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.
FSB RECOMMENDS:
— 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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