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Spectrum - Culture, Media and Sport Committee Contents


4 Spectrum and coverage

56.  Areas where mobile services cannot be accessed are referred to as "not-spots". Ofcom has identified a number of different types of not-spots:

  • complete not-spots—where there is no mobile coverage at all;
  • 3G not-spots—where there is no mobile broadband;
  • partial not-spots—which are operator specific;
  • indoor-only not-spots;
  • interrupted coverage on the move.[56]

57.   Ofcom's most recent research on mobile not-spots was published in November 2010 and stated that 2G covers approximately 97% of the UK population and 91% of the UK land mass; and 3G covers 87% of the population and 76% of the land mass. Ofcom also stated that "in the vast majority of case study areas, not-spots existed because it was not a commercial priority for mobile operators to extend their coverage, influenced by low levels of traffic, discouraging investment".[57]

58.  There are problems associated with measuring mobile network coverage, as Ed Vaizey explained to us:

You could have 95% coverage, which could in effect be 98% coverage, depending on how many people are using the system, or it could be 85% coverage if a lot of people are using the network. [...] coverage waxes and wanes depending on how many people are using the network. So it is very difficult to measure.[58]

A further complication is that the figures for population coverage frequently refer to outdoor coverage. Indoor coverage is not as high as population coverage, as higher frequency spectrum (over 1GHz) is not as effective at penetrating buildings as sub-1 GHz spectrum. Kevin Russell of Three stressed the importance of access to this sub-1 GHz spectrum, noting that "our outdoor coverage could be perceived to be 97% to 99% in that range. Our indoor coverage, however, is only 79%".[59]

Rural broadband

59.  Access to broadband is critical to rural economies and communities as well as tourism. Broadband can be delivered via BT's network of copper phoneline cables; wireless connections; mobile internet devices (such as 3G phones and tablets); fibre optics (also known as "fibre"); and satellite delivery (which requires users to install a satellite dish). Fibre broadband offers the fastest speeds and greatest capacity for data handling. Ofcom predicts that when 4G services are deployed in the UK, consumers should be able to get similar speed and capacity broadband on their 4G devices to the speed and capacity available on a home fibre connection.[60] Ofcom also states that:

Coverage should, in time, be significantly better than today's 3G coverage, with 4G services available across more of the country and with better availability inside buildings—approaching if not exceeding today's 2G coverage. Capacity should also be significantly greater than that of today's 3G networks.[61]

60.  In its research on mobile not-spots, Ofcom states that complete not-spots (where there is no coverage at all) exist mostly in rural areas,[62] and that improvements to this problem have been slow.[63] There has been considerable attention paid to the subject of rural broadband in the media, through campaign groups such as the Country Land and Business Agency, and in Parliament. After a debate on rural broadband coverage on 19 May 2011, the House passed a resolution urging Ofcom to increase the coverage obligation to 98% of the population. Ofcom's written submission acknowledged this, stating that it was "currently considering such arguments carefully, and we will carefully consider any and all additional evidence supporting such a position, bearing in mind the costs as well as the benefits of increasing the coverage obligation". [64]

61.  In its written submission, Arqiva outlined the impact of rural not-spots:

Increasingly consumers and citizens need access to broadband for education, work, interacting with public services and for their social life too. Access to broadband at home enables remote working and hobbies to be turned into cottage businesses, and future SMEs.

[...] recent studies have shown that a 10% increase in broadband penetration increases GDP by 1% and, in addition to the economic benefits, access to broadband can be an instrument of real social change.[65]

62.  The Countryside Alliance also submitted evidence to us that stressed the importance of broadband access to rural communities. It wrote:

Reliable broadband is imperative for competitive and successful enterprises in a growing digital economy. The Coalition Government has made clear its desire to make more public services available online, which provides a more cost effective means of accessing public services. However online access to public services will only work if they are accessible to all and do not exclude those in remote areas, who already struggle to access public services.

