Broadband in Wales

Written evidence submitted by Ofcom

Section 1

1 Introduction  

Ofcom’s Role

1.1 Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

1.2 One of our main statutory duties is to ensure the availability in the UK of a wide range of electronic communications services, including high-speed services such as broadband. In our efforts to further the interests of consumers and citizens, Ofcom takes a close and continuing interest in the availability, take-up and effective use of broadband in Wales.

1.3 As a converged regulator, Ofcom publishes high quality data and evidence about the communications sector in Wales, through its annual Communications Market Report. The data in much of this submission is based on our 2010 Report, published in August. Data for the 2011 report is currently being collected and processed and we intend to publish the report in late summer.

1.4 Broadband is rapidly emerging as an essential service in society, with increasing economic and social importance, both across the UK and in Wales. We therefore believe the Welsh Affairs Select Committee's investigation into the provision of broadband in Wales is timely, and we hope the enclosed data in this submission will help to provide the market context and a useful resource for the Committee’s investigation.

Section 2

2 Executive Summary  

2.1 Broadband is a high speed Internet service enabling users to download files, view television programmes and films, take part in video conferencing and online gaming and access a wide range of other media, information and services online. Broadband speeds are measured in bits per second: 512 kilobits per second (512 kbps) is 10 times the speed of dial-up. However, the current copper telephone network has limited capacity – next-generation access (NGA) or superfast broadband services using optical fibre can provide download speeds (over 24 megabits per second – 24 Mbps) in excess of those that can be delivered using conventional copper wires.

2.2 According to the latest figures from Ofcom’s Communications Market Report for Wales 2010, 64% of people have access to broadband in Wales, ranging from 62% in urban areas to 69% in rural areas of Wales. This is below the UK average of 71%.

2.3 There are two major access networks for fixed-line broadband in Wales: BT's copper telephone network (which is used by a range of commercial suppliers, including BT Retail, to provide broadband to customers) and Virgin Media's cable network. Satellite and wireless technologies (both fixed and mobile) can also provide broadband services.

2.4 Virgin Media’s fibre optic cable broadband network can offer speeds up to 50 Mbps and the company plans to introduce a 100 Mbps service [1] in future. But access to the network is limited to 24% of premises in Wales, mainly in Cardiff, Newport and Swansea.

2.5 Broadband access over the existing copper telephone network is limited in practice to premises situated up to around 5 km from an exchange. BT estimates 99.6% of premises connected to its copper network are able in theory to obtain broadband speeds of at least 512 kbps. However, not all households are able to receive a broadband service due to the length of the line from the exchange to a customer’s premises; the number of people connected to the same exchange who are logged on to the internet concurrently; and local technicalities.

2.6 As such, there are a significant number of "not-spot" areas where, despite being connected to a DSL-enabled exchange, people are unable to receive broadband. According to Ofcom research, commissioned in 2006, 16% of premises in Wales are situated further than 5 km from an exchange (compared to the UK average of 13%).

2.7 In March this year Ofcom published its fourth report into fixed-line broadband speeds using data collected by research partner SamKnows. Our results show that in November/December 2010 average actual broadband speeds in the UK were 6.2 Mbit/s.

2.8 Local loop unbundling is the process whereby BT makes the copper lines in its access network available to other communications providers, which encourages competition in the provision of current-generation broadband services over copper. 77% of households in Wales are connected to an unbundled local exchange, which is the second-highest proportion among the UK nations (UK average: 85%).

2.9 Ofcom has introduced measures to make switching broadband providers easier for consumers and to stimulate competition.

Next Generation Access/Superfast Broadband

2.10 Superfast broadband optical fibre networks are being rolled out in the UK. They can theoretically provide nearly unlimited bandwidth potential depending on how close the fibre is brought to the end-user. There are two main types of fibre deployment: FTTC, where fibre is run from the exchange to a street cabinet serving an average of around 300 premises but the existing copper cables connect the cabinet to those premises; and FTTP, where fibre is run directly to the customer’s premises.

2.11 BT has committed £2.5 billion to the roll-out of superfast broadband across the UK and has already started to roll out FTTC services in the more populated urban areas of Wales, focused primarily on the commercially more attractive ‘Market 3’ areas. Industry and economic analysis suggests that the market, unaided, is unlikely to serve the final third of the UK population (a higher proportion of the population in Wales, which falls mainly into ‘Market 1’ areas).

2.12 Ofcom periodically reviews various markets in order to assess whether any communications providers have a position of significant market power (SMP) and assess the regulatory remedies that might be required. We completed reviews of the UK Wholesale Local Access (WLA) and Wholesale Broadband Access (WBA) markets in 2010. Effective competition – or effective regulation where sufficient competition does not exist – in wholesale markets underpins the choice in retail offers available to consumers.

2.13 We defined the WLA market to include copper loops, cable networks and optical fibre at a fixed location but not mobile, fixed-wireless and satellite technologies. We concluded BT has a position of SMP in this market and imposed a number of remedies with the aim of ensuring it provides access to its network to other communications providers. These are:

· SLU (Sub-Loop Unbundling) – an existing remedy, which allows communications providers to physically take over (or share) BT’s existing copper lines between street cabinets and customer premises. This remedy allows providers to deploy FTTC technology where they consider this to be economic.

· VULA (Virtual Unbundled Local Access) – which must be provided by BT wherever it has deployed its NGA network (both FTTC and FTTP) and will provide access to that network in a way similar to how LLU provides access to BT’s copper access network but through a ‘virtual connection’ that gives communications providers a dedicated link to their customers.

· PIA (Physical Infrastructure Access) – allows communications providers to deploy fibre in the access network using BT’s ducts and poles to support deployment of either FTTC or FTTP technology. PIA will be designed particularly to support superfast broadband availability in areas that will not be covered by BT’s NGA rollout (i.e. in the final third).

2.14 WBA relates to the broadband products and services communications providers provide for themselves and sell to each other. We last reviewed the WBA market in May 2008, [2] when we concluded that competition based on LLU had developed to a point where regulation was no longer required in parts of the UK (known as Market 3 areas). In other places, there was competition but not at a sufficient level (Market 2 areas), and in some parts of the UK, including large parts of Wales, there was no competition at all (Market 1 areas). The population split in Wales between Markets 1, 2 and 3, suggests that just under 50% of the Welsh population is in Market 3, with 22% in Market 2 and 29% in Market 1.

2.15 We concluded that BT had SMP in Markets 1 and 2 but no operator had SMP in Market 3, where no regulatory controls apply. To address the potential competition problems posed by BT’s dominance in Market 1 and Market 2 areas, we have proposed BT should continue to be required to provide bitstream services in a non-discriminatory manner and on the basis of cost-oriented prices. In addition, we have proposed BT’s prices in Market 1 should be subject to a charge control which will provide additional protection against excessive pricing.

2.16 There are a number of alternative fixed line next generation broadband providers already rolling out services in Wales.

