Supplementary memorandum from One Northeast
(S19 [a])
(INTERNAL BRIEF DATED 6 JANUARY 2003)
UPDATED BRIEF
ON BROADBAND
1. Purpose
The purpose of this short brief is to update
the CEO on the current Regional Broadband position.
2. Supply
Broadband is high-speed, permanently-on, access
to the Internet. Simply we can divide Broadband Supply into three
categories:
— True broadband—high speed telecommunications
links in excess of 2MB/sec largely via fibre optic cable.
— ADSL—BT's Broadband Service
over Copper wires running at 512 KB and above.
— Other—including wireless and
satellite—this runs at varying speeds.
Both industry (BT) and independent sources (Royal
Bank of Scotland, MORI) confirm the region's position as second
only to London, and the equal of Belgium and the Netherlands,
in the availability of high speed broadband in urban areas. Procter
& Gamble, BT's new Broadband Call Centre and British Airways,
to name but three major users of Broadband, are testament to the
availability of this business biased and relatively expensive
commodity. This is commercially driven supply.
These high speed cables also exist in a number
of rural locations (along the A66, the A68, the A69, the A1, the
Railway Lines and Offshore)—but are expensive to "break
out" from—at approximately £100,000 a time plus.
This cost has generally prohibited breakouts in rural areas. This
is why satellite in rural areas is attractive.
Most schools (over 90%) now have at least 2MB
Broadband (shared between many users)—and there is a policy
to raise this to between 34MB and 100MB as soon as possible. This
is public sector driven supply—and therefore it is not entirely
clear where the funding for the upgrade is coming from. DFES have
not yet formalised a budget for this.
Pro rata there are more BT ADSL enabled exchanges
in this region than any other (source: BT and other suppliers).
At the last meeting with BT (12 December 2002) there were 63 of
177 BT exchanges capable of conversion to ADSL. Currently 48 of
the 63 are enabled. The ones not enabled are: Blaydon, Corbridge,
Denton Burn, Hexham, Hylton, Ingleby Barwick, New Brancepeth,
Ponteland, Prudhoe, Ryton, Stainton, Stanley, Whickham, Whitburn,
Wideopen. Since October 2002 Ponteland, Wideopen and Stanley have
hit threshold levels—and Hexham and Ingleby Barwick are
close—and should be ADSL enabled shortly. This means that
over 74% of the region and 80% of businesses are covered by ADSL
broadband. Additionally, further areas are covered by NTL or Telewest
Cable—and the region has a high proportion of subscribers
to these two facilities. This means that Broadband coverage is
slightly higher than the national average—and not as bad
as BT would make out from their figures alone.
There is patchy distribution of other Broadband
services outside the urban and peripheral urban areas. This includes
some satellite provision and some wireless provision. In general
peripheral urban areas and rural areas are poorly catered for.
Nevertheless over 80% of the population and
businesses of the region have access to broadband if they need
it from at least one of the three major suppliers.
It is often the case that Broadband access is
expensive. However, prices are now the third cheapest in OECD.
Significant other networks exist supplying niche
needs: NHS, Rail, Water, Electricity, Gas, Metropolitian Local
Authorities; Norman (Colleges), Janet and SuperJanet (Universities)—to
name the best known.
There is a vocal minority in the region who
wish to continue to claim that there is not enough Broadband even
in urban areas. This minority is often interested in pursuing
independent networks that have traditionally been less reliable
than those offered by the mainstream suppliers such as BT, NTL,
Telewest, Thus.
3. Demand
Demand has generally lagged behind supply—and
still does so to the degree that it will take at least three to
ten years at present growth rates to put much of the fibre in
urban areas under any form of strain.
The same is true of ADSL enabled exchanges.
The largest demand is on the Washington Exchange, followed by
Newcastle NE and Gosforth. None of these exchanges have yet reached
500 consumers—with capacities in thousands.
