Examination of Witnesses (Questions 1-19)
MONDAY 31 MARCH 2003
DR PETER
RADLEY AND
MS VALERIE
CARTER
Chairman
1. Dr Radley, Valerie Carter, welcome. This
is the first of the oral hearings for the Provision of Broadband
in Rural Areas Sub-Committee. You have been invited as representatives
of the Regional Development Agencies (RDA); I understand that
the various RDAs got together and decided that SEEDA was the appropriate
RDA to give evidence, so welcome. Would you like to introduce
yourselves for the record and then we shall make a start?
(Dr Radley) My name is Peter Radley.
I am currently the Director of the Wired Region Programme for
SEEDA and SEEDA takes the lead on the broadband issues on behalf
of all the RDAs. My background is in the telecoms industry man
and boy. I was one of the originators of the broadband stakeholder
group set up by Patricia Hewitt. My task group gave recommendations
on a variety of things to do with catalysing the public and private
demand for broadband.
(Ms Carter) I am Valerie Carter, Rural Sector Director
at SEEDA, which means that I lead on rural issues within SEEDA
and on broadband in particular I would work with Peter and his
team; Peter and his team would be the ones to lead on developing
SEEDA's broadband strategy as such. As Rural Sector Director,
I am working almost daily with the DEFRA director at the Government
Office and with the Countryside Agency. We work in partnership
on a whole range of things.
2. To start the ball rolling could you give
a general response on the effect of the lack of broadband access
on rural areas and also deal a little bit with the difference
in the demand for broadband in rural areas as against the type
of demand which exists in urban areas.
(Dr Radley) Many of the issues to do with the effect
of lack of broadband can be summed up in one word which is frustration.
Frustration from people who feel themselves cut off or people
wanting to do business from rural locations and seeing broadband
as a way of enabling that. It has become accepted, particularly
for small businesses and medium-sized businesses too that broadband
is their window on the world. They can access the world and the
world can access them. Broadband is important there. One of the
other things which I think is important, which communities and
particularly district and county councils are discussing, is the
impact of e-democracy. If we are going to have ubiquitous availability,
availability to everybody of public services, of e-democracy,
then broadband is a tool for making that happen. There is frustration
that things are not happening faster.
(Ms Carter) I should like to add that it was quite
clear from our work with all the rural and wired region people
in the RDAs that broadband is going to be one of the tools which
is going to be necessary if you are going to have sustainable
rural communities. Communities themselves are losing public transport,
they are losing their post offices, they are losing their accessible
banking and it is making that exclusion in rural areas much worse
and potentially it will go on getting worse. Therefore broadband
is one of the key tools they think they would want to use for
regeneration. As you can see from our written response, all the
RDAs are saying that there is a significant lack of provision,
yet those which have actually looked at what the demand is in
rural areas, when they have gone out practically to find out what
people want, is that a demand is coming forward, that people would
want it. Of course the other strand to that is that there is a
significant lack of understanding of the benefits that broadband
can bring, particularly to small SMEs, but we know that if that
message were addressed then those small SMEs would want broadband,
the same as any other SMEs in the rest of the country.
3. Some other rural areas already have access
to broadband. Do you have any comments on the difference of demand
which exists in those areas where broadband is already available
as against those areas where it is assumed it is not available
and would not be available for a long time?
(Dr Radley) The issue is not necessarily availability,
but one of awareness. In one of our areas broadband has been put
into one of the very deprived areas which is Hastings. Because
it was such a deprived area with incomes only 60% of the national
average per household, it was felt that this was not a good picking
ground for broadband. No, not at all. It had a far higher take-up
than some other areas. The point of that story is that once people
are aware that it is available—and we did quite a lot of
promotion in Hastings—then take-up is very, very high indeed.
Take-up has also proved high, for example, in the West Midlands
area where a campaign was started to look at provision of broadband
in Bridgnorth. Once one of the commercial companies found the
demand was rising, they were in like a flash and decided to deploy.
The issue is one of awareness rather than one of availability
and where there is awareness and there are local champions who
are willing to go do things—and there are many, many of
them—that is what creates this bow wave which can move us
forward. It is not purely availability. Availability clearly helps,
but if there are these champions who are aware and know how to
get things done, that really makes it happen, as happened in Bridgnorth.
Mr Wiggin
4. Are you telling us that Bridgnorth has broadband?
(Dr Radley) Bridgnorth now has broadband being installed.
5. So it has not got it.
(Dr Radley) It has not got it yet, but it is being
installed as a result of that local awareness programme.
