. We and learn from that. Put a 99% coverage obligation do not need subsidy; I do not want your money. If it and measure it by nation so those benefits are spread is going to spend another couple of years debating this equally. Ofcom now has more time to think about this, issue, I would prefer for Government to get out of the because the auction is being delayed due to operator way and just let market forces lead the charge. in-fighting, which is a source of great “unfortunateness”, but they have time to think about Q70 Geraint Davies: I understand that, but is 99% this and time to get this right. coverage a deterrent to some market entry and, Chair: I am probably going to move things on a bit therefore, possibly undermining competition? more quickly now. David Williams: Not in my part of the telecoms industry, no, I do not think so. Q72 Jonathan Edwards: Thank you, Chairman. May I ask a couple of questions if I am not too late? Q71 Geraint Davies: What do you think, Mr You have already touched on your work in Scotland, Davidson? but can you expand on the exact role of the Scottish Julian McGougan: I will take that. As Alastair said, Government in terms of that project? we have universal television and universal radio as a David Williams: Certainly. The Scottish Government basic level of service in this country. We have were very proactive and found a solution quickly. universal postal services and basic BT telephony. They determined that getting a 2 Mbps service into These are all market interventions. Universal the hands of the most rural families and businesses coverage, universal service, is not a new market was their number one priority. They advertised in intervention. All Governments have to balance letting Scotland and asked those families and businesses that the market rip and leaving a large number of people had a pressing need for a solution to make themselves unserved and delivering what are seen as utilities, known. 3,000 registered and then the Scottish basic rights to the majority of people, at a basic level. Government came out to the market with an open Broadband is now being seen as one of those basic tender, invited all and any technologies to bid. rights, not just here or in Europe, but in the UN as There were bids from Avanti for satellite, from some well, and your postbags will reflect that. wireless companies and from people who proposed to If we look at the mobile phone licences, because I get subsidy for cable. Avanti won. It was selected on think it is the 4G spectrum auction you are referring fitness for purpose and cost. Avanti took the list of to, the 1G and 2G licences had 99% population registrants. We phoned them all up and said, “You coverage obligations. That was quite onerous. It did have registered you want service. The service is now not stop the networks being built out or consumers available.” The Scottish Government paid for the taking up those phones, even though they were paying installation cost. A couple of hundred pounds is what for the network roll-out. Huge sums of money have it now costs, although three years ago, it was higher. been spent investing in that and subsidising handsets, The Scottish Government paid for the installation cost and millions of consumers were very happy with it. and then the end-user customer signed the service There are still lots of notspots in Wales, hence the contract for a £25-a-month tariff. Avanti then arrived, Chancellor’s recent announcement of £150 million. installed the satellite dish and away they went. We did That is very nice to have, but, none the less, it is a that on an old-fashioned satellite. Subsequently, 99% coverage obligation and virtually everyone gets Avanti launched its first high-speed broadband it. On 3G they slipped a bit and they only set an 85% satellite last November, and we quickly drove round coverage obligation, and that is measured by the UK. Scotland and upgraded all those customers to the new That means in Wales you do not do as well as England system, and I am happy to report that they are all very and Scotland, I am afraid. happy using the full range of internet services that you cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 18 Welsh Affairs Committee: Evidence
11 October 2011 David Williams, Alastair Davidson and Julian McGougan would expect to use on any other technology. It has record—is that you could install broadband tomorrow been a very successful project. in all but a tiny handful of buildings where you cannot There are some other Government organisations that see the southern sky. You could do it tomorrow; you are doing similar things. Some of the county councils do not need anything else. are moving forward quite aggressively with their own David Williams: Yes. I would give you a guarantee projects. I applaud Kent county council for being very that we could install a 2 Mbps broadband service in quick off the mark. They have already placed a at least 99% of the notspot homes in Wales and have contract which Avanti is involved in, and other county them working quite satisfactorily within a few councils around the country are doing the same. Some months—surfing, browsing, watching videos, playing are moving quickly, some are not, but, despite the most computer games, using Skype, doing most of the business I am in, this really is not rocket science. things that they need to do. Alastair Davidson: Just to highlight it, David did say Q73 Jonathan Edwards: What is the maximum there would be a £200 installation cost. Even in speed you are going to get from satellite with the David’s rosy picture of the world, we have to think newest technology? about whether consumers can afford that service, and David Williams: The maximum speed that our therefore you do come back to whether there should satellite will provide is about 260 Mbps, but that is be support for subsidy for universal coverage. for an industrial scale product. With a consumer David Williams: Let me just correct that. £200 is the modem that costs about £200 to install and the maximum speed is 10 Mbps. cost of the modem. My service providers choose, in most markets, to subsidise that themselves. With every telecoms service there is an installation cost. Q74 Jonathan Edwards: Have you been holding trials in Brecon? My service providers in most markets choose to David Williams: It is not really a trial, to be honest. subsidise that down and to recover it in the There is an Assembly Member called Kirsty Williams subscription. When you buy an iPhone from the who was very proactive in making a noise about mobile phone shop you do not pay the £600 that the broadband when she came to see us. I was frustrated iPhone costs. You might pay an activation fee, but with the slow pace of development in the broadband then it will be recovered in your service charge. One debate. So we just went and installed some customers of the things that is stopping my service providers for free in Felinfach, including in a magnificent inn from subsidising that cost down is the notion that called The Griffin. There are half a dozen customers there might be a tsunami of cash coming out of the in Felinfach who just got free installations from us. Welsh Government to pay for subsidy. No rational They are paying for their service, but we did it to business will itself invest if it thinks that Government make a point, just to say, “It’s here, and if you want are about to do the investment for it, which is why I it you can have it now.” say make your decision quickly, please. Invest or do not invest. Either way, industry will step in and solve Q75 Jonathan Edwards: Has there been any your problem. Your challenge is whether you want to analysis of that? do it quickly and you want to help the lowest- Geraint Davies: Did Kirsty get it free? income families. David Williams: I do not believe Kirsty got anything for free from Avanti and, if she had, I am quite certain Q78 Mr Walker: I just have a very quick question she would have declared it. for Arqiva. You have talked about this 99% obligation and you think that is the way forward. What level of Q76 Chair: What about listed buildings? Do you investment would be needed for your technology to have any problems putting satellites on to listed provide that 99% coverage? buildings? Alastair Davidson: Using 4G spectrum to provide the David Williams: Yes. There are some restrictions that fourth generation services and installing a small cause problems in 0.1% of buildings in the UK. If a antenna on the outside of a building to get the building is listed, one has to seek permission to put a satellite dish on the roof. It is possible to get that optimum coverage would cost £30 million for all the permission, but there is an approvals process. If a notspots in Wales, and about half of that is on the building is in a conservation area, there is a slightly CPE—the modems and the installation—and about lighter approvals process. Just returning to your half is on the network. The advantage is that it would question a while ago, there is a look-angle issue. In use about 111 masts, of which we have identified 107 Scotland, out of 3,000 installations that we did, there already existing. We did a trial of this technology. I were something like 17 locations where we could not am proud to say the first LTE 4G trial in the UK was see the southern sky because of the existence of a very in Preseli in Pembrokeshire. It was a very successful tall building or a forest. There are a small number of trial, with 30 Mbps peak information rates just from locations where you have a look-angle problem, but it one set, and you can have up to three on a mast. The is a tiny number. consumer reaction was amazing. We were just doing field trials and we had the folk from the local café, Q77 Chair: Your pitch, as it were, here today—and people outside the village hall and the owners of a we can check this out, but you are putting this on the print shop coming up to us. They were asking us when cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 19
11 October 2011 David Williams, Alastair Davidson and Julian McGougan we were going to make the service live and whether Q80 Mr Walker: I have one last question, following they could take it. The guys in the print shop could up on Mr Williams’ point. Do you think that your not run their business properly because they could not company could invest in this amount and subsidise it upload files and graphic images quickly enough. by what is charged to customers rather than having to There is definitely a demand—an appetite—for it. have public subsidies for getting to 99%? Alastair Davidson: No. Realistically, I think there is Q79 Mr Walker: You said in your written a need for public subsidy. I hear what David says, but submission that the impact of the trial was not lost it is an immutable law of economics that, if you ask on the Welsh Assembly Government. What shift or the service providers to subsidise the cost of the response have you seen from the Welsh Assembly installation, they are going to up the service charge. Government as a result of that trial? Rather than keeping the market clear of competitors Alastair Davidson: It is definitely a part of the for satellite, I would prefer to see some subsidy so procurement. Now they understand what is possible, that everybody can afford the service. the peak information rates being sought in the Chair: We seem to agree that everyone should have procurement reflect that. What I am not clear about, access to the service, even if we are not in complete and that is why I am making the point today, is what agreement about the best way to achieve that. We also their criteria are for deciding on the solution, and that seem to agree that everyone could have the service is why I would urge that people listen to the universal and that it is just cost that is the issue, so that is good. coverage requirement. Thank you all very much indeed.
Witnesses: Phil Sheppard, Director of Network Strategy, and Julie Minns, Head of Public Policy, Three, and Richard Rumbelow, Head of Corporate Affairs, Everything Everywhere, gave evidence.
Q81 Chair: Thank you very much indeed for coming We have worked very closely with local employment along. Perhaps you could quickly introduce agencies and others to make sure that is the case, and yourselves. I am David Davies, Chair of the Welsh it is a continuing challenge to make sure that we have Affairs Select Committee. Do make yourselves the right people coming through the door, both as first- comfortable while you are here. timers to work but also a significant number of people Richard Rumbelow: Good morning. I am Richard who are returners to work. Because of the nature of Rumbelow, Head of Corporate Affairs for Everything the work we do, it is attractive for those who are also Everywhere, which is the UK holding company for looking for part-time work, so the balance and profile the Orange and T-Mobile brands in the UK and was of the people we have in our contact centre is wide. formed in July of last year. In addition to what we are Clearly, there are other opportunities to help provide going to be talking about today, I just thought I would more local skills within the employment work force make a note that we have our customer contact centre and encourage that through education. As one of the in Merthyr Tydfil, which has about 700 employees, sectors where we rely specifically on high-calibre and, in addition to that, through our 30 or so retail people in a sector, we would like to see some of that stores across Wales we probably employ up to another reflected in the local education and skills training 150 people. process that we get through, simply because our Julie Minns: I am Julie Minns. I am Head of Public customers require more sophisticated services, the Policy at Three. Three launched services in the UK devices are more challenging for them to use, and, in 2003, having acquired our licence in the 2000 3G therefore, we have to be more clear in the service that spectrum auction. We are currently the UK’s largest we provide. provider of mobile broadband. Phil Sheppard: Good morning. I am Phil Sheppard. I Q83 Chair: I pick up a hint there that perhaps you am Director of Network Strategy at Three, looking are not entirely satisfied with the education of some after the technical and economic strategy for the of the people that are coming forward. network. Richard Rumbelow: We are very happy to provide the core skills and training that we need in our service Q82 Chair: Thank you very much indeed. Could I centre. We are looking for a basic level of skills start off by asking you, Mr Rumbelow, just out of competence to come through that we can train up, and interest, how you find Wales as a place to employ sometimes it has been difficult to identify at that point people, because, obviously, as well as doing an of entry the relevant skills. I am just talking about inquiry into broadband, we are looking at inward basic maths education and social skills engagement. investment generally and the two areas overlap? Are We are happy to do the rest. As a good employer we you finding Merthyr is the place to be? would do that, but it is getting those people through Richard Rumbelow: We have been in Merthyr now the door with those initial competences that we can for just about 10 years, and, as a result of other then train up for the future. But, as I say, in terms changes in the local economy there, we are now the of the overall performance of the centre, it is doing largest private sector employer in Merthyr and in the extremely well and that is a reflection of the quality area. I have to say the quality of the people we have of the people within the Valleys area. The Committee within our operation there is excellent. They perform is very welcome to visit should it be in Wales at some to a very high standard. point in the future. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 20 Welsh Affairs Committee: Evidence
11 October 2011 Phil Sheppard, Julie Minns and Richard Rumbelow
Q84 Mrs James: Just as an add-on, are you not tied Q86 Chair: Perhaps I can say that we are not in with any of the local colleges or education centres? specialists here, so do try and put it across in simple Richard Rumbelow: We are, and I would be happy to terms if you can. One thing that I want to know is supply the Committee with information regarding this. I use my mobile phone, as most people do, to local initiatives. I do not have them to date or with access the internet occasionally, but I would not me at the moment, but I am happy to supply some of consider this a substitute for a fixed-line connection, those reference points for you. We do have, and have or even a wi-fi connection. Are you really saying, as had for a long time, a history of working with local mobile phone operators, that we could have a mobile schools and also with Jobcentre Plus and other similar connection that becomes a substitute? Are you trying agencies in getting people interested in work, and also to compete, in other words, against fixed line and wi- providing other facilities, such as driving people to fi connections, or do you see yourselves as simply come into the centre for job placement, work being able to offer something like this, only perhaps placement and other experiences where they can a bit faster, for people with mobile phones? understand how a modern employer works. Phil Sheppard: I think I can attempt to answer that one. The reality is that there is a range of services. Q85 Chair: Could any one of you explain to us in You have fixed line, mobile and satellite, as mentioned very simple terms—not for my benefit, of course, but earlier. They all provide different capabilities at perhaps for anyone else’s—why Ofcom’s coverage different costs, so we have customers who use mobile obligations should not be raised in the forthcoming broadband as their only broadband connection. For spectrum auction? example, students may not have a fixed line and may Julie Minns: Our position is that Ofcom could not wish to do so, so it is very convenient for them. increase the coverage obligation beyond 95%. We The speeds we are getting now from the latest certainly believe 97% indoor coverage is achievable. technology and mobile support are in excess of the 2 That is based on our current infrastructure of 13,000 Mbps figure that we were talking about earlier. What masts across the UK. The key thing for us is being we have found is that the speeds are quite acceptable able to acquire sufficient low-frequency spectrum in to most users for what they wish to do, and the the auction. To get to 97% is achievable, deploying technology and the spectrum will allow us to improve that low-frequency spectrum across the current that speed from around the 2 Mbps figure up to the 4 infrastructure. To go beyond that becomes a choice as Mbps or 5 Mbps figure when we get the new to whether you allocate Government subsidy to plug spectrum; and this is real average speeds rather than that remaining 3% for indoor coverage or you take a just a headline peak. decision on a lower value of the spectrum licence that would be auctioned, but that is 97% indoor coverage. Q87 Chair: That is very good, but it does not quite You could get a much higher population coverage if answer the question, which is really a yes or no. I you looked at outdoor coverage, and you could think the answer to the question is yes, you do see certainly get up to 99%. yourselves as offering something that will compete Richard Rumbelow: We have a similar view. The and that can be offered instead of a fixed wire or wi- nature of the spectrum discussions that industry and fi connection. Is that right? You see yourselves as a Ofcom have been having for some time has centred competitor to BT, Avanti and the satellite operators. on what is relatively economically achievable, and it Phil Sheppard: I think I am saying that for some is generally assumed that around a 95% figure is people in their own economic circumstances we relatively comfortable to achieve. The ambition for compete, and for some people in locations where fixed what 4G can do, particularly in terms of coverage, has line is just too expensive we compete. For the rest we entered into the conversation, and quite clearly there are perhaps more complementary. are pressures for that figure to go much higher than 95%. The challenge is going to be in what way and how is Q88 Geraint Davies: On that same point, in a world that additional amount of coverage going to be funded where people have access on an iPad through a mobile and who has the responsibility for that. As Julie has phone system, Vodafone or one of yours, would that indicated, it is possible to get higher than 95%, but it not be perhaps a more economic way of getting that is a question of the economic value and the social extra 3% than doing all these wires and satellites and costs of providing that service, which will provide, in all the rest of it? the end, the decision as to what Ofcom wants to do in Phil Sheppard: There has been quite a good study of terms of coverage obligations. But the history of the this in the broadband stakeholder group, which has sector has been that, in the spectrum that we have looked at the economics of the various different used to date, whether it is for 2G services or 3G technologies. You usually find that fixed line is quite services, we are extremely efficient users of radio economic for very high speed up to a certain spectrum and have gone well beyond what we have percentage population coverage. Mobiles then start to already been expected to achieve in terms of coverage become an even more cost-effective way of doing across the UK. As a sector that has shown and things, and then, at the very end of it, perhaps the last demonstrated investment in the spectrum we can do 1% or 2%, because that figure is debatable, satellite it; in terms of coverage we can do it; the nitty problem starts becoming a feasible thing. It is not a one-off here is just whether 95% is currently the right figure answer; it is to choose the right technology and put that should be set up, given the economic cost to go the money in the right technology for the best benefit beyond that. you get overall. cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 21
11 October 2011 Phil Sheppard, Julie Minns and Richard Rumbelow
Q89 Guto Bebb: Just following on that issue, and think that people are going to want to take that very then specifically asking a question of Three, your low spectrum. written evidence stated fairly clearly that in your view Richard Rumbelow: We expect it to be in a there were some areas which were impossible to cover competitive position as it currently stands. We have on a commercial basis. What is currently stopping the some disagreement with some of the rules and levers private sector from providing that service to the final which Ofcom want to put in place as to the entry rules third of the country? that are going to be allowed for the operators, given Phil Sheppard: If you take Wales in particular, it is their current spectrum holdings. We would just like to quite a challenging geography to cover. The see a more level playing field in that position before population is distributed, it is highly rural and there the auction takes place. Hence, I think that is why are a lot of hills which stop mobile and other Ofcom have given themselves more time to consider coverage. Up to a point, we as a commercial company some of those technical arguments before formally and other companies can provide increased coverage, coming forward with what the spectrum rules will be so we are planning to continue to invest in Wales and and the auction taking place next year. grow the coverage there. At some point it becomes very expensive to provide a mast or a site. If there are Q92 Guto Bebb: I am picking up some degree of only a small number of people in that area, then the concern, possibly, at the way the Government are economics do not work out very well, and in that end going about this situation. In terms of the strategy the case, if you like, that is perhaps where the Government are adopting, are you supportive in Government subsidies can come in. But we still think general terms or do you have real concerns? there is a great deal to be gained if we have a Richard Rumbelow: In terms of the overall competitive market with several operators working, Government strategy, I think it is absolutely essential but they compete against each other to drive that that the UK Government have a very clear and very coverage out, perhaps not all the way to 100% but precise policy when it comes to broadband, simply certainly a long way towards it, and then, once we get because it is a necessary economic instrument and to that point, perhaps there are a few areas that need infrastructure, and it has been replicated across to be subsidised. Europe in terms of similar Government action, both in terms of providing spectrum and getting spectrum Q90 Guto Bebb: Just to clarify then, in comparison to market, and also in terms of stimulating investment with some evidence that we have heard this morning, in other technologies too. It is absolutely critical that your view is that there is a role for Government the UK Government carry that action forward. In our subsidy for the final 3% or 4% of the population who specific part of that, what has hijacked the speed of are very difficult to reach. that is getting the low-frequency spectrum to market. Phil Sheppard: I think, certainly for rural areas, Had we had that completed two or three years ago, particularly in countries like Wales, yes, there is. which was a possibility at that time, then we would There is a role for that subsidy to finish off that not be here talking about an auction next year; we coverage. would be here delivering 4G services now, and that Julie Minns: The key thing at the moment is that is the significant difference in time scale that we are neither we nor Everything Everywhere have the low- now facing. frequency spectrum, which is the spectrum that is the best for providing rural coverage. Just to give you an Q93 Guto Bebb: I have one final question, and I am example, if you deploy a network using low- going to be very parochial now. I represent a very frequency spectrums, that is either the 900 currently rural area in North Wales and I am just interested in held by Vodafone or O2, or the 800 that will be the work that Three have done in Ceredigion and auctioned in next year’s auction, your deployment Powys. Are there any lessons there for us to take on costs are roughly three times less than deploying a board in terms of mobile coverage, because some network on the spectrum that we currently hold, which community councils in my constituency would be is much higher frequency at 2100. Our concern at the very interested to know whether you do have the moment is that you do not have a competitive market. answer to the issue in question? You have the two operators here today without access Phil Sheppard: Historically, in the last three years we to low-frequency spectrum, and, therefore, the have achieved considerable expansion in coverage competition perhaps is not as optimal as it could be. with our joint venture with Everything Everywhere to If next year’s spectrum auction achieves what Ofcom improve coverage. Powys, for example, has gone from set out to achieve, which is a competitive, four-player 24%, which was very low, to 70%, which is still not wholesale market, the market should push coverage to huge in terms of coverage, but it is a significant more rural areas in Wales than is currently delivered, improvement. We do, as I mentioned, intend to and I think that allows you as a Government better to continue to expand the coverage in Wales with further target your subsidy. There is a risk at the moment that, sites. I do not know what the number will be for if you look at the £150 million that was announced Powys at this moment in time, but it will improve. last week, some of that, if you deploy it today, could go into areas that arguably the market will serve post Q94 Geraint Davies: You have made some slightly the spectrum auction. veiled criticisms of the mechanisms for the spectrum auction and Ofcom. We are about to ask questions of Q91 Mrs James: Are you not expecting it to be a Ofcom. Are there any points you would like to make competitive bidding process next year? We do not to us now that you might want made to Ofcom? cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 22 Welsh Affairs Committee: Evidence
11 October 2011 Phil Sheppard, Julie Minns and Richard Rumbelow
Chair: Bearing in mind they are sitting at the back. to another to provide that balance in the marketplace Geraint Davies: You could make them as hand before the auction has taken place. In the UK, we have signals. not gone through that process and some of the Julie Minns: I can sense the pens coming out behind technical discussions that we are going through with me. The key thing from our perspective is that we Ofcom at the moment are centred around trying to support Ofcom’s proposals to maintain a four-player bring some balance to who has what currently to make wholesale market. We think the benefits of the economic investment in the future sensible and competition have been quite considerable for UK practicable. consumers. What is going to be key in that is ensuring, as Richard has alluded to, that each of those four Q96 Chair: Mr Rumbelow, you are basically saying players has access not just to sufficient spectrum but that you have been disadvantaged by the liberalisation a sufficient mix of spectrum. In urban areas, it is going of the 900 MHz licences, but others might claim that to be key to have sufficient high-frequency spectrum; you hold the largest share of the spectrum, so you to cover rural areas, it is going to be key to have have certain advantages elsewhere within the system. access to low-frequency spectrum. How would you respond to that? Three disagrees with Ofcom’s current proposals on the Richard Rumbelow: As a result of the merger, amount of low-frequency spectrum that they believe certainly the amount of spectrum that Orange and T- each of those four operators should have. I am sorry Mobile bring to the table was, in terms of pool, large, to introduce a lot of numbers here, but Ofcom’s but, as part of the arrangement in terms of the proposals are that two times 5 MHz would enable you consolidation between the two, we are required to give to achieve 95% coverage at 2 Mbps. We disagree with spectrum away as part of that merger process. It is not that. We think you could not achieve 2 Mbps off two just about the amount of spectrum you have; it is times 5 MHz. We believe you need two times 10 MHz about the frequency level or where it is in the of low-frequency spectrum in order to get 2 Mbps spectrum band that is important, and it is not so much across a minimum of 95% of the population, and that the volume of where it is on the spectrum band that is the key point from Three. is critical, and that is why the arguments and Chair: I suspect we won’t be in any position to pass discussions with Ofcom are on those points of detail. judgment on that one. Mrs James: Is that to the power of 10? Q97 Chair: Did you or the companies that now form your company not know when they bid for the current Q95 Geraint Davies: Is there a suggestion, so I have licences, around 10 years ago, that the liberalisation got this right, that Vodafone already have some was going to take place 10 years later? Did they not frequencies that you do not have access to, and that, bid for a specific period of time? in some sense, on entry to the competition, there are Richard Rumbelow: I think I am correct in saying different incentives and different benefits and different that at the time the 3G auction was done, 10 years games may be played in order to keep people out at ago, the frequencies that were held for 2G services whatever cost? It is not a proper competition. were only designated for 2G services. It was Richard Rumbelow: There is a significant legacy of subsequent to the 3G auction in 2000 that a European how the operators came to have the spectrum holdings directive came out that allowed that liberalisation of they have today. Some of those spectrum holdings other spectrum to be made available, and that came were granted without an auction process back in the into force in the UK at some point during the course early to mid ’80s, and also there has been an auction of last year. The decision to liberalise was post the 3G process subsequently for that. The capability of what auction in the UK. At the time of the auction we bid you do with that spectrum is now fundamentally purely on what we knew at the time: 3G spectrum at important, because that spectrum is being liberalised certain frequency bands, and at 900 MHz 2G-only and therefore you can do more with it in terms of the services. high data bandwidth capacity that we are talking about Julie Minns: At the time of the 2000 auction, the here in terms of giving people mobile broadband indications were that the next spectrum auction would services. The spectrum width you have at certain happen ahead of the liberalisation of existing frequencies has greater capacity to provide the level spectrum. The view was that you would have had a of service that you want to provide to customers and level of spectrum allocation before you had the the degree of coverage that is now being required of freeing-up of those legacy spectrum bands for 3G us. Therefore, those who have low-frequency services. That is not what has happened, and it is spectrum have a distinct advantage over those who partly as a result of the delay in the proposals for the have high-frequency spectrum, given the costs of roll- 4G auction. The original timetable would have had the out, coverage obligations, etc. It is the levelling off of auction take place last autumn. Now we are looking at that playing field in terms of who owns what which an auction next autumn, and in the interim we have is absolutely critical to the arguments about how the had liberalisation in January. That does mean that auctions take place. Three, which only has the 2100 MHz spectrum, does In other countries in Europe, for example, there has not benefit from any of that legacy spectrum. We hold been a mandated decision by regulators to force that 10% of the spectrum in the market, yet we carry 50% change where there are seen to be differences in of the mobile broadband data across our network. We spectrum holdings of those operators concerned. In are very keen for the 4G auction to happen quickly, other countries in Europe they have gone through a because we need that spectrum to meet the growing process of re-allocating spectrum from one operator demand, and, certainly by the time we get to 2015, all cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 23
11 October 2011 Phil Sheppard, Julie Minns and Richard Rumbelow the predictions are that more people will be accessing are also going to find it very difficult to get a fixed the internet on their mobile devices. line broadband link, because it is going to be people out in isolated rural areas, not near an exchange and Q98 Mrs James: Are we just hearing here companies not near a mast either, generally? that are protecting their own interests or making an Richard Rumbelow: In terms of coverage, that is appeal now that there is a fairer allocation in the where the nub of the question is. Part of that is, do future, whereas there was a land grab, was there not? we go beyond 95%? Where will the pitch be? That is what happened in the earlier auctions. People made a lot of money and spent a lot of money and Q100 Chair: Those you do not reach are likely in there was a market share that they were then many cases, though perhaps not all, to be the same guaranteed. What you seem to be saying now is that ones whom BT and Virgin cannot reach with their everybody should have a little bit of this and a little cables and wires, are they not? bit of that, and I am not quite getting it. Richard Rumbelow: In terms of the UK market, Richard Rumbelow: There are a number of points on everybody accepts that there has to be a blend of that. First, by any measure, the UK market has been technology in terms of the way people have one of the most competitive markets in Europe for our broadband services. It is absolutely critical that we sector. That is widely recognised. You have also had have a fibre network that supports the mainstream of some of the largest European players in the UK what people want to do. It helps us too, because that market who have invested consistently over that capability supports our network capability and period of time, and I think that needs to be welcomed functions too, particularly in the more rural areas. and recognised, and we want that to continue, which However, I think it is widely accepted that this is not is why this spectrum auction is particularly critical, a one-technology solution to provide, if you like, a just to ensure that there is, from our point of view, a universal-type service to people. It is a blend of rebalancing of what currently is in existence, but also, technologies and people will mix between those given three things: first, a sudden uptake and the clear technologies, either according to where they live or direction of traffic, in that mobile is here to stay as a because of their own lifestyle and choice. One thing critical mobile broadband product for consumers, not that is certain is that mobile is going to play a more just for those who cannot have access to fibre but for critical part in how people access broadband services a generation of people for whom mobile will be their in future, simply because it is in many cases both an only option of choice in terms of how they have economic choice because of the pay-as-you-go broadband services. facilities that we offer and/or a lifestyle choice as well, and it gives businesses a lot more flexibility than we Q99 Chair: If your coverage is 95%, which is what see currently. you are aiming for, even if it was 97%, which is what Chair: We have run out of time on this fascinating some have suggested, there would still be 3% or 5% subject. Can I thank all three of you very much indeed who would not get mobile coverage. Is it not likely for coming along and giving evidence today? We now that that would probably be the same 3% to 5% who look forward to hearing what Ofcom have to say.
Witnesses: Rhodri Williams, Director, Wales, David Clarkson, Technical Adviser and Project Manager, Competition Technology, and Matthew Conway, Director of Regulatory Development and Nations, Ofcom, gave evidence.
