House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Eleventh Report

3 DELIVERING RURAL BROADBAND

20. The Government told us that "in the main part we believe that the competitive market which has brought about the current level of availability should be allowed and encouraged to roll out services where it believes this to be economically viable and to develop innovative approaches to doing so".[46] In other countries different approaches have been taken: in Korea the government has intervened heavily in the market having set a target of universal access to broadband by 2002;[47] and we were told that in countries such as Germany the incumbent telecommunications operator has been given a virtual monopoly in more commercially attractive areas to encourage it to develop broadband in less attractive areas. BT quoted research which showed that the United Kingdom Government had spent less than $5 per head on broadband, compared to $25 per head in France and $95 per head in Japan.[48] As BT says, although it does not advocate Government intervention in the marketplace, "it has to be recognised that this different public policy context means the United Kingdom's path to broadband will inevitably take a different route from those of countries such as Korea and Germany".[49]

21. Although the Government's general policy is to leave the development of broadband to the market, it acknowledges that rural areas face specific difficulties. It has said that "there are still many people - in rural and remote parts of the country - who cannot access an affordable and reliable broadband service".[50] The Minister for Rural Affairs confirmed that it was the Government's aim "that every community in the United Kingdom, irrespective of location, should be able to access broadband at affordable rates within a reasonable time".[51] We set out below the main steps which we think should be taken to achieve that aim.

Market-led solutions

ENCOURAGING BT

22. Several of our witnesses pointed out that the ADSL solution offered by BT is not the only solution to providing broadband. Nevertheless, BT has committed itself to extending ADSL coverage to 90 per cent of United Kingdom homes in a foreseeable period, taking it into market towns and rural communities. We are keen that the extension takes place as quickly as possible and as widely as possible.

23. The Country Land and Business Association (CLA) told us that it is "unhelpful for infrastructure providers to raise the hopes of rural businesses in areas where there is never any intention of enabling telephone exchanges to provide ADSL".[52] For that reason it said that BT should set trigger levels "for all rural exchanges, even if those trigger levels are as high as, let us say, 2,000. It will actually say to the community there that their chances of getting broadband are extremely slim, if not zero; at least you know you have the information there".[53] BT told us that in certain places it would be "nonsensical" to set a trigger level, since the number of customers needed to reach the trigger might actually exceed the number connected to the exchange.[54] Nevertheless, we agree with the Country Land and Business Association that setting trigger levels for all exchanges, no matter how high they might be, would help rural communities to gauge their prospects of accessing broadband via ADSL. We therefore strongly urge BT to set trigger levels for all exchanges.

24. We found that there seemed to be confusion about the degree to which BT could cross-subsidise the enablement of more marginal exchanges from the profits made in more commercially-viable areas. BT told us that "there are Competition Act rules and regulatory rules under which we operate where we have to demonstrate we are not crosssubsidising".[55] However, the Director-General of Telecommunications told us that there is "no substantive or substantial, both words, regulatory inhibition".[56] We recommend that Oftel and BT meet to clarify whatever confusion persists about the degree to which BT is able to cross-subsidise the enablement of exchanges with money made in profitable areas.

ENCOURAGING DEMAND

25. BT pointed out that the Government could be of "enormous help" by ensuring that it made full use of broadband itself. By improving the quality and quantity of Government services accessible online it can encourage demand for them and, by extension, demand for rapid and reliable access to them via broadband. UK Online reports that 54 per cent of services are now available electronically.[57] By offering good quality services online the Government can make a vital contribution to stimulating demand for broadband services, which will in turn encourage investment in such services. We recommend that the Government move quickly to offering all of its own services online, including those services particularly directed at rural communities. We also recommend that the Government encourage other public sector bodies to make services available online as quickly as possible. Encouraging demand should not stop once broadband has been made accessible: take-up of the service is also important.

Encouraging campaign groups

26. We were impressed by the evidence we received from groups which had been formed to campaign for broadband provision in rural areas, such as in Blewbury. The Government, through the UK Broadband Fund, has taken steps to encourage such groups, but we urge it to do more. We recommend that the Government, in conjunction with regional and local authorities and local Business Link services, work to encourage and support local groups and businesses campaigning for broadband provision in rural communities. Such support should include advice and small grants to facilitate their activities.

Radio spectrum

27. A number of our witnesses raised the issue of radio spectrum. Several commented that radio spectrum licences were too expensive. NTL told us that licence fees should be "set at a much more realistic level",[58] and Firstnet said that the cost of its radio spectrum licence (£850,000 per year) was an 'issue' which is affecting deployment.[59] Witnesses also commented that insufficient spectrum was available for wireless broadband. The Broadband Stakeholder Group told us that the currently available radio spectrum "does not allow for commercially sustainable low cost [wireless broadband] products in areas of low population density".[60] We recommend that the Government continue to work to make more frequency bands available for use by providers of wireless broadband services. We further recommend that the Radiocommunications Agency be formally directed to set the price of radio spectrum licences at a level which actively encourages the development of wireless broadband.

Intervention

28. Despite its general policy of leaving broadband provision to the marketplace, the Government is in fact actively intervening in the market in several ways - for example by providing funds to Regional Development Agencies to undertake pilot projects and trials, and by investing considerable sums in the provision of broadband to schools and healthcare facilities. We explore in this section the ways in which Government intervention can be extended and exploited to widen access to broadband in rural areas.