Mobile Broadband

2.17 Mobile broadband uses a mobile telephone network to connect to the Internet via a mobile device or a "dongle" that plugs into a computer’s USB port. Such services depend on spectrum and mobile broadband services are currently only available in areas that are served by 3G mobile networks. 3G geographic coverage by one or more mobile networks is quite poor in Wales currently, with just under half (49%) of postcode districts in Wales receiving 3G coverage from one or more mobile networks, lower than the UK overall (76%). But geographic coverage of 2G services is significantly better.

2.18 Two significant recent developments will release more radio spectrum for the deployment of mobile broadband services: freeing-up the existing 2G spectrum for 3G use and a new 4G spectrum auction.

2.19 Mobile phone operators could previously only use a limited amount of spectrum to deliver 3G (in the 2.1 GHz band) as the rest of their spectrum holdings (in the 900 MHz and/or 1800 MHz bands) was licensed in the 1990s with the condition that it could only be used for 2G services. In January, Ofcom introduced a new measure to free up the airwaves used by mobile phone operators for 2G services to be available to provide 3G services. This measure will help the mobile phone operators to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas

2.20 In March this year, Ofcom announced the largest ever single auction of spectrum for mobile services in the UK which will provide much needed capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services – approaching today’s ADSL home broadband speeds. The auction will include a combination of safeguards to promote competition and coverage conditions to ensure widespread availability of mobile broadband services to the UK population.

2.21 The auction will be for two spectrum bands – 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed-up as the UK switches from analogue to digital terrestrial TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds. The combination of low and high frequency spectrum available in the 800 MHz and 2.6 GHz bands creates the potential for next generation mobile broadband services to be widely available across the UK, while at the same time having the capacity to cope with significant demand, even in urban centres.

2.22 Ofcom believes that competition at the national wholesale level is essential to future competition and maximising consumer and citizen benefits. In addition, there would be a significant risk to national wholesale competition if there were fewer than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services. To guard against this risk, Ofcom proposes introducing limits both on the minimum and maximum amounts of spectrum bidders can win.

2.23 A number of other technologies are available as alternatives to fixed line broadband distribution, including satellite broadband, wireless broadband via WiMAX and Wi Fi networks in local areas. A number of providers have already rolled out services in Wales.

Broadband Take-up and Digital Inclusion

2.24 According to our latest Communications Market Report for Wales, [3] take-up of broadband in Wales has reached 64% and the gap with the UK average (71%) has narrowed from 10 to seven percentage points in a year. Some 69% of people in rural Wales have a broadband connection compared with 62% of people in urban Wales. 70% of people in North/Mid Wales have a broadband connection compared with 66% in South West Wales and 58% in South East Wales.

2.25 During 2009, mobile broadband take-up in Wales rose by five percentage points as consumers increasingly turned to mobile networks to access the internet. In Q1 2010, 16% of households in Wales claimed to access the internet via mobile broadband, marginally above the figure for the UK as a whole (15%).

2.26 There are many reasons for not having the internet, and these fall into two broad categories: voluntary and involuntary. Voluntary non-ownership is when potential consumers do without services because they perceive they do not need them, or because they are satisfied with alternative services. Involuntary non-ownership is when potential consumers do without services, but not through choice; this is mainly due to affordability.

2.27 Nine per cent of adults in Wales said that they did not have internet access at home for involuntary reasons. This was similar to the UK average and lower than in Scotland (15%) and Northern Ireland (12%). England was the nation least likely to state involuntary reasons for non-ownership (8%).

2.28 The growth of the internet has provided another platform over which content can be delivered to consumers. As a result of the widespread availability and take-up of broadband, the majority of households can now receive content in this way (though by no means all do). In recent years the internet has had a significant impact on how content can be consumed. This has enabled consumers and citizens to access government services, online banking and information on health-related issues.

The Role of the UK and Welsh Assembly Governments

2.29 The UK Government is committed to delivering universal broadband at speeds of 2 Mbps within the lifetime of the current Parliament (2015). The UK Government aims to secure the best superfast broadband in Europe by the end of the current Parliament. In Wales, it has announced three market-testing projects in rural areas, including one location in Wales: Felindre near Swansea.

2.30 Broadband Delivery UK (BDUK) was created following publication of the final Digital Britain report by the previous UK Government. It was created within the Department for Business, Innovation and Skills (BIS) as a delivery vehicle for the UK Government’s broadband policies. Following machinery-of-government changes, BDUK is now part of the Department for Culture, Media and Sport.

2.31 The UK Government is committed to ensuring BT and other infrastructure providers allow the use of their assets to deliver broadband access.

2.32 The Welsh Assembly Government’s RIBS project was specifically designed to provide 35 exchange areas of Wales, initially deemed unviable by BT, with broadband access. The initiative has covered around 8,500 households and businesses to date. It has also looked at addressing not-spot areas and has allowed more than 1,000 residents and businesses to enjoy access to broadband services for the first time.

2.33 The Assembly Government is embarking on a programme to facilitate the deployment of a broadband infrastructure capable of delivering fast and ultra-fast broadband services to 100% of premises across Wales. The Economic Renewal Programme aims to provide every business in Wales with access to next-generation broadband by the middle of 2016 and domestic premises by 2020 at a minimum speed of 30 Mbps.

2.34 The Open Market Review published at the end of March aims to collect information that will help determine where the deployment of next generation broadband networks should be focussed. The Assembly Government would like to understand where private sector investment in next generation networks across Wales has already happened or is planned in the next three years.

Section 3

3 The Provision of Current Generation Broadband Services  

Introduction: Broadband Services

3.1 Broadband is a high speed Internet service enabling users to download files, view television programmes and films, take part in video conferencing and online gaming and access a wide range of other media, information and services online.

3.2 Typically, broadband speeds using a standard telephone line are tens – and increasingly hundreds – of times faster than dial-up internet connections. Speeds are measured in bits per second: 512 kbps is 10 times the speed of dial-up and the minimum generally considered to be broadband; 1 Mbps is 20 times faster etc. 2 Mbps is the generally around minimum speed required to watch standard-definition video online.

3.3 Recent attention has focused particularly on the provision of next-generation or superfast broadband services, which provide download speeds (over 24 Mbps) in excess of those that can be delivered using conventional copper wires.

Current Broadband Availability in Wales

3.4 According to the latest figures from Ofcom’s Communications Market Report for Wales 2010, 64% of people have access to broadband in Wales, below the UK average of 71%. Broadband take-up ranges from 62% in urban areas to 69% in rural areas of Wales. Total broadband take-up (fixed and mobile) varies significantly across Wales (SE Wales 58%, SW Wales 66%, North/Mid Wales 70%).

3.5 Whilst almost 100% of fixed line exchanges in Wales support broadband, actual speeds experienced by consumers depend on a variety of factors. These include the length of the line from the exchange to a customer’s premises; the number of people connected to the same exchange who are logged on to the internet concurrently; and local technicalities.

