APPENDIX 23
Memorandum submitted by the Federation
of Small Businesses (S 39)
INTRODUCTION
1. With 177,000 members, the Federation
of Small Businesses (FSB) is the UK's largest lobby organisation
representing the interests of small businesses and the self-employed.
2. The FSB believes that it is only through
effective Information Communications Technology (ICT) that the
UK can remain competitive.
3. The FSB recognises the key role that
effective ICT, especially broadband, can play in sustaining our
vital rural communities. Not only can rural businesses stay competitive
through affordable, accessible broadband communication, but the
development of satellite offices and home working supports local
communities, reduces transport pressures and benefits the environment.
4. The FSB believes the lack of a consistent
definition of the term broadband, is a significant obstacle to
wider understanding of its benefits. For the purposes of this
submission broadband means a form of access to the Internet which
is faster than ISDN, always on and cheaper than ISDN.
WHAT DEMAND
IS THERE
FOR BROADBAND
IN RURAL
AREAS
5. The business case for broadband in rural
areas is clear-cut. Major research amongst FSB membership indicates
that three quarters of small businesses who use ADSL broadband
find that the technology increases their productivity and staff
satisfaction. Of those businesses that have broadband, 76% say
it has increased productivity, while a further 14% expect it to
deliver productivity gains in the next year. 58% have said that
it has improved their cost-base, with a further 14% expecting
it to this year. As important, 74% of those businesses claim that
broadband access has increased employee satisfaction, yet broadband-connected
businesses still only represent 4% of the whole.
6. Small businesses are frustrated by the
slow progress that has been made towards broadband connectivity.
According to the FSB's Lifting the Barriers Survey published in
May 2002, 15% of businesses see this as a major reason for their
failure to make best use of new technology.
7. For those aware of its potential, broadband
offers a way of reducing the necessity to travel. This is particularly
significant in rural areas where public transport provision is
inconsistent. The FSB is aware of research in Dorset that demonstrates
that 88% of parishes in the county do not have a daily bus service.
8. The East of England Development Agency
(EEDA) has been running a pilot to map demand for broadband and
to provide a "brokerage service". So far the greatest
number of registrations (6,500) have been received from Norfolk
and Suffolk—the two most rural counties in the East of England.
The registration pattern is similar for another EEDA initiative
called the "Connecting Communities Competition" which
encourages people to get together and submit a bid for funding
towards the provision of broadband in their area.
9. The FSB believes that national, independent
demand-mapping scheme is required to properly assess the demand
for broadband in rural areas.
WHAT PROVISION
ALREADY EXISTS
AND WHAT
IS PLANNED
10. The East of England case study demonstrates
that the existing provision of broadband in rural areas is very
limited, with the greatest access to such services being in the
larger conurbations such as Cambridge, Norwich and Luton, and
in areas close to the London border such as Hertfordshire.
11. Figures on ADSL coverage for the East
of England are as follows:
| County/Unitary |
BT Exchanges | BT ADSL Exchanges and %
|
| Bedfordshire | 40 | 8-20%
|
| Cambridgeshire | 76 | 9-12%
|
| Essex | 123 | 24-20%
|
| Hertfordshire | 64 | 30-47%
|
| Norfolk | 145 | 8-6%
|
| Suffolk | 113 | 8-7%
|
| Luton | 2 | 2-100%
|
| Peterborough City | 12 |
3-25% |
| Southend on Sea | 6 | 4-67%
|
| Thurrock | 7 | 5-71%
|
| Total | 588 | 101-17%
|
| UK Total | 5,407 | 1,079-20%
|
12. Forecasts from EEDA indicate that the provision of
broadband in rural towns will only rise from 5% in 2001 to 18%
in 2006, whilst coverage in remote rural areas is forecast to
increase from 1% in 2001 to 3% in 2006.
13. The FSB understands that British Telecom (BT) has
said that in future rural exchanges will only be upgraded to ADSL
broadband if sufficient numbers of customers pre-order the service.
At present, 64 Internet Service Providers (ISPs) are working with
BT to collect pre-demand orders. According to BT the requisite
number of pre-demand orders is dependent on the size of an exchange
and the cost of upgrading it, but it appears that BT effectively
needs to be able to guarantee that an exchange will be profitable
before it is upgraded. The campaign group, Broadband for Britain
estimates that the economic level of pre-demand is approximately
50 users.
14. The FSB understands that ADSL broadband is only available
within a five km footprint of an enabled exchange. Therefore much
of the countryside is excluded, presenting a significant barrier
to agricultural diversification because offices and workshops
converted from redundant farm building are unlikely to be within
a `footprint'.
WHAT OBSTACLES
THERE ARE
TO THE
PROVISION OF
BROADBAND IN
RURAL AREAS
Lack of infrastructure
15. The FSB believes that inadequate infrastructure is
the obvious barrier to the provision of broadband in rural areas.
The lack of infrastructure is a consequence of a reliance on commercial
organisations for the roll—out of ADSL broadband. This is
exacerbated by inadequate methods of assessing customer demand
to the level required to warrant a significant investment in infrastructure.