(Ms Carter) May I just say that a local awareness
programme is part of SEEDA's strategy in looking at the benefits
of broadband in both rural and disadvantaged areas and in the
urban fringes and the suburbs. That is another area which is not
necessarily being picked up. One of the key programmes where this
awareness will get more work on it will be the market towns initiative;
all the RDAs have a market towns initiative, working with the
Countryside Agency. The Countryside Agency do the health check
process of the market towns initiative and one of those issues
which is raised is always broadband. Therefore that will have
to be addressed in the developing action plans of market towns.
There will be quite a lot of awareness raising in the communities
of between the 5,000 or 10,000; that is not covering the villages.
We have 200 small rural towns in the South East but we have more
than 1,400 villages. What I am saying is that more of that awareness
work will be going on in the 200 small towns and through those
sorts of regional partnerships.
6. You say you are involved with Patricia Hewitt
on helping to devise the government strategy for broadband.
(Dr Radley) Yes.
7. Looking at it now, what percentage of cover
do you think the government should be aiming for in rural areas?
Do you think it is realistic?
(Dr Radley) My answer is 100%. We cannot afford a
digital divide. We must have digital inclusion. In fact everybody
in the British Isles can have access to broadband now—at
a price. The technology which can deliver broadband everywhere
is satellite—satellite reaches the parts others cannot reach.
It is at a price. A programme has been engaged in right across
the British Isles involving most of the RDAs and devolved administrations,
a programme called RABBIT for remote access through satellite
technology. Across the English regions for which I have the statistics,
there have been 1,306 businesses so far registered for this scheme.
There is support usually in payment for the first year. Certainly
that is an example where you can see there is demand and people
are willing to take up some of these schemes. Within reason, at
a price, broadband is available, but there is not enough capacity
via satellite to serve everybody. It just fits some niches in
the market and they are only niches. If we look at some of the
other things which are going on, in the Eden Valley up in Cumbria,
if you look at what is happening in the New Forest in Hampshire,
there are wireless schemes going into those communities; Buckfastleigh
down in the South West as well. There are alternative technologies
which can and are being used to provide fast broadband access,
in some cases extremely competitively with what we are getting
from the main line suppliers. In Bottisham in Cambridgeshire you
get connected for £49 and your service is £23.99 a month,
which is cheaper than you will get anywhere else by the way. There
are technologies which can be deployed on a community by community
level and justified commercially on that basis. As your communities
get more and more remote, that becomes a bit more difficult. Although
much of the time we will focus on the technology which delivers
into the home or the office, we must not forget the technologies
which connect those communities back into the rest of the network,
what some people call the middle mile. The further your community
is away from the rest of the backbone network, the more costly
that is. That is an issue which has to be addressed as well as
the technology to deliver within the communities.
Mr Wiggin
8. I am just glad you drew attention to Bridgnorth
because the pilot scheme which Advantage West Midlands put in
there caused the interest to rise.
(Dr Radley) Exactly so.
9. It is a BT trigger and BT are actually putting
it in rather than Advantage West Midlands which hopefully has
moved to Leominster, which is very important and dear to my heart,
as you can imagine. Can you tell us in what ways the RDAs intervention
in the broadband market is affected by European Union legislation
or state aid rules?
(Dr Radley) This is an issue of some concern to us
because we are limited in what we can do, as you are well aware.
We have been talking in SEEDA and our colleagues in other RDAs
have been talking to various providers, not just the big providers
but some small ones wishing to get into this marketplace, and
getting some idea of what the initial cost would be for an implementation.
Typical figures we are told are of the order of £70,000.
Unfortunately I had a rail problem this afternoon and did not
meet with the DTI on state aid rules, but my proposition is that
we can put in aid to specific communities, to a limited company
in a community for example, under the de minimis rules
of state aid, that is under
100,000. As far as I can see that would help quite
a lot of communities. The other provision I am very keen to see
exercised is a provision which was made under the original EU
Treaty, which was for services of general economic interest. It
is up to a Member State to declare what are services of general
economic interest (SGEI). As far as I know, no state has yet done
such a thing.[1]
However, it is currently being looked at very keenly by all states
because many services which originally came from the public sector
are now delivered by the private sector, gas, water, electricity,
telecommunications. What I am urging, and indeed the RDAs have
urged Stephen Timms to look at, is the declaration of broadband
as a service of general economic interest. That provision is in
the treaty. I should like this government, on behalf of the UK,
to exercise that. It then means some of the state aid rules, which
we are encumbered with otherwise, are a bit easier. Alongside
that declaration of an SGEI, has to go a declaration of public
service objectives (PSO), which are very important for rural areas
and must be addressed. That is a particular issue surrounding
state aid which I should like to recommend to the Committee is
seriously considered because it is something within our gift to
do if we wish.