Aggregation

29. BT has called for public sector demands for broadband to "be aligned to help accelerate the roll out of broadband".[61] It told us that the "purchasing power" of the public sector in relation to the provision of broadband to schools and healthcare facilities "could drive demand even faster".[62] The Government told us that it had concluded that the best way for it to realise the potential for public sector investment to facilitate broadband access for private sector customers was to "aggregate the key aspects of public sector demand".[63] For example, BT envisaged that Government demand would "benefit the whole community if implemented in a way that helps reduce trigger levels in non-enabled exchanges".[64] We assume that aggregated demand might also be used to obtain provision from suppliers other than BT. A broadband aggregation project team has been set up, based in the Department for Trade and Industry, to ensure that the benefits of aggregation are realised.[65] Given the particular importance of demand aggregation in the provision of broadband in small towns and villages, we urge the Government to ensure that Defra is strongly represented on the aggregation project team.

30. Public sector aggregation may not always be sufficient to allow the enablement of a BT exchange, or lead to investment by a cable company. In such cases provision may only be possible via dedicated lines to individual schools or healthcare facilities. Opportunities then exist for communities to 'piggy-back' on such lines, using them to access broadband. For example, a wireless system may be built at the end of the line to permit local broadband access: we were told about a school in Cheshire where precisely such a solution had been developed.[66] A number of witnesses to the Committee advocated such solutions in other areas but more work needs to be done to clarify the circumstances under which, and the mechanisms by which, private sector consumers can 'piggy-back' on public sector infrastructure. We recommend that the Government work closely with regional and local authorities and broadband suppliers, as well as consumers, to develop imaginative means by which private sector consumers can 'piggy-back' on public sector infrastructure.

31. The Government is naturally concerned that ensuring aggregation of public sector demand, or allowing 'piggy-backing', may delay the provision of broadband to schools and hospitals.[67] Such a concern is understandable. Nevertheless we recommend that the Government strike a balance between ensuring that educational and healthcare facilities are connected rapidly to broadband and allowing individuals and small and medium-sized businesses to benefit from aggregation and 'piggy-backing'. In principle we believe that public sector investment should have a secondary aim of making broadband more accessible to the wider community as well as to schools and hospitals.

The most remote areas

32. All of our witnesses agreed that there was a small proportion of the country in which the provision of broadband could not be left to the market, even after Government intervention. BT said that "the last 10 per cent … will be the most challenging to provide".[68] There is a proportion of the countryside - generally the most rural and remote areas - where the provision of broadband cannot reasonably be left to the marketplace. In order not to disadvantage such areas intervention is essential. We therefore recommend that the Government rapidly identify those areas in which its intervention is needed; develop policies, in conjunction with Regional Development Agencies and local authorities which ensure that broadband is made accessible in remote areas; and back those policies with adequate funds. It should, for example, make specific funds available under the England Rural Development Programme to subsidise the cost of broadband in the most remote areas.

State aid rules

33. There was confusion amongst our witnesses about the degree to which public investment in broadband was inhibited by European state aid rules.[69] The Regional Development Agencies told us that they were "constrained by torturous … state aid rules", and called for "the designation of broadband as a Service Of General Economic Interest, under European Union treaty provisions, in order to increase their powers of intervention".[70] The Director-General of Telecommunications told us that "provided the Government develops a competitive procurement model … this should not have state aid implications".[71] We recommend that the Government clarify in its response to this report its understanding of European state aid rules as they relate to public sector support for broadband. We are keen to ensure that such rules, or current misunderstanding of them, do not affect public support for broadband provision in the most remote communities.

Co-operation

34. There are a range of agencies involved in the delivery of broadband, including the Department of Trade and Industry, Defra, the Department for Education and Skills, the Department of Health, the UK Broadband Taskforce, the Regional Development Agencies, local authorities, the Countryside Agency and the other members of the Broadband Stakeholders' Group. A number of our witnesses agreed with NTL, which said that "the mosaic of agencies are currently in danger of getting in each others' way".[72] The Rural Affairs Minister has recently said that he wants to simplify the 'alphabet soup' of organisations offering advice to farmers and other rural entrepreneurs:[73] that proposal is particularly apposite in the case of rural broadband.

35. In our report into the Delivery of Education in Rural Areas we called for Defra to maintain a presence in rural areas, to monitor developments, offer advice and co-ordinate the actions of different agencies.[74] We believe that Defra can play a vital role locally in providing advice to rural businesses and other members of rural communities, as well as to infrastructure providers and others, about broadband. The Department should also take on greater responsibility for co-ordinating those agencies charged with delivering broadband in rural areas. We strongly recommend that it make arrangements to do so.

46 Ev 98 Back

47 Parliamentary Office of Science and Technology (2002), Broadband Internet Access, postnote no.181. Back

48 Ev 48, para.7 Back

49 Ev 48, para.8 Back

50 Office of the e-Envoy (2002) UK Online Annual Report 2002, p.23 Back

51 Q.230. Mr Michael was agreeing to an assertion (quoted here) made by David Curry MP. Back

52 Ev 39, para 20 Back

53 Q.69 Back

54 Q.99 Back

55 Q.119 Back

56 Q.198 Back

57 Office of the e-Envoy (2002) UK Online Annual Report 2002, p.5 Back