Broadband - Business, Innovation and Skills Committee Contents

Memoranda submitted by the Communication Workers Union (CWU)


  The Business and Enterprise Committee announced its inquiry into broadband speed in the UK in June this year, following the publication of the Government's "Digital Britain" report. The Committee states that it will be informed by the conclusions of the Welsh Affairs Committee which recently reported on its inquiry into Digital Inclusion in Wales. The BEC is seeking written evidence from stakeholders before 25 September 2009.


  The Communication Workers Union represents approximately 70,000 members in the telecommunications industry across a range of companies including BT, Virgin Media, 02, Orange and Carphone Warehouse. The CWU has been at the forefront of campaigning for the development of broadband services for many years, beginning with the launch of our "Demand Broadband" campaign in 2002. We have also been a consistent contributor to the broadband debate, having made many representations to both Ofcom and government calling for a regulatory environment that encourages investment in and universal access to broadband services.

Summary of key points

    — The CWU considers the target for universal broadband access arrival speed of 2Mb/s by 2012 to be a reasonable starting point, but believes it should be increased gradually over subsequent years to improve access to high bandwidth services and increase the potential for economic activity.

    — Rather than taxing individual consumers, the proposed Next Generation Fund levy should be placed against all Communication Providers, including mobile companies and Internet Service Providers as they will ultimately realise the economic benefits of fibre networks created by public funding.

    — The proposal of a universal broadband service "commitment" should be made legally binding under a Universal Service Obligation to ensure the effective delivery of universal broadband access.

    — The CWU supports the Government's proposals for Ofcom to have placed upon it a general duty to encourage investment in telecommunications infrastructure and to provide a full assessment of UK communications infrastructure every two years.

    — The Government remit for the implementation of the Digital Britain report should be placed in the hands of a single Government Department, and Parliamentary timetabling for the funding plans should be coordinated with the main body of the Digital Britain plans.

    — Content in the Pay TV market should be made available at the wholesale level between service providers to ensure fair and effective competition. Much in the same way that the BT access network has been opened up. The potential start up and sunk costs for satellite TV is prohibitive and a barrier to entry as well as effective competition that benefits the consumer through choice and lower prices.

    — The legal requirement for employers to provide workforce training in the broadcasting industry should be applied to the telecommunications sector as the two sectors converge, and at a time when a well trained workforce will be vital to delivering quality networks and services for a successful Digital Britain.

Is the target for universal access to broadband at a speed of 2Mb/s by 2012 ambitious enough?

  The Digital Britain report's proposed target speed of 2Mb/s as a minimum at the point of arrival is a reasonable starting point as it is the minimum speed necessary for delivering high bandwidth applications such as broadband television.

  However, the CWU believes that the Government should be looking to increase speeds progressively over a period of time to improve service standards and to support the development and use of modern high bandwidth applications. As broadband speeds increase, the quality of the user experience improves as does the potential for generating economic activity. The Welsh Affairs Committee supports this view when concluding in its recent report on Digital Inclusion in Wales that "…there is an emerging consensus that access to next generation broadband will be a key factor in future economic growth."

  Both BT and Virgin Media are investing heavily in their networks to offer speeds of up to 50Mb/s in commercially attractive urban areas. In rural areas however, there is currently no incentive for the market to deliver high speed broadband, and no plans by BT or other telecommunications companies to commit investment.

  This is at a time when broadband services are increasingly seen as a prerequisite for full participation in society and the economy. The Welsh Affairs Committee supports this view when its states "Broadband access is no longer merely a desirable service, it has become an essential utility and a basic prerequisite for access to many services."

  The CWU believes that to avoid exacerbating a digital divide, high speed broadband services must be available on a universal basis, which is why we support the roll out of next generation access networks right across the UK.

Is the Government right to propose a levy on copper lines to fund next generation access?

  The Government is right in proposing the creation of a fund, because without one it will be impossible to roll out high speed broadband in areas where the market will not deliver. The Welsh Affairs Committee acknowledged this when it noted the NGA Fund promises "to subsidise network development in less commercially economic areas so as to ensure that disadvantaged and rural communities can share the economic benefits."

  However, rather than taxing individual consumers directly, the CWU proposes that the levy should be placed on Communications Providers, including mobile companies and Internet Service Providers. We believe this is a fairer arrangement because it will ultimately mean that costs are distributed amongst both consumers and shareholders, rather than consumers alone. To place the levy purely on individual copper lines is to tax people who may not actually benefit from the fund such as low users, whilst the benefits financially may accrue to non-fixed line communication providers.

  Mobile companies and Internet Service Provider (ISP) providers should be included because they will be able to apply for Government funding to provide broadband and will ultimately realise the economic benefits of fibre networks created by public funding. To place the burden solely on fixed incumbents would be perverse when they could lose the tender process to a mobile company or ISP and be left shouldering the risk and rising costs of an expensive copper network with declining financial benefit. In addition the creation of new networks will generate economies of scale to mobile and ISP companies through increased network capacity. The extension of the levy to all communication and internet service providers will also widen the tax base and help reduce the cost of the overall levy per household.

  In this regard the CWU supports the current Government proposals for a new duty to be placed on Ofcom to encourage investment in infrastructure and to report and to provide a full assessment of UK communications infrastructure every two years. This should include a report on deficiencies in NGA coverage, and the capability and resilience of NGA networks across the country.

Will the Government's plans for next generation access work?