3.6 Internet delivered via broadband is rapidly establishing itself as an essential service for modern life in Wales. However, broadband access over the existing copper telephone network is limited in practice to premises situated up to around 5 km from an exchange. As such, there are a significant number of "not-spot" areas where, despite being connected to a DSL-enabled exchange, people are unable to receive broadband. According to Ofcom research, commissioned in 2006, 16% of premises in Wales are situated further than 5 km from an exchange (compared to the UK average of 13%). People living in these areas will not be able to fully benefit from the rapidly growing number of online services, such as the streaming of audio-visual content, that require higher connection speeds.

3.7 There are two major access networks for fixed-line broadband in Wales: BT's copper telephone network (which is used by a range of commercial suppliers, including BT Retail, to provide broadband to customers) and Virgin Media's cable network. Satellite and wireless technologies (both fixed and mobile) can also provide broadband services.

3.8 Openreach, a division of BT Group, is responsible for managing and maintaining BT's existing copper lines and infrastructure [4] running from exchanges to premises (also known as the "local loop") which are used by around 400 communications providers (in addition to BT Retail) to provide broadband services, either via wholesale capacity from BT or through direct infrastructure investment at individual exchanges.

Existing Network Infrastructure

BT

3.9 BT’s access network is illustrated below. In most cases, a street cabinet is situated between the customer’s premises and BT’s local exchange. All premises in Wales are connected to a broadband-enabled exchange. BT estimates 99.6% of premises connected to its copper network are able in theory to obtain broadband speeds of at least 512 kbps. However, for a number of reasons, not all households are able to receive a broadband service. These reasons include issues with network quality, shared lines and distance from the exchange. Even with such high availability, a significant number of consumers remain unable to receive broadband services.

3.10 However, Openreach has been working on a programme to extend broadband coverage in Wales by removing line-concentrator cabinets (which enable multiple customers to share lines running from the cabinet to the exchange) and digital-access carrier systems (DACS, which enables two voice services to be supported on one physical line), none of which are able to support broadband.

3.11 Broadband delivered via copper is mainly based around variants of DSL technology.

· ADSL (asymmetric DSL) is the most common DSL technology. Information is downloaded more rapidly than it is uploaded. (Typically for an "up to 8 Mbps" service, the download speed might be around 3.2 Mbps while the upload speed might be 0.5 Mbps.) As ADSL popularity grew, a new family of standards known as ADSL2 was developed. ADSL2 extends the capability of basic ADSL in data rates to 12 Mbps download and 3.5 Mbps upload. ADSL2+ allows even higher download data rates to be achieved within 3 or 4 km of an exchange. ADSL2+ is now available (by Spring 2011) in 47 out of 437 exchanges in Wales, offering speeds of up to a theoretical maximum of 24 Mbps.

BT has announced that it plans to roll out ADSL2+ to exchange areas covering 75% of the UK population. This will lead to significant improvements in broadband speeds for Welsh consumers, although the detailed rollout plans have not yet been finalised.

· VDSL (very high bit-rate DSL) can offer up to 52 Mbps but only over even shorter distances compared to ADSL. VDSL2, the newest and most advanced standard of DSL technology, deteriorates quickly from a theoretical maximum of 250 Mbps "at source" to 100 Mbps at 300 m and 50 Mbps at 1 km. By around 1.6 km from an exchange, its performance is similar to ADSL2+.

· SDSL (symmetric DSL) downloads and uploads information at the same speed. This type of broadband requires an extra telephone line. It is particularly suitable for businesses that send large volumes of information (e.g. those using computer-assisted design packages).

Local Loop Unbundling (LLU)

3.12 Local loop unbundling is the process whereby BT makes the copper lines in its access network available to other communications providers. These are able to upgrade individual lines using DSL technology to offer high-speed internet access direct to the customer.

3.13 LLU is one way in which we have been able to encourage competition in the provision of current-generation broadband services over copper. LLU providers can offer broadband services at a competitive price and bundle them with other services.

3.14 77% of households in Wales are connected to an unbundled local exchange, which is the second-highest proportion among the UK nations (UK average: 85%). This represents a 45 percentage-point increase since the end of 2006.

Sub-Loop Unbundling (SLU)

3.15 In sub-loop unbundling (SLU), communications providers install equipment that connects to the copper lines at the green street cabinet rather than at the telephone exchange. This arrangement can be used for distributing very high-bandwidth services, such as VDSL, which can only be sent a short distance over copper.

Wholesale Bitstream Services

3.16 Wholesale bitstream services are provided by BT to ISPs. They support retail competition in areas where LLU uptake is not widespread and enable ISPs to provide broadband services to consumers in competition with BT Retail. BT is required to provide these services in Markets 1 and 2 and supplies them on a commercial basis in Market 3 (see section 4).

Virgin Media

3.17 Virgin Media is the UK's main cable-broadband company. It provides high-speed broadband internet access via fibre-optic cables, which also provide digital-television and telephone services (although the final part of the connection to domestic premises is made via coaxial cable for the television and broadband service and copper for the telephone service).

3.18 Virgin Media’s cable-network architecture is shown below. It also comprises street cabinets between the access network and the hub site. A number of cable street cabinets connect to a Virgin Media hub site.

3.19 Faster speeds – currently up to 50 Mbps – are a key benefit of cable broadband. Virgin Media plans to introduce a 100 Mbps service [5] and is conducting higher-speed 200 Mbps trials in some areas. But in Wales, only 24% of premises – concentrated primarily in the major cities of Cardiff, Newport and Swansea in South Wales – are served by Virgin Media’s cable network.

3.20 Virgin Media is currently operating a trial to provide broadband via fibre delivered across electricity pylons in the village of Crumlin in South Wales. The trial began in August 2010 and is expected to run until 2011. Customers who take part will receive up to 50 Mbps broadband along with Virgin Media’s digital-television services.

Broadband Speeds

3.21 In March this year Ofcom published its fourth report into fixed-line broadband speeds using data collected by research partner SamKnows. It sets out the findings from data collected during the period 1 November 2010 to 15 December 2010, during which 765 million tests were run across a panel of 1,710 UK residential broadband users. We believe that the integrity of our hardware-based technical methodology, combined with the scale of the project and the sophistication of the statistical analysis, makes this research the most robust analysis of fixed-line broadband speeds in the UK.

3.22 Our results show that in November/December 2010 average actual broadband speeds in the UK were 6.2 Mbps based on multi-thread testing . We do not have time-series data for multi-thread tests, but single-thread test data suggests that average download speeds in the UK increased by 5% between May and November/December 2010, this following an increase of 27% between April 2009 and May 2010 [6] .

3.23 In practice, headline broadband speeds are rarely experienced by consumers. The move to faster headline speeds has led to a growing gap between the actual speeds delivered and the speeds that some ISPs use to advertise their services. Differences between headline and actual speeds are often caused by broadband being delivered over copper lines, which were originally designed for phone calls. Hence speeds slow down over long and poor-quality lines and because of electrical interference.