The total number of Broadband customers in the
UK has recently passed the 1 million mark. In the North East the
total (all sources) is just under 40,000. This is approximately
4% of the national figure in a region of approx four per cent
the national population. BT put the overall ratio at 3.2% of the
telecommunication population.
Growth rates in the North East still lead the
country. Last year at this time there were less than 10,000 Broadband
users. There has been at least a 400% increase in the last year—
and the monthly growth rate remains over 20%. (BT confirmed by
other suppliers).
4. Support and Applications
There is little commercially driven support
for Broadband users. There is also a lack of a clear understanding
of what Broadband is about. However, in the last three months
significant progress has been made with regard to broadband awareness
through the One Northeast/BT/Onyx campaigns in key regional areas.
This has been partly responsible for the continued increase in
broadband take-up in the region—and has had major impact
on Teesside and parts of Northumberland.
5. The Suppliers' Position
Most of the suppliers remain cash poor. They
all need demand to be generated before they can supply. There
is no formal requirement on BT to provide a universal service,
although this may change. There is some reticence to introduce
Broadband into areas that may benefit from "Broadband"
3G and better mobile phones—as these will give broadband
performance in a mobile environment and will connect to existing
urban cable.
6. What the Agency is Doing?
6.1 Supply
Following the decision to devolve 75% funding
to the SRPs the Agency has been involved with the development
of SRP supply side initiatives. To date Northumberland, Durham
and Teesside have relatively robust plans, having engaged competent
consultants to advise them. Tyne and Wear's will be available
by March 2003.
The Agency itself has looked to deal with major
gaps—such as Disaster Recovery and Data Centres, establishment
of a Regional Telco, and Network Integration. Studies have been
commissioned and resources allocated to deal with arising issues.
The major Telecommunication Companies (BT, NTL, Telewest and Thus)
have agreed informally to help the Agency over "last mile"
issues—and the first meting of this group was held on 1
November 2002—with the next planned for mid-January. All
regional telcos have agreed to participate in a "Chatham
House" forum to improve regional connectivity. Funding is
likely to be an issue.
The Agency is also looking at developing alternative
technologies, apart from satellite, for Rural Areas—and
is working with BT to establish a £7,000 per exchange solution
to enable rural businesses with Broadband Internet to serve specific
numbers of rural customers (perhaps up to 50 for each £7,000).
Funding has yet to be sourced for this.
In summary, supply is being dealt with by SRPs
except for some key integration issues on which the Agency is
leading.
Until June 2002 the supply side issues were
generally the responsibility of NiAA.
6.2 Demand
As supply currently follows demand the Agency
has prioritised the stimulation of demand.
The Market Towns ICT Initiative has enabled
over 550 businesses to become eBusinesses and 4,700 more to be
accessible via the web. This gives a rural population that this
year can be assisted to obtain Broadband, via Agency and ERDF
funds—and gives BT, and others, some of the thresholds needed
to enable rural exchanges.
The rural satellite initiative has Broadband
enabled some 156 businesses in rural areas. As Radio Four commented
from "Wild Redesdale" on 8 November this has been a
saviour of a number of businesses. The Agency needs to find further
funds to extend this programme, if possible, within State Aid
rules. Some supply difficulties have recently been experienced
with the reseller/local distributor on this initiative. Following
intervention this has now been resolved with the principal supplier.
The Regional Portal provides increasing content
for Broadband users—and has in its own right access to over
77,000 regional businesses—forming a further pool for conversion
to Broadband. The business database is currently undergoing a
conversion process to enable them to be accessed via the Regional
Portal.
The Regional Information Partnership, the Regional
Database and the Regional Statistical Database will need Broadband
to be accessed effectively.
Various other initiatives from virtual Knowledge
Campus through to Online Upskilling are generating demand for
Broadband services—and in the process delivering an increasing
number of Broadband using applications.
In summary the Agency's main objective has been
the development of Broadband demand.