Q101 Chair: Good morning. I am David Davies, for the future? Obviously, there has been some Chair of the Welsh Affairs Committee. Some of us criticism from the last witnesses. To what extent are know each other very well, but perhaps for the record the priorities clearly about virtually universal you could quickly introduce yourselves and then I will coverage and, alongside that, the superfast versus ask Geraint to start off this session. getting loads of money for the Government? Would Matthew Conway: I am Matthew Conway. I am the you comment on that? Director of Regulatory Development and Nations at Matthew Conway: Let me begin, then maybe Dave Ofcom. can pick up fixed and I will come back to mobile. The Rhodri Williams: Rhodri Williams, Ofcom’s Director starting point is that universal coverage is a matter for in Wales. the Government. It is for the Government to decide David Clarkson: Dave Clarkson. I am the how far services should go beyond the point where Competition Policy Director who specialises in the market is not going to set them. That is what the broadband. legislation requires. We are a key part in implementing the universal service, whether that is Q102 Geraint Davies: I want to open by asking expressed as a fixed service, as it currently is, or if the about this relationship between universal access to Government ever chose to designate a mobile service broadband versus superfast and what the balance as part of the universal service; we are clearly part of should be, but, following the last conversation, could the implementation. However, the fundamental you comment on the spectrum auction as well, in definition of what it is that every citizen in the UK or relation to the impression at the last auction that the a certain percentage of the citizens in the UK should Government just wanted to come in and maximise the get starts with the Government. Dave might want to revenues alongside providing a competitive framework pick up on fixed and then I will come back to mobile. cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 24 Welsh Affairs Committee: Evidence
11 October 2011 Rhodri Williams, David Clarkson and Matthew Conway
David Clarkson: Certainly, with regard to the case in conscious that we probably need to go through the terms of fixed, the universal service obligations questions that we have quite quickly, if that is okay. currently only apply to telephony, and there is a Matthew Conway: Can I just make one more point of provision in there as well for what is designated as clarification? It would be utterly illegal for us to run functional internet access, which stems from the dial- a spectrum auction to maximise proceeds to the up modem days, which is specified at 28 Kbps, so, Government. Our duty is to optimise the use of the clearly, not even current broadband. Broadband to spectrum, full stop. date has largely been a commercial phenomenon. All Chair: That is a good point. Can I bring in Jonathan? of the current generation, and, obviously, superfast which now we are moving into as well, is commercial Q103 Jonathan Edwards: It is just a quick one on up to a point. But, as we all know from plans from this 95% threshold for the 4G. I take it there is some BT and Virgin, it looks like over the next few years sort of mapping exercise. What sort of geographical those plans are not going to lead to universal areas are likely to miss out? coverage, in many respects, analogous to some of the Matthew Conway: One of the issues that we noted in early stages of broadband roll-out 10 years ago, where the consultation was that, if you set a crude UK-wide the roll-out was going as far as people believed was coverage obligation, it is easy to reach large parts of commercially possible. There were some Government the country by ignoring large parts of the country. interventions at the time, and, if you mix that up with Northern Ireland is the classic example. It is part of changing perceptions and costs, it got to almost the UK and part of existing coverage obligations. 3G complete coverage but not quite. coverage there is much lower than it is in the rest of Matthew Conway: Mobile has never been expressed the UK. We did ask in the consultation whether we in terms of universal service in quite the same way. should set sub-UK coverage obligations so that to a All the way up to two years ago, the kind of coverage large extent we would mitigate large areas being obligations that had been imposed by the Government sacrificed in order to meet the overall coverage when they awarded those licences was not universal obligation. We got a lot of responses and a lot of very in the kind of terms that you would expect from fixed positive responses, so that is one of the things that we telephony or terrestrial television, for example. Even absolutely need to look at. the 3G licences that the Government auctioned in 2000 only had at the time 80% coverage obligations, Q104 Guto Bebb: Do you feel as an organisation and the Government direction to us, which picks up a that, in terms of increasing competition within the number of these issues that went through Parliament broadband market, access to the BT structure is very at the back end of last year, envisages a coverage important? Would you agree with that? obligation of 90%. The issue of universality becomes Matthew Conway: Absolutely. One of our duties is to particularly live in the context of the 800 MHz and further the interests of citizens where appropriate by 2600 MHz spectrum that we are going to be promoting competition. It is in our DNA. auctioning next year. We have started from an analysis of what you might be able to cover using 4G Q105 Guto Bebb: That brings me on to the second technologies over that spectrum, using the existing question. Are you of the view that BT are playing fair infrastructure, and that is where, essentially, our on this issue, because we have had a lot of evidence proposals for a 95% UK-wide population coverage which would indicate otherwise? obligation came from. We have heard, not least David Clarkson: In terms of competition to BT, there possibly from some of you, and certainly from many are a number of different models of competition. other parliamentarians and others, that that obligation There is what we would call intermodal competition, should go further. That is one of the key issues that where there is complete end-to-end competition we are looking at now, and it is one of the reasons against BT’s network. Virgin Media is a good example why we announced at the back end of last week that of that in the fixed space, but, obviously, its coverage we would be re-consulting before we finalise the is geographically limited. Potentially, if mobile is auction rules. coming into the market and being a more direct As a regulator, we are required by law to be substitute, that can offer intermodal competition as proportionate in what we do. We ultimately cannot well. However, there is another form of competition impose obligations on the cellular industry that, if you which is based on access to BT’s network in some like, would cost more to deliver than the benefit that way, and, certainly for the current generation of would be derived, and I should be clear that that is broadband services, one of our main intervention not just economic benefit. Our duties are to citizens points there was a process of local loop unbundling, as well as consumers. Our definition of benefit is a where other operators can get hold of the BT total welfare one, but, beyond the point at which we telephone lines. That has certainly proved to be very judge essentially that further obligations would be a successful, with high coverage in the UK and high net cost to society, our ability to intervene runs out. In take-up. that context, it is very interesting that the Chancellor With the current superfast broadband roll-out, you can announced last week £150 million for extending no longer rely on the old telephone lines; you need mobile coverage, so that is the point at which our more fibre, essentially, in the BT network. There are responsibilities and abilities to act have to hand over effectively two remedies. One is sub-loop unbundling, to the Government to intervene. which is a very similar process to local loop Chair: Thank you for that. That is a good opening unbundling, but it takes place at the street cabinets statement. I am just looking at the time and am rather than the exchanges, thus shortening the line cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 25
11 October 2011 Rhodri Williams, David Clarkson and Matthew Conway lengths and increasing speeds, and the other is by Government intervention. This is all the work of getting access to BT’s duct and pole infrastructure. Broadband Delivery UK. They have been reasonably The duct and pole infrastructure remedy was open, as they see that there is a role for a mix of introduced a year ago when it was first put in place. technologies. They want to take a service-neutral It is new, so there has been a process of industry approach to that. It is a Government process. I think agreeing the products and the processes to support we would entirely support that. Trying to specify the that. In fact, just last Friday, revised prices were put precise way in which we will deliver a service is into the market. Where we are now, we think we have probably not the best way to deliver value for money, the right products/processes in the market and now even assuming you get the service you want. there is a question of the fundamental economics. Rhodri Williams: I will just add that there is considerable evidence from the Welsh Government’s Q106 Guto Bebb: Can you just clarify something on Broadband Support Scheme, which is currently up and the revised prices, because some of the evidence we running, that they have used that blended approach received earlier in this inquiry indicated that the of providing wireless and satellite broadband to those competitors were of the view that possibly the pole people who cannot access anything beyond 2 Mbps and duct access prices being offered by BT Openreach now. The scheme started off at ½ Mbps and provided were four to five times what they considered to be the £1,000 per user. It has now gone up to 2 Mbps. It actual cost? In view of what you have just stated in would not really be possible to do that in the short terms of the new prices announced last Friday, has term if you insisted on using either fixed wire or cable there been any significant change? to do it. It can only happen now by using other David Clarkson: We have not been able to speak to technologies. all the people concerned yet to get first-hand views of what their views are of the announcements on Friday. Q108 Chair: Can you just explain something to me, Going back to some letters and commentary which Rhodri? If you can install satellite for £200—or was appeared in the press a few months ago, there are two it £400?—which will give every household in Wales different types of product being made available. There broadband access, why does it need to be up to £1,000 is one which is the ongoing rental product of access per user? According to one of our previous witnesses, to the infrastructure, which is, how much do you pay anyone in the country, bar half a dozen who have trees BT to rent some part of its duct, and there is a cost of in the way, could have 2 Mbps via a satellite for, I its duct network which can be reconciled to its think we were told, a £400 maximum installation fee. regulatory accounts. It is heavily depreciated because Mrs James: A total of £30 million, I think. it has been there for so long. From the numbers and Rhodri Williams: The question really is one for the the methodology that BT shared with us, and doing Welsh Government, as to why they have chosen the some background bottom-up tests on what the costs figure of £1,000 per user. I think that is the maximum of a new build is, the prices look quite reasonable— they would pay. Obviously, they would not pay £1,000 quite good even, I think. if the cost of the installation was £250 or £400. Some of the commentaries earlier in the year, and I think Virgin Media released a press release on Friday Q109 Chair: Have there been instances where as well, related to what are ancillary services. This is anyone has had to pay more than £400? to do with things like duct unblocking, building new Rhodri Williams: I do not know is the answer to that. bits of duct where there is a problem because of lack Chair: It is an unfair question to you. Forgive me. of space or there has been a collapse, and things like that. Our understanding of how this product is Q110 Mrs James: Just looking at the notspots again structured is that it is a very hands-off process from and the pick-up in Wales, there is a lower than average BT. The CPs who use BT’s ducts and poles actually take-up on broadband in some urban areas of Wales, go out and survey the ducts themselves. They work so have we evaluated this? Do we understand why? out what they want to do. They do it themselves, Rhodri Williams: We have certainly done quite a subject to using accredited engineers. A lot of these considerable amount of research in that. We have ancillary services, 95% plus, you could ask BT to do material that is published in our annual for you, but, equally, you are at liberty to do it communications market report and also studies of yourself, or, indeed, employ your own contractors to media literacy in Wales, and take-up, clearly, is do it. So there has always been less focus on those influential in that. What that shows is that in densely from the industry group who are developing these populated urban areas, particularly those areas that are processes. not the most economically thriving parts of Wales, take-up falls below the average. Merthyr and Blaenau Q107 Guto Bebb: I have a final question on Ofcom’s Gwent, I think, off the top of my head, are probably responsibility. Have you made any analysis of the the two lowest unitary authority areas where the take- other options that are available in a Welsh context to up is low, despite the fact that availability is quite deliver broadband to those notspots, in effect? Have high, but that in a sense is not a surprise. That follows you done an analysis of satellites versus fibre, for the same pattern in other parts of the UK as well. example, or anything along those lines? Matthew Conway: I do not think we have. That is Q111 Mrs James: We heard evidence earlier that this getting into the area where the Government, and the is one of the key areas that we could address through UK Government in particular, have observed that the Government and through the Welsh Assembly. It is market has stopped rolling out and it sees a case for how we get the more economically challenged cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Ev 26 Welsh Affairs Committee: Evidence
11 October 2011 Rhodri Williams, David Clarkson and Matthew Conway households in Wales and in the UK as a whole at least utilise BT’s network for backhaul purposes, but I a 2 Mbps speed access, because now, for education would not say that we have had many complaints. It and all other areas, it is vital. How are we going to is a small number. I do not know if the UK picture address those challenges? is different. Rhodri Williams: Again, to encourage take-up is not David Clarkson: I do not think we have had many something that falls within Ofcom’s responsibility. As what I would call formal complaints. There is the I say, we do a lot of research and we co-operate with normal sort of friction and issues that go on, anybody who is interested in that area but, again, it is especially as new things are being brought out. an area where the Welsh Government specifically has a programme of work addressing that point and, as it Q116 Chair: I have picked up quite a lot of friction, moves towards the procurement of superfast services, but maybe it has not— is also looking to ensure that whichever contractor is Matthew Conway: That is normal. contracted to provide those services will take part in demand stimulation activity, not just putting in the Q117 Chair: Another issue that has been put to me cables. is that all of the operators talk about download speeds, 2 Mbps up to 25 Mbps, or whatever it is, but there is Q112 Mrs James: But, you know, Rhodri, superfast very little mention of upload speed. For the allegorical is not really relevant when you cannot even download farmer wanting to fill out forms or somebody running photographs. If I send photographs to one of my a business upload speeds are just as important, if not friends in Monmouth, she will take 20 or 30 minutes even more so, as download speeds. Is that something to download them, and I would not say she lives in a that you have looked into, and particularly whether or particularly rural area. Most people would be very not operators are giving people accurate information happy just to get the basic speeds. If you are in a as to what upload speeds might be? notspot area, anything has got to be better than what Matthew Conway: Let me start with the general, you currently have. which is that there has been an ongoing issue about Rhodri Williams: The Broadband Support Scheme the advertising of broadband speeds, whether that is should be able to solve every single one of those upload or download, focusing on download. The cases. There should not be anybody in Wales who Advertising Standards Authority has recently decreed cannot get that service, other than going through the that a communications provider should not advertise process of applying for the grant, getting it approved “up to” speeds that cannot be accessed by at least 10% and getting the service installed. Once that is done, of those who receive them. We welcome that as a step then anybody in Wales should be able to access at beyond what was there before and we will be very least 2 Mbps. So far, if I understand it correctly, about interested to see whether that has a positive effect on 1,600 applications have been processed, but the take- the market. We had argued for something a little bit up is ongoing and will continue to be ongoing, I take more stringent in the form of typical speed ranges of it, until everybody who needs to have that service broadband, the equivalent of miles per gallon, has it. something where, as a consumer, you would intuitively understand that most people would get a Q113 Mrs James: So you think the Government-set particular range. However, this is an area where in the targets and the coverage are realistic and we can first instance the advertising is regulated by the ASA achieve them? and we wait to see whether their decision has an Chair: A quick yes or no will suffice there. impact. Rhodri Williams: Yes, if they are prepared to put the On upload versus download, the focus is usually money in. download because most people are pulling down large amounts of information rather than pushing large Q114 Jonathan Edwards: I think Ofcom designates amounts up. Doubtless there will be some people for mobile and satellite technology as complementary whom limited upload speeds will be an issue, but, if rather than mainstream. Does this indicate that the all you are doing is conducting your affairs online, regulator is prejudiced towards fixed-line technology? then the kind of upload speeds that you typically see Matthew Conway: I am not sure I would recognise will not be a problem. the designation, so, no, we are not prejudiced in the slightest. As I said, we would very much prefer to Q118 Chair: The final question from me, and focus on outcomes and to the greatest extent possible possibly from everyone here, is whether you can be service-neutral in how those outcomes are clarify when the spectrum auction is going to take delivered. No, I do not think we are biased at all; place. quite the reverse. We try to be as studiously neutral as Matthew Conway: We plan to publish a further we can. consultation at the end of the year. We will then give stakeholders at least eight weeks to comment on that. Q115 Chair: Mr Williams, have you had many Our aim is to make our decision and publish the complaints about British Telecom from independent statement in the summer, with the aim of the auction suppliers of broadband who have had difficulty getting following a few months later, perhaps starting in the access to the infrastructure, within Wales? last quarter of next year. Rhodri Williams: We certainly have not had many complaints in Wales. Sometimes there are delays Q119 Chair: So it will start a year from now? when a provider maybe of wireless services needs to Matthew Conway: Yes. cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:21] Job: 013975 Unit: PG02 Source: /MILES/PKU/INPUT/013975/013975_o002_th_Corrected transcript HC 1367-ii WAC 11 October 2011.xml
Welsh Affairs Committee: Evidence Ev 27
11 October 2011 Rhodri Williams, David Clarkson and Matthew Conway
Q120 Geraint Davies: I have just a quick question. undertake the various duties that farmers have for We have done a recent inquiry into inward investment applications for animal passports and for filing opportunities in Wales. Can I just ask how important returns, which have to be done online. I think it is these things are—depth and speed of roll-out—in very important. We certainly hear a lot about that. encouraging small companies to come to Wales so they can set up and access the global marketplace? Q121 Geraint Davies: In terms of the differentials How important strategically is this for Wales in terms between England and Wales, perhaps you can of inward investment? comment on those. One of the differentials is the fact Rhodri Williams: It is not something that we research that in Wales, if you are thinking of setting up a ourselves, but from evidence that is available from business, you know the people working for you, and other sources it is very important. I recently visited their children at the moment could go to university for Cornwall, where the provision of superfast services £3,000 a year tuition fees instead of £9,000. If you under a contract not exactly analogous but similar to have, say, three children, you are talking about the the current one being implemented by the Welsh difference between a £90,000 cost to the family and Government is already under way. I visited some £30,000. Given that those things are in play, how small design companies and a pub that put lots of its important is it that this infrastructure is provided? material on the web in video format to encourage Given that that infrastructure is there for SMEs to set people to come and see what fish had come out of up, do you anticipate a sort of accelerated migration the sea that morning. You could actually see the guy of inward investment into Wales because of these standing there with his turbot or whatever. other factors? Geraint Davies: I was thinking of virtual drinking. Matthew Conway: I think it is fair to say we have not Rhodri Williams: Particularly for those parts of Wales looked at it in enough detail to give an answer. where the SME community is higher than the UK Chair: I congratulate Members for the ingenious way average—the Chair referred earlier to the agricultural that they have scored some political points. Thank you community—broadband is now essential in order to all very much indeed for coming along. cobber Pack: U PL: COE1 [SE] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Ev 28 Welsh Affairs Committee: Evidence
Tuesday 22 November 2011
Members present: David T C Davies (Chair)
Stuart Andrew Karen Lumley Guto Bebb Mr Robin Walker Geraint Davies Mr Mark Williams ______
Examination of Witnesses
Witnesses: Mr Ed Vaizey MP, Parliamentary Under-Secretary of State (Culture, Communications and Creative Industries), and Simon Towler, Head of Spectrum, Broadband and International ICT Policy (Broadband Delivery UK), Department for Culture, Media and Sport, gave evidence.
Chair: Good morning, Minister, and Mr Towler. areas, the infamous notspots, which blight large parts Thank you for gracing us with your presence. May I of mid-west Wales in particular? invite Mark Williams to ask the first question? Mr Vaizey: Yes, I am. We want the market to deliver in about two thirds of the country as a whole, and Q122 Mr Williams: You are in a very jovial mood, that will apply to Wales in terms of customers, not Mr Chair, this morning. I have a general question. We necessarily in geographic area. That will be mainly have had a lot of evidence from farming unions and BT and Virgin, but there will be other companies such the small business community about the importance as Fujitsu who may also want to play a part in of broadband to businesses in Wales. I probably know infrastructure roll-out. The Government can help there the answer to this question already, but do you through deregulatory measures, which we may come recognise the difficulties faced by many people and on to later. The money that we have set aside for businesses and their concerns about the inadequacy of broadband roll-out—the £530 million up to 2015 and broadband provision in Wales? £300 million thereafter—is very much designed and Mr Vaizey: Yes, I do. Over the years, but particularly focused on getting broadband to rural areas. That is in the last 12 to 24 months, the importance of the focus there. broadband has moved up the agenda. All of us as It is important not to forget urban notspots as well. Members of this House, wherever we live, will have That is why we have asked the Welsh Government, had correspondence from constituents concerned or and in England local authorities, to come up with frustrated about their broadband connection. Either broadband plans because they will know of particular they do not have one at all or it is slow. The reason notspots that might be in the centre of towns that need we have put together a broadband plan, and we addressing. That is why I was also delighted when continue to grow it, is because we recognise that there the Chancellor announced the £150 million for mobile are huge opportunities based precisely on the masts. Although the initial target is to fill in voice notspots, it stands to reason that those masts can then frustrations of people living in rural areas. A lot of be relatively straightforwardly upgraded to cover 4G, people living in rural areas, particularly farmers, are which is data and internet broadband. I am satisfied running their own business, but people would also like the focus is right, and, more importantly, I am satisfied to run businesses from rural areas. You will find even that the money is there and available. very high-tech businesses based in quite remote communities. Q125 Mr Williams: When, on 12 July, the Secretary It is an important point to make that getting broadband of State made the very welcome announcement of an out to rural areas is not simply a nice thing to do; additional £56.9 million to Wales, he had a message it is very important for economic growth and lots of for the business community and householders, “If you businesses, particularly farmers. suffer the frustration of slow internet connections, tell your Welsh Assembly Member that you need Q123 Mr Williams: You are right to highlight that. I broadband. Urge them to make this investment and can think of many householders with small ensure that Wales is not left behind.” Would you like businesses. Per head, for a large number of small to add anything else to that message to the businesses anywhere in the UK, businesses based in communities that some of us represent? people’s homes are often in quite challenging areas Mr Vaizey: If I can unpack what the Secretary of State geographically, which makes the targets that much was saying, the message is very clear for the Welsh more difficult to address. Assembly, the Welsh Government, as well as for Mr Vaizey: Absolutely. That is why it is important that English counties, Scotland and Northern Ireland. The we still have a target of 100% broadband coverage of money is there. £56.9 million is a substantial 2 Megabits, even though our superfast broadband allocation to Wales. We can come up with various target is 90%. That is why we are keen to set ourselves different statistics that may or may not be treated a target date of mid-2015 to try and realise that. sceptically, but it is about three times more than you would get under the Barnett Formula. It is about £63 Q124 Mr Williams: Are you satisfied that the focus per head of the population, when the English is right in terms of dealing with those hard-to-reach allocation is about £44 per head. We think it is going cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Welsh Affairs Committee: Evidence Ev 29
22 November 2011 Mr Ed Vaizey MP and Simon Towler to address it, but it is a partnership. We would hope Simon Towler: We work very closely with Wales that the Welsh Assembly would be able to find Office officials on policy matters to bring things in. resources to match that sum. I am not talking of an You spoke about the Welsh Government. That is much exact figure, but we would hope they would provide more of an operational dialogue and co-operation, but resources to increase that sum. We hope European it is close and very good. The operational dialogue is Regional Development funding might also play a role, largely with BDUK addressing the practical issues and and, indeed, individual local authorities in Wales. I problems of rolling out broadband in Wales: for know times are tough but people have to set priorities. example, dialogue on elements of their national plans We think there is a substantial sum of money available and sharing experience on the procurement elements, to do that, but the important point is that we cannot as the Minister just said. Wales is in its commercial do it unless we are in a partnership. So we have to dialogue process. BDUK generally is in a dialogue work with the Welsh Government. We are happy to process, developing a framework contract usable work with the Welsh Government, the Wales Office across the whole of the United Kingdom. There are and local authorities in Wales through the Welsh lots of close co-operative working issues and it is Government. very practical. First of all, Wales is well placed to have the Welsh Government covering the whole of Wales and, Q128 Stuart Andrew: You mentioned BDUK. Why therefore, able to aggregate the funding. In some was Wales not included in the broadband pilot ways, we would like English local authorities to co- schemes that were run in England and Scotland in operate more, potentially, to aggregate their funding 2010 and 2011? as well. That is a win. Secondly, my understanding is Mr Vaizey: I was not aware that it was left out of the that they are almost ready to go out for tender. They broadband plan schemes. Do you mean the pilot are ahead of pretty much the rest of the country in schemes? doing that. So Wales is in a very good place. Simon Towler: Do you mean why did it not get a pilot in the first wave of pilots, as opposed to getting one subsequently? Q126 Stuart Andrew: The Welsh Assembly Chair: Government have a broadband policy. They have Yes. released a document that is intended to outline the Mr Vaizey: The pilot schemes were based on the merits of the proposals; so we were not going to go role devolved government can play in expanding the out and choose sites. It was a process where people private sector. One of its key principles is for all came to us with worked-out schemes. Obviously, we Welsh businesses to have access to superfast wanted to have pilot schemes that were ready to go broadband. How does the DCMS broadband policy fit so that we could get them up and running and learn in with the Welsh policy and vice versa? from them for the benefit of further pilot schemes. Mr Vaizey: We are on relatively the same page. The There was no intention to exclude Wales, nor did we Welsh Government are very ambitious. That is not gerrymander. meant to be a Whitehall code word where your officials tell you that you are being very ambitious. I Q129 Chair: Their application was not good enough. think they are genuinely ambitious. There is nothing Mr Vaizey: It was not a question of whether it was in our plans that says a local authority or a devolved good enough. We picked what we felt were the four Administration could not go further than our target. best ones to begin with. Quite soon after that, the We set ourselves what we think is a realistic target in Chancellor announced the grant of £10 million to the terms of 90% superfast broadband and 100% FibreSpeed project in north Wales. I do not know 2 Megabits, but, if people want to go further, we are whether I am allowed to call it a pilot, but in effect it not going to hold them back. We cannot give them was a pilot, and we have worked closely with them to additional money. We cannot wish that money out of make that happen. thin air. Simon Towler: The point about the selection of the Business broadband is very important. There may be first group of pilots was that BDUK has been looking other parts of the Welsh Government’s digital agenda, to learn very specific lessons. Cumbria offered very such as its Broadband Enabling Scheme, which I specific opportunities about learning and engagement know is helping individual communities to get online, of quite a high concentration of community-led which might be configured for particular business projects. The North Yorkshire Project had a very needs. We are pleased to be working with an specific focus on the ability to re-use a public sector ambitious Government who want to ensure that Wales asset. The Highlands and Islands have the most plays its full part in the digital future. challenging geography. They are the most remote and the most difficult. It was very much about the Q127 Stuart Andrew: Do you meet regularly with learnings that could be made applicable across the Welsh Government Ministers on this issue? country, rather than selecting somebody because they Mr Vaizey: We do. I talk regularly to my counterpart were better or worse. in the Wales Office. We have had regular updates with the Welsh Government. We have not had them for a Q130 Stuart Andrew: Do you feel confident that few months now. They are also part of the taskforce those pilots have drawn out some valuable lessons for of officials. There is a cross-departmental officials implementing broadband? working group. Simon, I can hear you itching to get Mr Vaizey: Yes. Next week we are publishing a in to emphasise the close co-operation. synopsis of some of the lessons we have learned. That cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Ev 30 Welsh Affairs Committee: Evidence
22 November 2011 Mr Ed Vaizey MP and Simon Towler will include the need for proper resource and Q133 Geraint Davies: There is talk of a digital governance for particular projects, project planning, divide between Wales and England, which is again clear funding strategies to ensure match funding, the linked in to the geography and sparsity of population. importance of stimulating demand for broadband to Mr Towler mentioned that the economies of running give confidence to private investors to manage the lines under the ground become less and less efficient. expectations of communities and so on. All of those Is there an opportunity somehow to top up the points will be made in what we are planning to publish wireless satellite end in terms of benefiting Wales with next week. regard to this inequality? Mr Vaizey: The wireless satellite, if there was a role Q131 Geraint Davies: Leading on from that, in for satellite, would form part of the broadband plan terms of the insights you have from the Highlands and being driven forward by the Welsh Assembly. In terms Islands, presumably you have found that the unit cost of the digital divide, I find the figures in the recent for delivery of these services in challenging areas, Ofcom Communications Report very interesting. The with mountains and sparse populations, is far greater amount of broadband take-up in Wales has increased than the increase in finances you mentioned of £63 very significantly. It has gone up by 7% from about versus £44 per head. The difference in cost ratios is 64% to 71%, which is just below the English average far greater than that, is it not? of 74%. Things are moving forward in that respect. It Simon Towler: Yes. is interesting to note that people who responded to the Mr Vaizey: Is it? survey in Wales had the highest levels of satisfaction Simon Towler: The further out you get, self-evidently, with both mobile and broadband, higher than England yes. The £63 versus £44 you are talking about is an and Scotland. Perhaps it is part of the national average across the piece. Particularly, if you are characteristic not to complain as much as the English talking about extending fixed networks—i.e. literally and the Scottish, but I was very pleased to see the digging trenches or stringing fibre—it is entirely increase in the broadband take-up. distance-dependent. The further out you are, the more sparse the population is, the greater the distance you Q134 Geraint Davies: In terms of the different have to dig or string fibre, the higher the cost objectives for Wales and England with regard to the becomes. There is a point at which the unit cost per roll-out, what is your view on how they will be person for fixed telecoms crosses over with the unit perceived by prospective inward investors or people costs for wireless or satellite. wanting to start their own business in Wales? Do you think Wales is putting forward a more attractive offer Q132 Geraint Davies: Exactly. While it is good to or not? Is there anything else you can do to help hear that we are getting nearly 50% more per head, Wales, given this digital divide and rural difficulty? alongside that, we have the problem of challenging Mr Vaizey: I do. Wales is well ahead of the game. It is mountains and sparsity of population. Also, Wales has ahead of Scotland. If you could compare and contrast, 74% gross value added of the UK economy; in other England has a range of different local authorities words, business productivity is lower in Wales. involved in getting broadband roll-out, whereas Wales Therefore, there is a greater need, again, for has the Welsh Assembly driving it forward for the investment in this catch of opportunity. Is there any whole of Wales, and Scotland has its Government opportunity to look at more investment, possibly, driving it forward. Wales is well ahead of Scotland relatively in Wales in the light of what has happened and most of England in those terms. In that sense, with these pilots? there is a very attractive agenda there for Wales to Mr Vaizey: We are not planning to put in more market inward investment round the world. investment. We have set aside the money we need for Since I have been a Minister, the Welsh Assembly has broadband roll-out. There is still money available for always been driving forward on issues that touch my contingencies, but we are confident that a range of portfolio, like the creative industries and a clear digital different technologies will address the issue of very strategy for Wales. This partnership, in terms of the rural broadband in Wales. For example, Arqiva has money we are putting in, working with Broadband just done a 4G trial in west Wales, and they have made Delivery UK and the Welsh Assembly, is a very an estimate of what it would cost to get rural good one. broadband to very rural communities. As Simon was indicating, there is a range of different technologies Q135 Guto Bebb: I have a quick question for Mr for that core last percentage of people for whom it is Towler, but it is based upon the comment made by the very difficult to get fibre broadband. It could be Minister that Wales was ready to go out to tender. My satellite as well. I am confident that the funding is understanding is that that process has been delayed at available, and, as Simon has just pointed out to me, least twice over recent months and the likelihood is the additional funding, if you were saying, “Is there that the tender process will be further delayed. In that any more money of the £150 million for mobile respect, therefore, are you offering any advice to the masts?”, I regard as effectively part of that broadband Welsh Assembly in terms of the procurement process, package, because, once we get the 4G spectrum out, because my understanding is that there are currently a lot of people will be getting their broadband via problems with the tendering process within the mobile spectrum. The fact that we have that money, Welsh Assembly? which I welcome, means that we will be able to pump Simon Towler: I am not intimately familiar with the money into Wales to get the voice notspots for mobile ins and outs of the Welsh Assembly Government covered and then upgrade them to 4G. tender process. My colleagues in BDUK may well be cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Welsh Affairs Committee: Evidence Ev 31
22 November 2011 Mr Ed Vaizey MP and Simon Towler more familiar on an operational level. I know they resources to do that. Sometimes it is how many speak regularly. I am sure we are happy to provide engineers you have to do this work. We have set advice. That is more a question for the Welsh ourselves a realistic but stretching target, so there is Government. We are here; we have expertise. The no room for complacency or to allow the programme BDUK framework contract, when available early next to slip significantly. We have now allocated all the year, will be available for use by the Welsh money in Wales and around the country. We have Government. I am not sure there is anything more I most local authorities and devolved Governments can add to answer your question usefully. getting their broadband plans ready for sign-off. It is a partnership with BDUK to sign off the plans as Q136 Guto Bebb: In terms of the Minister’s achievable. We are going to get there. statement that Wales was ready to go to tender, when It is important as well to emphasise that the best did the DCMS last discuss the issues of the tendering superfast broadband in Europe includes a range of process with the Welsh Government? targets such as speed, price and competition, and Mr Vaizey: I have not personally discussed it with issues like that. I am confident that we will reach that them recently at all. target. It is a good thing. I do not know whether I am allowed to mention Europe in the Select Committee Q137 Mr Williams: Following on from Geraint with certain Members, but, funnily enough, in Davies’s observation about the digital divide between Brussels—am I even allowed to go that far?—the UK England and Wales, I wanted to touch on the digital is regarded as one of the leaders in broadband. Neelie divide within Wales. The Minister has alluded to Kroes, the Commissioner, and I have regular catch- progress across the board. There are particular ups. She is impressed particularly by our Big Society problems in mid-west and north-west Wales. Are you solution to broadband inclusion, using Martha Lane satisfied with the difference of emphasis in England? Fox to encourage people to get online, but also by the You have a county-based focus finding local solutions, rapid pace of our progress, not that I would regard and then we have an aspiration for an all-Wales European endorsement as important, I hasten to add. solution with the Assembly Government. Yes, it is UK endorsement is important. completely appropriate that the Assembly Government is the driver. Are you satisfied that the Q139 Mr Walker: Of course they are our friends and relationships between the Assembly Government and allies in Europe. Who would you say is the main people in the localities in the county councils are competition in that arena? robust enough to deliver those local solutions? Mr Vaizey: Germany and France are competitors in Mr Vaizey: I would hope they are. Very early in the terms of the size of their economies and their process you heard the occasional rumbling from local ambitious plans. We see some of the innovations that authorities about whether or not they felt they were the French undertake, and, when they go wrong, we going to be on an even keel with the Welsh Assembly learn from their mistakes. Government, but I have not heard anything recently to cause me any particular concern on that point. It is Q140 Karen Lumley: Minister, you talked earlier important that the message goes out from this about percentages of people taking up broadband in Committee that the Welsh Assembly Government Wales, but there is a very big difference in certain work closely with local authorities and rely on their areas of Wales. For example, in south-east Wales, we very local knowledge as compared to their oversight are looking at 58% of people taking up broadband. of the whole thing. That combination, hopefully, will How do you account for that in the urban areas? be very effective. I hope people will unite to aim at a Mr Vaizey: There is always a range of factors. There common goal, which is to get Wales as broadband- may be notspots in some urban areas. It is important enabled as possible. we do not lose sight of that and just assume that To come back to Mr Bebb’s question, since I have Swansea and Cardiff are fully broadband-enabled. been brought up to date in the intervening period, I There may be patches there and in England. gather that BDUK is meeting with the Welsh Sometimes it is down to demographics. If I can put it Assembly Government next Friday to be brought up quite crudely, the younger you are, the more likely to date with the tender process. I am sure we could you are to be online and living your life online. It is share the outcome of that meeting with this also the pace of enabling exchanges. Committee. That would be appropriate, and the last One thing I forgot to mention when I was addressing discussion was two weeks ago. Mr Walker’s question about whether we are confident that we are going to reach our target is that it is Q138 Mr Walker: You have described the 90% important to acknowledge the contribution that the target for superfast broadband as ambitious but private sector is making. BT is a global company and realistic. You have also talked in your written a great British success story. They have brought evidence about giving the UK the best superfast forward their plans to get broadband to two thirds of broadband network in Europe by 2015. Are you on premises by year to 2014. They are passing 90,000 track for that aim? homes a week. Mr Vaizey: I think we are on track for that aim. We Simon Towler: A quarter. did not want to set a target that we simply could not Mr Vaizey: They are putting in as much fibre as reach. We have been realistic. There were previous Singapore every quarter. That is the killer statistic to targets set, for example, to get universal broadband by take down the pub tonight and tell your friends. Virgin the end of 2012. I do not think there were the Media passes 300,000 premises in Wales and is cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Ev 32 Welsh Affairs Committee: Evidence
22 November 2011 Mr Ed Vaizey MP and Simon Towler making available as we speak up to a 100 Megabit which they mean about 1 Megabit per second. We are service. That is the pace of change there. But I cannot very close to that. Not many people cannot get 1 Meg. account for the discrepancies. I will go back and talk About 10 or 12% cannot get 2 Megs. We think 2 Megs to my officials after these questions to see whether is a more functional level of access. there is any further drilling down that would help the In designing the programme to roll out broadband, Committee with its report. there was a theoretical exercise done in remote areas to look at the costs. Coming out of that, Jeremy Hunt Q141 Karen Lumley: How often does Ofcom report and Ed took the decision to combine the programmes, to you on the Government’s targets? not to try and have two separate efforts for universal Simon Towler: Ofcom is not responsible for broadband at 2 Megs and a superfast programme, delivering the targets. Ofcom produces authoritative because the vast majority of the actions you need to reports such as the Communications Market Report take in pushing the fibre optic network deeper and on an annual basis. As you probably know, they break closer to people’s homes will deliver superfast to most that down. They produce a Communications Market and will provide you an upgrade path for those people Report for Wales, which is the source of all our who you are starting with a minimum ambition of 2 authoritative data. They are not reporting to us on Megabits per second for now, as you work towards the progress. Broadband Delivery UK reports to the ability to deliver those more ambitious targets later on. Ministers, Jeremy Hunt and Ed Vaizey, every week on the progress. Q145 Guto Bebb: To put the question in context, the Minister has mentioned that BT are doing sterling Q142 Karen Lumley: Are you satisfied with the work, and I agree with that, but there are a number of take-up of these urban areas in Wales? witnesses who have stated that competition within the Mr Vaizey: I will not be satisfied until we reach 100%. broadband sector depends upon BT allowing access to It is a constant strive to get people to sign up to their infrastructure. Would the Minister agree with broadband and to make sure that all premises are that? broadband-enabled. Simon is right. We have a weekly Mr Vaizey: Yes, I would. meeting. On Monday morning, the Secretary of State sits down with Broadband Delivery UK for an hour Q146 Guto Bebb: In terms of the fact that that access and we go through all the issues in terms of challenges is crucial, do you believe that BT have offered a fair and opportunities that we face in delivering this price for that access? Do you think that opportunity programme. It is a very hands-on programme from the for competition within the sector is being facilitated Secretary of State. by BT? Mr Vaizey: We recognise that what is known as Q143 Geraint Davies: You said you would not be Passive Infrastructure Access—i.e. access to BT’s happy until you got 100%. Do you agree with a lot of ducts and poles—was absolutely crucial. The pricing our witnesses who have said that universal access of that access was absolutely crucial to getting a should be a much greater priority than superfast competitive solution to broadband. We certainly made broadband to the relative few? How do you see it a very strong focus earlier this year to make sure balancing those two objectives? we could get a solution. We were not content with Mr Vaizey: The point about our target is that we took the original timetable that was proposed, which would a view quite early on that, if we were going to invest have taken about two years. I am glad that, through all this money in enabling broadband, it would be engagement with the telecoms sector, we have got to good, as far as possible, to future-proof it. Rather than the right place in terms of PIA. It is much lower than go for a low-level solution, we wanted, where people anticipated. It enables potential competitors possible, to ensure that it was superfast. In effect, our like Fujitsu, as they announced last week, to hold target is universal access by 2015, which we think is successful trials with BT’s infrastructure, or they are realistic and achievable, but, of that universal access, about to hold them. We have got to the right place in 90% will be superfast broadband because we think terms of pricing. that by 2013Ð14 people will want 8 or 10 Megs at To pick up on what Mr Williams was saying earlier least, possibly more. We want to ensure, as far as about local councils working with the Welsh possible, that there are fibre and superfast solutions. If Assembly Government, a lot of the broadband success you are going to dig up the roads, you want to do is going to be on deregulation, which is access to it once. ducts and poles and sorting out wayleave so that people can get across land easily. Local authorities can Q144 Geraint Davies: That will be for Wales as play a role as well by making it as easy as possible well. for infrastructure providers to lay fibre. We have heard Mr Vaizey: Simon, do you want to come in on that? stories—not in Wales, I hasten to add—of individual Simon Towler: These are staging posts. The Minister councils in difficult economic circumstances charging has already mentioned the European targets of telecoms providers substantial sums just to have a universal access to 30 Megabits per second by 2020, meeting with them to discuss planning. If they and 50% of the population are taking up 100 Megabits genuinely want to help their local communities by per second services by 2020. There is a third delivering superfast broadband, I am not saying it European target which we pretty much meet now, should not cost the telecoms providers anything in today. There is less focus on that, but everybody terms of their engagement with the council, but—and should have functional broadband access by 2013, by I am not saying this happens in Wales—they should cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Welsh Affairs Committee: Evidence Ev 33