3.24 We have recently strengthened our Voluntary Code of Practice on Broadband Speeds, [7] which we first introduced in 2008. ISPs who sign up to the revised Code commit to give consumers a more accurate and consistent estimate of the maximum speed likely to be achievable on their line. ISPs also commit to help consumers improve their speeds and to give consumers the option to leave their contracts early (within three months of signing up to the service) and without penalty if they receive a maximum line speed that is significantly below the estimate they are given at point of sale and the ISP is unable to resolve the problem.

3.25 Some ISPs have in the past year moved away from advertising their services on the basis of "up to" headline speeds, but others continue to do so. We have discussed this issue with the Advertising Standards Authority and the Committee on Advertising Practice, who are currently undertaking a review in this area.

3.26 Many consumers could take some relatively simple steps to improve their broadband performance. We provide advice for consumers on the factors to take into account when choosing a broadband provider and how to improve broadband speeds at home. [8]

Switching Broadband Providers

3.27 Over time, various processes have been developed for switching between providers of different communications services. Currently, many broadband services are switched using the Migration Access Code (MAC) process. This is an example of a losing-provider-led process, where the consumer contacts their current provider to obtain a MAC. The consumer must then contact their new provider to give it their MAC within 30 days.

3.28 We committed to review switching processes in our Annual Plan 2010/11, [9] following requests from communications providers and consumer groups to improve and simplify them. We subsequently published research and a consultation on 10 September 2010 that looked at switching in a number of services – fixed and mobile telecommunications and pay TV as well as broadband – to identify similarities and common challenges that arise in making sure the process is easy and reliable.

3.29 We focused on two key areas. First, we wanted to ensure an individual consumer's experience of switching is easy and hassle free, both now and in the future. Second, we wanted to ensure switching processes do not get in the way of providers competing vigorously with each other to deliver benefits to all consumers in terms of lower prices, greater choice and innovation and value for money. Notably according to our research, over a third (39%) of those consumers who have switched broadband provider using the MAC process thought changing provider seemed like too much hassle. [10]

3.30 We instead proposed a process where the customer’s new service provider (the gaining provider) takes the lead on switching the service, delivering lower prices, more choice and innovation for consumers. This would include appropriate measures to protect consumers from so-called "slamming," where a customer is switched without their consent.

3.31 [Include reference to anything relevant in the 2011/12 annual plan]

S ection 4

4 Next Generation Broadband infrastructure  

Fixed Line Next Generation Access

4.1 As broadband services become more bandwidth demanding, communications networks are moving to NGA, promising to offer very high speeds to end-customers. Current broadband services based on the existing copper access infrastructure are limited by the length and quality of the copper loop. A future-proof solution is the replacement of copper by optical fibres, which use lasers to transmit pulses of light down very fine strands of silicon. Fibre-optic cable can carry thousands of times more data than copper, is lightweight and free from electromagnetic interference and experiences no loss of broadband service over distance. Fibre-optics can theoretically provide nearly unlimited bandwidth potential depending on how close the fibre is brought to the end-user.

4.2 There are two main types of fibre deployment:

· FTTC, where fibre is run from the exchange to a street cabinet serving an average of around 300 premises but the existing copper cables connect the cabinet to those premises; and

· FTTP, where fibre is run directly to the customer’s premises.

BT superfast-broadband investment

4.3 In 2004, BT announced that the roll-out of its £10 billion UK 21st Century (21CN) next-generation network would start in South Wales. This investment is essentially in the core networks operated by BT that eventually feed local exchanges. In addition, BT has committed £2.5 billion to the roll-out of superfast broadband across the UK.

4.4 BT has set out the areas where it will roll out superfast FTTC/FTTP broadband services in Wales. FTTC services, offering speeds of up to 40 Mbps, are now available from the Cardiff Central, Taffs Well, Barry, Penarth and Caerphilly exchanges. In addition, during last year BT announced roll-out of FTTC to the Connah’s Quay, Hawarden, Llantrisant, Bridgend, Chepstow, Hengoed, Llanishen, Newtown Llantwit and Llanedeyrn exchanges. Subsequently, in April, BT added Aberkenfig, Blackwood, Buckley, Kenfig Hill, Llanrumney, Maesglas, Newport (Bettws, Malpas area) and Porthcawl to this list.

4.5 However, the business case for investment in Wales’ rural telecommunications infrastructure is challenging, and BT’s current investment is focused primarily on the commercially more attractive Market 3 areas (see below). Industry and economic analysis has concluded there is no obvious means whereby the market, unaided, will serve the final third of the UK population (a higher proportion of the population in Wales, which falls mainly into Market 1 areas).

Ofcom’s Market Reviews

4.6 We completed a review of the UK market for Wholesale local Access (WLA) in 2010 and we published a statement setting out our conclusions on 7 October 2010. [11] We also reviewed the UK market for Wholesale Broadband Access (WBA) and we published consultations on our proposals for the WBA market on 23 March and 20 August 2010 [12] . A final statement on this review was subsequently published in December [13] .

4.7 We periodically review various markets in order to assess whether any communications providers have significant market power (SMP), which means a position of ecomomic strength affording them the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. If any communications provider has SMP, we assess the regulatory remedies that need to be imposed to address this.

4.8 While the reviews relate to wholesale markets, they are important for consumers because effective competition – or effective regulation where sufficient competition does not exist – in wholesale markets underpins the choice in retail offers available to consumers.

Wholesale Local Access

4.9 WLA relates to the network infrastructure that provides local access connections to individual consumers, for use in the provision of telephony, broadband and other services. We have defined this market to include copper loops, cable networks and optical fibre at a fixed location but not mobile, fixed-wireless and satellite technologies. We concluded BT has a position of SMP in this market and imposed a number of remedies with the aim of ensuring it provides access to its network to other communications providers.

4.10 The remedies are designed to promote both investment and competition. For current-generation services, we have retained the existing remedies (LLU and Sub Loop Unbundling, SLU). To support the development of superfast-broadband services, we have introduced two new remedies, namely virtual unbundled local access (VULA) and physical infrastructure access (PIA).

· LLU – this is an established remedy that allows other communications providers to physically take over BT’s existing copper lines between telephone exchanges and customer premises.

· SLU – this is also an existing remedy, currently only used in very limited situations, which allows communications providers to physically take over (or share) BT’s existing copper lines between street cabinets and customer premises. This remedy allows providers to deploy FTTC technology where they consider this to be economic.

· VULA – this new remedy must be provided by BT wherever it has deployed its NGA network (both FTTC and FTTP). VULA will provide access to the NGA network in a way similar to how LLU provides access to BT’s copper access network. However, rather than providing a physical line, VULA will provide a virtual connection that gives communications providers a dedicated link to their customers.

· PIA – like VULA, this is a new remedy. It will allow communications providers to deploy fibre in the access network using BT’s ducts and poles to support deployment of either FTTC or FTTP technology. In the case of FTTC, it could be used to provide a "backhaul" connection between street cabinets and the provider’s network. BT is required to produce a draft reference offer for duct and pole access by January 2011, with a view to launching a commercial product in the middle of the year.