10. Can you tell us how much your budget is
and how you are spending it on schemes to improve broadband coverage
and take-up?
(Dr Radley) Budget is a good question.
I have proposed a scheme to the SEEDA board for which we are currently
writing a very detailed plan, in principle accepted by the board.
We are looking at a scheme which would spend around £17 million
over a three-year period to stimulate broadband across our area
and to seek to do that with the commercial sector in such a way
that the risks we take in putting money up front are counterbalanced
by reward, that is a share of the margins, as that business flows
later from those commercial organisations. Our CEO calls it adventure
capital, that is we are taking risk over and above what a bank
would take, but accelerating the whole programme. That is the
sort of scale which would bring broadband into most of the communities
within three years, for example, in the SEEDA area.
11. Would it not be cheaper for them simply
to give the money to BT and then everyone would get ADSL broadband?
(Dr Radley) Fine. You solve the state aid rules for
me.
12. I do not know.
(Dr Radley) That is illegal.
(Ms Carter) May I add one thing on the budget? The
money we get from the DTI broadband fund is £3 million. So
you can see there is a very great deal of difference between the
£3 million which we get officially to help with broadband
and the money we actually need to be able to spend on it. You
can imagine that as all the RDAs have just produced their regional
economic strategy, obviously broadband is a theme, but we are
under tremendous pressure in terms of the money we get to be able
to fund the things we actually want to do.
13. How do you go from £3 million to £17
million?
(Dr Radley) The £3 million is the SEEDA share
of the £30 million which was granted by DTI for broadband
programmes; that is the £3 million mentioned. We have to
justify spending £18 million with a good business case. Another
comment about what you said about giving it all to one company:
that is anti-competitive. We would be rushed to the European Court
of Justice in Luxembourg if we tried to do that.
Mr Drew
14. I am genuinely confused on this issue of
the interpretation of state aid. Who has said that this is not
within the USO because it falls outside the normal exemptions?
In other words this is deemed to be a form of state aid. Are there
not any ways around this?
(Dr Radley) No.
15. The government determines it has a broadband
strategy, it wants broadband put in, it decides it will use certain
measures to put that in, as indeed could happen in France through
its own state telecommunication industry. Who can stop that?
(Dr Radley) The European Court of Justice is the short
answer. A programme was declared in France—I was working
in France at the time so I knew it quite well—to put
1.5 billion into a rural programme for broadband
and they were stopped because it was judged illegal by the Commission;
it never got as far as the European Court of Justice. You mentioned
USO. As far as I am aware, nobody has linked universal service
obligation to state aid rules. Universal service obligation is
a notion which applies just to the telephony service only in most
European countries related to the old monopoly PTT. It is not
something which has been applied, as far as I am aware, to anybody
in the broadband area. The closest you get to it in the various
documents which have been going around the Commission in the last
few months is something called the public service obligation.
As long as money which is put in by the State is commensurate
with achieving those public service objectives, not universal
service, public service objectives, then apparently it is allowable
and you will see a reference to that in statements made by Mario
Monti about three weeks ago.
16. In a nutshell, we call it USO and get away
with it.
(Dr Radley) No. USO is something which just applies
to regulation of telephony services, not telecommunications, only
the phone service is subject to USO.
Ms Atherton
17. Going back to the broadband pilots and the
£30 million, how much have the various RDAs been linking
with one another, sharing experiences? What has proved to be successful,
what has not been successful and what overall have you learned
from them? Could you mention something about what is happening,
and this perhaps links to the previous questions, in Cornwall
where European Union structural funds are being used in order
to deliver broadband to ten towns?
