Broadband - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Question Numbers 80-103)



  Q80  Mark Oaten: Why is it that individuals cannot afford to access it? Is it simply because they cannot afford the landline?

  Mr Stearn: Yes, they do not have landlines but it is all the issues that go with it. You need a computer and the hardware to be able to link up, and then you need to be able to afford the charges on a monthly basis. Then you also have the other issues of training and support. I do not know what experiences you have of trying to get service and having to pay for services, but it can be quite expensive to get linked up. It is all that issue about affordability.

  Q81  Mark Oaten: You do not think that is being addressed enough on the work on the digital divide?

  Mr Stearn: There have been pilots. We had this home access pilot, which has been piloting Suffolk and Oldham, which is trying to get Internet for school age children. The idea is to move that out to the whole country, but I do not think anyone has seen an evaluation of that in terms of how it is working. As I understand it, that is using the mobile network as a way of linking up families that do not have access. I do not know how they are dealing with that in terms of its potential very high cost. There are issues about how families can get linked up and afford to have broadband and to continue to pay for it, and get the support and education. The other group I have not mentioned is older people. There are quite extraordinary numbers here. There are 6.5 million people over 65 who have never used the Internet. That is quite extraordinary in terms of what we are talking about here: there is a whole group that is being completely left out of this.

  Q82  Mark Oaten: Does that not happen with every bit of technology in every generation?

  Mr Stearn: You can say that, but what it means in terms of what is happening is that Government is driving forward with DirectGov to get information on the Internet. In years to come, and indeed now, that group will just get completely left out and not get access to key and essential services, because so much is now being driven through the Internet—

  Q83  Chairman: — services are available through post offices and local communities, not just on the Internet.

  Mr Stearn: Of course, that is absolutely key as well, but it means that a group is missing out on that potential. Let me go back again to the point: if you look at the way the markets are working, for example in energy, you can get much, much, much cheaper deals if you use the Internet and direct debit to get deals. A whole group of people is being excluded from that.

  Q84  Mark Oaten: But some may want to be excluded. I am interested to understand the figure. If we are assuming we want to get to 90% coverage, which the Final Third would achieve, are we ever going to get to that figure? Will there be some individuals that just do not want to be part of this?

  Mr Stearn: The research that has been done shows about 48% of people who are not linked up want to be linked up, and it is either because they cannot afford it, or they plan to in the near future. Then you have this other figure of 42%, and there is a large group of older people amongst them, who say they do not want to get linked up. I can give you personal experience. My mother and father were not linked up two years ago, and my Mum kept saying, "Why do I need to bother?" We paid for her to get on the Internet. I saw her yesterday, and now the conversation is completely dominated by talking about the Internet and e-mail and what she is up to. It has completely transformed her life and she is doing all sorts of searches for her family, and using it in a very productive way. She would not have been doing that two years ago.

  Q85  Mark Oaten: My final question on access: if the 90% target is achieved by various things being put in place, paint a picture of the 10% that is going to be excluded. The Final Third fund aims to achieve access for 90%, so what is the 10% going to be? Should we be concerned? Even with these targets, if we achieve 90% is there going to be a crucial 10% that does not have access?

  Mr Holoway: 10% of households?

  Q86  Mark Oaten: 10% of the population is not going to have access, even under the Government's plans to meet the Final Third.

  Mr Holoway: These could be suburban areas, not just out in the middle of nowhere, that do not have the broadband capability of the 90%. We may have already seen a distortion of things like house prices, because the closer you are to an exchange the faster your broadband. We have seen new houses knocked down next to exchanges just to build two or three houses next to it just because it has got fast 8Mb broadband. There are more issues than just the speed. There are other outlying issues. Moving on, I just want to go back to what that gentleman said. For broadband you need a BT line generally or thereabouts, and you pay £10 a month just for the telephone number. You should be able to get broadband without having to pay £10 a month for a telephone line. These days broadband is getting fast enough so that you can have normal telephone conversations down a broadband line, without having to pay extra for the cost of having a line number.

  Ms Payne: Can I come back on your question? At the moment, for example, 17% of rural villages cannot even get half a megabit, so there will be particular areas where cable is not being put to the boxes, and we heard earlier on that there will be particular issues here. We do know that satellite can provide some solutions, but it will not provide all solutions. We want to see a combined strategy that targets some of these areas. At the moment it does not look as though a commercially viable solution will be put forward. We are talking at the moment with a couple of government departments about the huge investment that is going into the broadband supply for schools, the JANET system. We have raised the issue of whether we could possibly use that investment to provide an ongoing service to the communities where those rural schools are. We have been told that that cannot happen because of the procurement rules at the moment, which will not allow that to happen. We suggested a framework agreement that would overcome that, because we think that there is not just one solution to this, and that a number of solutions can deliver. If we can get a combined programme that is a bit more creative and more engaged in what we are trying to live with, then we could hit that last 10%.

