Memorandum submitted by Digital Region
1. Whether the target for universal access
to broadband at a speed of 2MB/s by 2012 is ambitious enough?
The challenge of universal access is always
difficult from an economic and deployment prospective, in practice,
the principle of achieving this should be maintained.
We support the proposition to deliver universal
broadband. The figure of 2Mb/s does not appear to be ambitious
enough in the light of ongoing international initiatives and the
potential impact on British competitiveness if we do not retain
an information technology leadership position on a global basis.
Moving to 2Mb/s leaves alot to be desired in
the provision of the additional capabilities of Next Generation
Access (NGA), such as Quality of Service, multiple service providers
across a single connection, guaranteed bandwidth.
By 2012 large parts of the country will
have these NGA capabilities, while others will have been introduced
to broadband via the universal obligation of 2Mb/s download. This
will further widen the digital divide as applications development,
and business & public sector solutions move to NGA delivery
models that are inconsistent with 2Mb/sec download.
The delivery mechanism should remain technologically
We strongly believe serious consideration should
be given to the uplink channel of the broadband circuit, this
has been required for some time. We believe the uplink is required
to stimulate creation of new services and capability locally.
This will allow the UK to remain at the leading edge of innovation
on a broader basis. Furthermore it will also better support recent
government initiatives such as proposed in the Glover report and
for the longer term objectives of transformational government.
2. Is the Government right to propose a levy
on copper lines to fund next generation access?
We have reservations on the levy's of this nature.
It is recognised that economic timulations may be required to
achieve the overall objectives and such economic instruments would
be better based on a more technologically neutral approach.
2.1 The principle here is a reasonable method
of at least part funding the move to 2Mb/s particularly in strong
However, we do not believe It is right that
everyone should pay, and debate is required to determine which
groups can be excluded, eg:
Lower income groupswe believe
should be excluded
Those who are already contributing to
their own NGA development
South Yorkshire is a good example here.
The sub region is contributing significantly to the development
of the Digital Region NGA network, including end user customers
through their local taxation and normal service charges. We do
not believe it is right that the people of South Yorkshire pay
an additional levy to provide NGA in other parts of the UK?
Essential userswe don't believe
they should pay an additional charge
2.2 Funding alternatives should also be
explored, for example
2.2.1 The Digital Britain report sets out Broadband
at a reasonable level, 2Mb/s, is now an essential requirement
of every household, business and public sector organisation. It
is highlighted as being critical as we progress to an information
and knowledge economy. This raises the question of how something
so critical can be achieved and aligned with appropriate funding
2.2.2 Who will own this new infrastructure? BT
and others have shown concern around the likely outcome of a "patchwork
quilt of networks", but the alternative is the continuation
of their monopolistic position. It is becoming evident that this
"patchwork" is practical through clear governance, standards
and processes. However, if BT are to own large sections of the
extended infrastructure, including taking returns over a very
long period, surely they should be encouraged to channel a significant
amount of their profits to make this happen?
2.2.3 The cost of collection must also be considered.
Upgrades to what are already relatively complicated billing systems
will be required by each operator, and business processes will
have to change to adapt the new requirements.
The 50p levy is only helpful if as much of it
as possible reaches the intended destinationmore NGA for
homes, businesses and public sector organisations.
3. Will the Government's plans for next generation
3.1 A universal obligation is probably
the only method of getting 2Mb/s to every
location in the UK in the short/medium term.
This does not have to be a single nationally provided obligation,
but could be made available through multiple providers, promoting
further competition in the market place.
3.2 The "Final Third Project"
is vague in its delivery plans at this time so difficult to consider
the likelihood of success.
3.3 The concern is that it will expand the
digital divide further and leave us behind many of our competitor
countries due to the fairly lengthy timescale and relatively unambitious
target of 2Mb/s.