22 November 2011 Mr Ed Vaizey MP and Simon Towler have a clear engagement process on the planning issue Simon Towler: I would refer you back to the with telecoms providers. That would be enormously explanation and clarification I was giving to Mr helpful. Geraint Davies. It is part of a whole programme. BDUK, when it is looking at local broadband plans, Q147 Guto Bebb: In view of your answer, is the is ensuring that people are taking care to ensure that concept of Ofcom being allowed to intervene in terms they have allocations to make universal provision. of setting a price for the market—a comment you Taking a fibre out to a cabinet will be part of a made in May 2011—now off the agenda? superfast solution, but, if you are still a very long way Mr Vaizey: I do not think Ofcom was planning to from a cabinet, you will still only get that universal intervene on the PIA pricing because they are satisfied provision. that the PIA pricing now agreed with BT is adequate. Q153 Chair: Is that going to be as much of a priority Q148 Guto Bebb: With respect, the question I was as taking the fibre in and out of cabinets to deliver asking was: are you satisfied that the prices are superfast broadband? acceptable? Simon Towler: The point about taking the fibre out as Mr Vaizey: Yes. deep as you can get it is that it does both. It is essential to the delivery of both the superfast and the universal. Q149 Guto Bebb: In May 2011 you did indicate that If, for example, you have a fixed wireless solution for Ofcom could intervene. dispersed and remote homesteads, you need to get fibre out to the point at which you can transmit the Mr Vaizey: Yes, I am satisfied, aren’t I, Simon? broadband signal out to the homes. You still have to Simon Towler: Yes, you are. get the fibre out there, but you have to have the customer premises’ equipment on the homes further Q150 Chair: Minister, we have heard evidence from out. It is an integrated and holistic solution. It has to one satellite provider of broadband, Avanti, who have be part of local broadband plans and designed locally. been connecting remote Scottish homesteads. That appeared to be a very good news story. Is that Q154 Chair: In the broadest possible sense—I would something you are aware of? Has the experiment been not hold you to figures that would have to be educated a success in Scotland? guesses—if you meet the targets that have been set, Mr Vaizey: We are aware of that. I was interested to and if Wales is to meet its ambitious targets, what read the evidence that was presented to you and your percentage of people roughly will be receiving colleagues from the various companies that are broadband through fibre, through a mobile broadband interested in this. We have always said that broadband solution and via a satellite or other? roll-out should be a technology neutral solution. We Mr Vaizey: I have a figure in my head. I want to see are not going to mandate that there should be whether you and I agree, so you go first. particular technologies employed. We have always Chair: I make it clear that we would not hold you said that satellites should be part of the solution, to this. particularly for very difficult-to-reach areas. It is not Geraint Davies: They are switching off the the solution for Swansea or Cardiff; it’s just not, but recording now. it may well be the solution for remote communities. Simon Towler: If you look at cost curves, about 85% to 92% or 93% of people you would expect to get Q151 Chair: It is working perfectly well and it is fibre to the cabinet or to the premise. Some of this delivering the 2 Megabits to areas that would never will be fibre directly to the premises solution. Working have got on cable. That was the thrust of the evidence. back from the other end, about 1% or 2% is satellite. Mr Vaizey: I would be wary of companies coming It could be a little bit more. The HYLAS 1 satellite of bearing gifts. I was struck by Everything Everywhere Avanti has a capacity of 125,000 premises. We could giving evidence, where they said that, if it had not use that all up, and that is quite a small percentage. I been for the delay in the spectrum auction, they could think it is about 2%. In between, you are looking at be delivering 4G services now. They could not, fixed wireless and mobile solutions, somewhere because that spectrum has not been cleared yet and between about 90% up to the 97th or 98th centile. will not be until 2013Ð14. Similarly, the satellite providers are an incredibly important part of Q155 Chair: Just to be clear, is that ballpark figure broadband delivery, but they have to be realistic about for the whole of the UK or for Wales? what they can deliver. The Committee’s focus should Simon Towler: That forecast figure is for the whole be very much on the hard-to-reach communities that of the UK. There is no reason to suppose that that are a very important part of this broadband plan, and, breaks down particularly differently in Wales. certainly, satellite can play a role there. Q156 Chair: At the risk of extending this, I thought Q152 Chair: This has been asked in a roundabout Wales, having slightly harder geography, might have way, but I have had a sense that there has been more a higher percentage of satellite. of a priority on rolling out superfast broadband than Simon Towler: Satellite would suffer more in central concentrating on getting everyone up to 2 Megabits. Wales. Now we are getting into reasonably technical Is that a fair perception or am I mistaken? areas. There are places that satellite does not reach Mr Vaizey: Simon said no, so he might want to because of shadows and the topography. Even coming expand on that. in at that sort of angle, you are going to have satellite cobber Pack: U PL: COE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Ev 34 Welsh Affairs Committee: Evidence
22 November 2011 Mr Ed Vaizey MP and Simon Towler notspots. Bear in mind the population density at that area the solution might be slightly more expensive point is quite low, and fixed wireless versus satellite than if you were living in the centre of Swansea or has similar challenges. Cardiff. Chair: Fine; I don’t want to hog this. Mark Williams, you had a question. Q158 Mr Williams: As Simon alluded to this as Karen Lumley: The Minister didn’t answer. well, notwithstanding satellite technology in Mr Vaizey: I had the figure of 8% in the back of my particular, which some of us are heralding as the great mind. I calculated that there are something like answer to all the problems, there are still difficulties 190,000 premises in Wales that receive broadband that have to be overcome and, in some instances, will under 2 Megabits. It is a population of 3 million and not be able to be overcome for a very small number 1.4 million premises. I was making rough and ready of people. That is the reality, is it not? workings on that basis. That would stand to reason. Simon Towler: Yes, absolutely. Satellite broadband is But it is the topography—the mountains. I heard this 22,000 miles, round trip, for the signal. That builds in amazing statistic. If you flattened Wales, it would be a delay of about 0.7 of a second. For some purposes, the size of England. Did you know that? That would with that delay or latency, for heavy, interactive be a very expensive solution to have broadband. gaming you get shot the second you reappear, for Chair: I can see the Western Mail scribbling away as example. It is not very good for those purposes. The you say that, Minister. satellite providers will tell you quite fairly that their innovation does not stand still. Let’s be honest: Q157 Mr Williams: I am not sure that is a message sticking one of those things up in space is an we want to take back with us to the mountains. enormous engineering achievement. These are Mr Vaizey: The message we want to take back is that extraordinarily gifted engineers and great minds. They there are more gold medal Olympic winners from have got all sorts of clever tricks like side loading— Wales than any other part of the UK. Did you know they will tell you about how well they use it for that? broadcasting—that can mitigate against some of these Mr Williams: Not if you flatten Wales. things, but, nevertheless, there are the basic laws of Mr Vaizey: That is a good statistic. physics around this that put limitations on it and say Karen Lumley: They are the leader of the hills. that fibre optic broadband to your premises or to a Chair: I can see another inquiry coming. cabinet will always be better in terms of the Mr Williams: You mentioned the population sparsity performance, but there is a cost trade-off. What we and the topography issue in mid-Wales. Those two are talking about here is a series of trade-offs of what low figures of fixed wireless and satellite would be of is doable. more significance to some of our constituents, potentially. The Chair has pinched the question I was Q159 Mr Walker: Minister, you touched on this going to ask later on. However— earlier when you were talking about Everything Chair: That is the Chairman’s prerogative. Everywhere and their evidence. Can you explain why Mr Williams: As he often does. However, how does the spectrum auction was delayed, and, if it was satellite broadband compare with mobile broadband in purely around the clearing of the spectrum, why was terms of cost, specifically? that not foreseen earlier? Simon Towler: Satellite broadband depends on the Mr Vaizey: It was not a question of whether or not it provider, but your initial connection fee would be was foreseen. We always knew when the spectrum anything from about £400 up to about £1,000. That would be cleared. When we came into Government, would include installation of the customer premises there was a potential solution on the table which had equipment—i.e. your little dish—and, if I remember been brokered by the independent spectrum broker, correctly, the typical packages are between about £25 but that solution fell apart because of the merger of to £30, which is comparable to what most people pay, Orange and T-Mobile, which changed the rules of the up to about £70 or £80. The typical difference with game. They were then off to the European satellite is that there is a usage cap—i.e. there is a Commission to get clearance for that, and that has limit on the amount of data download that you are required them to give up some spectrum. I was not allowed to have, and that is usually lower than for confident anyway that that brokered solution was fixed broadband. You would expect that. Mobile going to hold. It was a moment in time that had passed broadband packages and fixed wireless access are in any event and other telecoms companies indicated slightly less in cost until you get out to the furthest to me that they were not entirely happy with the and most remote places because you have to build a brokered solution. mast structure. We wanted to do it in a much more straightforward Mr Vaizey: Avanti would have said in their evidence way. Ofcom is handling the process in an open and that they were cost-competitive. People want to consultative fashion. It is going to re-consult at the choose the solution that is right for them. Cost is an end of this year and we hope that the rules will finally element, but, if you are in a remote part of the country be agreed sometime in the spring or summer. or of Wales and you essentially need satellite, it is “Relaxed” would be the wrong word, but we are important that it is competitive. The mobile market aware that we have room for manoeuvre on the and the fixed market are very competitive because you auction rules because the spectrum will not physically have a whole range of providers. That will always be available. The sooner people know what spectrum mitigate against satellite, perhaps unfairly. People they have, the sooner they can plan their networks and recognise that sometimes in a very difficult-to-reach do all the planning, but it would be inconceivable that cobber Pack: U PL: COE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG03 Source: /MILES/PKU/INPUT/013975/013975_o003_db_Corrected transcript - 22 November 2011.xml
Welsh Affairs Committee: Evidence Ev 35
22 November 2011 Mr Ed Vaizey MP and Simon Towler the mobile network operators do not already have optimise the take from that auction. To what extent plans ready for spectrum. It is inconceivable that they will you be considering doing that versus your other would not have modelled their networks on the basis priorities of coverage and all the rest that we have of what spectrum they may or may not secure at the been talking about until now? auction. We cannot physically use 4G spectrum Mr Vaizey: There is a balance to be struck. We have around the country until it is available, which will not several different priorities. We want to maintain a be until the end of 2013 and early 2014. competitive mobile marketplace. Ofcom has made it A bizarre bonus is that, where 4G is being rolled out clear that it wants to keep a four-player market in the United States, we will be able to hit the ground through its auction rules, but at the same time we want running in this country because we will have seen its to give people an incentive to bid, so we do not want uses and applications in other jurisdictions. people to think there is enough spectrum for everyone all round. There will be a competitive element. But Q160 Mr Walker: We have had some evidence from the 3G auction in 2000 was a one-off with the £20 Arqiva, who were suggesting that the Ofcom plans for billion that that raised. A lot of people from the the spectrum auction were not ambitious enough and private sector, not necessarily from Government, look there ought to be higher coverage obligations. I back on that auction ruefully in terms of the amount understand the Culture, Media and Sport Committee of sums they had to bid. Auctions around the world have looked at this and they are concerned about the for 4G show that those sums are nowhere near going costs of higher coverage obligations. Where would to be realised, partly because of the capital available you come down on that? to telecoms companies, but also there is a different Mr Vaizey: On the coverage obligations, it may be perspective on the value of the spectrum, although the part of the re-consultation. I have not seen what spectrum is very valuable indeed. Ofcom is going to put out in its re-consultation. It We are not going to realise those kinds of sums. proposed 95% in its original consultation. It may Ofcom’s initial consultation—and I am sure its second increase it in the new consultation. The £150 million consultation also—will address the priorities of for mobile masts that has been set aside is going to keeping a competitive marketplace, making the make that very achievable. It is the kind of policy auction competitive, but also addressing the points Mr intervention that was needed. It is a recognition that, Walker raised about the level of coverage and other now that mobile is ubiquitous, Government have a social issues. role to play in filling the notspots and coming in, and not just leaving it to the market to roll out the network. Q163 Geraint Davies: Will maximising revenue That is important and that may influence Ofcom’s have any bearing on it? Do we need the money? approach. Mr Vaizey: I am sorry to keep bringing Europe into this, but it is against European law to run an auction Q161 Geraint Davies: Have you any estimate of simply to raise the maximum amount of money. It is what the value of the auction will be to the important that the auction is fair, open and Government in terms of billions? competitive, but it is not simply an auction for the Mr Vaizey: No. We try and avoid making estimates. spectrum to go to the highest bidder. You can look around the world and see other Simon Towler: Ofcom made that point in evidence to countries. €2 billion to €3 billion was about the sum this Committee, did they not? in Germany and Spain. One could make an educated Geraint Davies: I was trying to press them then. guess, but we are reluctant to make any promises. Chair: On that note of clarification, as the clock strikes noon, I will thank Mr Vaizey. Q162 Geraint Davies: When the last Government Mr Vaizey: Doesn’t time pass when you are having did the last major auction, they managed to pay back fun, Chair? significant amounts of the country’s debt. It is a Chair: It was fun at this end anyway. Thank you very significant issue in today’s economic environment. much, Minister, and Mr Towler. My understanding is that they used game theory to cobber Pack: U PL: CWE1 [SE] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 36 Welsh Affairs Committee: Evidence
Written evidence
Written evidence submitted by National Farmers Union Cymru NFU Cymru welcomes the opportunity to provide the Welsh Affairs Committee with evidence on the provision of broadband in Wales. NFU Cymru considers the universal provision of high speed internet access to be crucial to the economic well-being of all rural businesses, including farming businesses. As more and more business to customer, business to business and business to government interactions are conducted online, the importance of electronic communications will only increase. The social importance of broadband internet access should not be overlooked either. Lack of access to broadband internet in rural areas can add to feelings of social isolation. NFU Cymru sees itself as a key stakeholder in all future Next Generation broadband discussions: 1. NFU Cymru considers the provision of high speed internet access to be crucial to the economic and social well-being of rural businesses (including farming businesses) as well as rural dwellers in general. The Union therefore welcomes the commitment by the One Wales Government to a broadband support scheme. 2. NFU Cymru welcomes the fact that the UK government is to spend £830m to finance its broadband strategy to 2017. It is vital that rural areas of Wales are at the forefront of the rollout of superfast broadband. 3. Figures compiled by the Wales Rural Observatory (WRO) in 20101 show that 65% of farms use a computer for business purposes. Of this 65%, 80% are connected to the internet with 78% using the internet for business purposes. The same set of figures also show that of those using the internet 82% did so using broadband and 18% via dial up. 4. The WRO questioned further those who were not connected to the internet and it was revealed that whilst 41% would be able to access broadband, 59% would not be able to access broadband internet. 5. WRO data also showed that 74% of farmers surveyed considered broadband to be either very important or important to the future of their business enterprise. Lack of high speed internet access can severely hamper business to customer, business to business and business to government interactions. 6. Farmers and rural businesses are increasingly being urged to market themselves and their products be it meat, cheese or diversified tourist enterprise to their customers via the internet; however this can be frustrated by the lack of availability of rural broadband. 7. We believe that it is wrong for government and regulators to insist on the use of electronic communications when there are still many broadband “not spots” in Wales. For example from April 2010 Her Majesty’s Revenue and Customs have insisted on the electronic completion of VAT returns by businesses with a turnover more than £100,000. This presents a real challenge for farmers and rural businesses operating in broadband “not spots”. 8. The reporting of cattle movements to BCMS within the required three calendar days presents a significant challenge to farmers who are unable to access broadband internet. Failure to report such movements within the allotted time can lead to financial penalties in relation to a farmer’s Single Farm Payment. 9. Similarly there is to be a rollout of online completion of the SAF (Single Application Form) from 2014 with full implementation from 2016. The SAF is completed by farmers in order to claim the Single Farm Payment, and so is of vital importance to farmers in Wales. In the absence of more complete broadband provision the Union feels that insisting on online completion of the SAF would discriminate against those who do not have broadband access. 10. Accessing information online is a quick and convenient way for many farmers to check the market prices for what they produce and also to compare the prices of those inputs that they buy in such as fuel, fertiliser, feed etc. Farmers unable to do so are immediately placed at a disadvantage vis à vis their competitors. 11. With regard to mobile broadband coverage government must ensure that not spot areas are not ignored and that every effort is made to deliver urgent provision into not spot areas in parallel with 3G provison. 12. Like many businesses and organisations NFU Cymru has also become increasingly dependent on electronic means of communicating with members, this is at least in part due to the increasing costs associated with postage. We believe that the volume of business that we conduct electronically will increase in future but as an organisation representing rural Wales we are acutely aware that the use we are able to make of electronic communication will be determined by the availability of rural broadband. 1 http://www.walesruralobservatory.org.uk/reports/english/2010/SurveyFarmingHouseholdsWales2010.pdf cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 37
13. With regards to Government consultations there has been an increasing trend to move towards sending out a letter to consultees advising them of the fact that a consultation is underway and providing them with a web address from which to access what might be a very substantial consultation document. In the absence of adequate broadband provision it can be very difficult if not impossible to download such large documents therefore essentially excluding many people from the consultation process. 14. As well as being essential for conducting business we believe that high speed internet access is also a valuable tool for social interaction and that a lack of such provision can lead to feelings of social isolation in rural communities, particularly amongst younger people, and this must not be overlooked. May 2011
Written evidence submitted by Ofcom SECTION 1 1. Introduction Ofcom’s Role 1.1 Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services. 1.2 One of our main statutory duties is to ensure the availability in the UK of a wide range of electronic communications services, including high-speed services such as broadband. In our efforts to further the interests of consumers and citizens, Ofcom takes a close and continuing interest in the availability, take-up and effective use of broadband in Wales. 1.3 As a converged regulator, Ofcom publishes high quality data and evidence about the communications sector in Wales, through its annual Communications Market Report. The data in much of this submission is based on our 2010 Report, published in August. Data for the 2011 report is currently being collected and processed and we intend to publish the report in late summer. 1.4 Broadband is rapidly emerging as an essential service in society, with increasing economic and social importance, both across the UK and in Wales. We therefore believe the Welsh Affairs Select Committee’s investigation into the provision of broadband in Wales is timely, and we hope the enclosed data in this submission will help to provide the market context and a useful resource for the Committee’s investigation.
SECTION 2 2. Executive Summary 2.1 Broadband is a high speed Internet service enabling users to download files, view television programmes and films, take part in video conferencing and online gaming and access a wide range of other media, information and services online. Broadband speeds are measured in bits per second: 512 kilobits per second (512 kbps) is 10 times the speed of dial-up. However, the current copper telephone network has limited capacity—next-generation access (NGA) or superfast broadband services using optical fibre can provide download speeds (over 24 megabits per second—24 Mbps) in excess of those that can be delivered using conventional copper wires. 2.2 According to the latest figures from Ofcom’s Communications Market Report for Wales 2010, 64% of people have access to broadband in Wales, ranging from 62% in urban areas to 69% in rural areas of Wales. This is below the UK average of 71%. 2.3 There are two major access networks for fixed-line broadband in Wales: BT’s copper telephone network (which is used by a range of commercial suppliers, including BT Retail, to provide broadband to customers) and Virgin Media’s cable network. Satellite and wireless technologies (both fixed and mobile) can also provide broadband services. 2.4 Virgin Media’s fibre optic cable broadband network can offer speeds up to 50 Mbps and the company plans to introduce a 100 Mbps service2 in future. But access to the network is limited to 24% of premises in Wales, mainly in Cardiff, Newport and Swansea. 2.5 Broadband access over the existing copper telephone network is limited in practice to premises situated up to around 5 km from an exchange. BT estimates 99.6% of premises connected to its copper network are able in theory to obtain broadband speeds of at least 512 kbps. However, not all households are able to receive a broadband service due to the length of the line from the exchange to a customer’s premises; the number of people connected to the same exchange who are logged on to the internet concurrently; and local technicalities. 2.6 As such, there are a significant number of “not-spot” areas where, despite being connected to a DSL- enabled exchange, people are unable to receive broadband. According to Ofcom research, commissioned in 2 Virgin Media announced plans on 30 March 2011 to offer speeds of 100mb for thousands of homes in Cardiff later in the year. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 38 Welsh Affairs Committee: Evidence
2006, 16% of premises in Wales are situated further than 5 km from an exchange (compared to the UK average of 13%). 2.7 In March this year Ofcom published its fourth report into fixed-line broadband speeds using data collected by research partner SamKnows. Our results show that in November/December 2010 average actual broadband speeds in the UK were 6.2 Mbit/s. 2.8 Local loop unbundling is the process whereby BT makes the copper lines in its access network available to other communications providers, which encourages competition in the provision of current-generation broadband services over copper. 77% of households in Wales are connected to an unbundled local exchange, which is the second-highest proportion among the UK nations (UK average: 85%). 2.9 Ofcom has introduced measures to make switching broadband providers easier for consumers and to stimulate competition.
Next Generation Access/Superfast Broadband 2.10 Superfast broadband optical fibre networks are being rolled out in the UK. They can theoretically provide nearly unlimited bandwidth potential depending on how close the fibre is brought to the end-user. There are two main types of fibre deployment: FTTC, where fibre is run from the exchange to a street cabinet serving an average of around 300 premises but the existing copper cables connect the cabinet to those premises; and FTTP, where fibre is run directly to the customer’s premises. 2.11 BT has committed £2.5 billion to the roll-out of superfast broadband across the UK and has already started to roll out FTTC services in the more populated urban areas of Wales, focused primarily on the commercially more attractive “Market 3” areas. Industry and economic analysis suggests that the market, unaided, is unlikely to serve the final third of the UK population (a higher proportion of the population in Wales, which falls mainly into “Market 1” areas). 2.12 Ofcom periodically reviews various markets in order to assess whether any communications providers have a position of significant market power (SMP) and assess the regulatory remedies that might be required. We completed reviews of the UK Wholesale Local Access (WLA) and Wholesale Broadband Access (WBA) markets in 2010. Effective competition—or effective regulation where sufficient competition does not exist— in wholesale markets underpins the choice in retail offers available to consumers. 2.13 We defined the WLA market to include copper loops, cable networks and optical fibre at a fixed location but not mobile, fixed-wireless and satellite technologies. We concluded BT has a position of SMP in this market and imposed a number of remedies with the aim of ensuring it provides access to its network to other communications providers. These are: — SLU (Sub-Loop Unbundling)—an existing remedy, which allows communications providers to physically take over (or share) BT’s existing copper lines between street cabinets and customer premises. This remedy allows providers to deploy FTTC technology where they consider this to be economic. — VULA (Virtual Unbundled Local Access)—which must be provided by BT wherever it has deployed its NGA network (both FTTC and FTTP) and will provide access to that network in a way similar to how LLU provides access to BT’s copper access network but through a “virtual connection” that gives communications providers a dedicated link to their customers. — PIA (Physical Infrastructure Access)—allows communications providers to deploy fibre in the access network using BT’s ducts and poles to support deployment of either FTTC or FTTP technology. PIA will be designed particularly to support superfast broadband availability in areas that will not be covered by BT’s NGA rollout (ie in the final third). 2.14 WBA relates to the broadband products and services communications providers provide for themselves and sell to each other. We last reviewed the WBA market in May 2008,3 when we concluded that competition based on LLU had developed to a point where regulation was no longer required in parts of the UK (known as Market 3 areas). In other places, there was competition but not at a sufficient level (Market 2 areas), and in some parts of the UK, including large parts of Wales, there was no competition at all (Market 1 areas). The population split in Wales between Markets 1, 2 and 3, suggests that just under 50% of the Welsh population is in Market 3, with 22% in Market 2 and 29% in Market 1. 2.15 We concluded that BT had SMP in Markets 1 and 2 but no operator had SMP in Market 3, where no regulatory controls apply. To address the potential competition problems posed by BT’s dominance in Market 1 and Market 2 areas, we have proposed BT should continue to be required to provide bitstream services in a non-discriminatory manner and on the basis of cost-oriented prices. In addition, we have proposed BT’s prices in Market 1 should be subject to a charge control which will provide additional protection against excessive pricing. 2.16 There are a number of alternative fixed line next generation broadband providers already rolling out services in Wales. 3 http://stakeholders.ofcom.org.uk/consultations/wbamr07/statement/ cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 39
Mobile Broadband 2.17 Mobile broadband uses a mobile telephone network to connect to the Internet via a mobile device or a “dongle” that plugs into a computer’s USB port. Such services depend on spectrum and mobile broadband services are currently only available in areas that are served by 3G mobile networks. 3G geographic coverage by one or more mobile networks is quite poor in Wales currently, with just under half (49%) of postcode districts in Wales receiving 3G coverage from one or more mobile networks, lower than the UK overall (76%). But geographic coverage of 2G services is significantly better. 2.18 Two significant recent developments will release more radio spectrum for the deployment of mobile broadband services: freeing-up the existing 2G spectrum for 3G use and a new 4G spectrum auction. 2.19 Mobile phone operators could previously only use a limited amount of spectrum to deliver 3G (in the 2.1 GHz band) as the rest of their spectrum holdings (in the 900 MHz and/or 1800 MHz bands) was licensed in the 1990s with the condition that it could only be used for 2G services. In January, Ofcom introduced a new measure to free up the airwaves used by mobile phone operators for 2G services to be available to provide 3G services. This measure will help the mobile phone operators to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas. 2.20 In March this year, Ofcom announced the largest ever single auction of spectrum for mobile services in the UK which will provide much needed capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services—approaching today’s ADSL home broadband speeds. The auction will include a combination of safeguards to promote competition and coverage conditions to ensure widespread availability of mobile broadband services to the UK population. 2.21 The auction will be for two spectrum bands—800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed-up as the UK switches from analogue to digital terrestrial TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds. The combination of low and high frequency spectrum available in the 800 MHz and 2.6 GHz bands creates the potential for next generation mobile broadband services to be widely available across the UK, while at the same time having the capacity to cope with significant demand, even in urban centres. 2.22 Ofcom believes that competition at the national wholesale level is essential to future competition and maximising consumer and citizen benefits. In addition, there would be a significant risk to national wholesale competition if there were fewer than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services. To guard against this risk, Ofcom proposes introducing limits both on the minimum and maximum amounts of spectrum bidders can win. 2.23 A number of other technologies are available as alternatives to fixed line broadband distribution, including satellite broadband, wireless broadband via WiMAX and Wi Fi networks in local areas. A number of providers have already rolled out services in Wales.
Broadband Take-up and Digital Inclusion 2.24 According to our latest Communications Market Report for Wales,4 take-up of broadband in Wales has reached 64% and the gap with the UK average (71%) has narrowed from 10 to seven percentage points in a year. Some 69% of people in rural Wales have a broadband connection compared with 62% of people in urban Wales. 70% of people in North/Mid Wales have a broadband connection compared with 66% in South West Wales and 58% in South East Wales. 2.25 During 2009, mobile broadband take-up in Wales rose by five percentage points as consumers increasingly turned to mobile networks to access the internet. In Q1 2010, 16% of households in Wales claimed to access the internet via mobile broadband, marginally above the figure for the UK as a whole (15%). 2.26 There are many reasons for not having the internet, and these fall into two broad categories: voluntary and involuntary. Voluntary non-ownership is when potential consumers do without services because they perceive they do not need them, or because they are satisfied with alternative services. Involuntary non- ownership is when potential consumers do without services, but not through choice; this is mainly due to affordability. 2.27 Nine per cent of adults in Wales said that they did not have internet access at home for involuntary reasons. This was similar to the UK average and lower than in Scotland (15%) and Northern Ireland (12%). England was the nation least likely to state involuntary reasons for non-ownership (8%). 2.28 The growth of the internet has provided another platform over which content can be delivered to consumers. As a result of the widespread availability and take-up of broadband, the majority of households can now receive content in this way (though by no means all do). In recent years the internet has had a significant impact on how content can be consumed. This has enabled consumers and citizens to access government services, online banking and information on health-related issues. 4 http://stakeholders.ofcom.org.uk/binaries/research/cmr/753567/CMR_Wales_2010.pdf cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 40 Welsh Affairs Committee: Evidence
The Role of the UK and Welsh Assembly Governments 2.29 The UK Government is committed to delivering universal broadband at speeds of 2 Mbps within the lifetime of the current Parliament (2015). The UK Government aims to secure the best superfast broadband in Europe by the end of the current Parliament. In Wales, it has announced three market-testing projects in rural areas, including one location in Wales: Felindre near Swansea. 2.30 Broadband Delivery UK (BDUK) was created following publication of the final Digital Britain report by the previous UK Government. It was created within the Department for Business, Innovation and Skills (BIS) as a delivery vehicle for the UK Government’s broadband policies. Following machinery-of-government changes, BDUK is now part of the Department for Culture, Media and Sport. 2.31 The UK Government is committed to ensuring BT and other infrastructure providers allow the use of their assets to deliver broadband access. 2.32 The Welsh Assembly Government’s RIBS project was specifically designed to provide 35 exchange areas of Wales, initially deemed unviable by BT, with broadband access. The initiative has covered around 8,500 households and businesses to date. It has also looked at addressing not-spot areas and has allowed more than 1,000 residents and businesses to enjoy access to broadband services for the first time. 2.33 The Assembly Government is embarking on a programme to facilitate the deployment of a broadband infrastructure capable of delivering fast and ultra-fast broadband services to 100% of premises across Wales. The Economic Renewal Programme aims to provide every business in Wales with access to next-generation broadband by the middle of 2016 and domestic premises by 2020 at a minimum speed of 30 Mbps. 2.34 The Open Market Review published at the end of March aims to collect information that will help determine where the deployment of next generation broadband networks should be focused. The Assembly Government would like to understand where private sector investment in next generation networks across Wales has already happened or is planned in the next three years.
SECTION 3 3. The Provision of Current Generation Broadband Services Introduction: Broadband Services 3.1 Broadband is a high speed Internet service enabling users to download files, view television programmes and films, take part in video conferencing and online gaming and access a wide range of other media, information and services online. 3.2 Typically, broadband speeds using a standard telephone line are tens—and increasingly hundreds—of times faster than dial-up internet connections. Speeds are measured in bits per second: 512 kbps is 10 times the speed of dial-up and the minimum generally considered to be broadband; 1 Mbps is 20 times faster etc. 2 Mbps is the generally around minimum speed required to watch standard-definition video online. 3.3 Recent attention has focused particularly on the provision of next-generation or superfast broadband services, which provide download speeds (over 24 Mbps) in excess of those that can be delivered using conventional copper wires.
Current Broadband Availability in Wales 3.4 According to the latest figures from Ofcom’s Communications Market Report for Wales 2010, 64% of people have access to broadband in Wales, below the UK average of 71%. Broadband take-up ranges from 62% in urban areas to 69% in rural areas of Wales. Total broadband take-up (fixed and mobile) varies significantly across Wales (SE Wales 58%, SW Wales 66%, North/Mid Wales 70%). 3.5 Whilst almost 100% of fixed line exchanges in Wales support broadband, actual speeds experienced by consumers depend on a variety of factors. These include the length of the line from the exchange to a customer’s premises; the number of people connected to the same exchange who are logged on to the internet concurrently; and local technicalities. 3.6 Internet delivered via broadband is rapidly establishing itself as an essential service for modern life in Wales. However, broadband access over the existing copper telephone network is limited in practice to premises situated up to around 5 km from an exchange. As such, there are a significant number of “not-spot” areas where, despite being connected to a DSL-enabled exchange, people are unable to receive broadband. According to Ofcom research, commissioned in 2006, 16% of premises in Wales are situated further than 5 km from an exchange (compared to the UK average of 13%). People living in these areas will not be able to fully benefit from the rapidly growing number of online services, such as the streaming of audio-visual content, that require higher connection speeds. 3.7 There are two major access networks for fixed-line broadband in Wales: BT’s copper telephone network (which is used by a range of commercial suppliers, including BT Retail, to provide broadband to customers) and Virgin Media’s cable network. Satellite and wireless technologies (both fixed and mobile) can also provide broadband services. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 41
3.8 Openreach, a division of BT Group, is responsible for managing and maintaining BT’s existing copper lines and infrastructure5 running from exchanges to premises (also known as the “local loop”) which are used by around 400 communications providers (in addition to BT Retail) to provide broadband services, either via wholesale capacity from BT or through direct infrastructure investment at individual exchanges.
Existing Network Infrastructure BT 3.9 BT’s access network is illustrated below. In most cases, a street cabinet is situated between the customer’s premises and BT’s local exchange. All premises in Wales are connected to a broadband-enabled exchange. BT estimates 99.6% of premises connected to its copper network are able in theory to obtain broadband speeds of at least 512 kbps. However, for a number of reasons, not all households are able to receive a broadband service. These reasons include issues with network quality, shared lines and distance from the exchange. Even with such high availability, a significant number of consumers remain unable to receive broadband services. Customer’s premises BT street BT local exchange cabinet Core Network
‘twisted copper pair’
BT access network Backhaul Core network
3.10 However, Openreach has been working on a programme to extend broadband coverage in Wales by removing line-concentrator cabinets (which enable multiple customers to share lines running from the cabinet to the exchange) and digital-access carrier systems (DACS, which enables two voice services to be supported on one physical line), none of which are able to support broadband. 3.11 Broadband delivered via copper is mainly based around variants of DSL technology. — ADSL (asymmetric DSL) is the most common DSL technology. Information is downloaded more rapidly than it is uploaded. (Typically for an “up to 8 Mbps” service, the download speed might be around 3.2 Mbps while the upload speed might be 0.5 Mbps.) As ADSL popularity grew, a new family of standards known as ADSL2 was developed. ADSL2 extends the capability of basic ADSL in data rates to 12 Mbps download and 3.5 Mbps upload. ADSL2+ allows even higher download data rates to be achieved within 3 or 4 km of an exchange. ADSL2+ is now available (by Spring 2011) in 47 out of 437 exchanges in Wales, offering speeds of up to a theoretical maximum of 24 Mbps. BT has announced that it plans to roll out ADSL2+ to exchange areas covering 75% of the UK population. This will lead to significant improvements in broadband speeds for Welsh consumers, although the detailed rollout plans have not yet been finalised. — VDSL (very high bit-rate DSL) can offer up to 52 Mbps but only over even shorter distances compared to ADSL. VDSL2, the newest and most advanced standard of DSL technology, deteriorates quickly from a theoretical maximum of 250 Mbps “at source” to 100 Mbps at 300 m and 50 Mbps at 1 km. By around 1.6 km from an exchange, its performance is similar to ADSL2+. — SDSL (symmetric DSL) downloads and uploads information at the same speed. This type of broadband requires an extra telephone line. It is particularly suitable for businesses that send large volumes of information (eg those using computer-assisted design packages).
Local Loop Unbundling (LLU) 3.12 Local loop unbundling is the process whereby BT makes the copper lines in its access network available to other communications providers. These are able to upgrade individual lines using DSL technology to offer high-speed internet access direct to the customer. 3.13 LLU is one way in which we have been able to encourage competition in the provision of current- generation broadband services over copper. LLU providers can offer broadband services at a competitive price and bundle them with other services. 3.14 77% of households in Wales are connected to an unbundled local exchange, which is the second-highest proportion among the UK nations (UK average: 85%). This represents a 45 percentage-point increase since the end of 2006. 5 Following our Telecommunications Strategic Review in 2004, BT agreed undertakings that resulted in the separation of the company’s wholesale (ie access-network) and retail operations. BT created Openreach to manage its access network. The undertakings enable other communications providers to use BT’s access network on the same or equivalent terms as BT Retail. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 42 Welsh Affairs Committee: Evidence
Sub-Loop Unbundling (SLU) 3.15 In sub-loop unbundling (SLU), communications providers install equipment that connects to the copper lines at the green street cabinet rather than at the telephone exchange. This arrangement can be used for distributing very high-bandwidth services, such as VDSL, which can only be sent a short distance over copper.
Wholesale Bitstream Services 3.16 Wholesale bitstream services are provided by BT to ISPs. They support retail competition in areas where LLU uptake is not widespread and enable ISPs to provide broadband services to consumers in competition with BT Retail. BT is required to provide these services in Markets 1 and 2 and supplies them on a commercial basis in Market 3 (see section 4).
Virgin Media 3.17 Virgin Media is the UK’s main cable-broadband company. It provides high-speed broadband internet access via fibre-optic cables, which also provide digital-television and telephone services (although the final part of the connection to domestic premises is made via coaxial cable for the television and broadband service and copper for the telephone service). 3.18 Virgin Media’s cable-network architecture is shown below. It also comprises street cabinets between the access network and the hub site. A number of cable street cabinets connect to a Virgin Media hub site.
‘coaxial cable’ VM Street VM hub site cabinets Core Network
Customer’s premises
Virgin access network Backhaul Core network
3.19 Faster speeds—currently up to 50 Mbps—are a key benefit of cable broadband. Virgin Media plans to introduce a 100 Mbps service6 and is conducting higher-speed 200 Mbps trials in some areas. But in Wales, only 24% of premises—concentrated primarily in the major cities of Cardiff, Newport and Swansea in South Wales—are served by Virgin Media’s cable network. 3.20 Virgin Media is currently operating a trial to provide broadband via fibre delivered across electricity pylons in the village of Crumlin in South Wales. The trial began in August 2010 and is expected to run until 2011. Customers who take part will receive up to 50 Mbps broadband along with Virgin Media’s digital- television services.
Broadband Speeds 3.21 In March this year Ofcom published its fourth report into fixed-line broadband speeds using data collected by research partner SamKnows. It sets out the findings from data collected during the period 1 November 2010 to 15 December 2010, during which 765 million tests were run across a panel of 1,710 UK residential broadband users. We believe that the integrity of our hardware-based technical methodology, combined with the scale of the project and the sophistication of the statistical analysis, makes this research the most robust analysis of fixed-line broadband speeds in the UK. 3.22 Our results show that in November/December 2010 average actual broadband speeds in the UK were 6.2 Mbps based on multi-thread testing. We do not have time-series data for multi-thread tests, but single- thread test data suggests that average download speeds in the UK increased by 5% between May and November/December 2010, this following an increase of 27% between April 2009 and May 2010.7 3.23 In practice, headline broadband speeds are rarely experienced by consumers. The move to faster headline speeds has led to a growing gap between the actual speeds delivered and the speeds that some ISPs use to advertise their services. Differences between headline and actual speeds are often caused by broadband being delivered over copper lines, which were originally designed for phone calls. Hence speeds slow down over long and poor-quality lines and because of electrical interference. 6 Virgin Media announced plans on 30 March 2011 to offer speeds of 100 Mbps for thousands of homes in Cardiff later in the year. 7 http://stakeholders.ofcom.org.uk/market-data-research/telecoms-research/broadband-speeds/speeds-nov-dec-2010/ cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 43
3.24 We have recently strengthened our Voluntary Code of Practice on Broadband Speeds,8 which we first introduced in 2008. ISPs who sign up to the revised Code commit to give consumers a more accurate and consistent estimate of the maximum speed likely to be achievable on their line. ISPs also commit to help consumers improve their speeds and to give consumers the option to leave their contracts early (within three months of signing up to the service) and without penalty if they receive a maximum line speed that is significantly below the estimate they are given at point of sale and the ISP is unable to resolve the problem. 3.25 Some ISPs have in the past year moved away from advertising their services on the basis of “up to” headline speeds, but others continue to do so. We have discussed this issue with the Advertising Standards Authority and the Committee on Advertising Practice, who are currently undertaking a review in this area. 3.26 Many consumers could take some relatively simple steps to improve their broadband performance. We provide advice for consumers on the factors to take into account when choosing a broadband provider and how to improve broadband speeds at home.9
Switching Broadband Providers 3.27 Over time, various processes have been developed for switching between providers of different communications services. Currently, many broadband services are switched using the Migration Access Code (MAC) process. This is an example of a losing-provider-led process, where the consumer contacts their current provider to obtain a MAC. The consumer must then contact their new provider to give it their MAC within 30 days. 3.28 We committed to review switching processes in our Annual Plan 2010–11,10 following requests from communications providers and consumer groups to improve and simplify them. We subsequently published research and a consultation on 10 September 2010 that looked at switching in a number of services—fixed and mobile telecommunications and pay TV as well as broadband—to identify similarities and common challenges that arise in making sure the process is easy and reliable. 3.29 We focused on two key areas. First, we wanted to ensure an individual consumer’s experience of switching is easy and hassle free, both now and in the future. Second, we wanted to ensure switching processes do not get in the way of providers competing vigorously with each other to deliver benefits to all consumers in terms of lower prices, greater choice and innovation and value for money. Notably according to our research, over a third (39%) of those consumers who have switched broadband provider using the MAC process thought changing provider seemed like too much hassle.11 3.30 We instead proposed a process where the customer’s new service provider (the gaining provider) takes the lead on switching the service, delivering lower prices, more choice and innovation for consumers. This would include appropriate measures to protect consumers from so-called “slamming,” where a customer is switched without their consent.