6.3 Support
The E200+ group is encouraging a wider view
of Broadband at senior management levels—and will be linked
into the regional leadership initiative and the regional leadership
portal. A CD identifying the key messages that such companies
should be thinking about has been recently distributed, with content
and financial support from the Agency.
EBGB (E Business Is Good Business) is a continuing
effort to educate middle managers in current developments (now
in its third year) and will be collocated with a number of other
regional exhibitions and seminars on 11, 12 and 13 June 2003 at
St James' park, Newcastle.
The eBusiness Foundation addresses entry-level
businesses and individuals in computer and Broadband techniques.
(Inherited from NiAA).
A revamped Regional Information Society Initiative
is to be launched with the Regional Information Partnership. The
Agency has been criticised for slow development of the Regional
Information partnership. However, as was recently pointed out
by the "Group of 10" steering group it was Government
Office itself that slowed the process down because of an initial
failure to agree to anything more than a data handling service.
7. The Broadband Fund and the Regional Broadband
Officer
The Broadband Fund (£1.4 million over three
years) is being deployed in support of CORUS and a number of specific
Broadband Awareness raising measures agreed with DTI—which,
in conjunction with the Innovative Actions programme, should,
again increase uptake of Broadband. This fund cannot be used for
Infrastructure projects.
A Regional Broadband Officer is to be appointed
by DTI. He/she will be jointly appointed by Agency/DTI; paid by
DTI, and housed in the KIICT team with specific responsibility
for developing Broadband. Interviews will take place shortly.
The appointment is due to be made in early 2003. Interviews take
place on 10 January 2003 having been delayed by DTI from December
2002.
8. The Region in Comparison to Others
8.1 General
Other regions have invested more strongly in
some rural areas (Yorkshire between York and Leeds in particular),
the West Midlands in some new technologies; the Highland and Islands
in satellite and wireless. There is no doubt the region needs
to do the same—principally through SRPs.
8.2 Supply
Except in some peripheral and the rural areas
the region is better supplied than any other region except London.
Rural areas are disadvantaged—but no more so than others
except the Highlands and Islands and some parts of Yorkshire.
The region has some excellent coverage in specific rural and peripheral
urban locales (Redesdale, Consett, North Tyneside). More does
need to be done in these areas.
8.3 Demand
The overall view is that the Agency is no longer
bottom of Broadband adoption tables. It certainly has the fastest
growth rate in the country at present—and the gap between
the region and the rest of country except London and the South
East has narrowed considerably to within less than 0.25—1%
point. (Note this is especially the case since Ray Smith of BT
visited Great North House six to eight months ago).
Royal Bank of Scotland and MORI have commented
on other growth and penetration rates that also lead the country—such
as Digital TV coverage, mobile phone coverage and adoption rates
of eCommerce.
8.4 Support
The region is more active in support of business
in Broadband, both from an Agency and Business Link perspective,
than others, outside of other regions' Broadband Fund activity.
9. Agency Priorities
9.1 Supply
— Peripheral urban and rural areas—including
the Agency's own estates, portfolio sale permitting.
— SRPs should be spending up to £5
million each in each of the next four years on infrastructure—in
three this would have a massive impact on rural connectivity.
— The Agency is to concentrate on major
regional gap filling.
9.2 Demand
— Roll out of ERDF and Agency funds
to develop competence eCommerce in SMEs in particular, with SBS,
in coming year. (Some £4 million in total in the next year).
— Extension of Regional Portal, Market
Towns ICT Initiatives, Regional Information Partnership, Regional
Database and Regional Statistical Base.
— Co-ordination of Portal, Extranet
(due this year) and Intranet.
— More parochially extension of PMS
to SRPs (this will need Broadband too).
— Development by Herb Kim of Digital
Cluster will assist Broadband demand, too.
9.3 Support
— Extension of E200, EBGB and eBusiness
Foundation.
10. Overall
Pursuit of the "Towards an eRegion 2"
strategy—now published.
| 