  The CWU believes that the Government's plans for NGA are encouraging, but that they need to be more robust to fully succeed in their objectives. This is particularly true in regard to the provision for a universal service commitment rather than what the CWU would prefer—an "obligation". The proposed commitment the CWU sees as too weak as it is predicated on a promise of best endeavours rather than a legally binding requirement to provide an acceptable standard of service across all parts of the UK. As the Welsh Affairs Committee stated in its conclusions, "The provision of reliable and high quality broadband access for all is an essential part of achieving digital inclusion." The objective of the full inclusion and coverage of all parts of the UK and all socio-economic groups can only be achieved through a statutory obligation on universal provision.

  The CWU welcomes the appointment of Stephen Timms as the Minister for Digital Britain to direct the Government's programme. The CWU believes the new Minister must act quickly so that the momentum behind the interim report will not lose speed inside Government. There appears to be some ambiguity over whether the Department of Business, Innovation and Skills (DBIS) or the Department of Culture, Media and Sport (DCMS) are leading on this matter (which the Welsh Affairs Committee commented upon in its conclusions in paragraph 26). It appears that DCMS is concerned primarily with content and DBIS with infrastructure. In essence both run parallel to one another. If the UK economy is to benefit its full potential from the NGA roll-out and the "Final Third" of homes and businesses reached by 2017 then the decision to proceed must be made quickly.

  Finally the CWU is concerned that problems could arise from the fact that the funding proposals for the NGA are included within the Finance Bill, whilst the main body of the Digital Britain plans are held within the Digital Economy Bill. There is a potential that the momentum for NGA could be slowed by hold-ups between the Parliamentary timetabling of the two Bills.

Are companies providing the speed of access which they promise to consumers?

  In a recent Ofcom survey it was found that no broadband service provider was meeting their advertised speeds and that there were varying levels of quality. Broadband speed is largely dependent on the technology used to deliver the service and the capacity of each network. For example those ISPs using the Asymmetric Digital Subscriber Line 2 (ADSL2+) provide a faster service, while cable companies (such as Virgin Media 8.1-8.7Mb/s) provide a significantly faster speed altogether.

  Ofcom found that only 9% of customers with headline packages of 8Mb/s received speeds of over 6Mb/s and 19% received less than 2Mb/s. In addition speeds in urban areas were faster with an average of 4.6Mb/s compared to rural areas with 3.3Mb/s. The poorest performers were Tiscali, AOL Broadband and BT.

  Customers are often not aware of the technical limitations of traditional networks in delivering headline broadband speeds, including the quality of the line and the rate at which speed declines with increasing distance from the local exchange. This, combined with the raising of customer expectations through the promise of faster headline speeds, has led to greater customer dissatisfaction and disappointment with broadband services. The only way to overcome the problem of decreasing line speeds is to introduce fibre networks, which are not subject to the same limitations.

The extent to which current regulation strikes the right balance between ensuring fair competition and encouraging investment in next generation networks?

  The CWU believes that regulation has generally placed a greater emphasis on the development of competition than on encouraging investment in broadband and next generation networks.

  This is demonstrated by the vast number of broadband service providers and internet service providers competing in the marketplace, and the pressure placed on broadband networks through lack of sufficient capacity and reach to meet current demand.

  A recent example of a regulatory move that threatens NGN investment, is Ofcom's decision to set its pricing framework for BT Openreach whilst excluding BT's pension deficit in its cost base assumptions. This will make it far harder for BT to invest at a level it requires in order to improve its network and increase its service speeds.

  However, a level playing field has not been achieved everywhere, and the Pay TV market is a clear example of a situation where a lack of fair competition exists and is hampering investment in network infrastructure. Currently Sky holds a monopoly on content in the Pay TV market and has no obligation placed upon it to make its content available to other service providers. The result is that network providers who seek to enter or expand in the Pay TV market are struggling to do so and this will have a negative impact on their ability to upgrade their networks to support high quality broadband television. Furthermore, regulation in the Pay TV market is not consistent with that of the infrastructure market, where BT is obliged to make its network available to competitors on a fair and equitable basis.

Any other views the stakeholders think the Committee should be aware of?

  The continuing process of technological convergence in the telecommunications and broadcasting sectors, combined with the possible introduction of a process that enables any number of organisations to bid for funding to build next generation networks, calls for minimum service standards to guarantee quality and universal application across the telecommunications industry.

  Without such an arrangement, there is a danger of having a patchwork of local networks all operating under very different service levels, and poor standards if the work is progressively sub-contracted to untrained operatives. The introduction of minimum standards would need to go hand in hand with adequate workforce training and the CWU therefore believes it is vital that the requirement for employers to provide training in the broadcasting sector is now also applied to the telecommunications sector as the two sectors converge. This is an argument we have put to Ofcom on a number of occasions, and Ofcom has responded with the suggestion that whilst it is not something they have express powers to act upon, it may be an issue the Government and Parliament may wish to consider in future revisions to communications legislation.


  1.  That the proposal of a universal broadband service 'commitment' be made legally binding under a Universal Service Obligation to ensure the effective delivery of universal broadband access.

  2.  That the proposed Next Generation Fund levy be placed against all Communication Providers, including mobile companies and Internet Service Providers to spread the costs more evenly.

  3.  That content in the Pay TV market be made available at the wholesale level between service providers to ensure fair and effective competition.

  4.  That a legal requirement for employers in the broadcasting industry to provide workforce training be extended to the telecommunications industry to ensure the successful delivery of a Digital Britain.

16 September 2009

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