Farming businesses are increasingly required to meet certain obligations online, such as VAT returns, animal movements and applying for agriculture support. Farming businesses and other rural businesses can only meet these obligations if they have a decent and reliable broadband connection.[66]

COVERAGE OBLIGATIONS

63.  In terms of coverage, the forthcoming auction is significant, for two reasons: the lower frequency (800 MHz) spectrum that is being auctioned is particularly effective for wide geographical coverage; and Ofcom is proposing to implement a 95% (population) coverage obligation for one of the 800 MHz licences allocated at the auction. Ofcom states in its consultation that a 95% coverage obligation should result in "coverage of future mobile broadband services that approaches today's 2G coverage by the end of 2017".[67] Ofcom also states in its consultation that it considered whether the coverage obligation should apply to more than one of the spectrum licences being auctioned. Ofcom concluded that a coverage obligation on one licence would be sufficient and other MNOs "may in practice follow suit and also offer such coverage, but if they do not we will nevertheless have ensured that citizens and consumers in most areas will have access to such services, albeit their choice of supplier may be somewhat limited".[68]

64.  It is difficult to understand why it should take until 2017 for 3G services to reach current levels of 2G coverage. We asked Ofcom about this and Ed Richards told us that "you could do it faster and you could even have a higher number faster, but that simply requires engineers to deal with the masts, so there is a cost implication".[69] Graham Louth went on to say:

there is a limit to how much roll-out a network operator can do in any given period of time, and if you require them to roll out into rural areas, then they may well not be able to deploy as quickly and as extensively in urban areas and there will be a consumer impact there. It is a trade-off between urban consumers and rural consumers for who gets the service, possibly even who gets the service first.[70]

65.  The infrastructure company Arqiva argued in its written submission that Ofcom should set the coverage obligation at 99% of each British nation's population, and described Ofcom's proposed 95% as "an obligation so unadventurous that an operator could theoretically comply without deploying its 800 MHz spectrum in the whole of Suffolk, Northern Ireland and Cumbria combined".[71] Arqiva also said that any short-term cost of imposing a 99% coverage obligation on one 800 MHz licence would, over the long-term, "be considerably less than the opportunity cost of not providing access to broadband, or of providing it years later, to at least hundreds of thousands of homes, schools, farms and small businesses".[72]

66.  John Cresswell, Chief Executive of Arqiva, perceives the forthcoming auction as a "once in a generation opportunity" to "have a digital Britain":

99% outdoor reach coverage will enable virtually every home in the country to be able to access at least 2 Mbps, which is enough to watch the BBC iPlayer, for instance. I don't think the market would provide that, just as television reaching the last 5% would be uneconomic for commercial operators if they were left to choose. I guess that would be the same for a build out for fibre; it would be uneconomic to do that. Therefore, you have to set down the coverage obligation.[73]

He put a figure of £200-230 million on the predicted cost of a 99% coverage obligation.[74] The MNOs who gave evidence to this inquiry broadly agreed with this figure,[75] although Guy Laurence of Vodafone told us that this figure did not include operational costs which he estimated to be in the region of a further £140 million to achieve 99% coverage.[76]

67.  Attaching a coverage obligation to one of the licences may result in that licence achieving a lower price at auction, because of the costs associated with increasing coverage. BT argued this point and said that imposing a coverage obligation on one of the 800 MHz licences would negatively affect the value of that spectrum, effectively creating a public subsidy to the holder of the licence with the coverage obligation to support rural broadband delivery.[77] Attaching a coverage obligation to one of the 800 MHz licences may well result in that licence achieving a lower price at the auction; however, this will probably be off-set by the costs associated with increasing coverage. Increasing coverage will bring business benefits from attracting new consumers, which should encourage other network operators to follow suit. There is a risk that, by only applying a coverage obligation to one licence, consumers in the rural areas that would receive the extended coverage may still be limited in their choice of network provider. We recommend that Ofcom reconsider applying a coverage obligation to two or more licences.

68.  Once again, the four MNOs do not agree with each other about Ofcom's proposal for a 95% population coverage obligation. O2 opposes the imposition of any coverage obligation at all, and wrote in its submission that "whilst coverage obligations are superficially attractive, they can have the effect of deterring entry by new players and therefore potentially reduce the level of competition in the auction".[78] By contrast, Three not only supports the notion of a coverage obligation, but also suggests that 95% is not high enough, recommending instead an obligation of 97% indoor coverage at 2 Mbps: "this would guarantee mobile data services to an additional 1.2 million people compared with the 95% proposal. With Government funding allocated to broadband, it may be possible to achieve over 98% national coverage".[79] Kevin Russell went on to say that meeting a 99% coverage obligation was "very doable".[80]

69.  Rural broadband coverage has not developed as quickly as it should have. Having access to broadband services is vital for rural communities and economies, and the UK economy as a whole. The evidence we have received suggests that Ofcom's proposed 95% population coverage obligation on one of 800 MHz spectrum licences being auctioned is readily achievable. In fact, we consider the imposition of a 95% coverage obligation to be unambitious.