SECTION 4 4. Next Generation Broadband Infrastructure Fixed Line Next Generation Access 4.1 As broadband services become more bandwidth demanding, communications networks are moving to NGA, promising to offer very high speeds to end-customers. Current broadband services based on the existing copper access infrastructure are limited by the length and quality of the copper loop. A future-proof solution is the replacement of copper by optical fibres, which use lasers to transmit pulses of light down very fine strands of silicon. Fibre-optic cable can carry thousands of times more data than copper, is lightweight and free from electromagnetic interference and experiences no loss of broadband service over distance. Fibre-optics can theoretically provide nearly unlimited bandwidth potential depending on how close the fibre is brought to the end-user. 4.2 There are two main types of fibre deployment: — FTTC, where fibre is run from the exchange to a street cabinet serving an average of around 300 premises but the existing copper cables connect the cabinet to those premises; and — FTTP, where fibre is run directly to the customer’s premises.
BT superfast-broadband investment 4.3 In 2004, BT announced that the roll-out of its £10 billion UK 21st Century (21CN) next-generation network would start in South Wales. This investment is essentially in the core networks operated by BT that eventually feed local exchanges. In addition, BT has committed £2.5 billion to the roll-out of superfast broadband across the UK. 8 http://stakeholders.ofcom.org.uk/telecoms/codes-of-practice/broadband-speeds-cop-2010/ 9 See http://consumers.ofcom.org.uk/guides/ 10 www.ofcom.org.uk/about/annual-reports-and-plans/annual-plans/annual-plan-2010–11/ 11 http://stakeholders.ofcom.org.uk/consultations/consumer-switching/ cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 44 Welsh Affairs Committee: Evidence
4.4 BT has set out the areas where it will roll out superfast FTTC/FTTP broadband services in Wales. FTTC services, offering speeds of up to 40 Mbps, are now available from the Cardiff Central, Taffs Well, Barry, Penarth and Caerphilly exchanges. In addition, during last year BT announced roll-out of FTTC to the Connah’s Quay, Hawarden, Llantrisant, Bridgend, Chepstow, Hengoed, Llanishen, Newtown Llantwit and Llanedeyrn exchanges. Subsequently, in April, BT added Aberkenfig, Blackwood, Buckley, Kenfig Hill, Llanrumney, Maesglas, Newport (Bettws, Malpas area) and Porthcawl to this list.
4.5 However, the business case for investment in Wales’ rural telecommunications infrastructure is challenging, and BT’s current investment is focused primarily on the commercially more attractive Market 3 areas (see below). Industry and economic analysis has concluded there is no obvious means whereby the market, unaided, will serve the final third of the UK population (a higher proportion of the population in Wales, which falls mainly into Market 1 areas).
Ofcom’s Market Reviews
4.6 We completed a review of the UK market for Wholesale local Access (WLA) in 2010 and we published a statement setting out our conclusions on 7 October 2010.12 We also reviewed the UK market for Wholesale Broadband Access (WBA) and we published consultations on our proposals for the WBA market on 23 March and 20 August 2010.13 A final statement on this review was subsequently published in December.14
4.7 We periodically review various markets in order to assess whether any communications providers have significant market power (SMP), which means a position of ecomomic strength affording them the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. If any communications provider has SMP, we assess the regulatory remedies that need to be imposed to address this.
4.8 While the reviews relate to wholesale markets, they are important for consumers because effective competition—or effective regulation where sufficient competition does not exist—in wholesale markets underpins the choice in retail offers available to consumers.
Wholesale Local Access
4.9 WLA relates to the network infrastructure that provides local access connections to individual consumers, for use in the provision of telephony, broadband and other services. We have defined this market to include copper loops, cable networks and optical fibre at a fixed location but not mobile, fixed-wireless and satellite technologies. We concluded BT has a position of SMP in this market and imposed a number of remedies with the aim of ensuring it provides access to its network to other communications providers.
4.10 The remedies are designed to promote both investment and competition. For current-generation services, we have retained the existing remedies (LLU and Sub Loop Unbundling, SLU). To support the development of superfast-broadband services, we have introduced two new remedies, namely virtual unbundled local access (VULA) and physical infrastructure access (PIA). — LLU—this is an established remedy that allows other communications providers to physically take over BT’s existing copper lines between telephone exchanges and customer premises. — SLU—this is also an existing remedy, currently only used in very limited situations, which allows communications providers to physically take over (or share) BT’s existing copper lines between street cabinets and customer premises. This remedy allows providers to deploy FTTC technology where they consider this to be economic. — VULA—this new remedy must be provided by BT wherever it has deployed its NGA network (both FTTC and FTTP). VULA will provide access to the NGA network in a way similar to how LLU provides access to BT’s copper access network. However, rather than providing a physical line, VULA will provide a virtual connection that gives communications providers a dedicated link to their customers. — PIA—like VULA, this is a new remedy. It will allow communications providers to deploy fibre in the access network using BT’s ducts and poles to support deployment of either FTTC or FTTP technology. In the case of FTTC, it could be used to provide a “backhaul” connection between street cabinets and the provider’s network. BT is required to produce a draft reference offer for duct and pole access by January 2011, with a view to launching a commercial product in the middle of the year. PIA will be designed particularly to support superfast broadband availability in areas that will not be covered by BT’s NGA rollout (ie in the final third). PIA will reduce the costs of entry for non-BT providers and improve the economics of broadband delivery in the final third. 12 http://stakeholders.ofcom.org.uk/consultations/wla/statement 13 http://stakeholders.ofcom.org.uk/consultations/wba/ and http://stakeholders.ofcom.org.uk/consultations/wholesale-broadband- markets/ respectively. 14 http://stakeholders.ofcom.org.uk/consultations/wba/wba-statement/ cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 45
Wholesale Broadband Access 4.11 WBA relates to the broadband products and services communications providers provide for themselves and sell to each other. We last reviewed the WBA market in May 2008,15 and at that time we concluded competition based on LLU had developed to a point where regulation was no longer required in parts of the UK (known as Market 3 areas). In other places, there was competition but not at a sufficient level (Market 2 areas), and in some parts of the UK, including large parts of Wales, there was no competition at all (Market 1 areas). 4.12 The population split in Wales between Markets 1, 2 and 3, as proxied by the number of distribution points, suggests just under 50% of the Welsh population is in Market 3, with 22% in Market 2 and 29% in Market 1. 4.13 We concluded BT had SMP in Markets 1 and 2 but no operator had SMP in Market 3, where no regulatory controls apply. To address the potential competition problems posed by BT’s dominance in Market 1 and Market 2 areas, we have proposed BT should continue to be required to provide bitstream services in a non-discriminatory manner and on the basis of cost-oriented prices. These proposals are designed to ensure consumers benefit from competitive services provision at the retail level. 4.14 In addition, we have proposed BT’s prices in Market 1 should be subject to a charge control. This will provide additional protection against excessive pricing in areas where the prospect of further investment by competing providers is limited and we published a detailed consultation on the Market 1 charge controls in January this year.16 Ofcom’s proposed charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services. This difference is due to the absence of LLU, the more limited set of bundled offers available and the higher costs of delivering broadband to customers in rural areas. 4.15 Ofcom’s aim is to incentivise BT Wholesale to continue to improve its efficiency. This could make it cheaper for other communications providers to roll out services and should ultimately benefit consumers in those areas through lower prices. 4.16 If wholesale broadband costs are reduced, ISPs should be able to buy more capacity for their customers without increasing their costs. This could result in faster broadband for rural areas. 4.17 Ofcom also proposes to exempt ADSL 2+ technology from charge controls. This should encourage BT Wholesale to invest in this new technology where it is cost effective to do so. ADSL 2+ is capable of supporting faster broadband speeds than ADSL, with a maximum possible speed of 24 Mbps over the copper network.
Alternative Next Generation Service providers in Wales FibreSpeed 4.18 The Fibrespeed Open Access Network for Wales is a Welsh Assembly Government initiative that aims to provide affordable broadband connectivity (minimum 10 Mbps symmetric) to business parks in North Wales. Financing for the project has come jointly from the European Regional Development Fund, the Welsh Assembly Government and Geo Networks, FibreSpeed’s parent company. 4.19 The project’s initial focus was on serving 14 key strategic business parks in North Wales from Wrexham and Deeside in the east and along the A55 corridor to Holyhead. Overall, the network could potentially expand to incorporate around 50 locations across Wales. As a wholesale-only provider, FibreSpeed will allow other service providers to acquire capacity and offer high-speed communications services to businesses and consumers in Wales at the same rates enjoyed in other, more urban parts of the UK.
Carrier Wales 4.20 Carrier Wales offers wireless (WiMax) and fixed internet connections, using the Fibrespeed optical fibre network to provide services to business and community users. The company recently worked with residents in Treuddyn in North Wales to establish the commercial feasibility of providing a WiMax wireless solution to the community to address a number of broadband not-spots and to provide faster broadband services. Following the successful outcome of this trial, the company is currently working to provide similar services in other rural and urban areas of North Wales.
Rutland Telecom 4.21 Rutland Telecom offers broadband services to rural areas using ADSL2+, SDSL, wireless and fibre- optics. It is one of the first UK communications providers to develop FTTC in Market 1 areas with full access to copper lines to premises. It has implemented a voice and data network in Oakham and Lyddington— previously technologically isolated rural communities in Rutland suffering from poor broadband speeds—and announced similar plans to bring up to 40 Mbps speeds to the village of Erbistock near Wrexham, a rural area where many people currently receive no broadband services at all. 15 http://stakeholders.ofcom.org.uk/consultations/wbamr07/statement/ 16 http://media.ofcom.org.uk/2011/01/20/better-value-broadband-in-rural-areas/ cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 46 Welsh Affairs Committee: Evidence
Spectrum Internet 4.22 In March, Spectrum Internet, a Welsh owned and operated ISP, launched a new fibre optic service from the Chepstow, Cardiff and Newport exchanges. The company has established a multi-gigabit backbone between the three exchanges offering businesses in south east Wales uncontended fibre leased lines managed from Spectrum’s data centre in Cardiff. The company also aims to offer speeds of 20–30 Mbps to residential customers and it also plans to extend its network across south Wales in future.
SECTION 5 5. Mobile, Wireless and Satellite Broadband Mobile and other Alternative Technologies 5.1 Mobile broadband uses a mobile telephone network to connect to the Internet. The service is provided via a mobile device or a “dongle” that plugs into a computer’s USB port. Communications providers may charge for data downloaded or set a monthly fee with no download limit. Such services depend on the availability of radio spectrum, which is essential to meet the UK’s rapid increase in mobile traffic, fuelled by the growth of smartphones and mobile broadband data services such as video streaming, email, messaging services, mapping services and social networking sites. All of these services depend on spectrum—the airwaves that carry information between customers’ mobile handsets and the internet. 5.2 Mobile broadband services are currently only available in areas that are served by 3G mobile services. Geographic coverage of 3G services by one or more mobile networks is quite poor in Wales currently. Just under half (49%) of postcode districts in Wales had 3G coverage from one or more mobile networks, lower than the UK overall (76%) but higher than Scotland (41%) and Northern Ireland (40%). Only 7% of postcode districts in Wales had coverage from four or five network operators. 5.3 However, geographic coverage of 2G services is significantly better with 79% of postcode districts within Wales covered by one or more mobile networks. (According to the 2010 CMR, Wales had the second lowest geographic coverage among the nations, ahead of Scotland (64%) but below Northern Ireland (87%) and England (91%). Nearly two-thirds of postcode districts in Wales were served by one or two providers, with the remaining third receiving 2G coverage from three or four. 5.4 During the past year there have been two significant developments that will release more radio spectrum for the deployment of mobile broadband services: — freeing-up the existing 2G spectrum for 3G use; and — a new 4G spectrum auction. 5.5 In January, Ofcom introduced a new measure to free up the airwaves used by mobile phone operators for 2G services, such as making phone calls and sending texts, to be available to provide 3G services, such as mobile internet browsing. This measure will help mobile phone operators operating on 900 MHz (Vodafone and O2) and 1800 MHz (primarily Orange and T-Mobile—now merged into one entity, Everything Everywhere—but also Vodafone and O2) to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas. 5.6 Mobile phone operators could previously only use a limited amount of spectrum to deliver 3G. The remainder of their spectrum holdings was licensed in the 1990s with a condition that it could only be used for 2G services. This spectrum could in future be used to meet the growing demand from smartphone devices and the like for 3G services. 5.7 In addition, on 22 March this year, Ofcom announced plans for the largest ever single auction of spectrum for mobile services in the UK, equivalent to three quarters of the mobile spectrum in use today and 80% more than the Government’s 3G auction which took place in 2000. The new spectrum will provide much needed capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services—approaching today’s ADSL home broadband speeds. Under measures being proposed by Ofcom, the auction will include a combination of safeguards to promote competition and coverage conditions to ensure widespread availability of mobile broadband services to the UK population. 5.8 The auction will be for two spectrum bands—800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed up as the UK switches from analogue to digital terrestrial TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds. These two bands add 250 MHz of additional mobile spectrum. The combination of low and high frequency spectrum available in the 800 MHz and 2.6 GHz bands creates the potential for next generation mobile broadband services to be widely available across the UK, while at the same time having the capacity to cope with significant demand, even in urban centres. 5.9 In December 2010, Ofcom was directed by the Government to assess how the release of this new spectrum is likely to affect future competition in the mobile market. Ofcom considers that there are risks to future competition if bidders are free to acquire any amount of spectrum in an open auction. This is because access to new spectrum is scarce but essential for providing the higher speed data services demanded by cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 47
consumers, such as web browsing and video streaming. The combination of these two factors—scarcity and demand—could create incentives for bidders to bid strategically and reduce the amount of spectrum available to other bidders. The UK mobile market is made up of four national wholesale operators, who sell mobile services to retailers, as well as directly to their own retail customers. Ofcom believes that competition at the national wholesale level is essential to future competition and maximising consumer and citizen benefits. In addition, there would be a significant risk to national wholesale competition if there were fewer than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services. 5.10 To guard against this risk, Ofcom proposes introducing limits both on the minimum and maximum amounts of spectrum bidders can win. These are called auction “floors” and “caps”. The least restrictive way to ensure at least four national competitors is through the use of spectrum floors in the auction. This involves disregarding any auction outcomes in which four companies do not win the minimum amount of spectrum necessary to provide higher quality data services. This can involve different combinations of spectrum, each of which could be sufficient to ensure a credible competitor. Ofcom proposes that this minimum amount should be one of the following five combinations: — 2×5 MHz of sub 1 GHz spectrum and 2×20 MHz or more of 2.6 GHz; or — 2×5 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 1800 MHz; or — 2×10 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 2.6 GHz; or — 2×10 MHz of sub 1 GHz spectrum plus 2×10 MHz or more of 1800 MHz; or — 2×15 MHz or more of sub 1 GHz spectrum. 5.11 Ofcom also proposes to put in place safeguard caps to guard against longer term risks to competition from any one licensee holding a disproportionate amount of spectrum. Two safeguard caps are proposed: — A sub 1 GHz safeguard cap of 2×27.5 MHz, which will mean that no one competitor can obtain more than this amount of sub 1 GHz spectrum. — An overall spectrum holdings cap of 2×105 MHz, which will mean that no one competitor can obtain more than this amount of spectrum overall. 5.12 Ofcom proposes to include a coverage obligation in one licence for the 800 MHz spectrum. The obligation would require the licensee to provide a mobile broadband service covering 95% of the UK population. It is expected that bidders will factor in the cost of achieving this obligation when making bids for the licence. This should result in coverage for future mobile broadband services that approaches today’s 2G coverage. The date for meeting these obligations would be the end of 2017. Statistics on current 2G and 3G coverage demonstrate that coverage varies between areas of the UK, with coverage in more rural areas generally being less comprehensive than in urban areas. This is particularly significant for 3G coverage. 5.13 One way of ensuring more uniformity of coverage for 4G services in future would be to supplement the main coverage obligation described above with a requirement to cover a certain proportion of the population in particular areas—for example in certain rural areas. Stakeholders are being encouraged to give their views on the feasibility and appropriateness of this. 5.14 The consultation closes on 31 May.
Satellite Broadband 5.15 Satellite broadband is available almost anywhere in the UK using a dish. However, satellite transmissions may be affected by weather conditions or local obstructions including foliage and trees, and the cost of installing and running satellite broadband can be quite expensive compared with other types of broadband. Satellite broadband also generally has quite a high latency (delay) compared to other broadband and so is potentially unsuitable for certain types of real-time internet services such as voice over Internet Protocol, video conferencing and online gaming.
Broadband Wireless Access 5.16 Broadband Wireless Access (BWA) requires an aerial to be installed to connect to the internet. The most common technology for long-distance BWA is WiMAX. A telephone line is not required. BWA is particularly suitable for distributing information between buildings and for homes in remote locations where access to ADSL or cable broadband is unavailable.
Wi-Fi 5.17 A Wi-Fi “wireless hotspot” is a public area that has a wireless network. Hotspots are more common in cities and at locations where large numbers of people are likely to be: airports, train stations, motorway service stations and hotels, for example. Normally, even in the case of free services, users will need a password to access Wi-Fi hotspots via their computer or mobile device (eg smartphone, iPhone or BlackBerry). Some providers (eg BT Openzone) supply free access to hotspots bundled with a fixed-line broadband package. 5.18 Wi-Fi can also be used to provide wireless broadband networks anywhere in the home without the need for trailing wires. A wireless router provides the signal, and each computer uses a wireless network card (often cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 48 Welsh Affairs Committee: Evidence
already built in) to connect. The broadband connection comes in via the telephone line or cable connection and is accessed by the wireless router.
Avanti 5.19 Avanti intends to launch a broadband-specific satellite called Hylas 1 in late 2010 that will aim to tackle some of the UK’s broadband not-spots. Another satellite, Hylas 2, will launch in 2012. Two larger Hercules satellites will follow. Hylas will be able to provide broadband at speeds of 2 Mbps to some 350,000 customers in the UK. The Hercules satellites will have the capacity to provide 50 Mbps to an estimated 800,000 consumers. 5.20 Avanti already has 4,000 subscribers using existing satellite technology. It recently won a Scottish Government contract to supply 2,400 rural homes, all of which will benefit from faster speeds when Hylas is launched. The Scottish Government is subsidising the cost of installing the satellite equipment after running its own not-spot campaign. 5.21 The costs of satellite have proved prohibitively high in the past, with an average installation fee of around £400 plus a monthly cost of about £40. However, with the launch of Hylas, costs are likely to fall in line with market prices. Avanti estimates it will be able to offer satellite broadband for around £15 per month with a one-off installation fee of around £300.
BeyonDSL 5.22 BeyonDSL offers a range of satellite-broadband packages that come with either an unlimited data allowance (subject to a fair-use policy and a sliding speed limit) or a data allowance that can be topped up as required. For an extra charge, users wishing to download large amounts of data overnight can also add the “free zone” option without the sliding speed limit. 5.23 A value-package 2 Mbps connection costs £39.99 per month, and the standard equipment and activation fee is £349.99. Beyond DSL is the only satellite-broadband provider in the UK that offers Sky Digital/freesat television along with broadband services from the same dish, and the company also offers combined television and broadband packages (although pay-television subscription charges require additional monthly payments).
Walesbroadband.com 5.24 Walesbroadband.com was formed to deliver broadband internet services to the remotest areas of Wales. The company has developed a partnership with the Tower Sites and Infrastructure Division of TFL-Group. Established in 1983, TFL-Group offers a portfolio of services ranging from professional two-way radio- communications systems through to wireless broadband delivery. TFL-Group operates a network of hill-top communications tower sites in Wales that deliver secure, sustainable and fully integrated wireless systems.
Exwavia 5.25 Originally called Olive Tree IT, Exwavia specialises in the deployment of wireless broadband solutions to rural areas of Wales at prices comparable to the services found in towns and cities (4 Mbps+ for £19.99 per month to 12 Mbps+ for £34.99 per month). It believes delivering broadband wirelessly is more cost-effective, more reliable and better value for money than satellite broadband. 5.26 Some of the company’s methods of delivering a wireless service to rural locations in Wales are proprietary. However, the basic technology is available to all. Essentially, Exwavia purchases bandwidth from its wholesale supplier and then places its first wireless distribution node at or near the telephone exchange. This is used to “send” the broadband to where it is required. The distribution of broadband to users is then a simple case of feeding the wireless signal to each premise using the same wireless technology. The entire network is monitored, maintained, configured and upgraded from Exwavia’s office in Powys. 5.27 In the past, wireless technology has been plagued by interference, poor performance and intermittent delivery. However, Exwavia argues that its partner, Ruckus Wireless, has solved these issues and the performance of wireless broadband is now comparable with the performance of cable broadband. 5.28 Exwavia is committed to bringing superfast internet connections to all parts of Wales and will introduce speeds of 20 Mbps+ to rural areas when wholesale prices fall. Exwavia does not use the term “up to” to deliver services, believing consumers should receive what they order, so if a consumer orders a 4 Mbps connection, that is the minimum speed they will receive. Exwavia is planning additional services including discounted telephone services, streaming media and streaming TV in the near future.
SECTION 6 6. Digital Inclusion and Broadband Take-Up 6.1 According to our latest Communications Market Report for Wales,17 take-up of broadband in Wales has reached 64% and the gap with the UK average (71%) has narrowed from 10 to seven percentage points in a 17 http://stakeholders.ofcom.org.uk/binaries/research/cmr/753567/CMR_Wales_2010.pdf cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 49
year. Some 69% of people in rural Wales have a broadband connection compared with 62% of people in urban Wales. 70% of people in North/Mid Wales have a broadband connection compared with 66% in South West Wales and 58% in South East Wales. 6.2 There are many reasons for not having the internet, and these fall into two broad categories: voluntary and involuntary. Voluntary non-ownership is when potential consumers do without services because they perceive they do not need them, or because they are satisfied with alternative services. Involuntary non- ownership is when potential consumers do without services, but not through choice; this is mainly due to affordability. 6.3 Nine per cent of adults in Wales said that they did not have internet access at home for involuntary reasons. This was similar to the UK average and lower than in Scotland (15%) and Northern Ireland (12%). England was the nation least likely to state involuntary reasons for non-ownership (8%). 6.4 The growth of the internet has provided another platform over which content can be delivered to consumers. As a result of the widespread availability and take-up of broadband, the majority of households can now receive content in this way (though by no means all do). In recent years the internet has had a significant impact on how content can be consumed. 6.5 The Internet allows existing services such as some government services, banking and other information services to be delivered to citizens and consumers online; and it has allowed new, specifically internet-based forms of content to emerge (such as social networking sites, blogs and other user-generated content). 6.6 Broadband take-up in Wales has risen by six percentage points in a year, to 64%. Along with Northern Ireland, this was the largest increase among the nations in 2009–10. However, there were significant regional variations in broadband penetration within Wales, from 58% in South East Wales to 70% in North/Mid Wales. Within these regions there are variations in take-up and availability; even in areas with high overall take-up there will be instances of not-spots. 6.7 During 2009–10, mobile broadband take-up in Wales rose by five percentage points as consumers increasingly turned to mobile networks to access the internet (typically by using a 3G mobile USB modem, or “dongle”, plugged into a laptop PC). In Q1 2010, 16% of households in Wales claimed to access the internet via mobile broadband, marginally above the figure for the UK as a whole (15%). An increasing proportion (now four in ten) of mobile broadband consumers in Wales use this as their sole means of accessing the internet. However, the majority of mobile broadband users also have a fixed-line broadband connection at home. There was no significant difference between the claimed take-up of mobile broadband in rural and urban regions, despite the fact that high-speed 3G mobile networks are more typically available in urban areas. 6.8 Broadband accounts for the overwhelming majority of internet connections. Just 1% of internet users in Wales used dial-up for their home internet connection in Q1 2010. 6.9 However, across the UK, awareness of mobile broadband was lowest in Wales and Northern Ireland at 60% of adults compared to the UK average of 64%. This is slightly surprising since mobile broadband take- up is highest in Wales. Over the year levels of awareness have increased more in Wales and Northern Ireland than in England and Scotland. Within Wales, awareness was higher in rural areas than in urban areas, despite urban areas having wider availability of high-speed networks that can support mobile broadband. 6.10 The proportion of adults who claim to have accessed the internet using a mobile phone was slightly lower in Wales (14%) than in the rest of the UK (16%) in Q1 2010, and fell by four percentage points between Q1 2009 and Q1 2010. There were variations in use across Wales; in North/Mid Wales 17% of people claimed to use their mobiles to access the internet, compared to 11% in the South West.
Use of the Internet to Access Services 6.11 The internet enables users to undertake a wide range of activities online. Our consumer research asked about a number of these and found that the most common online activities among broadband owners in Wales were: sending and receiving email (89%); general surfing/browsing (85%); purchasing goods/services (70%); and finding/downloading information for personal use (57%). 6.12 Increasingly, people with a broadband connection are going online to access and engage in traditional “offline” services and activities. Accessing services and content in this way has the potential to bring real benefits in terms of time, functionality and cost to citizens and consumers.
Accessing Government Services Online 6.13 Almost all local, regional and central government departments, agencies, executives and bodies have an online presence. Some services such as driving licence renewal are increasingly being delivered over the internet. Looking at the number of people claiming to access government websites is one way of assessing engagement with these services in the nations and regions. Ofcom research shows that across the UK, 26% of adults claimed to visit a government or local council website in Q1 2010. In Wales the figure stood at 18%, below the UK average but higher than the figures for Northern Ireland (16%) and Scotland (13%). Within Wales, people in rural areas (22%) were slightly more likely to visit these sites than those in urban areas (17%). cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 50 Welsh Affairs Committee: Evidence
Use of these sites was most popular in North/Mid Wales, where over a third (34%) of people claimed to have used them.
Internet Banking 6.14 Online banking allows people to manage their money from the comfort of their own homes, and among other things allows them to receive up-to-date balances, pay bills online, open new accounts and transfer money. Our research shows that across the UK, more than four in ten (43%) of people used the internet for banking in the first quarter of 2010. Use of online banking was highest in England (45%), followed by Wales and Northern Ireland (both 36%) and Scotland (29%). In Wales, use of banking sites varied from 32% in South West Wales to 41% in North/Mid Wales. Our research found little difference in take-up between people in urban areas (36%) and rural areas (37%). The data suggests that a number of internet users are not using online banking regularly. This is likely to be for a number of reasons including concerns about security, and the fact that under-18s are less likely to have a bank account.
Health 6.15 The internet has also had an impact on how people can find out more about a wide range of health issues. It allows those organisations (whether the NHS, private health providers or otherwise) that offer information and support a way to reach their target audience easily and cheaply; it also opens up to individuals a vast array of information on almost any health issue. This brings both advantages and disadvantages. For instance, people with concerns about swine flu could access advice through portals like Direct.gov and NHS Choices, which may have played a part in keeping infectious individuals away from surgeries. But the sheer amount of available information on the internet has also raised concerns about inaccuracies and incorrect self-diagnoses. 6.16 Twenty-seven per cent of adults in the UK claimed to use the internet to find information relating to health issues. This figure ranged from 14% in Scotland to 27% in England. In Wales the figure was 19%. In North/Mid Wales more than a quarter (26%) of people used the internet to find health-related information, a significantly higher proportion than people in South East (17%) and South West (16%) Wales.
Social Networking 6.17 Social networking sites (SNS) are websites such as Facebook and MySpace on which users can create their own profiles using text, graphics and photos, join groups of people with common interests and send messages to other site members. SNS use in Wales, at 37% of individuals, has risen by 12 percentage points over a year. Its popularity rose faster in Wales than anywhere else in the UK, but as an online activity it is still less popular in Wales when compared to the UK average (30%). Patterns in use of social networking sites correlate to household broadband penetration levels, with use higher in North/Mid Wales than the South East. 6.18 The increase in use of SNS sites was most marked in urban areas, where there was a 14 percentage point increase from Q1 2009, bringing it into line with the figures for use of these sites in rural areas. Our UK report shows that Facebook is the most popular SNS by some distance, and is likely to be responsible for much of the growth found in our research. All major SNS have now been optimised for mobile phones too, and it is likely that this will be an area of future growth, particularly as smartphones become more widespread. 6.19 Recent data for the Ofcom Adult Media Literacy Tracker has recently been published on the Ofcom website.18 The nation summary for Wales is due to be published in the summer, however this latest data shows that Internet users in Wales estimate that they use the Internet for 12.5 hours per week. 6.20 The latest data also shows the top five uses for the Internet in Wales as follows: Activity Ever do This Sending/Receiving e-mails 89% Finding information for your leisure time including cinema and live music 85% Finding information for Booking Holidays 82% Buying and Selling things on-line 80% Looking at news websites 71%
6.21 The 2011 Communications Market Reports are due to be published in the summer and will include updated figures on broadband take-up and use in Wales.
SECTION 7 7. The UK Government’s Broadband Strategy and the Welsh Assembly Government’s Priorities UK Government 7.1 The UK Government is committed to delivering universal broadband at speeds of 2 Mbps within the lifetime of the current Parliament (ie by 2015). It will consider whether to use money available from the 18 http://stakeholders.ofcom.org.uk/binaries/research/statistics/2011Stats/adultmainset.pdf cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 51
underspend of the Digital Switchover Help Scheme to do so where the market has not delivered. These are primarily rural areas, but there is a significant minority of suburban and urban broadband not-spots. Ofcom is providing technical advice to assist with this process. 7.2 The UK Government aims to secure the best superfast broadband in Europe by the end of the current Parliament. It has announced three market-testing projects in rural areas, including one location in Wales: Felindre near Swansea. 7.3 Broadband Delivery UK (BDUK) was created following publication of the final Digital Britain report by the previous UK Government. It was created within the Department for Business, Innovation and Skills (BIS) as a delivery vehicle for the UK Government’s broadband policies. Following machinery-of-government changes, BDUK is now part of the Department for Culture, Media and Sport. It is engaging with a wide range of stakeholders (including the “industry,” public-sector bodies, Ofcom, regional bodies and community groups) to: develop the commercial models that will be used for implementing the universal-service commitment; agree the minimum service specification required to achieve the policy objectives of the universal-service commitment; plan the deployment of the superfast-broadband pilots to ensure the maximum information is gained for targeting potential future UK Government intervention; and investigate the detail of reuse of public- sector networks and assets, identify the challenges and develop solutions. 7.4 The UK Government is committed to ensuring BT and other infrastructure providers allow the use of their assets to deliver broadband access. On 15 July 2010, BIS published a discussion paper examining the benefits and problems associated with sharing non-telecommunications utilities infrastructure as a means of facilitating the deployment of broadband networks.19
Welsh Assembly Government 7.5 The Welsh Assembly Government’s RIBS project was specifically designed to provide 35 exchange areas of Wales, initially deemed unviable by BT, with first-generation (512 kbps–2 Mbps download, 256–512 kbps upload) broadband services at affordable prices comparable with urban areas of Wales. The RIBS initiative has provided around 8,500 households and businesses with broadband access and played an important role in reducing the digital divide that exists between rural and urban areas of Wales. 7.6 The project has also looked at addressing not-spot areas, and work was carried out in 2009 to broadband- enable the lines serving the West Wales communities of Bronwydd Arms, Cilcennin, Llanpumsaint, Reynalton and Saundersfoot and Gwytherin in North Wales. This allowed more than 1,000 residents and businesses to enjoy access to broadband services for the first time. 7.7 BT/Openreach is continuing to work through the RIBS contract to address some of the other known not- spots in Wales. Last year the Welsh Assembly Government and BT have announced the second phase of the scheme to address not-spots in Beulah and Ystrad Meurig in Ceredigion and Cil-y-Cwm and Llanfynydd in Carmarthenshire.
Economic Renewal Programme 7.8 In July 2010, the Assembly Government, announced a new Economic Renewal Programme that aims to provide every business in Wales with access to next-generation broadband by the middle of 2016. 7.9 The Assembly Government is embarking on a programme to facilitate the deployment of a broadband infrastructure capable of delivering fast and ultra-fast broadband services to 100% of premises across Wales. 7.10 Speeds will vary depending on whether a company is based in an urban (100 Mbps) or rural (30 Mbps) location. The Economic Renewal Programme is also committed to seeing all households in Wales being broadband-enabled with a minimum speed of 30 Mbps by 2020. 7.11 Following the publication of a European procurement advertisement and as part of this procurement process, the Assembly Government would like to understand where private sector investment in next generation networks across Wales has already happened or is planned in the next three years. The Open Market Review, published at the end of March aims to collect information that will help determine where the deployment of next generation broadband networks should be focused. 7.12 The Assembly Government encourages interested parties to contribute to the open market review process. The consultation closes on 3 May 2011.20 7.13 The Assembly Government has also established a new £2 million Broadband Support Scheme that will provide consumers in rural not-spots with a grant of up to £1,000 to enable them to gain access to broadband by approaching service providers directly.21 May 2011
19 www.bis.gov.uk/Consultations/broadband-deployment-and-sharing-other-utilities-infrastructure?cat=closedawaitingresponse 20 http://wales.gov.uk/docs/det/policy/110331ngbwreviewen.pdf 21 http://wales.gov.uk/topics/businessandeconomy/broadbandandict/broadband/bbss/?lang=en cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 52 Welsh Affairs Committee: Evidence
Written evidence submitted by the Country Land and Business Association
Summary — The Country Land and Business Association (CLA) represents nearly 4,000 members in Wales, all with a direct or indirect interest in broadband availability; — The CLA was the first national rural organisation to recognise the importance of broadband for its members and successfully lobbied BT for a rollout of universal broadband in 2005; — In 2008, the CLA calculated that 27% of rural areas in Wales did not have access to fixed line (at the exchange) broadband. This had fallen to just over 20% by the end of 2010; — Broadband is vital to the rural economy and to the well-being of rural communities. However, there continues to be a rural-urban digital divide and this is exacerbated by Government policy to digitalise most forms of administration; — The CLA is disappointed at the apparent lack of progress in implementing the Government’s broadband strategy and in particular, the delays that are hindering the announced superfast broadband pilots; — The CLA believes that the deadlines put forward by the Welsh Assembly Government (WAG) of 30 Mb/ps broadband for business by 2016 and households by 2020 are not achievable in the current climate; — Although the CLA accepts the principle of WAG’s broadband grant scheme, we believe that it could be seen as a satellite operator’s charter. No account appears to have been given to the technical restrictions of satellite broadband and how this could seriously undermine WAG’s broadband policy; — The CLA believes that WAG needs to give far more consideration into developing a clear and coherent broadband partnership with the private sector, for example, by allowing rural businesses and communities the ability to piggy-back off the public sector broadband network.
Introduction
1. The Country Land and Business Association (CLA) represents some 35,000 members across England and Wales, with nearly, 4,000 Welsh members, all of which will be affected by the provision, or otherwise, of an effective and adequate broadband service. Indeed, the Welsh Affairs Committee’s inquiry into broadband provision in Wales is timely as the Government broadband strategy, and the implementation of this by Broadband Delivery UK (BDUK) requires a review. This response sets out the CLA’s views as to the extent of broadband coverage in Wales as well as identifying some issues that require further clarification from government.
Background
2. In 2002, the CLA was the first nationally based rural organisation to recognise the importance of broadband for both rural businesses and rural communities. The CLA launched a campaign in the same year to lobby the main infrastructure providers (BT and Virgin Media) to roll out fixed line broadband across the country so that all could benefit. We were the first organisation to call for the setting of trigger levels for all exchanges, a view supported by the Environment, Food and Rural Affairs Select Committee inquiry into broadband in 2003 and through the campaign we were successful in encouraging BT to announce the full rollout of ADSL technology in 2005.
