Memoranda submitted by the Communication
Workers Union (CWU)
BACKGROUND TO
THE BEC INQUIRY
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.
COMMUNICATION WORKERS
UNION
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.
KEY RECOMMENDATIONS
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
| 