70.  When deciding the level at which any coverage obligation is set, Ofcom must balance the cost to the network operator of meeting the obligation with the effect that it will have on competition. The objections we have heard to imposing a coverage obligation higher than 95% have cited the cost of improving the infrastructure, rather than the feasibility of increasing coverage. The evidence that we have heard suggests that a 99% coverage obligation, although achievable, would cost up to £230 million and we are concerned that that cost could be transferred to consumers. Therefore we support the unanimous decision made by the House in May 2011 and recommend that Ofcom imposes a coverage obligation of 98% on one or more of the 800 MHz licences being auctioned.

BROADBAND DELIVERY UK

71.  Broadband Delivery UK (BDUK) is a team within DCMS that was set up to deliver the Government's broadband strategy, bringing superfast broadband to all parts of the UK.[81] BDUK's main role is to allocate and distribute £530 million of funding to bring superfast broadband to the third of UK homes and businesses which would not be served by the broadband market alone and would otherwise miss out. County councils, unitary authorities and Local Enterprise Partnerships can apply for a share of the money by developing a local broadband plan setting out how everyone in the area will be provided with superfast broadband access.

72.  Once again, the MNOs could not agree on the distribution of spectrum amongst themselves. Everything Everywhere argued that the duopoly on sub-1 GHz spectrum would also create a duopoly for rural broadband projects, which, if it continued, would "reduce the value for money achieved from the public funds set aside for rural broadband projects administered by BDUK".[82] Similarly, Three argued that increasing competitive access to sub-1 GHz spectrum would increase coverage, and therefore allow the public funds administered by BDUK to be targeted more effectively.[83]

INFRASTRUCTURE

73.  Extending broadband coverage, especially in rural areas, requires improved infrastructure and a mixed economy of broadband delivery through fibre, mobile and satellite services. Arqiva said in its written submission that:

Not everyone will be offered fibre; wireless will be the only cost-and-time-effective means of providing access to broadband for virtually all those who won't be, with 800 MHz the optimal spectrum to use for that. Satellite broadband will also play a role, but its higher cost and lower speed [...] makes it sub-optimal for all but those who couldn't be cost-effectively offered broadband by other means.[84]

Kevin Russell, then Chief Executive of Three, told us that he thought that O2 and Vodafone had "fundamentally under-invested" in their infrastructure and went on to say that they had "close to 8,000 sites [mobile masts]; Everything Everywhere and ourselves have 12,500-plus sites. Our indoor coverage would be 79%. I would expect their indoor coverage to be somewhere probably in the 60s—that would be my guess".[85]

74.  Coverage could be increased by infrastructure-sharing amongst MNOs. Ed Richards, Chief Executive of Ofcom told us:

The obstacles to site sharing and things of that kind were largely removed some time ago and quite substantial site sharing is now already taking place. There is site sharing between what was T-Mobile and Orange, now Everything Everywhere, and that also extends to Three. There is also site sharing now between O2 and Vodafone. [...] our general approach is to look at the economic benefits, but also at the risks to competition of those sorts of collaborations. There is no in-principle objection, and it clearly does offer benefits in terms of reach, and I think that is what has happened over the years.[86]

75.  The MNOs all told us they remained committed to sharing infrastructure. Richard Moat, Deputy Chief Executive of Everything Everywhere, said that MNOs "should seek every possible means of collaborating to reduce the costs and the impact on the environment";[87] and Kevin Russell, of Three, said that introducing high coverage obligations would encourage MNOs to collaborate and look for efficiencies.[88]

76.  We are encouraged to hear that mobile network operators are sharing their infrastructure in order to achieve a cost-effective solution to expanding their coverage. We believe that imposing a 98% coverage obligation will stimulate competition and the need for all operators to increase coverage. In turn, we think this will encourage more sharing and collaboration among the mobile network operators.

77.  If coverage obligations were implemented, the connection between the base station and the main network of the operator, known as the "backhaul infrastructure", would need to be updated. O2 stated that:

If [...] coverage obligations are included in licences then, to be effective in delivering rural mobile broadband coverage, they must go hand-in-hand with the availability of cost effective backhaul solutions from BT, plus the ability to use BT's "ducts and poles". There is little value in forcing mobile operators to build masts when those masts cannot be connected back to the core network with a fit for purpose backhaul solution. [89]

Guy Laurence, Chief Executive of Vodafone, agreed with a 98% coverage obligation in principle, but said that its successful implementation would depend on investment in the network infrastructure not just by MNOs, but also by BT who owned the backhaul network.[90]

78.  Backhaul infrastructure that connects mobile base stations with the main network is a vital component of mobile service provision. Lack of backhaul must not become a reason—or an excuse—for mobile network operators not to extend coverage into rural areas. We recommend that Ofcom and BDUK work closely with each other to ensure that backhaul is taken into account in any policy decisions relating to mobile network provision or extending access to broadband.