3. In 2008, it became increasingly apparent that there were significant failings in the provision of broadband across the country despite BT’s claim that 99% now had access to a broadband service. At this time, the CLA calculated that 25% of rural areas still did not have access to a reliable, cost effective and adequate broadband service. In Wales, the number was slightly higher at 27%.
4. Government activity before 2008 was limited. There appeared to be a clear attempt to allow the private sector to resolve the issues that arose. However, during 2002 to 2008 the Government sanctioned the development of a public sector broadband network to allow public sector bodies to take advantage of the benefits afforded. At this time, the CLA called for the Government to create a genuine public-private- partnership to allow for rural business and communities to “piggy-back” onto the public sector infrastructure.
5. The Government’s first attempt at a coherent broadband strategy was with the publication of the Digital Britain report in 2009. This set out two aims: — To put in place a Universal Service Commitment (USC) of 2Mb/ps to all areas by 2012; — To create a superfast broadband network, known as “next generation access”, by 2017. This would, in part, be paid for through a levy of each telephone line with the aim of generating some £1 billion up to 2017. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 53
6. The formation of the coalition government in May 2010 also led to a change in policy direction. The deadline for completing the USC was put back to 2015 and the funding for superfast broadband was achieved through the Comprehensive Spending Review with £530 million being allocated to 2015 with a further £300 million being made available up to 2017.
7. As part of the Government’s revised strategy, four initial pilot areas to trial superfast broadband were announced with between £5 million to £10 million being allocated. The areas are: Herefordshire, Cumbria, North Yorkshire and the Highlands in Scotland. A second tranche of funding of £50 million is in the process of being allocated. In addition, the Department for Environment, Food and Rural Affairs announced the creation of a Community Broadband Fund for the uplands worth £20 million.
The Importance of Broadband
8. Today, broadband is as essential as basic utilities, such as water, gas and electricity. Indeed, for some it may be even more important in terms of remaining competitive in the market place. However, rural areas still lag way behind urban areas in terms of broadband availability, this being termed as the “urban-rural digital divide”. Indeed, this divide appears to be getting wider as the infrastructure providers concentrate on the cities and towns in order to ensure a return on capital.
9. However, without broadband, rural areas will continue to struggle, this being exacerbated by government efforts to digitalise most forms of administration, such as the single farm payment and the whole-farm approach. Although the Government’s efforts appear laudable, they also fail to recognise that without broadband connectivity, considerable effort and time is wasted, leading to an economic disadvantage for rural businesses and the rural community. This is very much the case for rural Wales.
The Government’s Broadband Strategy
10. The primary objective of the Government’s broadband strategy that was announced in December 2010 was to resolve the problems of lack of access in the “final third”. This has been defined as those areas that either cannot receive a broadband service due, in the main, to their distance from the telephone exchange, or those areas where infrastructure providers do not believe that it is economically feasible to extend currently planned superfast broadband networks.
11. The CLA is disappointed at the lack of published activity regarding the rollout of superfast broadband. There appears to be little co-ordination between the pilot areas and BDUK although it is known that BDUK is consciously allowing the pilots to set out their own frameworks.
12. There remains significant disquiet that the Government’s strategy is not making sufficient headway. To this end, the CLA wishes to highlight two points. Firstly, the CLA believes that there remains a real possibility that the deadlines put forward by the Government and the Welsh Assembly Government (WAG) for universal broadband coverage will not be met. Although the 2Mb/ps benchmark by 2015 can be considered as the absolute minimum and, in a large number of cases, could very well be overtaken by the demands of technology in that faster speeds will be required for increased use, there is no guarantee that even this limited objective can be met.
13. In addition, the CLA seriously questions that the deadline of 2016 for all businesses in Wales to have access to 30Mb/ps broadband is realistic given the current rate of progress. It is admirable that WAG has proposed a far higher benchmark speed than set out in the Government’s strategy. However, this suggests a level of private finance that is unlikely to be forthcoming. It has to be recognised that one of the reasons why superfast broadband is unlikely to be extended to rural areas is the actual cost involved. The CLA believes that, in order for such a benchmark to be achieved, it requires the resources of one of the major infrastructure providers. Unfortunately, we see no evidence that this will in fact occur unless there is a sizeable public subsidy.
Pilot Projects
14. As noted in paragraph 7 above, the initial pilot projects were allocated outside of Wales. However, on 10 February 2011, the Chancellor announced that a pilot would run in Pwllheli and its surrounding area. A total of £10 million would be allocated.
15. It is important to stress that the pilots are trials only and it does seem logical for BDUK to wait until the results of the pilots are known before advocating further pilots in other areas of Wales.
16. However, this in itself raises an interesting situation. Within the private sector, there are a number of schemes being either advocated or undertaken to put in place superfast broadband networks in rural areas. One such scheme uses private equity in the form of community shares to finance the project. The CLA would recommend that the Welsh Assembly Government give more credence to such schemes if it is to meet its benchmark by the 2016 deadline. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 54 Welsh Affairs Committee: Evidence
Priorities for Broadband in Wales
17. As set out above, the CLA remains sceptical that the objectives and priorities set out by the Welsh Assembly Government can be realised by the timeframe envisaged. We accept and fully endorse the fact that broadband is a vital service, more so in rural areas than in urban conurbations. However, there remains the real problem that the set political priority does not match up to practical reality. This is why the CLA is calling on the Welsh Assembly Government to adopt a more patchwork approach, taking into account a number of different technologies. We do not believe that it is realistic to suggest that all businesses in Wales will have access to superfast broadband of speeds of at least 30Mb/ps by 2016, let alone all households by 2020. Such a policy necessitates the universal infrastructure build of fibre-optic.
Welsh Assembly Government Broadband Grant Scheme
18. We would accept, in principle, the objective of the Welsh Assembly Government broadband grant scheme that was launched in 2010. However, we are concerned that the level of take up of the £1,000 grants has been regrettably slow. This can be for a number of reasons, not least the apparent lack of publicity given to the scheme.
19. The CLA also remains concerned as to the actual implementation and eligibility of the grant scheme. It would appear that the scheme is targeted towards the satellite end of the market, given that its primary objective is the eradication of broadband “not spots” and that the grant only relates to hardware costs, not the actual cost of the service. It could be argued that the grant scheme is a charter for satellite broadband operators.
20. However, the scheme appears to be the opposite of the Welsh Assembly Government’s stated objective that it wants to see areas “rural proofed”, that is, it does not wish to see secondary investment after an initial capital outlay. Account must also be made of the technical restrictions around satellite broadband technology. Certainly, at the present time, the maximum speeds offered by satellite broadband are well below the benchmark set by the WAG.
21. The CLA is also concerned that no consideration appeared to have been given to allowing communities to pool grant funds in order to create a far bigger capital fund. The grant scheme should have allowed communities to create broadband hubs through aggregating demand, thereby allowing for superfast broadband options. The CLA has long advocated the idea of using wireless technology and broadband hubs would allow such technology to be pushed out to a wider area and to more people.
The Need for Demand Aggregation
22. A fundamental requirement for determining the economic case for broadband is to establish the demand for the service. This is known as demand aggregation. Despite its importance, however, there appears to be no uniform model or tool in use. Without such a model, it becomes increasingly difficult to equate which broadband technology should be employed. The CLA believes that this is vital for rural areas in Wales as it will provide much needed data so that broadband can be universally rolled out.
Mobile Broadband Coverage
23. As with many parts of the UK, Wales has very poor mobile broadband coverage in rural areas. Although 3G is available, it tends to be patchy and in a number of areas, non-existent.
24. However, the CLA believes that the proposed 4G auction from Ofcom for the early part of 2012 could lead to far greater availability of a practical mobile broadband network. Indeed, we are optimistic that 4G could fill the gaps that are inherent in the 3G network and which would greatly enhance broadband availability in rural Wales.
Conclusion
25. The CLA recognises the efforts being made by the Welsh Assembly Government within its digital strategy to broadband enable Wales. However, we remain concerned that a number of elements of that policy will not meet their anticipated objectives. We do not believe that the WAG’s benchmark speed of 30 Mb/ps by 2016 and 2020 for businesses and households respectively are achievable given the current rate of progress, particularly in terms of infrastructure build. We also believe that more needs to be done in terms of allowing rural communities to be able to “piggy-back” off the public sector broadband network. Finally, the present grant scheme is unlikely to meet its objective and appears to contradict stated WAG policy in trying to secure a superfast broadband future for Wales. May 2011 cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 55
Written evidence submitted by Avanti Communications plc
1. Summary — Existing terrestrial networks cannot offer broadband service to everyone in Wales. — Avanti’s satellite network can provide 100% coverage of broadband services in Wales at speeds of up to 10Mb. — Satellite delivered broadband has a crucial role to play in completing the technology mix to give complete broadband coverage in Wales. — It is important not to focus on ever faster networks without completing delivery of broadband to everyone who wants it. — On the assumption that one of the Welsh Assembly’s priorities is Universal service coverage it must be understood that satellite technology will be required to achieve this. — Trials in Brecon have worked very well and achieved high levels of user satisfaction.
2. The Current Provision of Broadband Services in Wales
2.1 Current provision of broadband in Wales is predominantly via the BT network and, in some towns and cities, by Virgin Media over their cable infrastructure. Wireless services using the 3G spectrum operated by the mobile telephone companies can also provide a limited service in Wales but it is once again focused on the urban and built up areas. This existing level of service clearly leaves tens of thousands of homes and small businesses with no broadband connection at all and many more with sub 2Mbps connections, the minimum speed recommended in Lord Carter’s Digital Britain report of 2010.
2.2 Those areas currently under served in Wales can have broadband now. Avanti Communications plc, a British company, launched a satellite in November 2010 designed specifically to deliver broadband services to users who cannot be economically served by other networks.
3. The UK Government’s Broadband Strategy, with Particular Regard to its Potential Impact on Wales
3.1 Lord Carter’s report recommended a provision of a basic standard of broadband universal service of 2Mbps across all of Wales—no matter how remote and rural. This report recognised that such a universal service will be delivered by a mix of technologies: DSL, fibre to the street cabinet, wireless and satellite technology. There is no single technology which can provide universal services across Wales.
3.2 The current UK Government activity relating to broadband is centred around the Broadband Delivery UK programme (BDUK) and Avanti recently submitted to BDUK its proposal of a minimum 2Mbps service that is deliverable to anywhere in the UK. It is anticipated that BDUK will recommend that satellite provision of broadband is recognised as an inevitable part of the technology mix. It is also Avanti’s hope that the outcome from this BDUK work will offer further encouragement to British companies owning and operating satellite technology to offer broadband services that will benefit everybody.
4. The Case for Further Next Generation Access (“Super-Fast” Broadband) Pilot Projects Based in Wales
4.1 Whilst the discussion of “Super-fast” broadband provision is important and there is significant investment already underway to deliver this, Avanti believes that the focus for the funding discussion should be on closing the gap at the basic level of no broadband access at all.
4.2 Every sector of business, and every home, can benefit from broadband access to the internet and the greatest benefits are arguably provided with the first connection of 2Mbps speeds. This enables farmers to complete mandatory paperwork, businesses to operate always on email and file returns online saving time and money as well as enabling education by giving school children access to online resources and homework.
4.3 None of these applications are dramatically enhanced by having increased speed of access and it is in these applications, rather than in the downloading of media, where one can argue that the greatest public good is obtained.
5. The Extent to which the Strategy of the UK Government will Complement the Welsh Assembly Government’s Priorities for the Future of Broadband in Wales
5.1 Not applicable to Avanti, this can only really be addressed by a member or representative of the UK Government who have full knowledge of the UK Government position and the Welsh Assembly’s priorities. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 56 Welsh Affairs Committee: Evidence
6. Progress made Towards Promoting Digital Inclusion in Wales, Including Evidence of the Take-up of Broadband Support Schemes on offer 6.1 Only the Welsh Assembly, and its executive, will know the take up rates of any broadband support offer. 6.2 In the past Avanti has helped provide 100% broadband coverage of Scotland and Northern Ireland through their own broadband support schemes. In working with those administrations Avanti has installed over 3,000 homes and businesses with broadband.
7. Progress made Towards Improving the Provision of Broadband Infrastructure Throughout Wales and Eradicating Broadband “Notspots”; 7.1 Avanti now offers, via its HYLAS 1 satellite, complete coverage of Wales. This means that virtually any premises, be it residential or business, can now access broadband speeds of up to 10Mbps. 7.2 Trials have been running in the village of Felinfach in Brecon for well over a year and have attracted strong approval ratings from all the trial users. With the proviso that one must have a view of the South West sky in order to “see” the satellite, the installation of a 74cm dish aerial and a small modem in the house will enable broadband access to all parts of the country. 7.3 With the right mix of technology there can be no reason to say that broadband is unavailable to everyone. The service levels may be different but as the years pass the trend in all networks is to deliver faster bandwidth but it is improbable that everyone will have a universal, “Super-fast” broadband connection without an enormous public subsidy. May 2011
Written evidence submitted by Arqiva Summary of Key Points and Recommendations — Arqiva welcomes the opportunity to respond to the Welsh Affairs Committee’s new inquiry into Broadband in Wales. — There is an ever-greater social and economic cost to each person who falls, or is left behind on the wrong side of this “digital divide”. Research suggests that consumers and SMEs left without broadband would be disproportionately rural… and disproportionately Welsh. The overriding public policy objective must be to deliver universal access to broadband. — It is therefore crucial that the political commitment to achieving universal access to broadband by 2015 is not lost in the heated arguments about who should receive “superfast” broadband first… and how. The real gain for UK plc is to achieve universal access to broadband—not to push fibre to 90% penetration and then stop. — We believe there would be a considerable opportunity cost (both economically and socially) if, come 2015, consumers who already have access to broadband were “super-served” with fibre… while millions who currently have little, or no broadband provision remain under-served, forgotten or left behind. — We note that the current debate, in both Wales and across the UK, is focused on how much penetration of superfast could be achieved, and how quickly, if all of the public subsidy were made available for that purpose. Arqiva warns that this would leave no public subsidy remaining for potentially millions of consumers, and nearby farms and other SMEs. — Fixed solutions alone won’t deliver universality: Where fibre is not cost effective (ie: more than one million households), we believe Wireless broadband is the only practical solution. Arqiva believes all the evidence indicates that the optimal means of securing universal access to broadband requires a procurement of a mix of technology solutions. — It is imperative that Wireless broadband be an essential part of the solution about to be procured by the Welsh Assembly Government. — To help achieve this, we believe that Ofcom should be obliged: — to increase the scope of the coverage obligation to, say, 99% population; — to measure that obligation by Nation, so Wales benefits equally; and — to double the size of the spectrum the obligation attaches to, to a third of the 800 MHz spectrum.
About Arqiva Arqiva is a media infrastructure and technology company operating at the heart of the broadcast and mobile communications industry and at the forefront of network solutions and services in an increasingly digital world. Arqiva provides much of the infrastructure behind television, radio and wireless communications in the UK and has a growing presence in Ireland, mainland Europe and the USA. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 57
Arqiva is implementing UK Digital “Switch-Over” from analogue television to Freeview—a huge logistical exercise which touches every Parliamentary constituency, requiring an investment by Arqiva of some £700 million and which is successfully being delivered to time and budget. Arqiva is also founder member and Shareholder of Freeview (Arqiva broadcasts all six Freeview multiplexes and is the licensed operator of two of them) and was a key launch technology partner for Freesat. Arqiva is also the licensed operator of the Digital One national commercial DAB digital radio multiplex. Arqiva operates nine international satellite teleports, over 70 other staffed locations, and around 9,000 shared radio sites throughout the UK and Ireland including masts, towers and rooftops from under 30 to over 300 metres tall. In addition for broadcasters, media companies and corporate enterprises Arqiva provides end-to-end capability ranging from: — outside broadcasts (10 trucks including HD, used for such popular programmes as Question Time and Antiques Roadshow); — satellite newsgathering (30 international broadcast SNG trucks); — 10 TV studios; — spectrum for Programme-Making & Special Events (PMSE);22 — playout (capacity to play out over 70 channels including HD); to — satellite distribution (over 1,200 services delivered). Elsewhere in the communications sector, the company supports cellular, wireless broadband, video, voice and data solutions for the mobile phone, public safety, public sector, public space and transport markets. Arqiva’s major customers include the BBC, ITV, Channel 4, Five, BSkyB, Classic FM, the four UK mobile operators, Metropolitan Police and the RNLI. Arqiva is a British success story, owned by a consortium of long-term investors and has its headquarters in Hampshire, with other major UK offices in Warwick, London, Buckinghamshire and Yorkshire. Arqiva welcomes the opportunity to respond to the Welsh Affairs Committee’s new inquiry into Broadband in Wales.
Why Access to Broadband Matters 1. We note that the Coalition Government in Westminster has endorsed the previous Government’s ambitious plans to move to digitised public services, which should: — Deliver better public services for lower cost; and — Create a new dialogue between citizens and public service providers. 2. We recognise there is also a broad consensus that a programme to address digital inclusion is essential, not just to ensure that the expected efficiency savings from digitising public services are achieved, but as an instrument of real social change: — Improving the life chances for the unemployed. — Widening access to online educational materials and resources and ultimately raising children’s grades and life chances. — Enabling the financially-disadvantaged and less knowledgeable, or media literate, to pay the same discounted prices for commercial products and services as the technology-savvy (who, ironically, are usually better able to pay more). 3. Digital inclusion has a passionate and experienced advocate in Martha Lane Fox, who has not shirked from addressing the key issues of literacy and affordability. However, unless access to broadband is universal, her Race Online 2012 initiative will never reach its full potential. There is an ever-greater social and economic cost to each person who falls, or is left behind on the wrong side of this “digital divide”. In addition, there is a risk that the much-heralded huge cost savings from slimming down “offline” Whitehall will not be realised— until access to digitised public services becomes universal. 4. It is therefore crucial that the political commitment to achieving universal access to broadband by 2015 is not lost in the heated arguments about who should receive superfast broadband first… and how. 5. However, whilst Westminster and Cardiff are right to highlight the superfast option—since there will undoubtedly be new services which will emerge to take advantage of this. Nevertheless, it is also prudent to “future-proof”, as far as practical, infrastructure subsidised with public funds. We believe there would be a considerable opportunity cost (both economically and socially) if, come 2015, consumers who already have access to broadband were “super-served” with fibre… while millions who currently have little, or no broadband provision remain under-served, forgotten or left behind. 22 Such as the wireless cameras operated by the BBC and Sky News, and the radio mics used in virtually all television production and many West End shows. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 58 Welsh Affairs Committee: Evidence
6. Research suggests that consumers and SMEs left without broadband would be disproportionately rural… and disproportionately Welsh. Indeed, in a world economy demanding that citizens, consumers and businesses are all connected—such a “digital divide” could even exacerbate the problems of “rural drift” (of both consumers and small businesses to towns).
The Key Public Policy Objective
7. The overriding public policy objective must be to deliver universal access to broadband and, within the funds available, to maximise the number of consumers and businesses with access to superfast.
8. We note that the current debate, in both Wales and across the UK, is focused on how much penetration of superfast could be achieved, and how quickly, if all of the public subsidy were made available for that purpose. Arqiva warns that this would leave no public subsidy remaining for potentially millions of consumers, and nearby farms and other SMEs.
9. The real gain for UK plc is to achieve universal access to broadband—not to push fibre to 90% penetration and then stop. We are concerned that, within the Digital Wales strategy, there is currently no interim target to ensure all citizens are able to receive 2 Mbps broadband, meaning that some may have to wait until 2020 to receive this basic level of service.
10. This is supported by studies undertaken by McKinsey, Allen, OECD and the World Bank which show that a 10% increase in broadband penetration increases GDP by 1%. Yet there are no studies which can be referenced as to the impact of superfast broadband.
Fixed Solutions Alone Won’t Deliver Universality
11. Many broadband “not spots”23 are in urban and suburban areas, and best addressed by fibre. However, a large number of “not spots” are in rural areas and the outer suburbs, where the need to upgrade individual connections to each home or business to provide broadband by fibre or other fixed line solution can be ruinously expensive—and this will all take considerable time.
12. If insufficient homes are clustered together, fixed line solutions are unviable. Fibre requires 50 households per cabinet to make it economic to deploy. So the risk is that many rural homes could not be offered fibre with the funds currently available for subsidy.
13. Where fibre is not cost effective (ie more than 1 million households), we believe wireless broadband is the only practical solution. No roads need to be dug up, no ducts shared (not that there are many in rural areas anyway), wireless broadband could be deployed quickly and offered to all consumers within range of each transmitter as soon as it was switched on—just like television, in fact.
14. We point out that television provides the optimal spectrum to use because as Arqiva switches off analogue television across the UK as part of Digital Switch-Over (Wales has, of course, already been switched), a swathe of spectrum (usually referred to as “800 MHz”) which is harmonised across Europe for “4G” wireless broadband is left behind unused. So unlike the few rural wireless broadband solutions offered to date, the spectrum is ideal for this use (having previously provided universal public service television); the infrastructure is already in place; and consumers could choose from a range of cheap, standardised equipment.
15. The effectiveness of using 800 MHz spectrum to deploy 4G wireless broadband in rural areas was modelled for Ofcom and Arqiva in 2009 and, at the end of 2010, Arqiva borrowed some of this spectrum from Ofcom and carried out an extensive 4G trial.
16. This trial was carried out in Pembrokeshire, which was selected precisely because it would be difficult and highly costly for fibre to address its rural “not spots”, and yielded very impressive results. We were able to demonstrate delivery of high speed broadband (in excess of 50 Mbps) in a challenging rural environment where citizens currently experience typical speeds which are less than 500 Kbps—see Appendix 1 for further details. The importance of this trial was not lost on the Welsh Assembly Government, and their representatives who attended demonstrations, not least as Broadband Delivery UK (BDUK) did not select Wales for one of its broadband pilots.
17. It is imperative that Wireless broadband be an essential part of the solution about to be procured by the Welsh Assembly Government. Indeed, Wireless could play a considerably larger role than just addressing the hardest to reach. Many consumers are denied fixed broadband due to poor internal wiring, and providing them with 4G wireless broadband would be more cost-effective than requiring a home visit from an engineer. 23 “Not spot” is generally accepted to mean the lack of access to fixed broadband (almost everyone could get satellite broadband). cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 59
18. UK mobile-only households increased from 8% to 15% in the five years to 2010, and many consumers clearly place a higher value on mobility than on absolute speed. So, there may be many consumers currently without broadband who would choose a Wireless solution in preference to fixed—not least as wireless could be offered to them years before any fixed solution could be.
19. We note that there are also some consumers for whom even wireless broadband would not be the most cost-effective solution. Where population density falls below 15 houses per km2, satellite is likely to be the cheapest broadband solution. As such consumers are easily identified, their needs could be addressed quickly and there are a range of satellite broadband providers who could offer their services almost immediately.
20. Arqiva believes all the evidence indicates that the optimal means of securing universal access to broadband requires a procurement of a mix of technology solutions.
Ensuring that Digital Wales is a Realisable Goal
21. Wireless cannot play its essential complementary role without access to suitable spectrum. For cost- effective coverage of rural areas, the optimal spectrum to deploy would be 800 MHz. This has been recognised across the EU where a recent Commission Proposal24 to the European Parliament and the Council included: “Member States…shall ensure that the provision of access to broadband content and services using the… 800MHz band is encouraged in sparsely populated areas, in particular through coverage obligations.”
22. Ofcom has responded by proposing a coverage obligation for 800 MHz, but for such a small slice of that spectrum25 that any operator deploying just this spectrum would be unable to support even the minimum 2 Mbps. In addition, Ofcom only proposes that 95% of the UK population be covered. This target is so un- ambitious that, in theory an operator could comply without deploying in Wales at all. In addition, the relevant operator would also have until 2017 to achieve this target, which almost certainly means that the most disadvantaged would not obtain access until the 2017 deadline.
23. It must be noted that Ofcom is proposing to retain back-stop powers to revoke licences in rural areas if the spectrum remains unused even where public subsidy is available. So Ofcom is aware of the strong likelihood of the relevant operator refusing to deploy its spectrum in rural areas even where public subsidy is available. However, given Ofcom’s aversion to intervening in the market, and the time it would take for Ofcom to fully investigate the rural coverage achieved and planned, it seems unlikely that these powers would ultimately achieve very much.
24. We believe that Ofcom should be obliged: (i) to increase the scope of the coverage obligation to, say, 99% population; (ii) to measure that obligation by Nation, so Wales benefits equally; and (iii) to double the size of the spectrum the obligation attaches to, to a third26 of the 800 MHz spectrum.
25. There will be those (in particular, the mobile operators and HM Treasury) who may argue that making these coverage obligations to the greater social benefit, and thus harnessing greater use of this precious spectrum, would depress the auction proceeds. Arqiva believes the auction proceeds will be principally influenced by the competitive tension which results from four mobile operators chasing a maximum of three licences. The number of masts which might be required by Ofcom to be deployed will be a secondary factor for the bidders.
26. We recall that, in passing the Communications Act 2003 (which established Ofcom), Parliament charged Ofcom with securing optimal use of spectrum (a Crown asset)—rather than simply selling it all to the highest bidders. Arguably any auction outcome which left the 800 MHz spectrum unused over vast swathes of the UK could not be considered its “optimal” use…
27. But for all Welsh consumers to benefit, it will also be essential that the Welsh Assembly Government in its current procurement of broadband recognises that a mix of technology solutions will be required, with the funding then made available to each of the selected technology solutions so that it can contribute as necessary to achieving what has to be the overriding public policy objective: Ensuring that no one is excluded from the connected, digital society of the future. May 2011 24 COM(2010) 471 final 25 Only2x5MHz, a mere sixth of the available spectrum. 26 2 x 10 MHz. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 60 Welsh Affairs Committee: Evidence
APPENDIX 1
PRESELI 4G WIRELESS BROADBAND TRIAL
Analysis of Locations and their Serving Telephone Exchanges
Not Spot Postcodes Analysed
Current Broadband (Downlink) Speeds Achieved at Not Spot Postcodes Post Code Premises Sam Knows27 Speed Checker SA66 7SB 8 0.25–1. 5 Mbps SA66 7XN 10 0.25–1.5 Mbps SA66 7SH 1 0.25–1.5 Mbps SA66 7SG 2 0.25–1.5 Mbps SA66 7XJ 23 0.25–1.25 Mbps SA66 7RY 22 0.5–4 Mbps SA66 7RU 17 <0.512 Mbps 0.25–1.25 Mbps SA66 7RT 4 0.25–1.5 Mbps SA66 7RX 4 0.25–1.25 Mbps SA66 7SF 1 0.25–1.25 Mbps SA66 7JP 6 0.25–1.5 Mbps SA66 7SE 16 1.5–6.5 Mbps SA66 7SN 8 0.25–1.5 Mbps
Speed Achieved with the 4G trial28
The bandwidth would be shared between users, with speeds of up to 42 Mbps and a guarantee of 2 Mbps in the busy hour.
27 A widely-quoted firm of broadband analysts. 28 Assuming the use of all of the 800 MHz spectrum, a fixed directional antenna installed on the users’ house at the same height as the TV aerial, and deploying only a Single Sector. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 61
Written evidence submitted by Three — Three welcomes the opportunity to submit evidence to the Welsh Affairs Committee’s inquiry into Broadband in Wales. — By way of background, Three is the UK’s largest provider of mobile broadband services with a 3G network that provides mobile broadband coverage to 97.4% of the UK population. — We offer mobile broadband and voice services to our customers on a range of devices including smartphones, tablets, mobile broadband dongles and MiFi.
Digital Inclusion 1. We recognise the importance of broadband connectivity in ensuring everyone has the opportunity to experience the benefits of being online. 2. Since our launch in 2003, we have led the mobile broadband market in delivering lower prices and innovative new products. 3. We were the first mobile operator to pledge support to Race Online 2012 and why we have worked with organisations such as UK Online Centres to deliver “mobile get online” days, and partnered with Microsoft and Remploy to offer low cost computer and internet packages to help bridge the digital divide.
Three’s Network Coverage in Wales 4. Over the past two years Three has invested an additional £11.5 million in expanding and improving its 3G network in Wales. 5. We have doubled the number of radio base stations in Wales so that we now provide outdoor coverage to 92% of the Welsh Population. 6. This expansion has been possible because until January this year all the mobile network operators were required to use the same radio spectrum to deliver mobile broadband services. This created a level playing field that stimulated competition that drove networks to compete on coverage and quality. 7. This has led to considerable consumer benefit in Welsh villages such as near Aberystwyth where mobile delivered the only broadband service. 8. In Ceredigion we have increased population coverage from 17% to 72%, in Powys it increased from 24% to 70% and in Pembrokeshire from 24% to 86%.
Consolidation with Everything Everywhere 9. Three’s expansion has been possible because of our groundbreaking network share agreement with T- Mobile. By merging our 3G network infrastructure together we have been able to offer improved stability, faster speeds and greater population coverage for our customers. 10. Following the merger of Orange and T-Mobile (to create Everything Everywhere) in 2010 additional sites will be added to our shared network which will increase UK population coverage to 99.5% by 2013. 11. Whilst growing our network of radio base stations improves coverage, there is a point where the cost of installing, servicing and maintaining a mast will not be recouped by the additional customers who may be gained from its installation, and therefore some areas remain impossible to cover on a commercial basis.
The Role of Competition in Increasing Broadband Coverage 12. The 2000 spectrum auction created a competitive market with all mobile providers providing mobile broadband on the same 2100MHz spectrum frequency creating a level playing field which drove network roll- out, lowered prices and delivered innovation. 13. The recent decision by Ofcom to permit those operators with legacy 2G spectrum (900MHz and 1800MHz) has weakened that competitive tension and threatens to stall roll-out and increase prices. If left unaddressed it will likely result in a further reduction in the number of wholesale mobile network operators in the UK market. 14. Three therefore welcomes Ofcom’s proposals to structure the forthcoming spectrum auction so that it ensures UK consumers continue to enjoy the benefits of a four player wholesale mobile operator market. 15. Central to the viability of a four player market is the allocation of low frequency (sub 1GHz) spectrum. Rolling out a mobile broadband network in a suburban area is three times cheaper on 900MHz spectrum than on 2100MHz spectrum. The savings are even greater in rural areas. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 62 Welsh Affairs Committee: Evidence
16. In the 1980s Vodafone and O2 were given 900Mhz spectrum. In order to preserve competition other European countries have either reallocated or re-auctioned 900MHz spectrum since it was initially awarded. The UK has not.
Government Broadband Policy
17. Whilst government agencies, such as BDUK, acknowledge the importance of remaining agnostic with regards to the technology used to deliver broadband services, government policy all too often refers to mobile as a “complementary” service.
18. Recent predictions from analysts such as Morgan Stanley, Gartner and Ovum suggest that more people will access the internet through mobile devices by the end of this Parliament than through fixed.
19. Ofcom stated that the mobile data traffic increased by 2200% growth in 2009. Data on Three’s network comprises 97% of all traffic.
20. There is therefore a risk that by continuing to refer to mobile as complementary, government policy may fail to harness the potential of mobile broadband.
Spectrum Policy and the Provision of Mobile Infrastructure in Wales
21. The auction of 3G licences in 2000 was designed to inject much needed competition by bringing a new entrant (Three) into the market. By rolling out our mobile broadband network we have prompted the other network operators to increase their 3G coverage and acted as a competitive pressure to deliver value and innovation to consumers.
22. Mobile broadband has a key role to play in delivering universal high speed internet access as it is unlikely to be economic to provide the fastest services to remote areas via fixed lines.
23. However, capacity constraints mean that universal mobile broadband cannot be delivered without the release of additional spectrum—and, in particular, the release of additional lower frequency (sub 1 GHz) spectrum that is ideal for covering rural and built-up areas in Wales.
24. The attached maps show Three’s current coverage in Wales on our 2100MHz spectrum, compared with the coverage we would achieve if we deployed 800Mhz spectrum across our existing infrastructure. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 63
Conclusion
25. A competitive market has delivered increased coverage to communities across Wales.
26. The expansion which has made this possible is at risk from the competitive imbalance now inherent in the market.
27. Ofcom must structure next year’s spectrum auction so that it rebalances competition and stimulates network operators to compete on coverage and quality and which will support the delivery of universal broadband across Wales. June 2011 cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 64 Welsh Affairs Committee: Evidence
Supplementary written evidence submitted by Three
Please find below additional issues referenced in our evidence session, alongside other points of interest for the Committee’s consideration.
The Internet is Mobile
The use of mobile internet has increased significantly in recent years.29 It is now seen as a competitor to fixed line services in many areas; indeed it is predicted that more people will access mobile internet than fixed line by 2015.30
For many people mobile broadband is their only means of internet access. For example, there are those in rural communities who cannot access fixed broadband, those who cannot take out a monthly contract because they ineligible for credit or they live in short term accommodation, whilst some people on lower incomes are reluctant to enter into long term contracts with fixed monthly fees. Mobile broadband offers these people an affordable and convenient opportunity to get online.
Data Usage in Wales
That many rural communities are turning to mobile internet is highlighted by our figures on data usage across Three’s network. Our Welsh customers use the same number of minutes on voice calls as those in Birmingham (52 million minutes). However data usage across our network in Wales is equivalent to the usage of the populations of Birmingham, Manchester and Leeds combined. This higher than average data usage suggests that many Welsh customers are opting to use mobile broadband as their main means of internet access.
Ofcom Auction Proposal
Three supports Ofcom’s decision to introduce floors & caps on spectrum holdings in the upcoming 4G auction, to ensure four viable wholesale players. The introduction of Three as a fourth competitor into the mobile market in 2003 has produced a number of benefits for consumers, such as much lower data costs.
However we are urging Ofcom to revise their proposed sub 1 GHz floor of2x5MHz. This lower frequency spectrum is suited for rural and indoor coverage. To ensure that all players can compete effectively, this floor must be raised to 2 x 10 MHz. This will not only ensure that all four players can compete but it will also support universal coverage targets, as this lower frequency spectrum will enable the existing network to reach more isolated communities at much lower cost to the network.
Fees
The delay in the spectrum auction also means there will be a delay before the other mobile operators are expected to pay market value licence fees on their legacy spectrum. In January this year Ofcom permitted Vodafone, O2 and Everything Everywhere to start to use their old 2G spectrum for 3G services. In Italy when similar spectrum was liberalised the regulator charged a fee of €64 million to each of the operators just for letting them use the spectrum for 3G. In the UK no fee was charged and the annual fees remained at their 1998 level. If the licence fees did reflect market value (based on the recent German auction values) the total annual levied between the three operators would be £381 million, a significant increase on the £64.5 million a year currently paid.
Chancellor “Notspot” Funding Announcement
While we welcome the Chancellor’s announcement that Government would provide a £150 million subsidy to tackle “not spots”, it must be ensured that this funding is targeted effectively. “Notspots” must be identified by mapping the coverage that will be achieved when networks are operating on the 800MHZ spectrum that will be released in the 4G auction, rather than planning on the basis of current coverage. Lower frequency spectrum is particularly good for rural and indoor coverage and means many current “notspots” will be served through existing network with the new spectrum. If Government does not do this, it will end up subsidising coverage in an area that the market could have reached of its own accord, to the detriment of other areas which will still need assistance post the auction. October 2011
29 Ofcom’s 2011 Communications Market Report showed data volumes on mobile networks have increased by a factor of 38 in the three years to the end of 2010. 30 Morgan Stanley. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 65
Written evidence submitted by South East Wales Economic Forum Introduction 1. The South East Wales Economic Forum (SEWEF) is a unique partnership in the region bringing together the 10 local authorities, the Welsh Assembly Government, the private sector, universities and the third sector to discuss and address regional economic matters. SEWEF’s geographical remit covers what is becoming known as the “City Region”, reaching from Bridgend County in the west to Monmouthshire and the English/ Welsh border in the east and north to the Heads of the Valleys.