  Q87  Mark Oaten: This could be quite a useful point for the Committee to pick up on, if there were a particular procurement issue that could be set aside to deal with access in terms of schools. Is there a note or something—

  Ms Payne: We can provide a note on that, absolutely. We have written to a few people already, but I can provide that to the group.

  Q88  Mr Wright: Are the Government's plans for the subsidised delivery of super fast broadband the best use of the public's money?

  Mr Holoway: I would like to think so.

  Mr Hearnden: I certainly think so. If you look at other areas that we see at the moment like Crossrail and London Olympics, the Government is spending money there to give the necessary push. What we are seeing for broadband is a similar example. It is a good use because, as we have already heard, broadband is important to everyone in the UK, and the more people who can get access to it the better it will be for UK plc. We are very supportive.

  Mr Stearn: There are two issues: how money is used and where it comes from. As you can gather, what I think should be happening here is that we should be seen as part of a universal service framework. Yes, it is getting the potential for access to everybody, but it is also then getting people the ability to be hooked up. Those are all very key. We know from what is happening that certain groups are being excluded, and that needs to be faced up to as well. I found the report quite thin on how the Government could use its powers, or the regulator could use its powers, as leverage—when you get into the techy stuff about the re-use of ducts and stuff, and the parachute view that the Government can have. We know, for example, that we are moving towards every household having smart metering. There seems to be an obvious link between these two. We have two-way communication needed, and there seem to be similar bits of technology in both; but there is no mention in this report about how this links into other bits of Government policy; yet I thought there should be some cross-linking going on to see how there might be benefits from Government policies and how they can be joined together.

  Q89  Mr Wright: You are asking for miracles there, are you not?

  Mr Stearn: You can always hope, I suppose. There are issues there about how government works and can use its powers to have an overview of how things work. It is very difficult when you look at the research to find out how they have come to this figure of a third that will not be met by the marketplace. Where it is needed we would certainly support funding from the public, but our priority would be for it to come from the public purse, because when you start talking about consumer paying for consumer, as you get rising within the energy industry and within climate change policies, it often becomes regressive. There are issues about the 50p that are problematic in terms of who that will fall on.

  Q90  Mr Wright: Do you think the 50p levy is a fair way of raising funds for this, or is there another way you consider the money could be raised other than through the public purse directly?

  Mr Stearn: Again, there is not much information on the demographics of this, but if you look at the age profile of people with landlines, you will find it is older people. The majority of younger people, I think 75%, use mobiles and do not have a landline. I think I would not have to pay this because I get broadband from cable and use Skype, and reading it I would not have to pay my 50p. I am lucky and one of the people with super fast broadband, 20 megabits, and I do not think I would have to pay a penny towards this.

  Mr Holoway: Instead of a flat-rate 50p tax I think it could be proportioned. I do not know, but if you have 20 Mb broadband and did 10 gig download a month, you could proportion it per 10 gig; so the poorer communities perhaps would not have to pay a penny, whereas those who use 5, 10 or 20 gig a month, including businesses, would pay a proportion—I do not know, say £1 per 20 gig or something like that. As more and more broadband gets faster and more downloads are performed, in that way you can get more money into the cost of the project, into the public purse, to pay for universal roll-out.

  Q91  Mr Wright: So you think the 50p levy is unfair and it should be judged on the broadband usage.

  Mr Holoway: Yes.

  Q92  Chairman: I think it seems very odd to tax an old technology to pay for a new one! It seems a very strange approach to me.

  Ms Payne: Can I come back to whether it is a good use of public money? From my perspective, I would look at it from a risk perspective more than anything else. If we look at the whole farm approach and the fact that farmers are now expected to put the movements of their livestock on the Internet, and those who do not have access are still relying on the post—that does mean—and I would hate to think of another outbreak of foot and mouth or something, but that is one of the reasons of going down the Internet route to keep more accurate up-to-date data available. That is not happening very well at the moment. There was mention earlier on about schools and the schools agenda and making that available to people. You could have people in rural areas not having access to lessons or the extra material that is available. The other area is on health. Again, there are some very good new technologies that are coming up to help people enter information about their health status and go directly to their local health centre, and they can enter it online. We spoke to some people up in Alston Moor, who are using this service, and they are retired people; and it has basically changed their lives. They get immediate information and access to a doctor as and when they need it. Online they can get through much quicker than having to make the trip every week into the area. I would look it as a Government investment on a risk-based approach—what would happen if they do not and what are the potential risks to the basic Government agenda.