79.  Planning constraints can also be a factor in coverage obligations. O2 and Vodafone both told us that mobile network operators often faced obstacles in erecting new masts caused by the availability of sites, planning issues and opposition from local communities. Ronan Dunne, Chief Executive of O2, said that "my mailbox is mixed between people writing to me asking for increased coverage and those writing saying they don't want a mast built in their area".[91]

80.  DCMS told us that it had an active dialogue with the Department for Communities and Local Government (DCLG) on all aspects of broadband roll-out, including the planning regulations for erecting masts.[92] Simon Towler told us that DCMS was trying to ensure that any planning regulation did not hinder broadband deployment, including masts, but "as ever, there is a balance to be struck between the rights of individuals and economic development needs".[93]

81.  It is widely acknowledged that achieving 100% broadband coverage will be difficult. However, Arqiva argued in its written submission that universal coverage should still be a goal, stating that the proposed coverage obligation "stops short of actually ensuring that universality would be achieved. This is short-sighted. There is an ever-greater social and economic cost to each person who falls on the wrong side of this 'digital divide'".[94] John Cresswell, Chief Executive of Arqiva, also explained how he thought this could be delivered: "I think you need a mixed economy. Principally it will be fibre with wireless broadband, and then the last 1% being able to be served by satellite".[95]

82.  Laying fibre networks into sparsely populated, rural areas is expensive. Guy Laurence of Vodafone told us that, in order for the MNOs to reach the most rural parts of the country, BT had to invest in its backhaul network:

if you have a small village in the middle of nowhere and BT can't run the fibre in there is not much that we can do about it. There are some technologies available but they are exceedingly expensive and therefore the faster we can encourage and work with BT to run the fibre in so we will get a solution for rural faster.[96]

83.  Ronan Dunne, Chief Executive of O2 described backhaul as one of the main obstacles to O2 ever reaching rural areas.[97] Similarly, Guy Laurence of Vodafone told us that:

we have to have BT run fibre into those areas as well because at the end of the day our base stations connect to a fibre link or should connect to a fibre link. If we don't have that it means we have to move to alternative technologies, which are very expensive to operate.

Therefore you have to see this as a package of us having spectrum and the ability to invest and, secondly, BT doing their part, which they do intend to do, I hasten to add, in order to run fibre into the rural areas as well. We can put up a base station but if it can't talk to anything then it doesn't work.[98]

84.  In order to achieve universal coverage, broadband provision to the hardest-to-reach last 1% would have to be supplied by satellite, although that is a more costly and slower service than fibre.[99] Rupert Pearce, Group General Counsel of Inmarsat, the satellite service provider acknowledged that satellite broadband is slower than fibre,[100] and also explained some other aspects of satellite broadband provision to us:

Although we would immediately deliver truly ubiquitous coverage in the UK merely by having a satellite over the UK, which we do, we have several, there are small issues like being able to serve only a few hundred customers at a time in a beam with a mobile satellite network and the fact that we don't work in building. You actually have to have line of sight to a satellite to be able to have a service.[101]

However, Mr Pearce went on to say that in the United States satellite broadband has had an unexpectedly high take-up, not just in rural areas but also in suburban areas, and satellite service providers there are offering a service for $50 a month.[102]

Innovation

85.  Commercial advantage is the real incentive for mobile operators to improve coverage, and the evidence we received suggests that they are making advances of their own volition. Everything Everywhere described a rural broadband trial in Cornwall that it is conducting with BT:

This trial sets out to develop a hybrid fixed and mobile solution to deliver broadband to those homes which do not currently have access to basic broadband of at least 2 Mbps. BT will extend its fixed fibre network as widely as possible. Everything Everywhere has obtained non-operational licences for 2 x 10 MHz of 800 MHz spectrum and based on that, we will deliver wireless broadband to the last few households and businesses that are very costly to reach with BT's fixed network.[103]

Everything Everywhere also said in its written submission that its findings from its rural broadband trial in Cornwall indicate that the suggested 2 x 5 MHz of 800 MHz spectrum (Ofcom is proposing that this should be the size of the spectrum floor) will not be capable of "providing sufficient performance or capacity to handle broadband traffic levels in rural not-spots".[104]