16. The FSB recognises that because of its market dominance,
BT is likely to remain the principal supplier of broadband facilities
in rural areas for the foreseeable future.
17. The FSB has expressed disappointment at BT's decision
to refuse to upgrade rural telephone exchanges to ADSL broadband
unless sufficient numbers of customers pre-order the service.
The FSB understands that BT's marketing plans are often limited
to targeted press releases to local newspapers and believes that
there is a danger that businesses in rural areas will not even
know that the service is on offer. There are few alternatives
to BT in many rural areas and it is unlikely that there will be
large numbers of people pre-ordering what they see as a lost cause.
Education and training
18. The FSB believes that consumers are thoroughly confused
as to what methods of Internet connectivity are available and
at what price. Businesses do not fully understand broadband and
need to be shown how broadband might improve their productivity
and profitability. The lack of a common definition of broadband
exacerbates this problem.
19. Business owners are unsure of where to go to for
the right advice, with 50% of businesses finding it difficult
or very difficult to access training in e-commerce, according
to the FSB's Lifting the Barriers survey. The FSB calls for the
provision of IT courses tailor-made to business needs, and for
greater consultation by higher and further education colleges
about business needs before designing courses on ICT and e-commerce.
WHAT ROLES
ARE PLAYED
BY DEFRA AND
THE COUNTRYSIDE
AGENCY AND
WHAT THEIR
RELATIONSHIP IS
WITH THE
UK BROADBAND TASKFORCE
AND THOSE
IN REGIONAL
DEVELOPMENT AGENCIES
DEALING WITH
BROADBAND
20. The FSB is aware that the Department of Trade and
Industry, through the Invest UK programme, is currently attempting
to quantify the number of businesses that would move away from
rural areas if they were unable to access broadband. At central
government level, the UK Broadband Fund is also running a Remote
Area Broadband Inclusion Trial (RABBIT) which will subsidise some
2,000 small businesses' access to broadband for the first year.
21. The FSB understands that in Autumn 2002, a member
of staff was appointed at each RDA/devolved administration with
specific responsibility for broadband provision.
22. The FSB is working with a number of Regional Development
Agencies on broadband initiatives. The South East Economic Development
Agency (SEEDA) has arranged a programme of 500 events in partnership
with organisations such as the FSB. EEDA runs a variety of activities
under the banner of "Demand Broadband" with a £5.8
million budget. These include the Connecting Communities Competition,
the Broadband Brokerage, and an awareness campaign.
23. The FSB welcomes the principle of public sector involvement
in encouraging the provision and uptake of broadband, but has
reservations about the effectiveness of current programmes. Future
programmes must strike the balance of being adequately integrated
but also responsive to local needs.
24. The FSB recommends that rural enterprise schemes
be extended to provide financial assistance for broadband projects.
25. The FSB notes that £100 million was recently
allocated by the Welsh Assembly to bring broadband to 67,000 extra
businesses in Wales, and recommends that measurable and timed
rural broadband targets are introduced for RDAs, as they have
been for the devolved governments.
WHAT ALTERNATIVES
TO BROADBAND
EXIST OR
ARE BEING
DEVELOPED THAT
MIGHT BE
OF PARTICULAR
RELEVANCE TO
RURAL AREAS
26. The FSB recognises that in reality a significant
number of rural areas will not get ADSL broadband for a number
of years and calls for greater transparency so that residents
of these rural areas are told that this is the case. As such,
the FSB also supports the investigation of alternatives to ADSL
broadband.
27. The FSB recognises that any one technology can become
obsolescent very rapidly and therefore welcomes a variety of ICT
delivery options.
28. The FSB advocates a basic commonsense approach such
as the integration of ducting into new build commercial and domestic
premises so that future cabling can be installed or upgraded without
difficulty.
29. The FSB notes the Minister for E-Commerce's response
to a House of Commons written question from Mr Liddell-Grainger
MP on 13th February 2003 in which he said that broadband is available
throughout the UK by satellite. The FSB believes that current
satellite technologies have limited potential due to problems
with bandwidth and time delays.
30. Other options include radio nodal systems such as
Mesh Radio, mobile options, and experiments currently being carried
out by Scottish Power and Northern Electricity involving the transmission
of data over electricity cables. A pilot scheme is also being
run in Essex, called the Tendering Wireless Trial which uses technology
developed in Texas, USA to provide long range wireless broadband
access.
31. Alternative forms of broadband are normally expensive
and/or depend on some kind of community development.
CONCLUSION
32. Recognising the commercial constraints, the FSB calls
for a level playing field for ICT across the UK, allowing all
business owners to access the communications technology of their
choice at an affordable cost, in order to develop and grow their
businesses. The ultimate goal is for ADSL broadband to be available
on demand throughout the UK just like any other utility.
33. The FSB is concerned that left to the private market,
remote rural areas may never get broadband and calls on the Government
to consider subsidies to support the roll out of ADSL Broadband.
One option is for central government to consider installing the
fibre optic infrastructure and then leasing it to the various
Internet Service Providers.
Federation of Small Businesses
3 March 2003
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