  Mr Hearnden: Can I come back, please, on the comment Jonathan made regarding where the Final Third came from. By way of background, the Broadband Stakeholder Group, which is a big organised group, set out to do some work last year and came up with what they considered to be a reasonable number of up to 65% that they believed would be delivered by the market, by a mixture of fibre, wireless and satellite. They thought that up to 65% of homes would be covered without recourse to incentives of any kind. We will discover in the next five years whether that figure is optimistic or pessimistic. Another point about the levy is that one of its benefits is that the tax is very transparent; you know where the money is being spent; it is being spent on upgrading the broadband network. I think that is an important point.

  Q93  Mr Wright: Coming back to what Mr Stearn about the number of people who do not have access to broadband, why should they pay for this upgrade to the broadband service? There are people like my mother who has a landline and no interest in the Internet whatsoever. Why should she pay the levy so that other people can access it?

  Mr Stearn: It is a very valid point and goes back to the demographics of who has landlines and who has this type of landline and who does not. As I said, it looks as though I would be a person who would not have to pay this, and yet I am benefiting from super fast broadband. That is completely contradictory. The group that is likely to be picking this up are older people who are very sceptical about broadband anyway. It is contradictory about where the funding is coming from.

  Q94  Mr Wright: If it was on the basis of what Mr Holoway said, about people who use broadband at the present time, do you think that would be a fairer system?

  Mr Stearn: I personally would think so, yes. I am certainly benefiting, absolutely, from having broadband access and fast broadband access; and I think it is reasonable for people like me to make a contribution for others to get a similar service, or get us to the point where everybody else can benefit from that.

  Mr Holoway: I agree. I think if you do not make use of broadband I do not think you should pay the levy. There is no benefit to you paying 50p unless you then go online and start using it; and to make it fairer to the less affordable, you do not make the fee from base zero; you make it higher from a proportion of your monthly usage.

  Q95  Chairman: We heard from Vtesse Networks that if we just had reasonable rates and charge BT the proper business rates, you are raising the same amount of money anyhow—problem solved! Is it your view—and I am looking for "yes" or "no" answers really—that the Government's focus should more properly be, from your perspective, on getting the 40% of people who currently could have broad band at whatever speed but choose for whatever reason—financial or other reasons—not to, that their focus should be there rather than developing new fast-speed technologies for people like you, Mr Stearn, who can access them with their ingenuity? Should the emphasis now be on solving digital inclusion, which might often be an economic issue for those households, rather than a technical solution for increasing speeds?

  Mr Holoway: I would like to say that if you were to spend this—whatever amount of money on getting someone just 2Mb broadband, how much more expensive is it to get fibre to the household but outside of the capital or outside of the conurbations where they have already got fast broadband? I agree—

  Q96  Chairman: The point I am trying to make, Mr Holoway, is a lot of people choose, for whatever reason—they may be forced to make that choice on economic grounds, I agree, but they choose not to have broadband at present: should that not be the focus of public policy, addressing that choice, whether it is an economic choice or a deliberate choice?

  Mr Holoway: Force them to have broadband?

  Q97  Chairman: Encourage greater take-up of currently available technology.

  Mr Stearn: I completely agree—encourage that group and give the support that that group needs to get online and get broadband. In terms of how that group is now being penalised, it will continue and people are going to lose out more and more and more in the future by not having access to the Internet. The priority should be to get to those millions of households that do not have access at the moment.

  Q98  Mr Clapham: Can I finish off with advertising? At the present time we know that Internet service providers are advised that they should advertise their speeds "up to" and that is the theoretical maximum, often never reached. We see that the Advertising Standards Agency suggests that you could only measure the speed as the service leaves the exchange. Do you feel the way these things are advertised are fair to the consumer as well indeed to the service providers?

  Mr Stearn: I agree with you that it is very confusing. Even the debate we had earlier on about whether the two bytes we are talking about is a minimum or an average. We have three different measurements: a minimum, an average, and a headline; and it depends what time of day it is as to what one you are likely to get. It is quite confusing. The basic thing for the consumer is that they have the ability to use it in the way they want to use it and download the information they need within a reasonable time period. If should come up with some system that gives people a clear idea of the truth about what they are buying. In some of the interviews Ofcom did, there were clear indications from people that they were disappointed when they got their broadband because it was not as fast as they thought it was going to be.

  Q99  Mr Clapham: Given that, Mr Stearn, you have looked at quite a lot of the research that has been done. How do service providers measure the speed of their service? Is it possible for you to say?