PIA will be designed particularly to support superfast broadband availability in areas that will not be covered by BT’s NGA rollout (i.e. in the final third). PIA will reduce the costs of entry for non-BT providers and improve the economics of broadband delivery in the final third.

Wholesale Broadband Access

4.11 WBA relates to the broadband products and services communications providers provide for themselves and sell to each other. We last reviewed the WBA market in May 2008, [14] and at that time we concluded competition based on LLU had developed to a point where regulation was no longer required in parts of the UK (known as Market 3 areas). In other places, there was competition but not at a sufficient level (Market 2 areas), and in some parts of the UK, including large parts of Wales, there was no competition at all (Market 1 areas).

4.12 The population split in Wales between Markets 1, 2 and 3, as proxied by the number of distribution points, suggests just under 50% of the Welsh population is in Market 3, with 22% in Market 2 and 29% in Market 1.

4.13 We concluded BT had SMP in Markets 1 and 2 but no operator had SMP in Market 3, where no regulatory controls apply. To address the potential competition problems posed by BT’s dominance in Market 1 and Market 2 areas, we have proposed BT should continue to be required to provide bitstream services in a non-discriminatory manner and on the basis of cost-oriented prices. These proposals are designed to ensure consumers benefit from competitive services provision at the retail level.

4.14 In addition, we have proposed BT’s prices in Market 1 should be subject to a charge control. This will provide additional protection against excessive pricing in areas where the prospect of further investment by competing providers is limited and we published a detailed consultation on the Market 1 charge controls in January this year [15] . Ofcom’s proposed charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services. This difference is due to the absence of LLU, the more limited set of bundled offers available and the higher costs of delivering broadband to customers in rural areas.

4.15 Ofcom’s aim is to incentivise BT Wholesale to continue to improve its efficiency. This could make it cheaper for other communications providers to roll out services and should ultimately benefit consumers in those areas through lower prices.

4.16 If wholesale broadband costs are reduced, ISPs should be able to buy more capacity for their customers without increasing their costs. This could result in faster broadband for rural areas.

4.17 Ofcom also proposes to exempt ADSL 2+ technology from charge controls. This should encourage BT Wholesale to invest in this new technology where it is cost effective to do so. ADSL 2+ is capable of supporting faster broadband speeds than ADSL, with a maximum possible speed of 24 Mbps over the copper network.

Alternative Next Generation Service providers in Wales

Fibrespeed

4.18 The Fibrespeed Open Access Network for Wales is a Welsh Assembly Government initiative that aims to provide affordable broadband connectivity (minimum 10 Mbps symmetric) to business parks in North Wales. Financing for the project has come jointly from the European Regional Development Fund, the Welsh Assembly Government and Geo Networks, FibreSpeed’s parent company.

4.19 The project’s initial focus was on serving 14 key strategic business parks in North Wales from Wrexham and Deeside in the east and along the A55 corridor to Holyhead. Overall, the network could potentially expand to incorporate around 50 locations across Wales. As a wholesale-only provider, FibreSpeed will allow other service providers to acquire capacity and offer high-speed communications services to businesses and consumers in Wales at the same rates enjoyed in other, more urban parts of the UK.

Carrier Wales

4.20 Carrier Wales offers wireless (WiMax) and fixed internet connections, using the Fibrespeed optical fibre network to provide services to business and community users. The company recently worked with residents in Treuddyn in North Wales to establish the commercial feasibility of providing a WiMax wireless solution to the community to address a number of broadband not-spots and to provide faster broadband services. Following the successful outcome of this trial, the company is currently working to provide similar services in other rural and urban areas of North Wales.

Rutland Telecom

4.21 Rutland Telecom offers broadband services to rural areas using ADSL2+, SDSL, wireless and fibre-optics. It is one of the first UK communications providers to develop FTTC in Market 1 areas with full access to copper lines to premises. It has implemented a voice and data network in Oakham and Lyddington – previously technologically isolated rural communities in Rutland suffering from poor broadband speeds – and announced similar plans to bring up to 40 Mbps speeds to the village of Erbistock near Wrexham, a rural area where many people currently receive no broadband services at all.

Spectrum Internet

4.22 In March, Spectrum Internet, a Welsh owned and operated ISP, launched a new fibre optic service from the Chepstow, Cardiff and Newport exchanges. The company has established a multi-gigabit backbone between the three exchanges offering businesses in south east Wales uncontended fibre leased lines managed from Spectrum’s data centre in Cardiff. The company also aims to offer speeds of 20-30 Mbps to residential customers and it also plans to extend its network across south Wales in future.

Section 5

5 Mobile , Wireless and Satellite Broadband  

Mobile and other Alternative Technologies

5.1 Mobile broadband uses a mobile telephone network to connect to the Internet. The service is provided via a mobile device or a "dongle" that plugs into a computer’s USB port. Communications providers may charge for data downloaded or set a monthly fee with no download limit. Such services depend on the availability of radio spectrum, which is essential to meet the UK’s rapid increase in mobile traffic, fuelled by the growth of smartphones and mobile broadband data services such as video streaming, email, messaging services, mapping services and social networking sites. All of these services depend on spectrum – the airwaves that carry information between customers’ mobile handsets and the internet.

5.2 Mobile broadband services are currently only available in areas that are served by 3G mobile services. Geographic coverage of 3G services by one or more mobile networks is quite poor in Wales currently. Just under half (49%) of postcode districts in Wales had 3G coverage from one or more mobile networks, lower than the UK overall (76%) but higher than Scotland (41%) and Northern Ireland (40%). Only 7% of postcode districts in Wales had coverage from four or five network operators.

5.3 However, geographic coverage of 2G services is significantly better with 79% of postcode districts within Wales covered by one or more mobile networks. (According to the 2010 CMR, Wales had the second lowest geographic coverage among the nations, ahead of Scotland (64%) but below Northern Ireland (87%) and England (91%). Nearly two-thirds of postcode districts in Wales were served by one or two providers, with the remaining third receiving 2G coverage from three or four.

5.4 During the past year there have been two significant developments that will release more radio spectrum for the deployment of mobile broadband services:

· freeing-up the existing 2G spectrum for 3G use; and

· a new 4G spectrum auction.

5.5 In January, Ofcom introduced a new measure to free up the airwaves used by mobile phone operators for 2G services, such as making phone calls and sending texts, to be available to provide 3G services, such as mobile internet browsing. This measure will help mobile phone operators operating on 900 MHz (Vodafone and O2) and 1800 MHz (primarily Orange and T-Mobile – now merged into one entity, Everything Everywhere – but also Vodafone and O2) to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas.

5.6 Mobile phone operators could previously only use a limited amount of spectrum to deliver 3G. The remainder of their spectrum holdings was licensed in the 1990s with a condition that it could only be used for 2G services. This spectrum could in future be used to meet the growing demand from smartphone devices and the like for 3G services.