UK Government and WAG Broadband Strategies 2. In the 2005 SEWEF economic strategy (Enter the Dragon) and again in its 2010 review, connectivity (both transport and digital) was highlighted as a key theme for SEWEF. Next generation broadband was announced as a Welsh Assembly Government (WAG) priority in 2010. WAG objectives are in line with the Digital Agenda for Europe (which has set a target of 30mbps for all of Europe by 2020) and follow the template set out by the UK Government in the DCMS’ Britain’s Superfast Broadband Future strategy launched in December 2010. WAG, however, has set a target of all businesses and public sector organisations within Wales having access to 30mbps by June 2016 and all households by 2020, an increase from the current fixed- line broadband speed of 5.2mbps. 3. There have been complaints from SEWEF’s private sector partners that the advertised broadband speed is well below the level that customers actually receive, and the current poor broadband speed that many Welsh businesses are forced to contend with is hindering attempts to grow internationally and attract inward investment opportunities. Separately, it can be argued that low business take up of broadband is having a direct negative impact on the competitiveness of the Welsh economy. 4. The Assembly Government has committed to access to 100mbps for 50% of all households and businesses by 2020. While this is an admirable objective, SEWEF believes that, for the region and Wales as a whole to benefit from superfast broadband, it is more important to ensure quickly that advertised speeds and available speeds match and that an interim target should be for 90% of businesses and 80% of households to be utilising broadband fully by that date. 5. Although take up of broadband in Wales has reached 65%, this is still 7% less than the UK average of 71% and 9% less than the 73% take up for England. Moreover, less than 40% of SMEs in Wales have an online presence and even fewer exploit opportunities for e-commerce, which suggests that more effort will be required to assist SMEs in accessing broadband and use of e-commerce. South east Wales, despite having the highest population density of Wales, currently only has a 58% broadband take up. Fixed broadband take-up in Wales (households) Wales: 65% (households: 823,349)
Rural Wales Urban Wales 69% 62%
North & Mid Wales South West Wales South East Wales 70% Households: 66% Households: 58% Households: 274,300 196,258 358,791 Source: Ofcom Communications Market Report 2010 6. Many of SEWEF’s objectives are aligned to the December 2010 Welsh Assembly Government Delivering a Digital Wales’ framework, which sets out a vision for “a thriving economy driven by our technology research and development. Flourishing Welsh cultural creativity. Enhanced mobile and wireless coverage across Wales”. The framework sets out five fundamental objectives (inclusivity, ICT skills, economic growth, digitally accessible public services and superfast broadband infrastructure). SEWEF sees superfast broadband as a means of removing perceptions of peripherality in parts of south east Wales, seamlessly connecting all parts of the region, and connecting the region to its markets in England and internationally. Nevertheless, it is important not to lose sight of the need to address continuing gaps and congestion blackspots in the south east Wales transport network in the enthusiasm to focus on rolling out next generation broadband. A strong focus on the value for money achieved by the introduction of superfast broadband—measured by improvements in economic growth—is therefore crucial. 7. WAG objectives for superfast broadband are fully in line with the Europe 2020 target of 30mbps, and exceed the UK government’s pledge of a minimum 2mbps for all UK households by 2015. However, a British Chamber of Commerce survey in 2010 showed that 71% of businesses felt that the base target for superfast broadband should be 100mbps minimum. With countries such as South Korea and Japan already in the process of planning speeds of around 1000mbps, Wales is in danger of being left behind even before its rollout to 30mbps is achieved in 2016 for all businesses. Moreover, much of the content currently offered requires at least 50Mb which existing copper infrastructure struggles to cope with. It is therefore essential to ensure that any new infrastructure investment guarantees the ability to achieve at least 100 mbps for all business users cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 66 Welsh Affairs Committee: Evidence
(rather than the 50% commitment made by the Welsh Assembly Government), even if this is not fully rolled out by 2020. 8. The Welsh Assembly Government’s policy on broadband goes further than the UK Government’s. It is therefore important to ensure that Welsh Assembly Government expenditure complements and adds value to (rather than replacing) UK Government funding for the overall UK programme.
Digital Exclusion 9. It should be noted that dealing with digital exclusion does not require next generation broadband. WAG’s 2009 Digital Inclusion Framework set out the vision “for a digitally inclusive, sustainable prosperous society, where all citizens are empowered to be able to take advantage of digital technologies to enhance their quality of life”. The Assembly Government estimated that approximately 34% of adults in Wales (785,000 citizens) were digitally excluded. SEWEF supports the WAG framework for digital inclusion delivery through community based approaches including engagement through libraries, education and lifelong learning, and skills development. 10. While it is accepted that the landscape of Wales provides certain logistical infrastructure challenges, SEWEF views the removal of the 40 not-spots in south east Wales as a priority for the Assembly Government. Although this alone will not solve the problem of digital exclusion it will provide a stepping stone on the way. 11. At the same time, SEWEF considers that greater emphasis should be placed on a linked but separate campaign promoting the benefits of broadband to the region’s businesses to improve business take up. This should include a particular focus on the benefits of utilising digital provision to enhance marketing and e- business to increase growth.
South East Wales Broadband SWOT Analysis Strengths Weaknesses — e-Crime prevention / e-Security R&D in — Lower broadband take up than parts of rural Newport wales — Digital classrooms in Torfaen/ — Topographical issues re: Valleys Monmouthshire — Creative industries—WAG priority sector — Advertised v. actual speeds. — Capacity to expand data warehousing — Poor speeds hindering attempts to grow Welsh provision businesses internationally — Welsh base for most ICT “anchor companies”
Opportunities Threats — By 2016 higher speed broadband than rest of — International competition re: future 1000mbps in UK, if WAG meets its target South Korea and Japan — Supply chain development — Increased home-working/decreased travel congestion.
What is Required for Next Generation Broadband to be Effective 12. To be effective next generation broadband needs to be available at consistent speeds (current provision suggests speeds that are all too often not achieved) and education provided about the benefits it can offer, in addition to enhanced security provision and better skills training (cf. paragraph 16). 13. In order for Wales to develop its digital economy and create a niche for tomorrow’s generation it requires: (a) Fast broadband connection and full utilisation for primary, secondary and tertiary education needs. (b) Full take-up of smart connections for homes—to encourage home-working, SME start-ups and independent and active home living (for the elderly/disabled). (c) Improved user-friendly public service content availability.
Forward looking local authorities are actively working on promoting and enabling fast broadband infrastructures to provide connectivity for SME, home-working and developing niche digital markets. These initiatives should be promoted and supported. Training in the use and benefits of broadband for SMEs is as important as increasing speed. Whilst existing users—particularly specialists in the creative industries and the ICT sector—will see benefit from increased speeds, the high percentage of individuals and businesses that do not currently use nor have access to broadband services will still not see any benefit without education and training. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 67
14. SEWEF would also like to suggest that all existing infrastructure, particularly that which is funded from the public purse such as super-JANET, should be opened to a wide range of users and not held to limited sectors. 15. SEWEF views business land and premises—many of which are located miles from telephone exchanges and therefore currently face slow broadband speeds or are in so-called “not-spots”—as a priority for superfast broadband. Almost every city in Wales has at least two or three ISP service providers while many rural areas may only have one supplier and large numbers of “not spots”. The Welsh Assembly Government’s Digital Strategy should focus on encouraging the market to invest in next-generation provision where an economic return is readily available, and concentrate its funding on market gaps which offer the best potential for a step- change in economic development.
Skills Development 16. For businesses and individuals to make best use of broadband technology there needs to be a co-ordinated approach to skills and R&D development to fully exploit its potential. SEWEF views skills development as part of a holistic approach, with private and public sector involvement. ICT training and skills development can be highly variable in content, relevance and cost. The public sector is well placed to work with specialist providers to educate the general and business public on the benefits of broadband, and provide a “signposting” and information service as regards the availability of different types of training. 17. In line with the roll-out of superfast broadband, skills development for both individuals and organisations is required to fully benefit from and exploit superfast broadband. The Assembly Government states that “widespread digital literacy and the development of a workforce which can offer a broad range of high quality “e-skills” is critical to the success of Digital Wales”. Any skills development programme should be developed in co-operation with the private sector and focus on the future rather than current needs of organisations. This should be a key focus of the six WAG priority Sector Panels, in particular the ICT Sector Panel. Skills development of ICT in schools should be aligned to the most progressive technologies, in order to provide a future “digital leadership” pool for all employers.
Mobile Broadband 18. A summer 2010 report from Ofcom found that Wales had the highest mobile broadband take-up in UK. 16% of the country’s properties have access to mobile broadband, with south east Wales being a “hot-spot” for mobile broadband usage with 18% of households using the technology compared to 15% in England, despite 90% of the population using a mobile phone. Mobile broadband provides an opportunity for organisations to optimise their digital marketing and target customers on the move, and allows employees to take “the office out of the office”, leading to benefits such as reduced road congestion and allowing businesses with field operatives (such as engineers) real-time contact and data exchange. 19. SEWEF welcomes the Assembly Government’s target for improving mobile broadband coverage (2G and 3G and enabling 4G where possible), since mobile access remains poor across the region. However, commercial suppliers are already actively investing in mobile 4G and 5G technologies, and SEWEF feels that public resources set aside to improve mobile infrastructure might be better spent fast-tracking the fibre installation and improving the uptake of broadband, and in providing more objective information on the potential business benefits of what are currently unproven technologies. May 2011
Written evidence submitted by British Telecom 1. Introduction BT is pleased to provide this input to the Committee’s inquiry into broadband services in Wales. We have provided comments in response to the specific issues raised by the Committee. As background to those comments we set them in the context of BT’s commitment to broadband and the way in which BT is playing a pivotal role in enabling the continued development of a competitive market, particularly through its investment in a competition-ready network via its Openreach division. BT is: — investing £2.5 billion to roll-out fibre to two-thirds of UK premises by 2015: — no other company in the world is investing as much in fibre without either public sector support or a regulatory regime that allows the company to make far greater returns; — we want to extend the fibre footprint and the benefits of broadband to more rural areas; — deploying at scale and pace: — installing 30,000 cabinets, connecting 200,000 distribution points, enabling over 1,000 exchanges and laying over 50,000km of fibre; — building the equivalent of the fibre network in Singapore every quarter; cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 68 Welsh Affairs Committee: Evidence
— more than twice the pace of Deutsche Telecom, AT&T, Verizon & Belgacom; and — more than three times the pace of peers in Japan and Korea.
2. BT Broadband Services—A Quick Guide Next Generation Access is the umbrella name for the FTTC (fibre to the cabinet) and FTTP (fibre to the premise) products, also known as “super-fast broadband”, that BT is rolling out to UK homes and businesses. Next Generation Broadband is the umbrella name for fibre “super-fast” broadband and the advanced copper- based ADSL2+ “fast” broadband that provides wholesale speeds up to 24Mbps and retail speeds up to 20Mbps. Super-fast broadband is provided by Openreach to any Communications Provider that wishes to buy. BT Wholesale’s products is known as Wholesale Broadband Connect and is currently available from 50 sites in Wales, providing coverage of 42% of households. Ethernet is a data service primarily used by businesses to create their own private networks. It can run over copper, providing download speeds of up to 10Mbps or faster, or fibre. Openreach offers Ethernet services throughout Wales, catering for the needs of larger businesses and large-scale public sector requirements. Like any other Openreach access infrastructure, it is fully “competition ready” and accessible to all Communication Providers). Thus, when Openreach brings an Ethernet circuit to a given location, it also brings the potential for other businesses to expand their capability in serving the surrounding area, creating a concentric circle of benefit around the initial site. Openreach offers Ethernet circuits from 10 Mbps to 10 Gbps and can “up the bandwidth” whenever businesses feel they are ready for the next step. Openreach has a ubiquitous capability and reaches 100% of Wales—if no fibre is available, Openreach will build out the network on demand.
3. The Role of Openreach in the Broadband Market Delivering next generation connectivity or Superfast Fibre Access to residents, businesses and institutions to support job creation, skills development, business growth, public service transformation and digital inclusion depends on a competitive market where multiple communication service providers compete for customers by providing innovative products and applications. Critical to all of this is how a ubiquitous, open access network can support multiple communication service providers. The functional separation model, (underpinned by Openreach—the access network division of BT Group created in 2006) has evolved to support a whole range of Access Communication Services. Openreach provides equal access to well over 400 Communication Provider (CP) customers, big and small, and is equivalent in all its dealings. The telecommunications market in the UK has been remarkably successful thanks to functional separation and Openreach systems and this has produced one of the most competitive telephony and broadband markets in the world, driving down the price of services to businesses and consumers, as well as promoting innovation and creativity within the industry. Openreach is firmly committed to conducting business with all CPs equally, and supporting the industry in a fair, even-handed and transparent way which protects and promotes the interests of all Communications Providers. In simple terms, this means: — Providing the same products, services and commercial information to all. — Offering all customers the same timescales, terms, conditions and price. — Interacting with all using the same systems and processes. — Delivering the same degree of reliability and performance to all, ensuring engineers remain impartial when interacting with end users.
4. BT’s Commitment to Super-Fast Broadband in Rural Areas BT has plans to bring fibre broadband to around two thirds of the UK by 2015, and is committed to exploring ways to extend the foot-print of super-fast broadband to the more remote areas of the country where it is not currently economic to provide superfast services. BT is working in partnership with local and regional government to improve the economic case for getting super-fast broadband access to every part of the UK. We are continually looking at ways to bring the benefits of super-fast fibre broadband to as many people as possible within the scope of our commercial deployment. In January 2011, for example, we announced the locations of 41 rural market towns in the UK that will benefit from the next phase of BT’s super-fast fibre broadband deployment. In addition, Openreach has announced draft pricing and design proposals for its new duct and pole sharing products, which are aimed at offering CPs an additional route to market for the delivery of super-fast fibre broadband services in the UK. Duct and pole sharing may play a role in further extending the availability of fibre broadband services across the UK, particularly within the context of the UK government organised tenders aimed at bringing faster broadband speeds to rural areas. The pricing, design and terms and conditions of these cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 69
products are draft proposals at this stage and follow extensive industry engagement. There will be further consultation and a trial of the products and process. The commercial launch of the service is expected in summer 2011. By putting all of this in place, Openreach has underlined its commitment to working with industry to find innovative solutions for delivering fibre broadband across the UK and finding new ways of extending the nationwide footprint for super-fast broadband. The proposed pricing of the duct sharing product compares very favourably with similar solutions offered in other European markets. BT believes there is a shared responsibility to meet the challenge of the final third. We welcome the UK Government’s creation of Broadband Delivery UK (BDUK) as a positive step. With potentially up to £830 million available to 2017 from the Digital underspend and BBC licence fee, BT will make its own funds available should we be successful in securing projects utilising this public intervention. The significant proportion of the BDUK funding is planned to be available by 2015 and BT will be prepared to co-invest with the public sector in these local and regional projects if selected to deliver them.
Committee’s Questions (1) The current provision of broadband services in Wales Broadband is now available to over 99% of Welsh households. In a very small number of instances where the lack of broadband availability has been down to line length, Openreach has re-configured the network at its own expense, to allow end-users to opt to be re-parented to another local exchange that is physically closer to them in order for them to be within reach of broadband provision. However, the debate has now moved on from the question of basic broadband access and coverage to one of bandwidth and speed. BT has announced the exchange areas serving Welsh customers where Superfast Broadband services are already available or where it is intended for them to be available by the end of 2012. The locations are as follows: Currently Live Barry Bridgend Caerphilly Cardiff Chepstow Connahs Quay Llanedeyrn Llanishen Llantrisant Newtown Llantwit Penarth Taffs Wells * Whitchurch Expected in 2011 Aberkenfig Blackwood Buckley Chester North Chester South Hawarden Hengoed Kenfig Hill Llanrumney Llantwit Major Mumbles Newport Chartist Pencoed Porthcawl Expected in 2012 Caldicot Maesglas Pontycymmer ** * Taffs Wells was one of the early exchanges to be enabled. It is a semi-rural exchange on the outskirts of Cardiff. ** Pontycymmer is one of the 41 rural areas mentioned earlier that will now be part of the next phase of BT’s super-fast fibre broadband deployment. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 70 Welsh Affairs Committee: Evidence
We intend to deploy next generation broadband to the majority of premises within these locations but cannot guarantee that all will be able to receive the service. The precise postcode locations that will receive next generation broadband will be planned in due course and announced nearer the planned deployment date. These plans reflect our current experience to date and are subject to change. Some telephone exchange areas also cover premises in England and Wales across the borders—but we can determine the expected coverage of these premises in Wales specifically. Based on these announced plans by BT so far, over 300,000 premises (businesses and households) or approximately 21% would potentially be able to access Superfast Broadband by the end of 2012. Over the next three years we intend to roll-out to approximately two thirds of the UK but as yet have not set out any plans beyond the end of 2012. Our roll out beyond end 2012 will be subject to feedback and learning from the market as a result of our current and future deployments. It is not possible, therefore, to determine where these areas will be with any precision, as factors in the emerging market may have a significant impact on current deployment models.
(2) The UK Government’s broadband strategy, with particular regard to its potential impact on Wales The UK Government set out its national Broadband Strategy in December 2010. This covered the whole of the UK including Wales and re-confirmed the Government’s commitment to have the best super-fast broadband network in Europe by 2015, and also confirmed that £530 million pounds of funding would be provided this Parliament to support this objective, with a further £300 earmarked for the two years after 2015 to further deliver on broadband. BDUK is tasked with ensuring effective and efficient delivery and deployment of these funds, in conjunction with local and devolved governments. We welcome the initial agreement from BDUK to provide £10 million to the Welsh Assembly Government (WAG) programme for delivering broadband across Wales. The WAG is setting the agenda for next generation broadband in Wales and it is important that BDUK assists the WAG team where possible and appropriate, particularly with additional funding as has been suggested to help ensure the WAG programme can deliver its targets. The WAG has a strong track record of securing additional funding from Europe and ensuring such funding is used effectively to support its development aims. Indeed it has received a Regions of Excellence award from the EC President Jose Manuel Barroso for the excellence of its management of projects linked to the Europe 2020 strategy. The current WAG plans for leveraging UK, WAG and private sector money to match additional funds from Europe is to be applauded and encouraged and is fully in keeping with the approach espoused by BDUK. The BDUK approach to funding and broadband planning is to aggregate local demand into a wider local government/county wide plan to provide efficiency and scale economy whilst ensuring local communities have an opportunity to contribute and input. The WAG approach is already delivering on this methodology, aggregating local requirements across Wales into a single Wales-wide plan for delivery, thus maximising efficiency whilst meeting local needs. This approach of channelling requirements into the devolved administration, rather than a multiplicity of local bids, should be encouraged.
(3) The case for further Next Generation Access (“super-fast” broadband) pilot projects based in Wales BT is not able to comment in detail on any discussion between the WAG and the UK Government in relation to any BDUK pilots. It is our understanding that the very welcome announcement of £10 million for next generation broadband in Wales made by the Chancellor, George Osborne, in Wrexham in February 2011 will augment the All-Wales procurement already announced by the WAG in its Economic Renewal Plan in July 2010 and advanced further in its current ongoing procurement for Next Generation Broadband in Wales. It seems logical for Wales to progress one central, strategic procurement, given the resource required to manage such a large procurement and the time such a process takes due its scale and the need for European Commission notification.
(4) The extent to which the strategy of the UK Government will complement the Welsh Assembly Government’s priorities for the future of broadband in Wales The strategy of the UK Government complements well the priorities identified by the WAG for future broadband in Wales. The UK Government has stated that it wants to have the best broadband system in Europe by 2015. The strategy is backed by up to £830 million of Government investment available during this Parliament and the next. This will be used to stimulate private investment and competition. The Government has clearly recognised the importance of rolling out next generation broadband infrastructure to ensure sustainability of rural communities, bridge the digital divide and support a thriving economy and healthy public service. In the last Digital Wales document, the WAG articulated the following objectives: — The aim is for all households in Wales to have basic broadband access by 2013. — All businesses in Wales will have access to super fast broadband by the middle of 2016. — All households in Wales will have access to super fast broadband by 2020. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 71
While Digital Wales objectives are more granular than those the UK Government has announced, meeting the UK Government’s objectives will also support the WAG’s ambitions in terms of broadband roll out. Both the UK Government and the WAG have recognised the importance of super fast broadband infrastructure in similar terms. Digital Wales’ five pillars: — Inclusivity: enabling Wales to be a more inclusive, sustainable and prosperous society. Making sure everyone can enjoy the benefits of technology is a key part of that. — Skills: Information and communication technology (ICT) skills will be part of all our children’s education, and we will use technology to improve teaching methods and learning. — Economy: Drive economic growth. Support Welsh companies to network with research departments to create and commercialise new digital technologies. — Public services: Make more public and government services digital so they are easier to access and become more efficient and convenient. — Infrastructure: To deliver all the benefits of digital technology. are absolutely aligned to the key benefits for the UK set out by the UK Government. The most important aspect of the UK Government’s plans is the commitment to make available up to £830 million in public funds. Accessing this fund as well as any other European funds available to Wales, will ensure that roll out of super-fast broadband infrastructure in Wales can go beyond what the private sector would cover on purely economic grounds. Were BT to secure access to that public financing, we estimate that fibre could be extended to up to 85% or even 90% of Wales. BT would offer access on the open, wholesale basis that has created the dynamic, competitive market we have in the UK today, thus bringing in major retail suppliers. BT has already demonstrated its ability to roll out fibre on an industrial basis through its current super-fast broadband programme which deploys as much fibre every quarter in the UK as that which covers the whole of Singapore today.
(5) Progress made towards promoting digital inclusion in Wales, including evidence of the take-up of broadband support schemes on offer For many years, BT in Wales has taken a pro-active approach towards tackling digital exclusion through a number of innovative projects which have been developed by working with partners and listening to what disadvantaged groups required. The programmes have been developed to include people of all ages, ethnic groups and people with disabilities. In the financial year 2009–10, BT donated more than £1.3 million in Wales comprising time, cash and in-kind contributions, in the community. BT worked with the WAG in the formation of its initial Digital Inclusion Programme Communities@one which has now evolved into Communities 2.0. BT remains an active partner in this government led initiative and a BT representative sits on the Advisory Board. BT takes an active interest in the evolution of public and private sector policy on CSR and digital inclusion and responded to the WAG’s consultation in September 2010. A copy of that response is attached.31 It has a representative on the Board of the Business in the Community Advisory Board for Wales and seconded one of its senior managers to work with BitC on sustainability and green energy for 18 months until March 2011. BT promotes BT’s mainstream Digital Inclusion programmes in Wales eg the Community Connection awards scheme which provides free broadband connections to charities, and BT’s Internet Rangers where young people act as personal ICT tutors to older relatives, and which also identifies an annual Wales Internet Rangers Champion from among the young people involved. In 2010–11 BT in Wales has delivered a series of Work Inspirations events (working with BitC) whereby 14–15 year olds from secondary schools in South East Wales have attended two to three day work experience sessions aimed at teaching them employability and business skills. In addition to this, BT in Wales develops its own Digital Inclusion projects working with local partners. These include: — Looked after Children—where BT engineering apprentices become mentors to young people in care or about to leave care as part of a structured two week work experience programme. — WISP—Welsh Internet Safety Partnership. BT has supported the annual conference and is an active member. — Caring Connections project with St Johns Cymru. BT has provided four secondees and has worked with the charity on an innovative digital stories programme which has both linked the elderly with the younger generation and taught both generations new IT skills. — Welsh language internet safety programme developed with the Urdd. As part of this project, 20,000 Welsh language versions of BT Internet Green Cross Code will be distributed to young people in Wales over the coming weeks. — Antur Waunfawr. BT has worked with this social enterprise that supports disabled adults with IT training for support workers who are then able to train the people that they support. 31 Not printed. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 72 Welsh Affairs Committee: Evidence
(6) Progress made towards improving the provision of broadband infrastructure throughout Wales and eradicating broadband “notspots” BT commercially enabled all but 35 exchanges in Wales under its Broadband Britain roll-out, providing broadband access to virtually every household in Wales. As a result of RIBS (a WAG funded project) and BT match-funding, the final 35 exchanges in Wales were ADSL enabled providing broadband access to a further 8,500 consumers. The 35 were not viable for pure commercial investment due to the small number of customers they served and their locations. Take-up has been high, with approximately 4,687 end-users connecting. As a result of joint WAG (through the RIBS contract) and Openreach investment, a further 10 copper uplift schemes were completed providing broadband to communities across Wales. These were: Saundersfoot (Amroth, Wisemans Bridge and Summer Hill), Bronwydd, Llanpumsaint, Gwytherin, Aeron (Cilcennin) & Martletwy (Reynalton), Cil y Cwm, Beulah, Llanfynydd, and Ystrad Meurig. These 10 schemes brought broadband access to a further 1,358 households. All of the consumers are served by the Openreach open-access, competition-ready network, which means that they have a choice of communications service provider all of whom are competing for business, all of which brings prices down and improves service for the consumer. The RIBS contract ended in March 2011 and will be superseded by new WAG approaches to supporting broadband delivery in rural areas reflecting the increasing demands for greater bandwidth than 0.5mbt/sec which was provided for by RIBS.
(7) Progress made towards improving mobile broadband coverage in Wales BT Wholesale plays a significant role in supporting the UK mobile industry by providing backhaul services connecting mobile base station sites to mobile core sites. Mobile broadband services have evolved over the past three years and during this time BT Wholesale has signed contracts for, and is actively rolling out, high speed Ethernet backhaul services for all UK mobile operators to support the network growth driven by mobile broadband. The continued deployment of next generation networks both in access and core, by BT, provides underlying infrastructure that supports BT’s provision of wholesale services to all mobile operators. There could be huge benefits to more remote areas, for example in West Wales, from the provision of Ethernet services. Looking ahead, BT has been conducting research into the potential use of advanced mobile technology, such as LTE (Long Term Evolution), to support the roll out of broadband into areas which are challenging for the deployment of current fixed technologies. This research covers the techno-economic considerations of deploying such technology in either a dedicated network or in a shared network approach. BT Wholesale has also approached its mobile operator customers with the future possibility of sharing LTE network deployment for fixed and mobile services. Confidential discussions with one specific mobile operator on the technical and commercial considerations of rolling out of a shared LTE network, that would enhance network coverage for fixed and mobile services, are progressing. May 2011
Written evidence submitted by FibreSpeed and Geo Networks Ltd Executive Summary Introduction 1. FibreSpeed and Geo are delivering NGA networks for Wales in partnership with the Welsh Assembly Government. Through our Open Access network, we are enabling retail service providers to invest and develop solutions for businesses and citizens in Wales, thus bridging the digital divide and enhancing the economic competitiveness of North Wales. More detail on the background of Geo and FibreSpeed is included in Appendix A.32 2. Within this paper for the Welsh Affairs Select Committee, we provide detail on the FibreSpeed network and its successes and seek to inform your inquiry into Broadband in Wales with comments on your stated areas on interest. 3. We have summarised the key points in our submission:
FibreSpeed in Wales — FibreSpeed is a successful intervention project, operating in North Wales, delivering NGA services today. Its structurally separated, open access model creates maximum competition in the market place, lowers the barrier to entry by allowing operators to engage and compete at the most cost effective level of the network, resulting in competitive prices, greater levels of innovation and more choice for consumers. 32 Not printed. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 73
— FibreSpeed’s current and planned network enables 40% of businesses and population in North Wales access to 30 Mbit/s services through wireless connectivity; with businesses, on or near the Welsh Assembly Government’s strategic business parks, able to receive multi-Gigabit services. FibreSpeed is working with the Welsh Assembly Government over the plans to extend the benefits to an increased perrcentage of the businesses and population in North Wales.
Current provision of broadband services in Wales — There is limited competition in the provision of broadband services in much of Wales. Despite previous interventions such as RIBS, there remains a significant number of businesses and premises that cannot receive basic broadband, let alone competition from different retail service providers. — The penetration of alternative broadband service providers, ensuring true competition, is confined to the more densely populated regions of Wales. However, with the support of the Broadband Support Scheme, a number of “not-spot” villages are being connected by FibreSpeed service providers in North Wales, confirming the benefits and success of the model.
Next Generation Access delivery pilot projects — We strongly support the UK Government’s pilots. Within Wales there would be benefit from pilots, due to the diversity of issues that are encountered and the potential for significant variation to solutions between the more deprived post-industrial areas and the mixed economy rural areas — FibreSpeed is an excellent platform from which to pilot solutions as it already delivers a Fibre Core backhaul solution as far as Pwllheli. FibreSpeed and Geo welcomed the announcement by the Chancellor of the funding for a 5th BDUK pilot in Pwllheli and the Lleyn peninsular, during his visit to Wrexham on 10 February 2011 however, we now understand that the Welsh Assembly Government do not intend to progress the pilot.
UK Government Strategy alignment to Welsh Assembly priorities — The UK Government and BDUK are adopting a different intervention approach to that compared with the Welsh Assembly Government. In Wales, it is unlikely that BDUK will run trials or regional NGA deployments as the Welsh Assembly Government’s Digital Wales objectives are already advanced and currently in competitive dialogue procedure with potential suppliers.
Digital Inclusion — Next generation networks are only as good as the people who use them and the skills they have to navigate the internet. We believe that the success of any next generation network is reliant on public take up and people’s skills to maximise the benefits. — The disadvantages of being off line both socially and economically are so great that we need to act quickly to close the poverty gap, improve standards of living and give everyone equal opportunities.
Provision of Broadband Infrastructure — It is widely accepted that within Wales the delivery of broadband has been slower than in other parts of the United Kingdom and that if Wales is not to be left behind in the roll-out of NGA networks, then government intervention will be required in certain areas. — To create a step-change in the capability of networks then increased deployment of Fibre to the Home (FTTH) would be required. A substantial cost reduction can be achieved through the use of existing infrastructure, such as BT ducts and poles. There is currently consultation ongoing with BT however, the current arrangements and pricing of the offer would not be sustainable.
Summary 4. There is a requirement for government intervention in the deployment of NGA networks if the power of the internet is going to be harnessed for both economic growth and social cohesion. The approach that should be adopted will vary from region to region and should be designed to meet the local circumstances. 5. There is a once in a generation opportunity to invest in the networks, and all infrastructure being deployed should have a long life cycle, such as fibre which should last 40 years, and be reusable. Geo and FibreSpeed strongly support investment in the passive network, consisting of fibre, co-location facilities and mast infrastructure, as a truly open access infrastructure platform that can be reused by multiple service providers for each technology cycle thus ensuring a long term benefit that will not become obsolete within a few years.
FibreSpeed in wales 6. The Welsh Assembly Government recognises FibreSpeed as a successful intervention project, a view which is widely shared across the telecommunications industry. FibreSpeed and Geo have been consulted by other regions wishing to replicate its success. Key to our success is the far-sighted open access and structurally cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 74 Welsh Affairs Committee: Evidence
separated organisation which was designed and specified during the procurement and is widely accepted as best practice for any NGA intervention project. 7. The open access model creates maximum competition in the market place, lowers the barrier to entry by allowing operators to engage and compete at the most cost effective level of the network, resulting in competitive prices, greater levels of innovation and more choice for consumers. The open access model is consistent with the European Commission’s regulatory Framework and the State Aid Guidelines for investment in NGA networks using public funds and should be a key part of any government funded solution for NGA network deployment. 8. FibreSpeed services were targeted initially at strategic business parks, but with an understanding and intention that by deploying an open access wholesale fibre network, then it would benefit businesses outside of the business parks and improve services for communities, citizens and the public sector. 9. The achievements from FibreSpeed’s initial focus on North Wales strategic business parks are: — Maximising the competitive benefits for businesses and consumers due to the presence of 12 Service Providers contracted in the two years since live services commenced. — Helping to drive down the pricing of incumbent providers, which was between three and seven times greater than the most competitive regions of the UK, to a point where it is now no higher. — Increased economic activity as service providers invest and grow their businesses and local businesses expand locally rather than relocate. 10. As the project has “Spread its Wings” beyond the initial focus, as envisaged during the concept phase of the project, a number of further benefits have been realised: — Three service providers are currently rolling out wireless broadband solutions to SME businesses and consumers, including many in “not-spots”; — Three projects have now been announced delivering direct connectivity to Ireland with subsea cables to Dublin expected to utilise and benefit from the FibreSpeed network. 11. The numbers of businesses and consumers benefiting are growing by the month, and are currently: — Number of directly connected premises: 41. — Forecast number of connected premises by March 2012: 70. — Number of businesses receiving services at their business premises on a FibreSpeed connection: over 100. — Number of businesses receiving business services remotely through a FibreSpeed connection: over 1,000. — Estimated number of businesses within reach of FibreSpeed’s masts: 9,000, representing circa 40% of all the businesses located in North Wales. — Estimated population covered by FibreSpeed’s masts: 270,000, representing circa 40% of all population living in North Wales. 12. The coverage area, with population mapped to ward centres, from the current FibreSpeed Phase 1 network is shown in Figure 1 below. The areas circled, in Gwynedd and Anglesey, are expected to be covered once final approvals are received for existing plans. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 75
Figure 1
CURRENT FIBRESPEED COVERAGE (INCLUDING IN DEVELOPMENT) IN NORTH WALES
13. FibreSpeed is in discussions with the Welsh Assembly Government of how to extend the benefits from FibreSpeed to the wider geographic area in North Wales in order to complete Phase 1 of the envisaged FibreSpeed network. The factors being considered include: — Extension of customer connection footprint. — New and extended towers at existing business parks. — Additional towers on or near network to enhance coverage. — Infrastructure access points for 3rd party infrastructure connection. — Targeted extensions to redevelopment areas to meet wider economic agenda. — Completion of the Network with full resilience for the six North Wales counties.
14. The benefits of this network growth plan for North Wales include: — Early mobilisation to deliver services and economics benefits quickly. — Providing access to 30 Mbps to 95% of businesses and residents by the end of 2013. — Ability to maximise use of ERDF funding in final years of programme in Wales. — Enhancing the economic benefit from existing network as service providers grow. — Attracts diverse service providers and private investment in a growing market demand area. — Leverages market innovations over increased coverage area.
15. The potential opportunity from the development under consideration would be to increase the coverage in North Wales to 96% for both business and citizens and attract significant private sector investment to deliver the retail services ensuring that the step change in benefits is extended from the coverage area to a much wider community.
16. The potential coverage area, with population mapped to ward centres, from a complete FibreSpeed Phase 1 network is shown in Figure 2 below: cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 76 Welsh Affairs Committee: Evidence
Figure 2 POTENTIAL COVERAGE FROM THE COMPLETE FIBRESPEED PHASE 1 NETWORK
17. In summary, FibreSpeed is a successful government intervention project that is delivering NGA services to businesses and citizens in North Wales today that meet the European Commission’s NGA targets today and the Welsh Assembly Government aspirations for 2016 and 2020, within its coverage area. It is also an exemplar of Government intervention that should be replicated for future NGA interventions. 18. Generally, intervention through networks, where retail service provision and wholesale operations are structurally separated, and service providers have open access to the passive (fibre, masts and co-location) elements of the network will support the expansion of competition in retail services in Wales and ensure that Wales can be an exemplar of both ICT services and Government intervention. 19. Within this paper and the attachments,33 we have set-out some of the key issues that should inform your inquiry into Broadband in Wales and be considered in any Government intervention in NGA.
Inquiry Areas of Interest Current provision of broadband services in wales 20. It is widely recognised that there is limited competition in the provision of broadband services in much of Wales and that despite intervention of the Welsh Assembly Government, through BT and the Regional Innovative Broadband Support (RIBS) project, there remains a significant number of businesses and premises that cannot receive basic broadband, let alone competition from different retail service providers. 21. The penetration of alternative broadband service providers, ensuring true competition through Local Loop Unbundling, and retail business service providers is confined to the more densely populated regions of Wales. In North Wales, this is predominantly restricted to the Flintshire and Wrexham, due to the close proximity to England. 22. Through FibreSpeed and the support of the recently introduced the Broadband Support Scheme, a number of “not-spot” villages are being connected and services are being delivered via at least three different FibreSpeed service providers. It is envisaged that more communities will be connected over the coming months as the solutions are designed and approved through the scheme and the service providers continue to invest in the network. 23. FibreSpeed’s retail service providers were not active in the connectivity market in Wales, prior to the availability of FibreSpeed. A recent press release by one service provider indicated that they were investing £450k in their network deployment and combined with estimates of other service provider investments that 33 Not printed. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 77
aggregate to a similar sum, demonstrates the investment attracted and that the level of services will continue to improve following the FibreSpeed intervention.
