Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by the Lattice Group


  Lattice Group is one of the three successor companies to British Gas. Its main subsidiary, Transco, owns and operates the majority of Britain's gas transportation network.

  In 2000, Lattice Group established a new telecoms subsidiary, 186k Limited. Based in Reading, 186k provides fibre optic infrastructure and related services designed to support the roll-out of telecommunications broadband services across the UK. To this end, 186k has invested some £350 million in the construction of a state-of-the-art backbone fibre optic network connecting 12 major centres of demand. This network is now completed and operational and provides potentially limitless capacity. 186k is also investing in the provision of transmission, managed data services and IP (Internet Protocol) services across Britain. 186k plans to become one of Britain's leading end-to-end, IP-specific network providers geared to the needs of the "broadband revolution".

  In the long-term, the necessary investment in broadband infrastructure to link the backbone network to customers will only be sustainable if companies have sufficient confidence that the heavy investments involved will be backed up by an increase in demand. Lattice is therefore concerned about the slow pace of broadband take-up in the UK, especially in comparison with other European countries. We believe it is essential that the Government takes urgent action both to remove the remaining barriers to broadband take-up and to address the so-called "digital divide" in the UK. Through the Lattice Foundation, which pilots a number of social initiatives, we are ourselves making an active contribution to identifying ways to address the UK's digital divide.

  This memorandum is divided in three sections:

    —  Section 1 sets out our perspective on the problems underlying the slow pace of broadband roll-out and the so-called "digital divide" in the UK.

    —  Section 2 outlines the actions that we believe Government can take to facilitate broadband roll-out.

    —  Section 3 describes the contribution of the work currently undertaken by the Lattice Foundation to providing solutions to the digital divide in the UK, and outlines a number of initiatives that Government could take to address the issue.


  A recent study by Booz Allen & Hamilton shows that Britain is far from leading in terms of Internet penetration. A noticeable gap exists between countries like the US and Sweden, where penetration levels amount to 60 per cent and 40 per cent respectively, and the UK where only 22 per cent of people regularly access the Internet.

  In addition, the UK is lagging behind other countries in terms of equality of access measured by social class, education level, employment status and company size (the so-called "digital divide"). It is anticipated that as the online revolution runs its course in the UK, this divide is set to grow worse. Statistics show that out of the 22 million people in the UK which will be without Internet access within three years, the majority will be part time workers, not working or retired and having socio-economic C, D and E, with only 7 per cent internet penetration for socio-economic groups D and E.

  In our view the main barriers to the roll-out of broadband services across the UK are the following:

The middle mile—the missing link

  The Telecoms market is expanding rapidly and the increase in data/internet communications is resulting in significant bandwidth requirements. Current networks are struggling to cope with this increase and new entrants such as 186k are moving into the market to meet this demand.

  Three network infrastructure components are required to make broadband services available nation-wide:

    —  A high capacity backbone or trunk network. Several backbones already exist, each offering similar geographic reach and with varying levels of capacity. Investment in developing these backbones will be led by market demand. The levels of investment required, while significant, are achievable and can be scaled to follow predicted demand with containable levels of business risk. 186k has built such a backbone extending from London and Bristol to Edinburgh and Glasgow, with practically limitless potential capacity.

    —  The middle mile. Capacity on backbone networks is generally not a significant constraint. A component of significant importance in broadband roll-out which is currently missing is the availability of high capacity network linking the backbone networks to the 6,000 points from which unbundled local loops are available. Without this link true broadband services cannot be made available. Links do exist in restricted geographic regions, typically the more densely populated regions of the country. Even within these areas, however, coverage is patchy. BT does not offer extensive coverage, and their services are relatively slow and expensive. The investment to construct this missing link is truly massive (approx £2 billion) and market uncertainty increase business risk to an unacceptable level. The result has been limited activity by the industry—essentially links have been built to generally the same, relatively small number of locations close to the backbones, resulting in reinforcement of the "digital divide". 186k has been actively considering investment in the middle mile network, but the current regulatory and market environment makes the development of a viable business plan for anything other than restricted geographic coverage impossible.

    —  The local loop or last mile. The development of the regulatory framework and processes for making BT's copper wire connections available to competing providers for broadband services has progressed over the last months. Development has been significantly slower than in other countries, and opportunities to make further progress remain.

The lack of sufficiently aggregated demand

  The necessary investment in broadband infrastructure will only be sustainable if companies have sufficient confidence that the heavy investments involved will be backed up by a sufficient level of demand.

  The viability of a new site requires the subscription of at least 500-1,000 households or 15-20 businesses. Currently demand for broadband services is often not sufficiently aggregated outside major business centres—even in urban areas—to make the initial investment in infrastructure worthwhile. This again reinforces the digital divide.


  The private sector does and should play the major role in building the broadband network and delivering broadband internet access across the country. However, we believe there is a role for government in setting overall objectives and removing the barriers that remain to broadband take-up.

  Government Could take the following action to help achieve the provision of broadband infrastructure:

    —  Clear targets in terms of internet penetration. It should be the Government's objective to make the Internet accessible to at least 70 per cent of individuals by 2003.

    —  Clear and stable regulation, ie effective implementation of local loop unbundling, and clarification of the costs and liabilities associated with street works.

    —  Demand aggregation by clustering and co-ordinating public purchasing, for example via the establishment of a portal for government-to-business and government-to-citizen transactions.

    —  Tax incentives for operators investing in "middle mile" infrastructure in the less populated parts of the UK.

    —  Removal of regulatory barriers to the construction of middle mile infrastructure. An important example are the facilitation of shared infrastructure initiatives including possible access to BT's ducts, which would significantly reduce the costs involved in the construction of middle mile infrastructure.


  The Lattice Foundation, in partnership with Advantica, Transco and 186k has developed a series of projects to address the digital divide in the UK for a number of target groups eg SMEs, children in care and young offenders. Examples are:

Digital Divide and SMEs

  Advantica in partnership with Lattice Foundation have developed a computer system for SMEs within University for Industry project. The Lattice computer system gives access and support for SMEs using the Learning Direct programmes. This work has been initiated, piloted and implemented in Leicestershire. Advantica have engaged in excess of 100 SMEs in this pilot.

Digital Divide and Children in Care

  The Lattice Foundation, in partnership with 186k and Advantica, has been working with the National Children's Home over the past 12 months to develop a pilot project called Lattice BEACH (Broadband, Easy Access for Children in Care) which is currently operational in the Brunel NCH Family Centre in Westminster.

Digital Divide and Young Offenders

  Lattice Foundation have installed a computer suite in Reading Young Offenders Institution. The Young Offenders receive training in prison for entry level engineering qualification. They also receive the practical training.

Digital Divide and Healthcare

  Lattice Foundation have installed a pilot project for Reading Young Offenders Institution to access healthcare using remote diagnostics.

  In addition, Government could take a number of possible actions to address the digital divide, eg tax incentives to companies that provide Internet equipment or access to under-served populations, or which provide employees with equipment or training. Other possible initiatives are educational measures or the development of a national infrastructure of low-cost, publicly-available Internet terminals, and issue "Internet Credits" which under-served communities can redeem for free access

14 January 2002

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