APPENDIX 46
Memorandum submitted by the Lattice Group
INTRODUCTION
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.
THE BARRIERS
TO BROADBAND
ROLL-OUT
IN THE
UK
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.
FACILITATING BROADBAND
ROLL-OUT
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.
ADDRESSING THE
DIGITAL DIVIDE
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
| 