3.4 The Digitial Britain report itself sets
out the criticality of broad competition. The move to 2Mb/sec
download leaves the UK well behind other parts of the developing
4. If companies are providing the speed of
access which they promise to consumers?
It is widely recognised that the "up to"
mentality has left many consumers and citizens dissatisfied with
the service. We believe that more precise service level agreements
should be provided to the individual consumer. Consideration should
also be given to both speed and quality of service to meet customer
The recent Ofcom study has now confirmed what
the market has always known.
The average broadband speed in the UK
in April 2009 was 4.1Mbit/s. This compares to an average
"up to" headline speed of 7.1Mbit/s.
The actual speeds received varied widely.
Fewer than one in ten (9%) of the sample on 8Mbit/s headline packages
received actual average speeds of over 6Mbit/s and around one
in five (19%) received, on average, less than 2Mbit/s.
The promises provided by ISP's are based on
download bandwidth. More and more applications are being developed
which require a critical upload bandwidth as well. ie more symmetry
of bandwidth, to support streaming and interactive applications.
The upload capability is almost always so relatively low that
similiar up to promises are not possible.
The technology is available today to provide
much greater upload bandwith, enabling that required symmetry.
5. The extent to which current regulation
strikes the right balance between ensuring fair competition and
encouraging investment in next generation networks?
It is fair to say that the current regulation
has historically endeavoured to strike the balance between fair
competition and encouraging investment in next generation networks.
In recent times there are areas of concern developing, the recent
Ofcom report outlining BT's commitment to next generation networks
has increased the uncertainty to the investment community. This
could potentially cause more investors to question next generation
investment. It is clear that action needs to be taken to stimulate
innovation alongside next generation network capability and maintain
pressure on the transition to a more flexible and capable next
Any industry will struggle where there is a
single monopolistic player and telecomms is no different. But
in telecoms it is more complex as the monopolist, BT, dominates
the infrastructure aspect, and is also the largest provider of
This leads to two key questions:
(i) How can BT be motivated to extend infrastructure
to non commercial areas?
(ii) At what level should competition be encouraged?
The relatively slow pace of progress in Next
Generation Access and "super fast" broadband infrastructure
development, coupled with the relatively unambitious targets set,
lead you to feel the market is not as capable as we would like.
In such a potentially lucrative market, this suggests the regulation
is not balanced making it difficult to encourage investment.
A very good recent example has seen BT announce
plans to provide NGA to 40% of UK residents. This is the 40% which
are most commercially advantageous to BT, extending the digital
At the same time BT have been allowed to introduce
an additional fee of up to £1,000 per cabinet for any
other operator to connect into their network. There are over 1,800 cabinets
in South Yorkshire, potentially adding £2 million to the
Digital Region build cost. This will total something closer to
£100 million of additional cost for operators to do this
across the UK.
Is it appropriate to compete at the infrastructure
level, particularly when one operator has such a distinctive first
mover advantage, with a certain degree of control over the national
network? Or should a railway network model be adopted with the
competitive layer being between those providing services across
While we still have a monopoly situation in
the broadband market, the market is progressing and continues
to need focused regulation, requiring intervention where appropriate.
Assuming a shared goal of wanting as many people
as possible using online services, the motivation to go online
comes from there being applications/services that the public want
to use. Having a particular infrastructure is not motivational
to the end user but is the critical dependency to progressing
To support this, regulation and investment,
needs to motivate new entrants to build the best possible infrastructure.
Competition will come across each network in the services and
It is also critical that the recommendations
of the recent "Glover Report" are implemented to provide
appropriate support to the SME community.
Current initiatives have commenced on a micro
scale, with multiple networks being developed, but all struggling
to provide the mass customer base required by the major service
providers. This has had the advantage that multiple networks can
work together technically, but still does not provide the required
platform to motivate competition in the services provided.
A "middle ground" of regional (for
example) networks takes the monopoly away but provides for sufficient
mass to attract greater competition across the services provided.
25 September 2009