  Mr Stearn: They tend to tell you in the headline figures; they say what the headline speed is.

  The speed I am told of my broadband is at 20 but I know it is roughly at 14. What is advertised is the headline figure. Often the information from Ofcom is that people are disappointed with what they get in the end.

  Q100  Mr Clapham: Would it be helpful if the service providers had to provide information regarding the actual speed of their service?

  Mr Stearn: It absolutely would because you could get them to say what the average speed was. You would have to work it out over an average day, but an indication of the average real speed would help.

  Mr Hearnden: There is a broadband speed code that Ofcom introduced last year, which I think about 90 to 95% of the ISPs have signed up to. At the point of sale the customer gets the opportunity to get an estimate of the maximum he could get on his line. Certainly the ISPs do give the opportunity for customers to try a typical number of different websites to measure what they get themselves on average. If the figures are significantly less, the code states that the ISP should give an alternative at no cost to that customer if it is technically possible. Ofcom is monitoring that. There is an organisation called Sam Knows that has done some work on five or six different ISPs with 600 or 700 different users, and they have a very good clear view of where the bottlenecks are and where the services are good. As you have said, it is a very complicated business. It is very difficult to measure. It varies according to time of day and varies according to who else you share your resources with on the network. The industry is aware of that and is investing in trying to make it better. However, there are certain rules of physics that prevent you, and the line length and poor home wiring and interference on the line is a difficult one. One of the other technical solutions that people have used is a thing called dynamic traffic management, where you can increase the line speed but if you get interference on the line the line then drops back to a lower figure. The difficulty there is that if you are watching a video, for example, that has the effect of an instant stutter as the network reconfigures itself. So you have this trade-off between absolute line speed, which we all want—we all want as many megabits as we can—but the practical limits are that you have to trade that against giving the customer a reliable service that is not subject to stops and starts. That is a very difficult balancing act. Very often you can crank the speed up a little bit more, but it would be at the expense of the quality, and it is the quality of the product that the industry is very keen on promoting and improving. It is not a very easy solution.

  Ms Payne: I look at that from a slightly different perspective, as I mentioned earlier on. Businesses and particularly micro-businesses in rural areas are not just dependent on the download speed, but it is the upload speed as well, because of getting information out there. It is non-symmetrical at the moment, which means that is often considerably lower. Although they might be getting the 2Mb, it might not be anywhere near there for uploading information. It is a big issue.

  Q101  Mr Clapham: Mr Hearnden you referred a little earlier to this survey that is being done by Ofcom. Will that be reported in the future?

  Mr Hearnden: It is already in the public domain. It is already on the Ofcom website. I can give you the website details afterwards.

  Q102  Mr Clapham: Does the panel feel that there is anything else that can be done with regard to regulations on advertising to make it much more transparent to the consumer?

  Mr Holoway: It is very hard for the typical home-user to find out their speed. I have gone into many households and businesses and told them "you have this speed or that speed". I can be next door to someone, and someone has 14 Mb broadband and someone has 2Mb. I just cannot understand why there is such variance between two households. The thing is that the home consumers do not know it either—if next door, over the fence, someone has got it faster, how do they know? They do not know. Many homes now have routers, a device like you have with the electricity and gas meters on the wall—a display of the current speed would have a better advertisement of their broadband service with their ISP. Then discussion would rage amongst different people in different communities, saying "I am getting this speed with this company". There is no way to compare like with like in this day and age.

  Q103  Mr Clapham: Is that the feeling of the panel generally, that it is such a complex and varied issue that to have regulations brought in by Ofcom to regulate and achieve consistency is nearly impossible—or is it possible and, if so, what kind of changes do we require?

  Mr Hearnden: I do not think that regulation is practical. As the panel has said, it is a very complicated problem. There are applications you can download that put a little meter in the corner of your screen and you can watch it; but that is far too complicated for the average consumer; nor does the average consumer want a little clock sitting on his desktop or his laptop. I do not think regulation is the answer. I think a voluntary code where the industry works with the regulator, making sure that the customer at the point of sale gets an accurate estimate of what he is likely to get—

  Mr Holoway: Or what he is getting.

  Mr Hearnden: Or what he is getting, yes.

  Chairman: Thank you very much. This is a complex and technical area but it raises some very important questions about poverty, about industrial competitiveness and all kinds of things. We are grateful to you for the time. As always, if there are things we feel we did not ask you and should have asked you, or that on reflection there are things you would have liked to have said but did not have an opportunity to say, please drop us a note with that infrastructure. We would be very grateful. Thank you.

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