5.7 In addition, on 22 March this year, Ofcom announced plans for the largest ever single auction of spectrum for mobile services in the UK, equivalent to three quarters of the mobile spectrum in use today and 80% more than the Government’s 3G auction which took place in 2000. The new spectrum will provide much needed capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services – approaching today’s ADSL home broadband speeds. Under measures being proposed by Ofcom, the auction will include a combination of safeguards to promote competition and coverage conditions to ensure widespread availability of mobile broadband services to the UK population.

5.8 The auction will be for two spectrum bands – 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed up as the UK switches from analogue to digital terrestrial TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds. These two bands add 250 MHz of additional mobile spectrum. The combination of low and high frequency spectrum available in the 800 MHz and 2.6 GHz bands creates the potential for next generation mobile broadband services to be widely available across the UK, while at the same time having the capacity to cope with significant demand, even in urban centres.

5.9 In December 2010, Ofcom was directed by the Government to assess how the release of this new spectrum is likely to affect future competition in the mobile market. Ofcom considers that there are risks to future competition if bidders are free to acquire any amount of spectrum in an open auction. This is because access to new spectrum is scarce but essential for providing the higher speed data services demanded by consumers, such as web browsing and video streaming. The combination of these two factors – scarcity and demand – could create incentives for bidders to bid strategically and reduce the amount of spectrum available to other bidders. The UK mobile market is made up of four national wholesale operators, who sell mobile services to retailers, as well as directly to their own retail customers. Ofcom believes that competition at the national wholesale level is essential to future competition and maximising consumer and citizen benefits. In addition, there would be a significant risk to national wholesale competition if there were fewer than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services.

5.10 To guard against this risk, Ofcom proposes introducing limits both on the minimum and maximum amounts of spectrum bidders can win. These are called auction ‘floors’ and ‘caps’. The least restrictive way to ensure at least four national competitors is through the use of spectrum floors in the auction. This involves disregarding any auction outcomes in which four companies do not win the minimum amount of spectrum necessary to provide higher quality data services. This can involve different combinations of spectrum, each of which could be sufficient to ensure a credible competitor. Ofcom proposes that this minimum amount should be one of the following five combinations:

· 2×5 MHz of sub 1 GHz spectrum and 2×20 MHz or more of 2.6 GHz; or

· 2×5 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 1800 MHz; or

· 2×10 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 2.6 GHz; or

· 2×10 MHz of sub 1 GHz spectrum plus 2×10 MHz or more of 1800 MHz; or

· 2×15 MHz or more of sub 1 GHz spectrum.

5.11 Ofcom also proposes to put in place safeguard caps to guard against longer term risks to competition from any one licensee holding a disproportionate amount of spectrum. Two safeguard caps are proposed:

· A sub 1GHz safeguard cap of 2×27.5 MHz, which will mean that no one competitor can obtain more than this amount of sub 1 GHz spectrum.

· An overall spectrum holdings cap of 2×105 MHz, which will mean that no one competitor can obtain more than this amount of spectrum overall.

5.12 Ofcom proposes to include a coverage obligation in one licence for the 800 MHz spectrum. The obligation would require the licensee to provide a mobile broadband service covering 95% of the UK population. It is expected that bidders will factor in the cost of achieving this obligation when making bids for the licence. This should result in coverage for future mobile broadband services that approaches today’s 2G coverage. The date for meeting these obligations would be the end of 2017. Statistics on current 2G and 3G coverage demonstrate that coverage varies between areas of the UK, with coverage in more rural areas generally being less comprehensive than in urban areas. This is particularly significant for 3G coverage.

5.13 One way of ensuring more uniformity of coverage for 4G services in future would be to supplement the main coverage obligation described above with a requirement to cover a certain proportion of the population in particular areas – for example in certain rural areas. Stakeholders are being encouraged to give their views on the feasibility and appropriateness of this.

5.14 The consultation closes on 31 May.

Satellite Broadband

5.15 Satellite broadband is available almost anywhere in the UK using a dish. However, satellite transmissions may be affected by weather conditions or local obstructions including foliage and trees, and the cost of installing and running satellite broadband can be quite expensive compared with other types of broadband. Satellite broadband also generally has quite a high latency (delay) compared to other broadband and so is potentially unsuitable for certain types of real-time internet services such as voice over Internet Protocol, video conferencing and online gaming.

Broadband Wireless Access

5.16 Broadband Wireless Access (BWA) requires an aerial to be installed to connect to the internet. The most common technology for long-distance BWA is WiMAX. A telephone line is not required. BWA is particularly suitable for distributing information between buildings and for homes in remote locations where access to ADSL or cable broadband is unavailable.

Wi-Fi

5.17 A Wi-Fi "wireless hotspot" is a public area that has a wireless network. Hotspots are more common in cities and at locations where large numbers of people are likely to be: airports, train stations, motorway service stations and hotels, for example. Normally, even in the case of free services, users will need a password to access Wi-Fi hotspots via their computer or mobile device (e.g. smartphone, iPhone or BlackBerry). Some providers (e.g. BT Openzone) supply free access to hotspots bundled with a fixed-line broadband package.

5.18 Wi-Fi can also be used to provide wireless broadband networks anywhere in the home without the need for trailing wires. A wireless router provides the signal, and each computer uses a wireless network card (often already built in) to connect. The broadband connection comes in via the telephone line or cable connection and is accessed by the wireless router.

Avanti

5.19 Avanti intends to launch a broadband-specific satellite called Hylas 1 in late 2010 that will aim to tackle some of the UK's broadband not-spots. Another satellite, Hylas 2, will launch in 2012. Two larger Hercules satellites will follow. Hylas will be able to provide broadband at speeds of 2 Mbps to some 350,000 customers in the UK. The Hercules satellites will have the capacity to provide 50 Mbps to an estimated 800,000 consumers.

5.20 Avanti already has 4,000 subscribers using existing satellite technology. It recently won a Scottish Government contract to supply 2,400 rural homes, all of which will benefit from faster speeds when Hylas is launched. The Scottish Government is subsidising the cost of installing the satellite equipment after running its own not-spot campaign.

5.21 The costs of satellite have proved prohibitively high in the past, with an average installation fee of around £400 plus a monthly cost of about £40. However, with the launch of Hylas, costs are likely to fall in line with market prices. Avanti estimates it will be able to offer satellite broadband for around £15 per month with a one-off installation fee of around £300.

BeyonDSL

5.22 BeyonDSL offers a range of satellite-broadband packages that come with either an unlimited data allowance (subject to a fair-use policy and a sliding speed limit) or a data allowance that can be topped up as required. For an extra charge, users wishing to download large amounts of data overnight can also add the "free zone" option without the sliding speed limit.

5.23 A value-package 2 Mbps connection costs £39.99 per month, and the standard equipment and activation fee is £349.99. Beyond DSL is the only satellite-broadband provider in the UK that offers Sky Digital/freesat television along with broadband services from the same dish, and the company also offers combined television and broadband packages (although pay-television subscription charges require additional monthly payments).