86.  Vodafone also described Sure Signal, an innovation that it has developed to improve indoor mobile coverage using " femtocell technology (indoor equipment that looks like a wireless router and connects via a fixed line broadband connection) as a potential solution to improve indoor coverage and for which we have hundreds of thousands of registered users".[105]

87.  Ed Vaizey commended the innovation of femtocell technology and told us that "the only mobile company at the moment that is using femtocells for the consumer is Vodafone. The other ones are using them for business, but they are not rolling them out for consumers, which I find baffling".[106] He went on to say that the Government "would encourage other mobile operators to adopt this technology as soon as possible".[107]

Digital village pumps

88.   Digital Village Pumps (DVPs) are one route BDUK can take in order to increase access to broadband in rural areas. DVPs are where fibre is run into a village and, rather than it feeding into every home, it terminates in a central data-centre, or "cabinet". The cabinet is owned and run by the local community, which then decides how connectivity is distributed from the cabinet to the homes and businesses in the village, via fibre or wireless connections.

89.  We asked Ed Vaizey how significant a part DVPs played in the Government's broadband policy. He told us that:

the digital pump is a very important part of the process. Again, we are not mandating any particular technology or method to deliver the broadband target. What we are trying to do is get the money out to counties and devolved Administrations to come up with solutions that are suitable for their areas. The village pump is, I think, one of those solutions, [...] But, as I say, the backhaul network is going to be very important for the success of mobile in any event.[108]

We asked the MNOs whether it would be possible for them to "piggy-back" on the DVPs in order to extend their coverage in rural areas. Richard Moat, Deputy Chief Executive of Everything Everywhere, told us that there was no reason why they could not.[109] Nicholas Ott, Vice President of Strategy at Everything Everywhere, however, pointed out that because DVPs were procured locally, there would effectively be a county-by-county build-up of this network, and each locality might have different approaches to their DVPs, which would make it difficult for MNOs to come up with a strategy to exploit them.[110]

90.  Any solution to the problem of limited rural broadband access has to be collaborative. We have heard much about access being dependent on mobile, fibre and backhaul networks, and yet we are not convinced that the operators of these infrastructures are co-ordinating their approaches in order to benefit consumers.

91.  Market competition has led to mobile network operators, and others, coming up with innovative solutions to problems such as mobile not-spots. We welcome the Government's decision to invest £150 million to increase mobile coverage and we welcome projects such as Everything Everywhere and BT's rural pilot in Cornwall, and Vodafone's femtocell technology. We note that other mobile network operators have not been using femtocell technology and we are disappointed that they have chosen not to offer this service to their domestic customers.


56   Ofcom,Mobile not-spots: an update on our research, November 2010 Back

57   Ofcom,Mobile not-spots: an update on our research, para 2.15, November 2010 Back

58   Q260 Back

59   Q75 Back

60   Ev 102 Back

61   Ev103 Back

62   Ofcom,Mobile not-spots: an update on our research, para 1.6, November 2010 Back

63   Ofcom,Mobile not-spots: an update on our research, para 2.21, November 2010 Back

64   Ev 97 Back

65   Ev 98 Back

66   Ev 68 Back

67   Ofcom, Consultation on assessment of future mobile competition and proposals for the award of 800Mhz and 2.6GHz spectrum and related issues, March 2011 Back

68   Ofcom, Consultation on assessment of future mobile competition and proposals for the award of 800Mhz and 2.6GHz spectrum and related issues, March 2011; para 6.32 Back

69   Q290 Back

70   Q290 Back

71   Ev 99 Back

72   Ev 98 Back

73   Q14 Back

74   Q18 Back

75   Q83, Q157 Back

76   Q158, Q160 Back

77   Ev 94 Back

78   Ev 64 Back

79   Ev 69 Back

80   Q87 Back

81   http://www.culture.gov.uk/what_we_do/telecommunications_and_online/7781.aspx  Back

82   Ev 107 Back

83   Ev 71 Back

84   Ev96 Back

85   Q76 Back

86   Q292 Back

87   Q94 Back

88   Q94 Back

89   Ev64 Back

90   Q153 Back

91   Q130 Back

92   Q265 Back

93   Q265 Back

94   Ev 99 Back

95   Q25 Back

96   Q148 Back

97   Q147 Back

98   Q107 Back

99   Q25, John Cresswell, Arqiva Back

100   Q208 Back

101   Q204 Back

102   Q205 Back

103   Ev 107 Back

104   Ev 107 Back

105   Ev 92 Back

106   Q 268 Back

107   Q 269 Back

108   Q262 Back

109   Q95 Back

110   Q95 Back


 
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© Parliamentary copyright 2011
Prepared 3 November 2011