(Dr Radley) Picking up the last point first, structural
funding helps, particularly in areas where that is allowed. That
is not allowed everywhere, certainly not in the RDA which Valerie
and I represent specifically, but it is clearly relevant in all
the devolved administrations as well as in parts of England and
particularly the South West. Those programmes have certainly been
helpful, the so-called ACT in Cornwall. The more general comment
about the £30 million is that £30 million is in the
process of being spent; it has not all yet been spent. One does
not have the full experience yet of the full programme. Under
the guidance of the DTI different regions took different angles
or were encouraged to take different angles to this problem and
that has been done under the co-ordination particularly of Michael
Duggan in the DTI and now falls under the remit of this special
task group set up in the DTI where there is a guy in the centre
with representatives placed in each RDA and devolved administration
reporting to him to help administer, to help watch, to help share
experience across all the RDAs. There is a very active programme
of sharing between the RDAs as a result of that programme which
was set up last autumn by the DTI. Just to comment on the results,
we talked about Bridgnorth earlier, there was a scheme in the
West Midlands, Advantage West Midlands, which was intended to
generate broadband interest and it was so successful that a commercial
organisation came and said yes, we will do it and now we are going
on to Leominster. This issue of awareness has been a great lesson
from all of the RDA programmes one way or another. In the East
of England for example, there was a deliberate brokerage programme
to bring together buyers and suppliers which has succeeded in
generating demand in places like Diss in Norfolk and so on. Awareness
would be one thing which has been created through these programmes.
The other thing we were aware of already but we are aware now
of the intensity of it in a way we were not before, is the ability
for community action really to play a role here. We have seen
champions in individual communities. I am going down to Lyndhurst
on Thursday where a local community has done its own thing for
their town and that is going to spread across the whole of the
New Forest by the look of it. Community action has been a lesson
to be learned and the other lesson to be learned is that there
is no one technology which solves the problem. From a technology
point of view, you have to be able to mix and match technologies,
be it satellite or enabling the local telephone exchange with
the DSL technology or using cable modems from the cable TV suppliers.
You have to be aware of all this and mix and match. I should actually
like to see further action taken here vis-a"-vis the rural
communities via the RDAs and alongside these technical advisers
from the DTI have people who can help communities understand the
business case and how to go about things for themselves. I can
see that is a role particularly to be picked up by Defra, for
Defra, like DTI, to set up a team of rural broadband advisers
which could be placed in each of the RDAs, linked to the centre
and of course linked with the technological view of the DTI. That
would help us forward, alongside those DTI-funded programmes.
(Ms Carter) One has already been highlighted for Yorkshire
Forward. They are the first ones to take this up, but we should
like to see it in all of the regions.
18. This sounds very good. You mentioned Lyndhurst.
My concern would be that the danger is that those communities
and rural champions which offer tend to be the middle classes,
which is going to ensure that those possibly more prosperous communities
are the ones which benefit over the poorer rural communities and
you will see an even greater divergence between rural rich and
rural poor.
(Ms Carter) The way the RDAs are structured is that
their money is targeted at particular regeneration areas and there
will be help specifically to those regeneration areas and broadband
will be one of the things they will look at.
19. That tends to be to towns.
(Ms Carter) No, no; I am talking about the rural regeneration
areas not towns. Certainly through the market towns programme
and the work we do in rural areas which are regeneration areas
which are large parts of Kent, East Sussex and the Isle of Wight
in our region particularly; other regions will have other areas.
I am saying that all the RDAs recognise that you need to do a
lot more in areas which do suffer from disadvantage and broadband
would be one of those regeneration solutions which would be looked
at and would be promoted actively, more so by the RDAs than any
other parts of the region.
(Dr Radley) I share very much the concern. My objective,
as far as my own involvement in SEEDA is concerned, is to make
sure everybody gets broadband: the better-off communities; the
worst-off communities; everyone. Yes, that leaves you with a commercial
conundrum. What we wish to see is that everybody who engages in
this business has sustainable business. It is no good having a
period of support and subsidy, that when that lapses then business
is not sustainable. We have to create something which is sustainable.
One of the issues we are looking at is the mechanism of clustering
together sets of communities who are more advantaged and less
advantaged, finding a way of clustering them together so they
are a single commercial enterprise, so you can share between the
two. One has to find mechanisms like that, otherwise you do have
the poorer communities, the really disadvantaged communities,
permanently disadvantaged and that is certainly not my objective.
I believe there can be commercial ways of doing this, as long
as the commercial sector plays its role in that as well.
(Ms Carter) Even in the more wealthy communities we
have areas or small pockets of deprivation and that is typical
of rural areas across the region, whether they be generally in
a rich area or a poor area. What we must also look at is if broadband
is being promoted by the community that it is actually going to
reach all parts of those communities rather than the people who
automatically think they are interested in it. That is a real
challenge when you are looking at places where you might not be
engaging the whole of the community. That is one of the issues
which the market towns programme is trying to do through their
health checks: to make sure that all parts of that small town—and
we are talking here of small towns of about 5,000 to 10,000, the
really small towns—are actively engaging the whole of their
community as part of what they are doing.
1 Note by Witness: I have subsequently learnt
that France has indeed made this declaration to help with Broadband
deployment and justification in rural areas. Back
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