Walesbroadband.com

5.24 Walesbroadband.com was formed to deliver broadband internet services to the remotest areas of Wales. The company has developed a partnership with the Tower Sites and Infrastructure Division of TFL-Group. Established in 1983, TFL-Group offers a portfolio of services ranging from professional two-way radio-communications systems through to wireless broadband delivery. TFL-Group operates a network of hill-top communications tower sites in Wales that deliver secure, sustainable and fully integrated wireless systems.

Exwavia

5.25 Originally called Olive Tree IT, Exwavia specialises in the deployment of wireless broadband solutions to rural areas of Wales at prices comparable to the services found in towns and cities (4 Mbps+ for £19.99 per month to 12 Mbps+ for £34.99 per month). It believes delivering broadband wirelessly is more cost-effective, more reliable and better value for money than satellite broadband.

5.26 Some of the company’s methods of delivering a wireless service to rural locations in Wales are proprietary. However, the basic technology is available to all. Essentially, Exwavia purchases bandwidth from its wholesale supplier and then places its first wireless distribution node at or near the telephone exchange. This is used to "send" the broadband to where it is required. The distribution of broadband to users is then a simple case of feeding the wireless signal to each premise using the same wireless technology. The entire network is monitored, maintained, configured and upgraded from Exwavia’s office in Powys.

5.27 In the past, wireless technology has been plagued by interference, poor performance and intermittent delivery. However, Exwavia argues that its partner, Ruckus Wireless, has solved these issues and the performance of wireless broadband is now comparable with the performance of cable broadband.

5.28 Exwavia is committed to bringing superfast internet connections to all parts of Wales and will introduce speeds of 20 Mbps+ to rural areas when wholesale prices fall. Exwavia does not use the term "up to" to deliver services, believing consumers should receive what they order, so if a consumer orders a 4 Mbps connection, that is the minimum speed they will receive. Exwavia is planning additional services including discounted telephone services, streaming media and streaming TV in the near future.

S ection 6

6 Digital inclusion and broadband take-up  

6.1 According to our latest Communications Market Report for Wales, [16] take-up of broadband in Wales has reached 64% and the gap with the UK average (71%) has narrowed from 10 to seven percentage points in a year. Some 69% of people in rural Wales have a broadband connection compared with 62% of people in urban Wales. 70% of people in North/Mid Wales have a broadband connection compared with 66% in South West Wales and 58% in South East Wales.

6.2 There are many reasons for not having the internet, and these fall into two broad categories: voluntary and involuntary. Voluntary non-ownership is when potential consumers do without services because they perceive they do not need them, or because they are satisfied with alternative services. Involuntary non-ownership is when potential consumers do without services, but not through choice; this is mainly due to affordability.

6.3 Nine per cent of adults in Wales said that they did not have internet access at home for involuntary reasons. This was similar to the UK average and lower than in Scotland (15%) and Northern Ireland (12%). England was the nation least likely to state involuntary reasons for non-ownership (8%).

6.4 The growth of the internet has provided another platform over which content can be delivered to consumers. As a result of the widespread availability and take-up of broadband, the majority of households can now receive content in this way (though by no means all do). In recent years the internet has had a significant impact on how content can be consumed.

6.5 The Internet allows existing services such as some government services, banking and other information services to be delivered to citizens and consumers online; and it has allowed new, specifically internet-based forms of content to emerge (such as social networking sites, blogs and other user-generated content).

6.6 Broadband take-up in Wales has risen by six percentage points in a year, to 64%. Along with Northern Ireland, this was the largest increase among the nations in 2009-10. However, there were significant regional variations in broadband penetration within Wales, from 58% in South East Wales to 70% in North/Mid Wales. Within these regions there are variations in take-up and availability; even in areas with high overall take-up there will be instances of not-spots.

6.7 During 2009-10, mobile broadband take-up in Wales rose by five percentage points as consumers increasingly turned to mobile networks to access the internet (typically by using a 3G mobile USB modem, or ‘dongle’, plugged into a laptop PC). In Q1 2010, 16% of households in Wales claimed to access the internet via mobile broadband, marginally above the figure for the UK as a whole (15%). An increasing proportion (now four in ten) of mobile broadband consumers in Wales use this as their sole means of accessing the internet. However, the majority of mobile broadband users also have a fixed-line broadband connection at home. There was no significant difference between the claimed take-up of mobile broadband in rural and urban regions, despite the fact that high-speed 3G mobile networks are more typically available in urban areas.

6.8 Broadband accounts for the overwhelming majority of internet connections. Just 1% of internet users in Wales used dial-up for their home internet connection in Q1 2010.

6.9 However, across the UK, awareness of mobile broadband was lowest in Wales and Northern Ireland at 60% of adults compared to the UK average of 64%. This is slightly surprising since mobile broadband take-up is highest in Wales. Over the year levels of awareness have increased more in Wales and Northern Ireland than in England and Scotland. Within Wales, awareness was higher in rural areas than in urban areas, despite urban areas having wider availability of high-speed networks that can support mobile broadband.

6.10 The proportion of adults who claim to have accessed the internet using a mobile phone was slightly lower in Wales (14%) than in the rest of the UK (16%) in Q1 2010, and fell by four percentage points between Q1 2009 and Q1 2010. There were variations in use across Wales; in North/Mid Wales 17% of people claimed to use their mobiles to access the internet, compared to 11% in the South West.

Use of the Internet to Access Services

6.11 The internet enables users to undertake a wide range of activities online. Our consumer research asked about a number of these and found that the most common online activities among broadband owners in Wales were: sending and receiving email (89%); general surfing/browsing (85%); purchasing goods/services (70%); and finding/downloading information for personal use (57%).

6.12 Increasingly, people with a broadband connection are going online to access and engage in traditional ‘offline’ services and activities. Accessing services and content in this way has the potential to bring real benefits in terms of time, functionality and cost to citizens and consumers.

Accessing Government Services Online

6.13 Almost all local, regional and central government departments, agencies, executives and bodies have an online presence. Some services such as driving licence renewal are increasingly being delivered over the internet. Looking at the number of people claiming to access government websites is one way of assessing engagement with these services in the nations and regions. Ofcom research shows that across the UK, 26% of adults claimed to visit a government or local council website in Q1 2010. In Wales the figure stood at 18%, below the UK average but higher than the figures for Northern Ireland (16%) and Scotland (13%). Within Wales, people in rural areas (22%) were slightly more likely to visit these sites than those in urban areas (17%). Use of these sites was most popular in North/Mid Wales, where over a third (34%) of people claimed to have used them.