UK Government’s Broadband strategy 24. The UK Government’s broadband strategy is to introduce new Universal Service Commitment (USC) of 2Mbps across the UK by 2015. The UK Government has set up Broadband Delivery UK (BDUK) to procure from the market the appropriate services to deliver USC to the currently underserved areas of the UK. 25. The ambitions of BDUK and Digital Wales share three common challenges in relation to universal broadband access: — Widespread geographical coverage; — High quality or bandwidth; — Affordability. 26. The Welsh Assembly Government’s existing actions to address the availability of basic broadband services include the Regional Innovative Broadband Support (RIBS) scheme which has been supplemented by the introduction of an infill Broadband Support grant scheme. The Welsh Assembly Government’s stated aim is to achieve near universal access to a basic level of broadband throughout Wales by the time that a new UK Government wide universal service commitment for broadband is introduced, while they progress with the next phase procurement through Digital Wales. An issue with this approach is that a number of businesses and residents continue to have no or poor quality access to broadband services. 27. The primary objective of BDUK is to deliver USC to the rural and remote areas of the UK. BDUK believe that intervention, on a regional basis, is necessary to deliver USC to underserved areas. They await proposals from the market on how to deliver this, but it is unlikely that an infill grant scheme will be part of the intervention strategy or deal structure with suppliers as it cannot guarantee broadband services to those that need it most. 28. Although, BDUK clearly distinguish between USC and NGA delivery, they are seeking solutions from the market that deliver a day 1 solution to USC with a migration path that climbs to NGA over time. BDUK’s regional approach to intervention to deliver USC and future NGA solutions contrasts significantly with the Welsh Assembly Government’s ambitions to deliver NGA on a pan-Wales basis. This is the key difference between the two broadband strategies. The advantages and disadvantages of these contrasting approaches are detailed in Section 3 of this response, headed Next Generation Access delivery pilot projects.
Next Generation Access delivery pilot projects 29. We have set-out above the success of FibreSpeed and strongly support this approach in underpinning NGA networks, however there have also been other projects in the UK and abroad, on varying scales such as “Cyber Moor” at Alston Moor in Cumbria and the Fibre to the Home (FTTH) network deployed in Nuenen, in the Netherlands, from which Reggefiber has grown to deliver FTTH networks in 40 towns across the Netherlands; these have shown differing approaches and how private and public sector can cooperate in tackling the delivery of the NGA networks. 30. We strongly support the UK Government’s pilots, as we believe that there are lessons that can be learnt which would then be applied across the UK, in particular as the contracting bodies will have limited experience of the business and dynamics of intervention in this market. 31. The dynamics and costs of intervention needed vary, dependent on a number of factors, in particular geography and population density, and these will only be fully understood through the pilots and the resolution of permitting access to BT Ducts and Poles, through “Physical Infrastructure Access” (PIA), which we address later. 32. Adopting a regional approach to intervention after the assessment of the pilot projects, would seem a logical approach to ensure best value for money, innovation in solutions and risk management. It is important to strike a balance between driving economies of scale and supporting innovation and bespoke solutions for unique local circumstances. 33. Within Wales we believe there would be benefit from pilots, due to the diversity of issues that are encountered and the potential for significant variation to solutions between the more deprived post-industrial areas and the mixed economy rural areas. However, the Assembly Government have adopted a Pan-Wales approach, which may favour larger operators due to complexity and size of the solution. While potentially reducing the total level of intervention, it potentially risks excluding the last 5–10% of the population from the solution. 34. In summary, addressing the problem of poor Broadband in Wales will not be achieved through a one size fits all approach and the pilots are mechanisms for sourcing the most cost effective solution for each area. The key areas for focusing intervention are the rural areas where there is a clear lack of market presence and competition to deliver broadband services, which restricts the services offered and makes those services offered more expensive for the end user. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 78 Welsh Affairs Committee: Evidence
35. FibreSpeed is an excellent platform from which to pilot solutions as it already delivers the Fibre Core backhaul solution as far as Pwllheli. FibreSpeed and Geo welcomed the announcement by the Chancellor of the funding for a 5th BDUK pilot in Pwllheli and the Lleyn peninsular, during his visit to Wrexham on 10 February 2011 however, we now understand that the Welsh Assembly Government do not intend to progress the pilot but intend to use the funding within its wider Digital Wales procurement, which we believe would be a missed opportunity to test the solutions and accelerate the roll-out to a key region of Wales. 36. Geo responded to the BDUK USC Theoretical Exercise in June 2010. An extract is included at Appendix B34 that describes an open access hybrid fibre and wireless broadband solution for remote areas to address market failure and provide a step change in service delivery for the consumer. Geo is engaged with the UK pilots and will be bidding to deliver some of them.
UK Government Strategy alignment to Welsh Assembly priorities 37. The UK Government and BDUK are adopting a different intervention approach to that compared with the Welsh Assembly Government. In Wales, and we understand that BDUK will not run trials or regional NGA deployments, as the Welsh Assembly Government’s Digital Wales objectives are already advanced and currently in competitive dialogue procedure with potential suppliers. 38. The UK Government did announce, as part of the Spending Review, a £10m investment in Pwllheli, North Wales, in late 2010. However, no NGA trial has been announced in Pwllheli, which would indicate that this public investment will contribute to the Welsh Assembly Government’s wider pan-Wales Digital Wales procurement process. 39. As a result, BDUK may not directly influence the Welsh Assembly Government’s approach and instead any money made available by UK Government for public investment in NGA in Wales, is likely to be combined with its other funding sources to deliver a pan-Wales solution. However, overall the delivery of better broadband to non-competitive areas remains a consistent theme.
Digital Inclusion 40. We responded to a Welsh Assembly Government consultation on Digital Inclusion and attach the response for your consideration.35 41. In summary, Next Generation Networks are only as good as the people who use them and the skills they have to navigate the internet. We believe that the success of any next generation network is reliant on public take up and people’s skills to maximise the benefits. 42. Internet and ICT skills bring countless benefits including consumer benefits, education benefits, employment benefits and overall improved community and government benefits. Notwithstanding this, over 10 million adults in the UK have never used the internet.36 Statistics show that use of the web decreases with age and increases with income. The links between social disadvantage and internet take up are strong and it is estimated that around four million of the non-users are among the socially disadvantaged people in the UK, of whom 39% are over 65, 38% are unemployed and 19% are adults in families with children.37 43. The advantages of being online are countless from both a social and economic basis, people have greater choice of goods and services, transactions and communications happen instantaneously saving people time and money. The internet creates countless efficiency in all areas of life from home working to online shopping, access to friends family and daily news. Further the sheer volume of resources available to someone who is online compared to someone who is not is vast. The disadvantages of being off line both socially and economically are so great that we need to act quickly to close the poverty gap, improve standards of living and give everyone equal opportunities.
Provision of broadband infrastructure 44. It is widely accepted that within Wales the delivery of broadband has been slower than other parts of the United Kingdom and that if Wales is not to be left behind in the roll-out of NGA networks, then Government intervention will be required in certain areas. 45. As previously highlighted, the FibreSpeed project is already delivering benefits to communities in North Wales. FibreSpeed has seen improving coverage of rural North Wales through the deployment of wireless solutions with two service providers: AB Internet and exwavia, providing residential and SME solutions starting from £19.99 a month to slow and Not Spots, with services at 30 Mbit/s available and operational. One Flintshire hotel that now has a 30 Mbit/s through AAB Internet and FibreSpeed, reported in the press that it had lost a corporate contract worth £70,000 in 2010 due to non-availability of broadband. 46. The deployment of these networks is being funded by private investors, however they are also receiving some funding through the Welsh Assembly Government’s Broadband Support Grants, which is enabling faster 34 Not printed. 35 Not printed. 36 http://raceonline2012.org/sites/default/files/resources/manifesto_for_a_networked_nation_-_race_online_2012.pdf Page 17 37 Ibid page 19 cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 79
roll-out and a greater mix of solutions. The use of grants focused on end-user businesses and citizens is an effective way of targeting funding to the area of highest need and for developing innovative solutions that address local circumstances.
Market Review 47. Under the Welsh Assembly Government’s Digital Wales procurement, they are conducting a Market review as required by EC guidelines. Geo has responded and we attach a copy of the response for your information.38
Regulatory Remedies—Physical Infrastructure Access 48. To create a step-change in the capability of networks then increased deployment of Fibre to the Home (FTTH) would be required. A substantial cost reduction can be achieved through the use of existing infrastructure and the industry has lobbied for access to the BT pole and duct infrastructure. There is consultation and negotiations ongoing with regard to the Physical Infrastructure Access (PIA) product that has been offered by BT, which will permit access to BT ducts and poles. 49. However, the industry believes that the current arrangements and pricing of the offer will not achieve the aims, in particular the following key issues need to be addressed: — Initial pricing is not reflective of the cost to BT and does not make the product commercially viable. — Restrictions on use for leased lines to businesses substantially reduces the services available and investment return. — Restrictions on use for Fixed or Wireless backhaul substantially reduces the services available and investment return. 50. Until a viable PIA product is agreed and available, there is likely to be slow progress on the roll-out of new NGA networks. From the experience of the introduction of Local Loop Unbundling products, which took two years to develop, thus early conclusion of the current negotiations is unlikely and it is likely that Ofcom will be required to formally regulate. Delays to the agreements on PIA may impact the success and benefits of the BDUK pilots.
Improving Mobile Broadband coverage 51. We have set-out some of the issues relating to Mobile broadband Appendix B,39 relating to the Pilot projects. Further to this information, consideration also needs to be given to addressing the following issues: — Provision of the additional spectrum following digital switch over at affordable pricing for rural areas. — Removal of the exclusion of backhaul from wireless and mobile masts in the use of the BT PIA product. 52. Addressing these issues, in conjunction with tackling the wider broadband coverage should provide a platform for mobile operators to increase coverage, although we are not well placed to discuss their investment decision making criteria. June 2011
Written evidence submitted by Disconnected Wales 1. Executive Summary 1.0 Disconnected Wales welcomes the Welsh Affairs Select Committee’s commitment to Broadband in Wales as part of the UK Government’s notable leadership and vision to provide the UK with “the best broadband network in Europe by 2015”. At Disconnected Wales we feel this a timely inquiry since the Welsh Government (WG) formerly known as Welsh Assembly Government (WAG) is currently in dialogue with Service Providers as part of its Next Generation Broadband procurement with a view of short listing suppliers over the summer months. 1.1 Disconnected Wales is an enablement hub to empower local communities to gain access to Broadband/ Superfast Broadband by engaging with the Public Sector, Service Providers, Academia and Media. We represent Social Enterprises across Rural Wales with the sole ambition of securing a level digital playing field for individuals, communities and businesses throughout the Principality. 1.2 With the Welsh Government aligning its ambition with the EU’s Digital Agenda for Europe to deliver 30Mb to all businesses and public sector organisations by 2016, we share the real concern that certain parts of Wales, particularly in rural areas will get left behind as part of this process. 38 Not printed. 39 Not printed. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 80 Welsh Affairs Committee: Evidence
1.3 Therefore further to the Committee’s previous inquiry into Digital Inclusion in Wales we are now at a critical point in regards to socio-economic issues confronted by the people and businesses in rural Wales which could be further complicated as WG’s current procurement programme is rolled out.
2. Scope of the Inquiry 2.0 Overview The Committee’s inquiry agenda is set out to examine: — The current provision of broadband services in Wales. — The UK Government’s broadband strategy, with particular regard to its potential impact on Wales. — The case for further Next Generation Access (“super-fast” broadband) pilot projects based in Wales. — The extent to which the strategy of the UK Government will complement the Welsh Assembly Government’s priorities for the future of broadband in Wales. — Progress made towards promoting digital inclusion in Wales, including evidence of the take-up of broadband support schemes on offer. — Progress made towards improving the provision of broadband infrastructure throughout Wales and eradicating broadband “not-spots”. — Progress made towards improving mobile broadband coverage in Wales. Disconnected Wales is a community led engagement hub which enables communities and business across rural Wales to gain access to Public Sector, Service Provider, Academic and Media resource enabling the citizens, social enterprise and business gain access to broadband and super-fast broadband services. Disconnected Wales is therefore pleased to share our insight, expertise and experience by commenting on the points raised by the Welsh Affairs Select Committee inquiry and we would be pleased to present our further finding if invited to do so.
2.1 The current provision of broadband services in Wales 2.1.1 Lack of clarity surrounding the provision of broadband services in Wales is a major concern. In truth we only have a vague macro view of fixed line provision and that is not to take into account roaming data enabled mobile devices. 2.1.2 The pace of change and churn in mobile contracts presents a complex picture however the Ofcom Communications Market Report for Wales, cites take up of Broadband in Wales has reached 64% and states that 77% of households in Wales are now served by a BT Unbundled Exchange. 2.1.3 Of the 434 Exchanges in Wales, BT has enabled all of them with ADSL Max technology, thereby in theory serving the respective communities with up to 8Mbps. Having said this, since ADSL runs over copper, which is subject to line loss over distance, there is no clear picture as to how many people get what service unless a customer by customer survey is conducted. For example a premises in SA18 3NQ is served by the unbundled Cross Hands exchange and therefore according to published data should receive up to 8Mbps, however the customer at this premises on a good day receives a maximum download service of 512kbps with a neighbour receiving download speed of 256kbps. With 2Mbps being the least that audio/visual reception can be received customers operating on such low bandwidth are clearly disadvantaged in both business and leisure. 2.1.4 Usage and take up remains to be a key concern, particularly amongst the more vulnerable age groups and people in poorer economic areas such as the Valleys and indeed certain parts of the National Settlements. 2.1.5 Pricing models by service providers are misleading and clearly discriminate against customers in rural locations and those furthest from the BT Exchange. In a highly competitive consolidating market, quoted service speeds, special offers and incentives over and above standard pricing and performance bear no resemblance to customers’ service experience. Only hearsay and rhetoric from motivated individuals and community groups are alerting us to the scope and scale of the problem. 2.1.6 Value added services supplied by the main providers such as BT, Virgin and Sky drive consumer choice and behavior. Whilst BT has the challenges of upgrading the breadth of their legacy network whilst providing value added services, both Virgin and Sky adopt a market penetration strategy driven by their content. This leaves people and businesses in rural wales at a disadvantage both from a competitive infrastructure and content perspective. Since there is currently no mechanism and effective joined up Market Led demand stimulation channels through which collective communities can express their desire and perceived need for greater broadband services. 2.1.7 Lack of competition in Ofcom Market 1 areas to roll out superfast/next generation broadband services has therefore stimulated WG to intervene as part of the current procurement programme. 2.1.8 Reliable and scalable technological solutions in intervention areas is a concern to the communities in which we represent. The widely held view is that Fibre to the Premises/Home (FTTP/H) is the most desirable, cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 81
followed by (GPON), Fibre to the Cabinet (FTTC), Wi-Fi/Wireless, then lastly xDSL and Satellite. Therefore the rush to deployment without clear market insight and a coherent strategy will inevitably simply serve to place a plaster on the deeper wound of digital inclusion in Wales, as the technologies further down the technology hierarchy will need to be replaced in due course and therefore simply represent a “quick fix”. 2.1.9 In the longer term Mobile broadband presents a welcome alternative addition to the provision of broadband in Wales. The backbench committee motion led by the Rt Hon Rory Stewart MP to open up 800Mhz indeed sends the right signal to Ofcom in addressing competition and coverage for business, education and people living in isolated areas in Wales.
2.2 The UK Government’s broadband strategy, with particular regard to its potential impact on Wales 2.2.1 The UK Government’s broadband strategy is to be commended in the way in which it recognizes the need to not only engage with main industry players and public sector bodies but also regional and community groups. Such engagement enables the likes of Broadband Delivery UK (BDUK) identify the perceived needs of consumers relative to delivery in order to ensure the effective and efficient use of resources. Having said this there is greater scope for increased vision and flexibility to maximize is impact in Wales. 2.2.2 BDUK’s performance as a delivery vehicle has indeed come under intense scrutiny in relation to its ability to address “non-commercially attractive areas” in the so-called “final third” by not empowering smaller operators and community projects with the tools to solve the issue. This is of particular concern in Wales where local providers and community groups will have to deal with not the “final third” but in fact the “final two thirds” of the nation. 2.2.3 Broadband Pilot Projects have been successful in creating an insider outsider environment and have served to stimulated awareness and media interest. Take up in the four initial pilot areas will be interesting to the people of Rural Wales given the project’s profile and proximity, with the Herefordshire project serving the key settlement towns in Powys such as Hay-on-Wye and currently poorly served outlying villages such as Glasbury. 2.2.4 Disconnected Wales strongly supports the deployment concept of a coherent roll-out strategy around the Community Broadband Hub as championed by BDUK. The Community Hub concept provides resilient backhaul and a scalable spoke effect solution for outlying villages and isolated premises. This carries particular pertinence in Rural Wales and is preferable to a deployment of a dysfunctional/non-integrated patchwork of community projects operating different technologies with varying service levels for their communities. That is why Disconnected Wales is passionate about sharing our knowledge and technological insight in order to manage not only public sector but also more importantly community expectations and perceptions for performance delivery. 2.2.5 Public Perceptions/Take up and Demand Stimulation are critical to the success of the UK Governments strategy and hold particular importance in Wales where the social, economic and cultural dynamic is very localized. The contribution of the likes of Communities 2.0 and other third sector organisations is be recognized and moreover built upon by an empowered body that effectively harnesses the awareness of broadband and drives interest through to action so that the citizens of all ages and businesses of all sizes benefit from digital inclusion in Wales.
2.3 The case for further Next Generation Access (“super-fast” broadband) pilot projects based in Wales 2.3.1 The Welsh Affairs Select Committee is be applauded for providing a platform from which we raise the case for a “superfast” broadband pilot in Wales. According to WG’s own research conducted by Analysis Mason, broadband service across vast areas of Rural Wales, home to Key Settlements, Primary Settlements as well as Rural Communities and Farms, will still remain unchanged in 2015 following WG’s current Broadband procurement programme. Whilst DEFRA administer an Agricultural Fund for Rural Development which has to date delivered One Broadband Project. This fund however, stops at the border and does not enter Wales. Therefore there is a substantial opportunity for Rural Wales to embrace and build upon the learning from all four first phase pilots especially from neighbouring areas such as Herefordshire. 2.3.2 Meaningful market insight into attitudes and buyer behavior together with the technical barriers and bureaucratic hoops would provide a clear and precise picture that would facilitate a successful pilot in Rural Wales. By co-ordinating a variety of interactive inputs and demonstrating a best defined budget for the area would re-establish credibility for not only the scheme but for government intervention as whole whilst demonstrating the potential for commercial viability to other geographically challenging areas across the nation. 2.3.3 There are scores of Primary and Key Settlements across Rural Mid & West Wales which fail to achieve broadband speeds as outlined in the Universal Service Commitment. Clearly WG are waiting on their successful bidders to submit their plans and also submissions from the Open Market Review. Moreover Disconnected Wales can provide live examples towards a business case for super-fast broadband pilot in Rural Wales of consumers and businesses from across the 600,000 premises of the Local Authority Areas of: Monmouthshire, Powys, Pembrokeshire, Carmarthenshire, Ceredigion. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 82 Welsh Affairs Committee: Evidence
2.3.4 Disconnected Wales would be proud to utilise our insight, engaging with our partners and drive local involvement, testing appetite and ensuring the supply of best of breed infrastructure and the deployment of the most appropriate technology, thereby affecting efficient use of Capital Expenditure whilst maximizing demand stimulation ensuring Pilot Project success and delivering a positive narrative around regional growth.
2.4 The extent to which the strategy of the UK Government will complement the Welsh Assembly Government’s priorities for the future of broadband in Wales 2.4.1 Both the UK government and WG acknowledge that the market, under normal conditions, is unlikely to deliver next generation access (NGA) to 100% of premises in Wales as vast areas of the final 2/3s of Wales will be commercially unattractive for service providers. Therefore the close alignment of WG’s priorities inline with UK Government’s strategy will enable choice, widen coverage, increase broadband speed, drive adoption and create competition. All stakeholders need to embrace insights from WG’s Open Market Review and other academic research currently being undertaken. Moreover to ensure complementary strategies for both the UK Government and WG an in-depth understanding of local consumers’ and businesses’ perceived needs, in relation to broadband will be required, ideally from hyper-local/ grassroots organisations such as the local social enterprise. These insights would prove invaluable and would empower the UK Government and WG to establish key objectives, define their positioning and manage the strategic balance.
2.5 Progress made towards promoting digital inclusion in Wales, including evidence of the take-up of broadband support schemes on offer 2.5.1 The latest broadband take up figures published by Ofcom (2010) suggests progress is being made in regards to digital inclusion since the Welsh Affairs Committee’s inquiry in 2009. Ofcom highlight Welsh consumers are embracing communications services and are becoming “increasingly tech-savvy” which has driven take up in Wales to 64% compared to 71% for the UK as a whole, thereby narrowing the gap from 10 to 7 percentage points. Wales has the highest proportion of mobile-only household at 19% compared with the UK average at 14%. Ofcom report that as a result Wales has the highest mobile broadband take-up of any nation in the UK at 16% which represents a 5% increase from 2009, however Wales still trails the South East at (18%) when comparing regional differences. 2.5.2 Consumers and businesses in Wales are becoming more dependent on the broadband and mobile technology, although broadband adoption rates in rural areas at 67% lagging behind equivalent fixed line adoption in urban areas at 72% highlights the present digital divide. Whilst good connectivity is a necessity for some, the cost benefit of having broadband in the current economic climate, together with the lack of perceived need amongst certain elements of the population presents a real challenge for digital inclusion, particularly in rural Wales. 2.5.3 The Broadband Support Scheme is a good scheme in softening the financial cost of broadband and awareness is high with stakeholders such as WG, Service Providers & Local Authorities, and Notably Dylan Griffiths in Gwynedd County Council doing sterling work raising its profile. Having said that, take up across the nation is poor and with only a fraction of the £2 million a review of the scheme is required. Disconnected Wales welcomes the WG’s intention to extend the scheme to consumers receiving less than the USC of 2Mbps, however further review of the process and accountability is required if community groups, Social Enterprises and individuals are to benefit from the scheme. An increase in the schemes functionality could also include data capture in order to create a profile map of broadband adoption across the nation. 2.5.4 The drought of market insight in rural areas is focusing Triple/Quad play providers to pursue product penetration strategies with Ofcom reporting 44% of Welsh households taking bundled services. This increase from 35% in 2009 whilst revealing a level of brand loyalty in urban areas highlights the drought of choice as a result of limited unbundled exchanges in counties such as Monmouthshire, Powys, Pembrokeshire, Carmarthenshire and Ceredigion are hampering Digital Inclusion in rural Wales.
2.6 Progress made towards improving the provision of broadband infrastructure throughout Wales and eradicating broadband “not-spots”; and 2.6.1 Recent infrastructure investments such as £30 million in North Wales have delivered a thorough assessment and scrutiny of providers’ plans and motivations should be undertaken for all future projects especially when considering the recent £30 million infrastructure investment. Realistic business models, costings and projections should be thoroughly assessed and effective payback to the public purse needs to be measured. Wales will not progress towards improving broadband provision and eradicating “not-spots” by lining the pockets of providers with ulterior motives or to satisfy local public servants. 2.6.2 Whilst some service provider business model projections appear to be stuttering Micro business continue to thrive. Micro Enterprises who account for a third of employment in Wales could be argued remain generally unaffected by such investment with the WG stating that 40% of Welsh Businesses do not engage in cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 83
e-commerce with many not even having a website. From our engagement with Micro Business it is evident that mobile communications are becoming an increasingly important tool in managing thriving business in Rural Wales.
2.7 Progress made towards improving mobile broadband coverage in Wales
2.7.1 The pace of innovation, change presents a real opportunity for future mobile broadband in Wales, with applications allowing providers supply dynamic service and price offerings around time, speed and content their network usage and services and offer dynamic pricing in a competitive market space.
2.7.2 Current pre-eminence of mobile technology together with short-term contract churn presents a real opportunity albeit the challenge of coverage remains. Given the topography of the Principality mobile base stations remain effective on hilltops however, given cloud cover, valleys and building architecture present users which at best is a patchy service. Indeed Mark Williams MP states that he cannot maintain a mobile signal as he drives through his Ceredigion constituency, which happens to have the highest proportions of small businesses per head of population anywhere in the United Kingdom. There is not a single obstacle to growth of Mobile Broadband rather a complex mesh of managing expectations, organizational ambition and technical ability.
2.7.3 Managing expectations maybe a medium term challenge as exists with fixed line broadband access and coverage with both the industry and academia cautious of resilient reliable delivery. As with fixed-line broadband, meaningful insight into the views, needs and expectations of end users will be required if the pace of progress towards improving mobile broadband coverage in Wales is to be achieved.
2.7.4 Mobile operator engagement will be required and their ambition incentivized given traditional perceptions of the challenges within Wales. Whilst new product development in knowing the views, needs and expectations of end users will prove a barrier to investment and deliver across Wales.
2.7.5 Technical ability and integration across devices will be a challenge to mobile broadband coverage in Wales. However, as operators merge such as T-Mobile/Orange and technology platforms consolidate around the like of Apple and Google Android network sharing and outsourcing will need to be more widespread in providing a greater chance of improving reliability of service across Wales.
3. Conclusion
3.1 Disconnected Wales welcomes this opportunity to propose to the members of the Welsh Affairs Select Committee that the approach to fully understanding the difficulties experienced by citizens and businesses in rural Wales in gaining access to broadband services, whilst addressing issues around market failure both in the short and long term is through: — Meaningful engagement with local communities and market-led demand stimulation. Thereby activating the Big Society heralding a third way for effective and efficient Broadband Deployment throughout Wales. — Joined-up approach in broadband deployment across the patchwork of key settlements, rural communities and outlying isolated areas beyond. This would ensure a scalable and future proof infrastructure over the long term. — Simple and flexible funding arrangements suitable to supporting community organizations through the public sector tendering process. Therefore ensuring efficient use of the public purse when and where required.
3.2 Direct Public Sector engagement and investment with third sector carries risks and costs not only in time, money and effort but moreover cost in trust that community sector organizations have the required management expertise and delivery capability. Therefore we at Disconnected Wales would be honoured to present to the Welsh Affairs Select Committee our insights, experience and findings of the challenges encountered by local communities in setting up Social Enterprise as they seek to gain access to broadband services.
We agree with the Rt Hon Rory Stewart MP when he states that Next Generation Broadband delivery is a significant opportunity for a big narrative around the success of community cohesion, the Big Society and social enterprise.
Disconnected Wales believe that Rural Wales can successfully champion this narrative with significant affect, whilst complementing WG’s procurement programme and the UK Government’s significant commitment, investing in the best broadband network in Europe by 2015. June 2011 cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 84 Welsh Affairs Committee: Evidence
Written evidence submitted by Virgin Media About Virgin Media Virgin Media is one of the largest residential broadband providers in the country, delivering next-generation internet access with ultrafast speeds of up to 100Mbps using a unique fibre-optic cable network. Our network delivers high speed connections directly to the home. We are dedicated to delivering innovative, next-generation services in response to ever-growing demands for faster broadband speeds, and increased capacity.
National Broadband Virgin Media’s national broadband product covers areas where the BT network is present (and where Virgin Media’s fibre-optic cable network is not). BT estimates that approximately 99% of the Welsh population could receive broadband service if ordered. High speed ADSL2+ service provides speeds of up to 16Mb per second and is provided through Cable and Wireless’ Local Loop Unbundled network which connects ultimately to BT’s access network. This has been enabled in 16 exchanges—detailed below—throughout Wales, which accounts for 3.69% of the population of the region. Exchange name Enable date County Region Barry Unknown Vale of Glamorgan Wales Bridgend Unknown Bridgend Wales Cardiff Empire 20/05/2005 Cardiff Wales Culverhouse 20/05/2005 Cardiff Wales Cwmbran Unknown Torfaen Wales Llandaff 20/05/2005 Cardiff Wales Llanedeyrn 20/05/2005 Cardiff Wales Llanishen 20/05/2005 Cardiff Wales Llanrumney 20/05/2005 Cardiff Wales Neath Unknown Neath and Port Talbot Wales Newport Savoy Unknown Newport Wales Penarth Unknown Vale of Glamorgan Wales Roath 20/05/2005 Cardiff Wales Swansea Main Unknown Swansea Wales Whitchurch 20/05/2005 Cardiff Wales Wrexham 20/05/2005 Wrexham Wales
Where exchanges are not LLU enabled, Virgin Media provide a service via BT wholesale.
Fibre Optic Broadband Our core broadband is delivered using cable technology over the Virgin Media network. This network consists of fibre optic cables to the cabinet, with the final link to the home provided by coaxial cable. This service is available to over 300,000 homes in Wales, predominantly in the areas of Cardiff and Penarth, Glamorgan and Gwent, Newport and West Glamorgan. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 85
Our core broadband proposition is available in a number of speed tiers: up to 10Mbps; up to 30Mbps; up to 50Mbps; and, following our investment and roll-out in the first half of this year, up to 100Mbps.
Virgin Media are also currently running trials on a 200Mbps connection in Ashford, Kent and a 1.5Gbps connection, originally being trialled with businesses in Shoreditch, London, but using a consumer connection that will, in years to come, be supplied to residential customers across our network.
100Mbps Roll-Out in Wales
We began rolling out our 100Mbps service across our network covering half of the UK in October 2010. Our roll-out in Wales began in November 2010 and we are now able to offer 100Mbps connection to our entire network in Wales. Included below is a summary of the completed roll-out timeline for Wales. Location Date of roll-out Barry November 2010 Pentwyn January 2011 Treforrest January 2011 Cwmbran February 2011 Port Talbot March 2011 Neath March 2011 Penarth March 2011 Newport West April 2011 Cardiff April 2011 Cwmbrwla May 2011 Newport East May 2011 Swansea May 2011 cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 86 Welsh Affairs Committee: Evidence
Nationwide, we are extending our 100Mbps service to around 300,000 homes per week, and it is now available to around three million customers. The new 100Mb package comes with a custom built, energy efficient, combined modem and wireless “N” router, which has the potential to deliver speeds of up to 400Mb as new services roll-out in the future.
Extending Future-Proof Superfast Network to the Final Third As well as innovating to offer the fastest possible speeds on our own network, Virgin Media is supporting plans announced in April 2011 by Fujitsu to invest in a future-proof superfast network to rural areas in the UK. Fujitsu announced plans—subject to a number of conditions—to invest in a fibre-to-the-home network that will be capable of carrying speeds of 1Gbps from day one to around five million homes in rural areas not covered by existing next generation networks. Virgin Media plans to purchase wholesale products from this network to offer truly game-changing speeds and services to customers in the final third. Virgin Media strongly believes that the Welsh Assembly and the Government must see the BDUK process as an opportunity to deliver the maximum return for every pound of public money spent. This means looking beyond the next five to 10 years to delivering a broadband network that is capable of delivering 1Gbps speeds and beyond for decades to come. Virgin Media strongly believes that Fujitsu’s proposed passive fibre optic network infrastructure offers that potential, combined with a flexibility to respond to demand from communications providers and consumers not currently present in the UK broadband market. However, a number of barriers stand in the way of that investment by Fujitsu going ahead.
Physical Infrastructure Access Fujitsu’s planned network investment is dependent on them gaining access to BT’s infrastructure in the final third. Following, Ofcom’s latest regulatory review of the Wholesale Local Access market, the regulator placed a regulatory obligation on BT Openreach to provide access to its physical infrastructure—poles and ducts—on fair and reasonable terms. Access to poles and ducts is absolutely crucial to reducing the cost of carrying fibre to more rural areas of the country and driving innovative solutions to the current lack of next generation services in rural Britain. The initial reference offer from BT Openreach for pole and duct access is vastly inflated—four or five times their underlying costs. These inflated costs represent a significant barrier to the emergence of a credible alternative to BT through the BDUK procurement process. Ofcom has recently stated that they stand ready to intervene if—as looks likely based on the current offer— agreement is not reached on a fair price for access. However, a regulatory intervention by Ofcom is unlikely to see a fair and usable pole and duct product in the market until the end of this calendar year at the earliest. As the Committee may be aware, the first tranche of BDUK trial areas have already begun procurement of a rural broadband solution. The Welsh Assembly Government began its procurement process for a next generation broadband solution in February 2011. There is a strong concern that without fair access to BT infrastructure, these procurement processes will not take place in a competitive environment. The consequence of a sub-optimal procurement process is likely to be the deployment of a solution which is not future proofed, therefore not gaining maximum value for public money.
Sharing Utility Infrastructure—Crumlin Case Study Virgin Media is seeking innovative solutions in order to deliver next generation broadband to hard to reach areas. One such solution—delivery of broadband through access to other forms of utility infrastructure—has the potential to play a role in significantly lowering the costs of fibre broadband rollout.
Crumlin trial In July 2010, Virgin Media announced a trial agreement with Surf Telecom to use the electricity distribution network in Crumlin, Caerphilly as the first UK trial of ultrafast broadband delivered over existing electricity poles. The trial—which took place throughout the remainder of the year—delivered a 50Mbps connection to residents in Crumlin, a ten-fold increase on what the community had previously received through the existing legacy copper infrastructure. The deployment allowed residents in the village to connect directly to Virgin Media’s fibre optic network. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 87
Figure 1 below illustrates the route of the electricity poles from nearby Cwmbran to Crumlin over which the Surf Telecom fibre carried Virgin Media services using Radio Frequency over Glass (RFoG) technology, and Figure 2 illustrates the local connection directly to homes from electricity poles in the village.
Figure 1
MV route
HV route LV within town
Infrastructure owned by Western Power, managed wavelength service from their telcoms subsidiary – Surf Telecoms Cable cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 88 Welsh Affairs Committee: Evidence
Figure 2
Virgin Media’s experience to date, through trialling of overhead deployment and constructive discussions with electricity providers, is that innovative commercial partnerships could see this model replicated on a wider basis. To achieve such an industrialised approach to utility infrastructure, Virgin Media has made representations to government that the following changes to the current regulatory structure governing overhead deployment are required:
— Greater clarity to utility network operators about the financial rewards for utility companies in entering infrastructure sharing agreements.
— Streamlining of the planning process under the Electronic Communications Regulations— removing duplication in the notification requirements that significantly add to the time and resources required at a local authority level for approval.
— Clarity over the provisions under the Electronic Communications Code in relation to transparency and certainty in the way in which wayleave payments are calculated. Virgin Media does not dispute the right of landowners to seek consideration for communications cables crossing land, but in doing so, the process should be resolved in a timely and certain manner. We would like to see RICS carry out a review of the current wayleave calculation methodology to provide fresh certainty over the rights of landowners and communications providers.
Virgin Media is encouraged that government is committed to making these changes to legislation in Britain’s Superfast Broadband Future40 in December 2010, and by the Chancellor during this year’s budget speech and in the accompanying Plan for Growth.41 May 2011
40 http://www.bis.gov.uk/assets/biscore/business-sectors/docs/b/10–1320-britains-superfast-broadband-future.pdf 41 http://cdn.hm-treasury.gov.uk/2011budget_growth.pdf cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 89
Written evidence submitted by the Department for Culture, Media and Sport The Committee has asked for evidence in the following areas: — The current provision of broadband in Wales. — The UK Government’s strategy, with particular regard to its potential impact in Wales. — The case for further next generation access (“Superfast broadband”) pilot projects based in Wales. — The extent to which the strategy of the UK Government will complement the Welsh Assembly Government’s priorities for the future of broadband in Wales. — Progress made towards promoting digital inclusion in Wales, including evidence of take-up of broadband support schemes on offer. — Progress made towards improving the provision of broadband infrastructure throughout Wales and eradicating “not-spots”. — Progress towards improving mobile phone coverage in Wales. The UK Government will provide evidence to most of these, but it is clear that in some cases, the Welsh Assembly Government is best placed to respond in more detail.
