Broadband - Business, Innovation and Skills Committee Contents

Memorandum submitted by Federation of Small Businesses (FSB)

  The Federation of Small Businesses (FSB) welcomes the opportunity to respond to the above-named consultation.

  The FSB is the UK's leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political, and with 215,000 members, it is also the largest organisation representing small and medium-sized businesses in the UK.

  Small businesses make up 99.3% of all businesses in the UK, and make a huge contribution to the UK economy. They contribute 51% of the GDP and employ 58% of the private sector workforce.

  Whilst small businesses welcome the Government's commitment for universal access to broadband speed of 2Mbps, it does not go far enough. Currently small businesses do not trade very much on-line because of a lack of reliable, fast, broadband speed and this is severely impacting upon the efficiency and growth of their businesses. Small businesses call on service providers to deliver the broadband speeds that they promise and to guarantee upload as well as download speeds. The FSB calls for greater diversification of the market and the availability of alternatives to BT land lines for use by other operators, improved infrastructure and technical reliability.

  In June 2009, the FSB carried out an online member survey on broadband speed. It received 6,656 responses, which were spread across the UK reflecting the FSB's membership. The results indicated that small businesses, especially small, rural businesses did not seem to trade as much on-line as they could because a lack of reliable, fast, broadband speed and that this was severely impacting upon the efficiency and growth of their businesses.

  Whilst small businesses welcome the Government's commitment for universal access to broadband speed of 2Mbps, it does not go far enough and small businesses call on the Government to ensure a minimum of 8Mbps broadband speed in order to be internationally compatible and competitive. Complementing this, service providers should offer guaranteed minimum speeds instead of "up to" maximums of broadband speed, guaranteed connections on both uploads and downloads, reliability and greater diversification of the broadband service provider market.

  The next-generation of super-fast broadband must remove many of the technological barriers to broadband that exist and current 'not-spots' must be prioritised in the roll-out of the new fibre optic service to fill the gaps.

  The FSB has noted the steps announced in the Digital Britain Report to provide a Universal Commitment for broadband at a basic speed of 2Mbps by 2012, but does not agree that this goes far enough in meeting the requirements of today's small businesses. When asked what Government could do to most effectively help businesses with on-line access, 60% indicated that they wanted a minimum speed of 8Mbps for all users. To be able to operate effectively, small businesses must ensure that they can have confidence in the speed as well as the reliability of their broadband connection. Broadband is not an added luxury to today's small businesses but an essential service similar to utilities such as gas and electricity.

  Responses to the survey showed that 29% of small businesses currently received less than 2Mbps and 27% between 2-4Mbps.

  The survey showed how the lack of broadband speed reduced productivity for a third of businesses, or 31% of respondents.

  Other areas of difficulty due to speed highlighted were the use of email (49%) and back-up (23%), the processing of payments (27%) and on-line marketing (20%) and also seriously impacted upon small businesses' use of new technologies, such as video conferencing, web-casts and pod-casts (60%).

  The FSB does not support the Government's proposal to add an additional levy on phone customers to fund the development of broadband roll-out. Instead, the Government should create the right conditions for broadband providers so that it becomes in their competitive interest to improve the infrastructure to enable high speed broadband roll out across the UK.

  The FSB survey indicated that 94% of members felt they were being let down by suppliers and that service providers' offerings were failing to match their advertising claims. Members indicated that it was not uncommon to be promised, and pay for, up to 8Mbps but in reality to receive less than 1Mbps.

  One FSB member said: "The real problem is that everyone has a different service level, and it fluctuates according to the local contention, mine is 0.55 download and 0.38 upload during the day, but evenings and weekends that significantly decreases when people return home. I should be getting about 6.5 according to BT and have the "up to 8 meg" package). So, there are two variables, geography and time."

  In addition, whilst some geographical areas offered 8Mbps download speed and actually achieved it, a minimum upload speed was not guaranteed. A minimum upload speed is essential for simple communications such as video conferencing. Therefore whilst guaranteeing a minimum of 8Mbps download speed is extremely important, guaranteeing a minimum upload speed is equally as important.

  Recently the Government has emphasised the important role of mobile phone operators in delivering jobs and growth in the digital economy. A recent meeting between Government and the Chief Executives of the UK's five main mobile network operators discussed usage of the wireless spectrum for internet and next generation services. There is significant concern from small businesses about the cost to the consumer, the reliability and effectiveness of going down this route.

  In July 2009 BT, the market leader on infrastructure, announced that they were speeding up their super-fast fibre plans and that 1.5 million homes would have access to this by early summer 2010.

  However, none of the locations ear-marked for this scheme are rural and BT's longer-term programme includes making super-fast fibre-optic broadband available to only 40% of the UK by 2012. Small businesses call on Ofcom, as the regulator of the communications markets to put pressure on service providers to do more to help struggling rural businesses compete in the digital age.

  2Mbps by 2012 falls far short of the needs of our rural businesses and risks perpetuating a digital divide between urban and rural areas. This means that rural SMEs and micro businesses are losing out to larger businesses who have invested in high-speed broadband and also to competitors operating from urban areas with adequate broadband. This is particularly exacerbated during an economic downturn when businesses need to innovate to survive since use of the internet, via broadband, so often provides a gateway to innovation.

  The FSB has suggested it its recent Postal Report that there should be Wi-Fi facilities for those businesses that cannot get connected at home or in their office. It is clear that there are a significant number of "not-spots" in the UK and until the Government's policy becomes reality, the Post Office could fill a gap in the market.

  Significantly more must be done to ensure that the UK remains a competitor in the digital age.


    — That service providers must deliver the broadband speed that businesses have been promised and pay for and guarantee upload as well as download speeds. It is simply not good enough to offer an "up to" maximum and deliver a fraction of that figure.

    — A greater diversification of the market to invite stronger competition and crucially to make available alternatives to BT land lines for use by other operators.

    — Improved lines and wider use of fibre-optic cables. The lack of broadband speed is largely an infrastructure problem and if the UK wants to be internationally competitive wider use of fibre-optic cable must be considered.

    — Improved technical reliability. A sudden loss of connection poses great problems for small businesses and leaves them unable to rely on the broadband connection to process payments, engage in video conferencing and carry out bookings and other transactions on-line.

September 2009

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