Internet Banking

6.14 Online banking allows people to manage their money from the comfort of their own homes, and among other things allows them to receive up-to-date balances, pay bills online, open new accounts and transfer money. Our research shows that across the UK, more than four in ten (43%) of people used the internet for banking in the first quarter of 2010. Use of online banking was highest in England (45%), followed by Wales and Northern Ireland (both 36%) and Scotland (29%). In Wales, use of banking sites varied from 32% in South West Wales to 41% in North/Mid Wales. Our research found little difference in take-up between people in urban areas (36%) and rural areas (37%). The data suggests that a number of internet users are not using online banking regularly. This is likely to be for a number of reasons including concerns about security, and the fact that under-18s are less likely to have a bank account.

Health

6.15 The internet has also had an impact on how people can find out more about a wide range of health issues. It allows those organisations (whether the NHS, private health providers or otherwise) that offer information and support a way to reach their target audience easily and cheaply; it also opens up to individuals a vast array of information on almost any health issue. This brings both advantages and disadvantages. For instance, people with concerns about swine flu could access advice through portals like Direct.gov and NHS Choices, which may have played a part in keeping infectious individuals away from surgeries. But the sheer amount of available information on the internet has also raised concerns about inaccuracies and incorrect self-diagnoses.

6.16 Twenty-seven per cent of adults in the UK claimed to use the internet to find information relating to health issues. This figure ranged from 14% in Scotland to 27% in England. In Wales the figure was 19%. In North/Mid Wales more than a quarter (26%) of people used the internet to find health-related information, a significantly higher proportion than people in South East (17%) and South West (16%) Wales.

Social Networking

6.17 Social networking sites (SNS) are websites such as Facebook and MySpace on which users can create their own profiles using text, graphics and photos, join groups of people with common interests and send messages to other site members. SNS use in Wales, at 37% of individuals, has risen by 12 percentage points over a year. Its popularity rose faster in Wales than anywhere else in the UK, but as an online activity it is still less popular in Wales when compared to the UK average (30%). Patterns in use of social networking sites correlate to household broadband penetration levels, with use higher in North/Mid Wales than the South East.

6.18 The increase in use of SNS sites was most marked in urban areas, where there was a 14 percentage point increase from Q1 2009, bringing it into line with the figures for use of these sites in rural areas. Our UK report shows that Facebook is the most popular SNS by some distance, and is likely to be responsible for much of the growth found in our research. All major SNS have now been optimised for mobile phones too, and it is likely that this will be an area of future growth, particularly as smartphones become more widespread.

6.19 Recent data for the Ofcom Adult Media Literacy Tracker has recently been published on the Ofcom website [17] . The nation summary for Wales is due to be published in the summer, however this latest data shows that Internet users in Wales estimate that they use the Internet for 12.5 hours per week.

6.20 The latest data also shows the top 5 uses for the Internet in Wales as follows:

Activity	Ever do This
Sending/Receiving e-mails	89%
Finding information for your leisure time including cinema and live music	85%
Finding information for Booking Holidays	82%
Buying and Selling things on-line	80%
Looking at news websites	71%

6.21 The 2011 Communications Market Reports are due to be published in the summer and will include updated figures on broadband take-up and use in Wales.

S ection 7

7 The UK Government’s Broadband Strategy and the Welsh Assembly Government’s priorities  

UK Government

7.1 The UK Government is committed to delivering universal broadband at speeds of 2 Mbps within the lifetime of the current Parliament (i.e. by 2015). It will consider whether to use money available from the underspend of the Digital Switchover Help Scheme to do so where the market has not delivered. These are primarily rural areas, but there is a significant minority of suburban and urban broadband not-spots. Ofcom is providing technical advice to assist with this process.

7.2 The UK Government aims to secure the best superfast broadband in Europe by the end of the current Parliament. It has announced three market-testing projects in rural areas, including one location in Wales: Felindre near Swansea.

7.3 Broadband Delivery UK (BDUK) was created following publication of the final Digital Britain report by the previous UK Government. It was created within the Department for Business, Innovation and Skills (BIS) as a delivery vehicle for the UK Government’s broadband policies. Following machinery-of-government changes, BDUK is now part of the Department for Culture, Media and Sport. It is engaging with a wide range of stakeholders (including the "industry," public-sector bodies, Ofcom, regional bodies and community groups) to: develop the commercial models that will be used for implementing the universal-service commitment; agree the minimum service specification required to achieve the policy objectives of the universal-service commitment; plan the deployment of the superfast-broadband pilots to ensure the maximum information is gained for targeting potential future UK Government intervention; and investigate the detail of reuse of public-sector networks and assets, identify the challenges and develop solutions.

7.4 The UK Government is committed to ensuring BT and other infrastructure providers allow the use of their assets to deliver broadband access. On 15 July 2010, BIS published a discussion paper examining the benefits and problems associated with sharing non-telecommunications utilities infrastructure as a means of facilitating the deployment of broadband networks [18] .

Welsh Assembly Government

7.5 The Welsh Assembly Government’s RIBS project was specifically designed to provide 35 exchange areas of Wales, initially deemed unviable by BT, with first-generation (512 kbps-2 Mbps download, 256-512 kbps upload) broadband services at affordable prices comparable with urban areas of Wales. The RIBS initiative has provided around 8,500 households and businesses with broadband access and played an important role in reducing the digital divide that exists between rural and urban areas of Wales.

7.6 The project has also looked at addressing not-spot areas, and work was carried out in 2009 to broadband-enable the lines serving the West Wales communities of Bronwydd Arms, Cilcennin, Llanpumsaint, Reynalton and Saundersfoot and Gwytherin in North Wales. This allowed more than 1,000 residents and businesses to enjoy access to broadband services for the first time.

7.7 BT/Openreach is continuing to work through the RIBS contract to address some of the other known not-spots in Wales. Last year the Welsh Assembly Government and BT have announced the second phase of the scheme to address not-spots in Beulah and Ystrad Meurig in Ceredigion and Cil-y-Cwm and Llanfynydd in Carmarthenshire.

Economic Renewal Programme

7.8 In July 2010, the Assembly Government, announced a new Economic Renewal Programme that aims to provide every business in Wales with access to next-generation broadband by the middle of 2016.

7.9 The Assembly Government is embarking on a programme to facilitate the deployment of a broadband infrastructure capable of delivering fast and ultra-fast broadband services to 100% of premises across Wales.

7.10 Speeds will vary depending on whether a company is based in an urban (100 Mbps) or rural (30 Mbps) location. The Economic Renewal Programme is also committed to seeing all households in Wales being broadband-enabled with a minimum speed of 30 Mbps by 2020.

7.11 Following the publication of a European procurement advertisement and as part of this procurement process, the Assembly Government would like to understand where private sector investment in next generation networks across Wales has already happened or is planned in the next three years. The Open Market Review, published at the end of March aims to collect information that will help determine where the deployment of next generation broadband networks should be focussed.

7.12 The Assembly Government encourages interested parties to contribute to the open market review process. The consultation closes on 3 May 2011 [19] .

7.13 The Assembly Government has also established a new £2m Broadband Support Scheme that will provide consumers in rural not-spots with a grant of up to £1,000 to enable them to gain access to broadband by approaching service providers directly [20] .

May 2011