Summary — The UK Government welcomes this inquiry. Our aim is to ensure the whole of the UK, including Wales, has the best superfast broadband network in Europe by 2015. This includes a good standard of broadband for all households. — We understand that Wales has its own challenges regarding broadband coverage, particularly due to the population spread and challenging geography. This has led to many households receiving a sub-standard service and the Welsh Assembly Government has an established programme to address these not-spots. — The current Welsh Assembly Government Regional Innovative Broadband Support (RIBS) project directly funds those properties that are unable to receive current generation broadband—either as a subsidy for satellite equipment, or by allowing funds to be pooled to provide community services. The project was responsible for ensuring all exchanges in Wales are ADSL-enabled. — The Welsh Assembly Government is in discussion with Broadband Delivery UK (BDUK) regarding its plans to stimulate market investment and the rollout of superfast broadband in Wales. Those discussions cover the question of the level of UK Government support that will be available out of the £530 million available in the period to 2015 to support broadband projects in Wales. — The general approach being taken by BDUK is to release funding for projects once local authorities have presented bids for sustainable projects on the basis of their local broadband plans. We anticipate that those plans should include an indication of the level and sources of public funding that will be available to support the project in addition to BDUK support. — BDUK is engaging directly with the three devolved administrations in Wales, Scotland and Northern Ireland. The three devolved administrations are able to co-ordinate on a national basis and BDUK is working with all three on their national plans which will form the basis for allocations to Wales, Scotland and Northern Ireland, which it will then be for the devolved administrations to allocate between projects. £10 million of funding for projects in North Wales was announced by the Chancellor in February. There will be further funding announced in addition to this initial allocation. This will support the wider Next Generation Access project that the Welsh Assembly Government recently put out to tender. There will therefore be no further pilot projects funded by BDUK whether in Wales or anywhere else. Future funding will however be available to support projects in Wales supporting the Government’s overall broadband objective and this will directly complement the work planned by the Welsh Assembly Government. — In addition to direct funding, the UK Government strategy also outlined a series of measures aimed at reducing the cost of deployment. — The Government’s planned regulatory and policy interventions, as outlined in the UK Government’s strategy document”, published in December 2010, are aimed at having an impact across the whole of the UK. We recognise that some matters, such as planning, are devolved, but we hope that the devolved administrations and local authorities, sharing our view of the importance of broadband to the economy would ensure that the application of planning regulation and other devolved matters, supports broadband rollout as far as possible.
The current provision of broadband in Wales and progress made towards improving the provision of broadband infrastructure throughout Wales and eradicating “not-spots” The Government recognises that the provision of broadband in Wales has been a cause for concern, and a significant number of households receive a sub-standard service or no service at all. This is primarily due to the geographic spread of the population; while much of the population is centred on key cities such as Cardiff cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 90 Welsh Affairs Committee: Evidence
and Swansea, the remainder is spread over a wide area. These areas include some which are geographically challenging, with many households quite a distance from their local telephone exchange. This means that the economics for market deployment are challenging, as the deployment of current generation broadband is expensive in more rural and remote areas, and the potential subscriber base is limited, meaning communications providers would be unlikely to see a return. This left many rural exchanges un- enabled for ADSL broadband and therefore left many households without access to broadband. Even those exchanges that have been enabled by the market, a significant proportion of households were still unable to receive broadband, primarily due to the distance of their household from the exchange. The Welsh Assembly Government recognised this market failure, and established the Regional Innovative Broadband Support (RIBS) programme. The programme has ensured that all exchanges in Wales have been enabled for ADSL broadband. For the remaining households in not-spots (those areas without broadband at all), the RIBS programme is making progress to eradicate not-spots in Wales. The programme allows for up to £1000 per home to be made available to subsidise a connection, such as a satellite service, or allows communities to group together to provide community-wide solutions. Broadband Delivery UK estimate that following market deployment of superfast broadband in Wales, approximately 65,000 households will still not be able to receive a service at all, and 127,000 households will receive less than 2Mbps. The RIBS programme is ongoing, and will continue until the roll out of the Welsh Assembly Government’s Digital Wales programme, which aims to deliver at least 30Mbps to all businesses by 2016 and all consumers by 2020.
The UK Government’s broadband strategy, with particular regard to its potential impact in Wales and the extent to which the strategy of the UK government will complement the Welsh Assembly Government’s priorities for the future of broadband in Wales In December 2010, the UK Government published its strategy for the broadband in the UK Britain’s Superfast Broadband Future. The strategy sets out the Government’s aims and objectives, and how it intends to deliver those. The overarching aim of the Government is to ensure the UK has the best superfast broadband network in Europe by 2015, including a good level of service for every household. The Government expects, for the most part, that the roll out of superfast broadband in the UK will be market-led. The strategy sets out the policy and regulatory interventions that it believes will enable the market to deliver as far as it can. The strategy also sets out how the Government will address the areas the market alone will not deploy to.
Policy and Regulatory Interventions Commercial providers such as BT and Virgin Media have published plans that would deliver superfast broadband to approximately 66% of UK households by 2015. We believe that by making a select number of policy and regulatory interventions, the cost of deployment can be lowered and enable the market to deliver to more households. As up to 80% of the cost of building new networks is in the civil works, we believe it makes sense to reduce this where possible. Other measures are designed to provide more certainty for the market and enable commercial decisions to be made more. In terms of reducing the cost of roll out, the Budget outlined there to be a presumption in favour of sustainable development for new overhead deployment of telecoms lines, except where there are exceptional reasons not to. Deploying new poles can reduce the cost of deployment by as much as 50%. We will be issuing a consultation on this issue shortly. We are making progress regarding infrastructure sharing, which can also bring the cost of deployment down, as it reduces the necessary amount of civil works needed. Access to BT’s duct and pole network is a regulatory matter for Ofcom. As part of its Wholesale Local Access review, Ofcom determined that BT should enable other communication providers to access its network of ducts and poles. BT made draft reference offers to industry in January, and together with Ofcom, industry partners and the Office of the Telecoms Adjudicator are working to bring these products to market. Part of this process involves trialling the use of ducts and poles with industry partners and BT hope to launch these trials soon, with commercial products ready in the summer. There are concerns from industry regarding the prices BT has proposed and the terms and conditions. It remains a matter for Ofcom to determine whether this will require regulatory intervention but we hope that progress can be made by the industry itself towards resolving the issues The Government is also keen to see other utility infrastructure used wherever possible. In February we held a seminar attracting attendees from across the energy, telecoms and water sectors. The seminar was designed to tease out some of the key concerns, as well as gauge the appetite from telecoms providers and increase the dialogue. Government believes that sharing of other utility infrastructure is possible (and does occur commercially), and dialogue is a quicker way to making this happen rather than through legislation. This has been demonstrated in Wales by a trial involving Virgin Media using Western Power’s electricity poles to deliver fibre-optic to a small rural community—Crumlin in Caerphilly. This trial was highlighted in Britain’s Superfast Broadband Future Progress is continuing, and the Energy Networks Association will be holding a further cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 91
smaller workshop in due course to try and address the concerns regarding health and safety and the terms and conditions for access. We will be issuing guidance to Local Authorities regarding the use of innovative minimal dig techniques such as microtrenching, which can also lower costs. Microtrenching is currently used by some providers, but in some cases Local Authorities are creating barriers to this deployment. The guidance will make clear there should be a presumption in favour of deployment, whilst allaying fears that some Local Authorities may have. We will also seek to clarify with local authorities the use of permit schemes. We are looking at clarifying the Electronic Communications Code, and how this applies to wayleaves and access to private land. In the first instance, we will be commissioning a review of the Code to determine if the legislation and processes remain fit for purpose. If amendments are needed, these will be made as part of an overall review of the Communications Act, due towards the end of this Parliament. We believe that all these measures will help broadband roll out across the UK, including in Wales. Where matters are devolved, such as planning, we will work with officials in the Welsh Assembly Government to ensure these interventions are appropriate and relevant to Welsh Local Authorities. Our common aim should be to ensure that planning and other related issues should as far as possible support the rollout of superfast broadband.
Public Funding As part of the Comprehensive Spending Review, the Government has secured £530 million over the lifetime of this Parliament to support the roll out of superfast broadband across the UK and help ensure the UK has the best superfast broadband network in Europe by 2015. Four superfast broadband pilots were announced in October, in Cumbria, Highlands and Islands, North Yorkshire and Herefordshire. Each will provide valuable learning opportunities to BDUK regarding procurement and the technical aspects of deployment. BDUK is working with local authorities and communities to prepare local broadband plans and procure solutions themselves. The projects to be supported under the second wave of funding will be announced in late May. The three Devolved Administrations will be responsible for co-ordinating their own national bids to ensure that local authorities in their areas meet the Administration’s own National plans and objectives. BDUK are working closely with the Welsh Assembly Government on their bid. It is anticipated that the bid from the Welsh Assembly Government will be for a total sum of money to be received from BDUK for Wales (over and above the £10 million to support a broadband rollout project in North Wales already announced in February 2011 by the Chancellor of the Exchequer). BDUK funds will be used to supplement and complement the Digital Wales procurement that the Welsh Assembly Government launched in February. This procurement aims to deliver access to at least 30Mbps to all businesses by 2016, and all residences by 2020. Following the announcement of projects to be funded using the next £50 million of funding, future funding will be released as and when projects are determined to be ready to procure solutions. This will help ease the pressure on the market to deliver credible tenders and ensure projects can be completed successfully. There will therefore be no further pilots. We believe this approach directly complements the Welsh Assembly Government’s plans for superfast broadband.
The case for further next generation access (“Superfast broadband”) pilot projects based in Wales There will be no further pilots, and as described above, future funding for projects will be as and when local broadband plans are ready to go to procurement and can present a sustainable commercial project. All funding for Wales will be managed as part of the Welsh Assembly Government’s wider superfast broadband project.
Progress made towards promoting digital inclusion in Wales, including evidence of take-up of broadband support schemes on offer Digital Inclusion is a devolved matter. The Welsh Assembly Government recently published their Digital Inclusion Delivery Plan, which sets out how they intend to drive the take-up of broadband in Wales. This sits alongside the wider infrastructure plan. However, despite being a devolved matter, the RaceOnline 2012 initiative, headed by Digital Inclusion Champion Martha Lane-Fox has national reach. Race Online is working with partners from government (central and local), business, charities, social enterprise and community groups to get the 9 million adults in the UK online who have never previously used the internet. The Government strongly supports the work of Martha Lane Fox and hopes to work even more closely with Race Online to promote take-up of broadband services. Take up is one of the parameters that we wish to measure as part of the scorecard approach to determining whether or not we have achieved our goal of having the best superfast broadband network in Europe by 2015. cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 92 Welsh Affairs Committee: Evidence
Progress towards improving mobile phone coverage in Wales
Mobile broadband coverage in Wales is currently poor, with coverage at approximately 69% of households, compared to 87% of households across the UK as a whole. Ofcom recently published their consultation that sets out how they intend to auction the 800MHz and 2.6GHz bands of radio spectrum. It is these bands that have the potential to deliver mobile broadband into more rural areas. As part of the consultation, Ofcom has set out possible coverage obligations on one of the 800MHz licences. Ofcom has also invited views around possible additional geographic coverage obligations, such as setting a specific population coverage for a particular region or indeed country. This provides an opportunity to argue for a more granular approach to coverage within the UK. Ofcom also has plans to address mobile (voice) not-spots specifically and intends to bring forward proposals later this year to address these. Government is keen for this process to be concluded as soon as possible and for the auction to take place as soon as possible, so that the benefits can be made available to consumers and citizens at the earliest opportunity. May 2011
Written evidence submitted by Dr Annelie Jane Fitzgerald
Executive Summary — Proposals to extend fast broadband services to rural areas of Wales are to be welcomed. — Fibre-optic technology provides a far more reliable and technologically advanced service than WIMAX systems. WIMAX systems require regular upgrading and will in any case shortly be obsolete. — WIMAX solutions cannot at the present time be proved not to damage health and mounting scientific research is highlighting immediate adverse effects on the health of certain people and risks to the health of the general public in the long term. — Any proposals to introduce or improve broadband services to the more rural and isolated parts of Wales must take into consideration the serious adverse health potential for local residents and require the services to be provided by cabled fibre-optic solutions.
1. Introduction
1.1 Access to broadband and the internet from all parts of the UK is essential for business, education and social purposes. Lack of a fast and reliable broadband service will leave those unable to use broadband to access the internet at a distinct disadvantage.
1.2 The Government’s aim, outlined in Britain’s Superfast Broadband Future, to give the country “the best broadband network in Europe by 2015” is to be applauded, as is the Government’s announcement that £830 million of public funding will be used to finance the nation’s broadband strategy.
1.3 While this initiative is to be welcomed there is considerable concern about the means chosen for providing broadband to the more rural and even isolated communities.
1.4 Users require a fast and reliable service that does not impose any health risks.
2. Potential Solutions
2.1 There are at least two ways of providing broadband services in rural areas: — fibre-optic cabling; and — the use of systems employing WIMAX and WiFi either separately or in combination.
2.2 Fibre Optics
2.2.1 Fibre-optic communication is a method of transmitting information from one place to another by sending pulses of light through an optic fibre. The light forms an electromagnetic carrier wave that is modulated to carry information. First developed in the 1970s, fibre-optic communications systems have revolutionized the telecommunications industry and have played a major role in the advent of the Information Age.
2.2.2 Because of its advantages over electrical transmissions, optical fibres have largely replaced copper wire communications in core networks in the developed world. Importantly it is fast, secure, reliable and safe.
2.3 WiFi
2.3.1 WiFi is a term that is in common usage today and it is a wireless digital communications system making a connection to the Internet wire-free using pulsed microwave signals at a frequency of 2.4 GHz. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 93
2.4 WIMAX 2.4.1 WIMAX is an acronym meaning “Worldwide Interoperability for Microwave Access”. WIMAX is a wireless digital communications system that provides wireless “metropolitan area networks”. WIMAX can provide broadband wireless access (BWA) up to 30 miles (50 km) from fixed stations. It uses a wide frequency band from 3.5 GHz to 66 GHz.
3. Disadvantages of WiFi and WIMAX 3.1 High speed internet connectivity via WiFi and WIMAX is inferior in several ways to a wired—especially a fibre-optic—connection: — Connectivity is unreliable. — The internet speed tends not to exceed 2Mb/s. If there are several simultaneous internet connections, this speed is further reduced. (Fibre-optics, on the other hand, allow speeds of >100Mb/s). — It is currently impossible to use double play or triple play via WIMAX or WiFi. — WIMAX customers would have no choice regarding their internet access provider. There would be no competition and the choice would simply be imposed on them. A WIMAX subscription also tends to be more expensive than a standard internet access subscription. — WIMAX and WiFi will shortly become obsolete technologies. The implementation of WIMAX would therefore represent an irresponsible waste of public money. Wales should invest for the long-term rather than for the short-term (a fibre-optic network would be permanent, much like that of the utilities). — Given that WIMAX was intended for urban areas it would be inappropriate to install such a system in rural areas. The technology is not suited to hilly or mountainous areas (ie, much of Wales) and the service provided would not live up to the performance promised by the companies given the contracts to provide the service. 3.2 The French Experience 3.2.1 In parts of rural France—the Finistère region of Brittany for example—there have been complaints about the WIMAX service as it has failed to live up to the users’ expectations (and operators’ promises) in terms of speed and reliability. 3.2.2 In addition, take-up has been poor—2,300 people were expected to take it up but in practice only 120 have done so. 3.2.3 It has also been found to be costly—the one-off installation cost in Brittany is 566 Euros per household. 3.2.4 Having installed WIMAX systems, many areas of France are now replacing them with wired systems, acknowledging that WIMAX was a “technological error” (Provence-Alpes-Côte d’Azur, Somme, Artois, Creuse, Aveyron), while other areas of France have decided to pursue a wired-only solution (Auvergne, Oise, Gironde). 3.2.5 Alain Paulien, a manager with France Telecom, recently condemned WIMAX as an expensive waste of public money. 3.3 Health Considerations 3.3.1 Again, the French experience is significant here. There is currently a class-action suit in progress against the regional government of Burgundy with regard to the adverse health effects experienced subsequent to the roll-out of WIMAX in the region. 3.3.2 In other parts of France the decisions taken by some regional governments to implement WIMAX are being contested in court by associations and by concerned members of the public. 3.3.3 Although the UK health authorities continue to deny that digital wireless technologies cause any health problems, this is not the case in some other countries such as Sweden, where “electrosensitivity” is an established medical condition. 3.3.4 There is now ample evidence that chronic exposure to the non-ionising radiation generated by such technologies causes significant health problems for certain categories of the population and that the number of people affected will rise as the level of electrosmog pollution increases. 3.3.5 In November 2006 a group of German doctors signed an open letter to Chancellor Angela Merkel asking for WIMAX not to be implemented on health grounds, and in September 2007 the German government warned its citizens to avoid using WiFi. 3.3.6 The 2007 Bioinitiative Report (www.bioinitiative.org) reviewed over 1,500 research papers on the effects of non-ionising radiation and concluded that the existing standards for public safety are inadequate to protect public health. Its conclusions were subsequently validated by the European Environment Agency, and on 4 September 2008 the European Parliament passed a resolution (with a vote of 522 to 16) calling for cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 94 Welsh Affairs Committee: Evidence
an amendment to Recommendation 1999/519/EC and a reduction in public exposure levels to radiation of this type: The European Parliament 21. Is greatly concerned at the Bio-Initiative international report concerning electromagnetic fields, which summarises over 1,500 studies on that topic and which points in its conclusions to the health risks posed by emissions from mobile-telephony devices such as mobile phones, UMTS, WiFi, Wimax and Bluetooth, and also DECT landline telephones; 22. Notes that the limits on exposure to electromagnetic fields which have been set for the general public are obsolete, since they have not been adjusted in the wake of Council Recommendation 1999/519/EC of 12 July 1999 on the limitation of exposure of the general public to electromagnetic fields (0Hz to 30 GHz), obviously take no account of developments in information and communication technologies, of the recommendations issued by the European Environment Agency or the stricter emission standards adopted for example, by Belgium, Italy and Austria, and do not address the issue of vulnerable groups, such as pregnant women, newborn babies and children; 23. Calls, consequently, upon the Council to amend its Recommendation 1999/519/EC in order to take into account the Member States’ best practices and thus to set stricter exposure limits for all equipment which emits electromagnetic waves in the frequencies between 0.1 MHz and 300 GHz.
3.3.7 Any immediate financial saving generated by the implementation of WIMAX is likely to be insignificant compared with the costs to the NHS and Social Services as the number of people sensitised to and handicapped by such technologies grows, along with the increase in cancer cases and chronic conditions amongst the general population.
3.3.8 It should be underlined that technologies using this form of pulsed microwaves have never been pre- market tested for safety and have only been in wide use for the past 10–15 years. The latency period for carcinogenic outcomes may be 20 years or more.
4. Conclusion
4.1 Any system based on wireless digital communications systems must be avoided for rural Wales—and anywhere else for that matter.
4.2 The correct solution is fibre-optic technology which is reliable, fast and perfectly safe.
4.3 The implementation of WIMAX, on the other hand, in addition to exposing the population to increased health risks, would ensure that the people of rural Wales were provided with a vastly inferior form of internet connectivity.
4.4 The people of rural Wales have the right to the same quality of internet access and health as the inhabitants of the more populated areas. They do not deserve to be treated like second-class citizens and this would certainly be the case if WIMAX was to be recommended as the means of providing internet access in rural Wales.
5. Recommendation
5.1 That broadband internet access for rural Wales be provided by means of a cabled fibre-optic network. May 2011
Written evidence submitted by the Welsh Government
Historic Welsh Government Broadband Investment
1.1 In 2006, following a competitive tender process, the Welsh Government entered into a five year contract with BT to upgrade the infrastructure serving communities that were not able to access broadband (Regional Innovative Broadband Support (RIBS) project).
1.2 Prior to the RIBS project, 35 telephone exchanges had been deemed unviable for broadband enablement by the telecommunications industry. The first stage of this project was to upgrade these exchanges to facilitate broadband delivery. The work was completed in July 2007 at a total cost of £2.5 million (50% public sector match-funding).
1.3 Following the exchange enablement programme we worked with BT to identify and upgrade the infrastructure serving ten communities facing continued broadband access issues at a cost of £1.7 million. The project closed at the end of March 2011 having benefitted around 9,000 premises. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 95
Current Welsh Government Broadband Investment Basic Broadband 2.1 We are currently taking steps to ensure that basic broadband is available to all now, through our Broadband Support Scheme (BSS), which was introduced on 3 July 2010. 2.2 The BSS provides a mechanism to eradicate broadband notspots by providing direct grant support for anyone affected by limited broadband access. Assistance of up to £1,000 is available to cover eligible set-up costs, but it does not fund monthly subscription charges. 2.3 The scheme is aimed at any individual, business or Third Sector organisation located in a notspot. It is technology and provider neutral, which means that eligible recipients have the freedom to choose the most appropriate technical solution for their location and their own Internet Service Provider (ISP), provided this offers value for money. 2.4 The scheme also encourages solutions that benefit entire communities, by allowing eligible applicants to pool their individual grants to purchase a community solution. The first community solution funded through the scheme was launched at Treleddyd Fawr (Pembrokeshire) on 1 March 2011. 2.5 The scheme has approved over 800 applications since its launch in July 2010, representing a financial commitment of close to £600,000. It is part-funded by the Rural Development Plan for Wales and £2.4 million has been set aside for the scheme during 2011–12. 2.6 Having initially prioritised individuals with no broadband access at all (defined at sub-512Kbps connectivity), we have now extended eligibility for the scheme to encompass “slowspots” (defined at sub- 2Mbps connectivity).
Next Generation Broadband 2.7 Despite strong and positive investment by the market in parts of Wales, the market will not deploy next generation broadband infrastructure to large parts of rural Wales without some form of public sector intervention. 2.8 It is widely documented that next generation broadband provision for the UK as a whole is anticipated to cover around 66% of households but, based on our own analysis, we expect the market to provide next generation broadband to around 54% of premises in Wales. The difference between the UK and Wales coverage estimates reflects the challenges faced by the market in the deployment of broadband in Wales. 2.9 We have announced our intention to support this market investment in broadband and will invest our own resources to ensure that all households and businesses have access to high speed broadband by 2015 through our Next Generation Broadband for Wales (NGBW) project. 2.10 This is a strategic pan-Wales initiative that covers the territory and interests of each of the 22 local authorities in Wales. We are engaging with Welsh Local Authorities and key regional stakeholders to identify local and regional priorities that will inform the delivery of the project and lead to a national roll-out plan through negotiation with the successful bidder(s). 2.11 The NGBW project aims to ensure that public sector investment is used to accelerate broadband deployment in areas that the market is not likely to reach by itself. Work is underway through our Open Market Review to fully understand the likely reach of private sector next generation access in Wales and this will help to define the area for intervention (estimated to be around 46% of premises in Wales). 2.12 The procurement process to secure a next generation broadband solution for Wales began officially on 25 February 2011 and we expect to award the contract by March 2012.
UK Government Support 3.1 The goals set out within Britain’s Superfast Broadband Future complement the work that we are taking forward through both our Broadband Support Scheme and NGBW projects. 3.2 The UK Government’s £530 million superfast broadband fund draws on revenue generated by the TV Licence Fee and the under-spend from the Digital Switchover Help scheme. This is a fund that Welsh licence fee payers have contributed to and we have been arguing that Wales should, therefore, receive a fair proportion of this funding. We received an initial £10 million from this fund in February 2011 and are in dialogue with UK Government about additional investment. 3.3 Wales’ challenging terrain, topography and low population density present significant barriers to the deployment of telecoms services. These factors affected the delivery of first-generation broadband and they will influence the deployment of high-speed broadband. 3.4 The population density of Wales is 144 people per square km compared to the UK average of 254 people per square km. There are about the same number of people living in settlements of at least 100,000 people (the cities of Cardiff, Swansea and Newport) as there are in settlements of less than 2,500 (everything from isolated cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 96 Welsh Affairs Committee: Evidence
farmhouses to villages and small towns). These areas with only small settlements are often a relatively long way from the nearest big place. The low population density and distributed nature of this population introduces additional expense to potential network operators attempting to reach them and impacts the business case for broadband deployment. 3.5 The potential lack of high speed broadband availability relative to other parts of the UK, Europe, and the rest of the world has the potential to entrench distributional inequalities, leaving many parts of Wales significantly less able to retain and attract businesses, which increasingly rely on high-bandwidth broadband. 3.6 Over time this is likely to reduce the possibility of regional economic development, and may threaten jobs. These factors are also likely to have a detrimental effect on digital literacy levels, business creativity, entrepreneurship and the growth of new sectors, thereby decreasing Wales’ overall competitiveness. 3.7 Such under-provision of broadband infrastructure and superfast broadband services is likely to widen the digital divide. It is also very likely that significant parts of Wales will not see rapid, early deployment of next- generation infrastructure without some form of public-sector intervention. On this basis we believe that there is a strong case for significant UK Government investment through its superfast broadband fund to support our efforts. 3.8 As telecommunications is not a devolved area, we are seeking financial support from European Structural Funds and the UK Government to assist with our NGBW project in order to deliver the UK Government’s goals outlined in Britain’s Superfast Broadband Future.
Digital Inclusion 3.9 The Welsh Government continues to make steady progress on digital inclusion. Delivering Digital Inclusion: A Strategic Framework for Wales, was published in December 2010, and the Digital Inclusion Delivery Plan was published in March 2011. These outline the strategic leadership role being provided by the Welsh Government, identify the levels of digital exclusion amongst key groups and set targets to help ensure that citizens increasingly have the necessary access, skills and support to benefit from the advantages of using the internet. July 2011
Supplementary written evidence submitted by the Welsh Government Thank you for your letter dated 3 October and the invitation to appear at the forthcoming evidence session on 22 November. The Welsh Government is in the middle of commercial negotiations with several bidders seeking to significantly improve the communications infrastructure in Wales. Dialogue is underway to deliver on our recently announced Programme of Government commitments to ensure that all citizens and businesses in Wales have first class digital access. I have informed the National Assembly for Wales Enterprise and Business Committee when questioned on this issue recently that discussing broadband in an open forum might possibly compromise this commercial engagement and prejudice the ongoing competitive process. The oral evidence sessions which the Committee has held to date have highlighted some points regarding broadband in Wales and Welsh Government intervention around which the Committee may value some additional clarification. Witnesses incorrectly stated that the Welsh Government’s Next Generation Broadband for Wales (NGBW) project has the aim of bringing high-speed broadband to businesses in Wales by 2016 and households by 2020. The actual target is for all businesses and households in Wales to have access to high-speed broadband by 2015. Criticism was levied at take up of broadband in Wales and the extent to which Welsh Government interventions have improved availability of broadband services. Take up in Wales is on a par with the rest of the UK. The Regional Innovative Broadband Support contract with BT provided broadband services to over 9,000 beneficiaries before the contract ceased in March 2011. Since then the Broadband Support Scheme has enabled nearly 1,600 residents and businesses to access broadband for the first time. A pilot marketing campaign launched this summer is expected to build on the excellent take up of the Support Scheme and will be extended across Wales if successful. The Support Scheme was described by one witness as not being easily accessible by communities. We currently have 13 communities successfully delivering community projects and a further 17 communities are in the process of developing applications. A question was asked about why the Welsh Government would elect to award grants of up to £1,000 when there are satellite companies capable of delivering 2Mbps services for less than half that amount. Allowing individuals, businesses and communities a fair and flexible framework enables us to support a range of technologies and cost models. Installation costs for some solutions may be more expensive than others but the cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 97
corresponding monthly running costs, which are borne by the end user, may be more affordable. This approach therefore places choice at the hands of the end-user and enables the creation of community-wide schemes with adequate financial leverage to consider the full range of available technologies. Witness statements about the footprint of the FibreSpeed network also require clarification. The FibreSpeed network connects 14 business parks along the A55 corridor. It does not extend to Pwllheli as stated in evidence. An opportunity was presented in 2009 to take advantage of planned street works along the A499 to deploy telecommunications ducting along the route but this does not form part of the FibreSpeed network. There are currently ten registered service providers offering a range of high speed broadband and voice services using the FibreSpeed backbone network. Some FibreSpeed service providers are now extending their footprint to deliver retail services to domestic residential customers near the network via wireless technology. This is a welcome additional benefit but it was not the primary objective of the network. The primary objective of the network was to provide affordable, advanced symmetrical services to strategic business park locations in North Wales. I am content to provide further written evidence on behalf of the Welsh Government if the need arises.
Supplementary written evidence submitted by the Welsh Government Further to my letter in October, I am writing to provide additional clarity on issues which emerged during the most recent evidence session for your ongoing inquiry into Broadband in Wales. Contrary to comments made during the evidence session of 22 November, a Contract Notice was published on 25 February which launched the tender process to invite a supplier to meet our next generation broadband ambitions (Next Generation Broadband for Wales (NGBW) project). There have been no substantial delays in the project and we remain on course to award the contract early next year; subject to State Aid and Major Project Notification approval processes with the European Commission. It was also reported that the UK Government expects the market to deliver high speed broadband to around two third of the UK population. Whilst this may be the case for the UK, it is misleading to consider that this is also the case in Wales. An Open Market Review conducted as part of our NGBW project indicated that the market is only likely to deliver high speed broadband to around 50% of the population in Wales. This reflects and underlines the challenge. Finally, it was incorrectly stated that the UK Government has allocated £10 million to the FibreSpeed project in North Wales. For Clarification, the £10 million for broadband announced by Chancellor of the Exchequer during his visit to Wrexham on 10 February 2011 forms part of the UK Government’s overall allocation to Wales of £56.9 million from its superfast broadband fund. We will use this as well as our own core funds to leverage significant funding from the private sector and European Regional Development Fund (ERDF) through the NGBW project.
Written evidence submitted by Vodafone The Need for Broadband—and Mobile Vodafone welcomes the Welsh and UK Governments’, and the Welsh Affairs select committee’s, support and commitment to investing in the UK’s broadband infrastructure. We share the aspiration for super fast broadband and to ensure that all areas of the UK are part of the broadband rollout and appreciate the particular need in Wales. The Committee is right to identify the potential of internet access and, more broadly, the communications sector to drive growth and create new jobs. It is an area where the UK has a tremendous record of achievement and innovation—as a British company Vodafone is proud to have played a key role in this. The Government’s strategy to drive broadband delivery in Wales and the rest of the UK prioritises investment in broadband fibre networks. However, the equal role and contribution of mobile networks should not be forgotten and is widely accepted by most consumers and observers. The rise of smart phones and tablet devices (now, the vast majority of new phones sold are smartphones) is enabling the country to work on the move, driving flexible, smarter working. There are clear productivity benefits for the private and public sector to use these technologies—and clear evidence that their adoption is cutting costs in terms of technology spend and accommodation needs. Government must not underestimate the role of mobile communications in ensuring that the UK economy continues to grow, and that we remain internationally competitive.
The Need for Mobile Coverage It is clearly in Vodafone’s interest to provide the best coverage possible to our customers. We are currently investing £1.2 million per day in our network. This investment has resulted in Vodafone winning Best Network of the Year awards for two years running. Vodafone regularly reviews its network infrastructure to analyse cobber Pack: U PL: CWE1 [E] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Ev 98 Welsh Affairs Committee: Evidence
where there is the greatest need to improve coverage and capacity. We take many factors into account when planning our network and determining where resources can be best utilised to provide the maximum benefit to our customers, our shareholders and our employees. However, even with substantial investment, we have to make difficult economic choices when it comes to network roll out. Factors that influence these decisions will include the local population density; land topography and the built environment; the demand for services; the existing coverage and capacity for calls and data usage in the area; and the availability of backhaul services, such as BT fibre links. We also look to cut costs where possible by sharing our network infrastructure to reduce costs and free up resources for rural coverage expansion. However, we face the dual challenges of making less return on our investment in the UK as an industry as many comparable countries in Europe—some 10% less on average— and having to investment more heavily in our existing network in order to meet the huge demand for data services. In the last 12 months we have seen a 100% increase in the data demand on the network as more of our customers switch to smartphones and utilise mobile broadband services. At the same time, Vodafone is well aware of the needs of its customers and businesses away from densely populated areas, in remoter areas. We have therefore invested in the development of unique innovative technologies to solve coverage and capacity issues in these areas, however the success of these technologies depends on access to fibre broadband and willingness of those fixed line operators to share their infrastructure.
The Barriers to Improving Mobile Services Historically, network rollout has been the preserve of the mobile network operators and rightly so. However, as the economics of the industry change and the calls on these networks increase, it seems like there is a great opportunity to try and re-think how the public and private sector can work better together to make network roll cheaper and less bureaucratic. There is also a great opportunity to ensure that we are allowing technological innovation to help solve coverage challenges.
Access to Fibre For mobile broadband to be delivered it is essential that backhaul services such as BT fibre links are both available and accessible. If there is insufficient fixed infrastructure, the installation of new network infrastructure by Vodafone will not be effective. And where there is sufficient infrastructure mobile operators must not be blocked by unrealistic utilisation charges. It is important that mobile operators have fair and economical access to BT’s duct and pole access and this is a matter that Ofcom are currently investigating.
Planning Planning rules must support infrastructure. There should be a presumption in favour of encouraging mobile phone infrastructure, and local authorities should make decisions in that spirit. We, along with the other mobile operators, have put forward suggestions for how to streamline the process for planning decisions. Over a sustained period there has been discussion in Wales about making the planning regime more restrictive for mobile networks: that view is clearly contrary to the desire of most people in Wales for better network coverage.
Local Authorities partnership Local authorities should make their own land and property available. Greater standardisation of processes and, in particular, better training, both for officials and elected councillors, could help reduce unnecessary inconsistency in the planning system. There should also be an investigation into the practices of private landowners who exploit their local monopolies, imposing very high charges for access.
Technological innovation Vodafone’s SureSignal which uses femto technology to provide full 3G mobile coverage at home or at their small business, and who have access to at least a 1Mbps broadband connection. The device is the size of a wireless router and plugs into a fixed line broadband router. This technology is suitable for improving coverage in rural locations. The femtocell technology connects to the Vodafone network via the broadband connection, and works with every UK broadband provider and any Vodafone UK 3G device. Up to 32 people can be registered to use any one Sure Signal device and four people can use it at any one time. Sure Signal is available to every Vodafone UK customer and costs £50. We believe it is a good example of using innovation to deliver improved 3G coverage to rural communities and hard-to-reach urban areas. Sure Signal plugs into a basic broadband line and highlights the importance of providing access to BT’s fibre network. This is the only femto product to have been launched commercially by a mobile company. cobber Pack: U PL: CWE1 [O] Processed: [13-09-2012 11:51] Job: 013975 Unit: PG04
Welsh Affairs Committee: Evidence Ev 99
There is a great opportunity to take this femto cell technology and apply it in a rural location to provide 3G coverage. Vodafone is currently investigating the use of ‘open access femto cells’ in several rural and remote locations to provide coverage for residents and businesses in the area, and we are currently analysing feedback to improve the technology and determine whether this may provide a viable and practicable coverage option for people living in rural and remote locations. This technology is probably most useful for rural communities, where it has the potential to improve connectivity greatly. Again however, we are dependent on the availability of infrastructure from companies such as BT to provide the backhaul links which enable this innovative technology to connect to the networks.
Spectrum 4G (LTE) will accelerate this expansion at it offers the potential to deliver much faster mobile broadband speeds. Vodafone looks forward to the future spectrum rollout which will provide the platform for us to deliver innovative technologies to consumers that give them faster mobile broadband speeds. However, it is also essential that the spectrum auction rules ensure that those operators who would value the spectrum most are allowed to successful bid for it. Ofcom is currently consulting on the rules under which the auction will be conducted. Given the current economic situation and the fact that all the mobile network operators are successful global companies, this is an opportunity to let the auction run freely and ensure a level playing field without special help for any particular mobile network operator. The most recent proposals favoured two operators, Hutchison (“3”) and Everything Everywhere (Orange and T-Mobile, guaranteeing them spectrum despite Hutchison’s position as a well established mobile phone operator in the UK with significant foreign backing, and Everything Everywhere’s position as biggest mobile operator (Vodafone is third largest of the four operators), which is guaranteed spectrum under the current rules when only last year it was ordered by the European Competition Authorities to give up some spectrum due to a potential dominant position following the merger between Orange and T-Mobile.
Conclusion As an innovative company, operating in a competitive market, Vodafone is continually seeking to bring its technology to as many customers and businesses as possible. To access remoter areas of the UK, particularly those remoter areas of Wales, there must be sufficient existing infrastructure and Vodafone must be allowed access to it for mobile broadband to be delivered. The rollout of 4G will assist with mobile broadband delivery to remoter areas, though the spectrum auction rules must ensure that a level playing field without a special help for any particular operator to ensure consumers and the wider economy benefits fully. There is also a great opportunity for the public and private sectors to work more effectively together to reduce the cost of network roll out and operating costs. October 2011
Printed in the United Kingdom by The Stationery Office Limited 09/2012 013975 19585 PEFC/16-33-622