Broadband in Wales

Broadband in Wales 

Submission by FibreSpeed and Geo Networks Ltd 

 

Executive Summary       

 

Introduction

1 FibreSpeed and Geo are delivering NGA networks for Wales in partnership with the Welsh Assembly Government. Through our Open Access network, we are enabling retail service providers to invest and develop solutions for businesses and citizens in Wales, thus bridging the digital divide and enhancing the economic competitiveness of North Wales. More detail on the background of Geo and FibreSpeed is included in Appendix A [1] .

2 Within this paper for the Welsh Affairs Select Committee, we provide detail on the FibreSpeed network and its successes and seek to inform your inquiry into Broadband in Wales with comments on your stated areas on interest.

3 We have summarised the key points in our submission:

FibreSpeed in Wales

FibreSpeed is a successful intervention project, operating in North Wales, delivering NGA services today. Its structurally separated, open access model creates maximum competition in the market place, lowers the barrier to entry by allowing operators to engage and compete at the most cost effective level of the network, resulting in competitive prices, greater levels of innovation and more choice for consumers.

FibreSpeed’s current and planned network enables 40% of businesses and population in North Wales access to 30 Mbit/s services through wireless connectivity; with businesses, on or near the Welsh Assembly Government’s strategic business parks, able to receive multi-Gigabit services. FibreSpeed is working with the Welsh Assembly Government over the plans to extend the benefits to an increased % of the businesses and population in North Wales.

Current provision of broadband services in Wales

There is limited competition in the provision of broadband services in much of Wales. Despite previous interventions such as RIBS, there remains a significant number of businesses and premises that cannot receive basic broadband, let alone competition from different retail service providers.

The penetration of alternative broadband service providers, ensuring true competition, is confined to the more densely populated regions of Wales. However, with the support of the Broadband Support Scheme, a number of "not-spot" villages are being connected by FibreSpeed service providers in North Wales, confirming the benefits and success of the model.

Next Generation Access delivery pilot projects

We strongly support the UK Government’s pilots. Within Wales there would be benefit from pilots, due to the diversity of issues that are encountered and the potential for significant variation to solutions between the more deprived post-industrial areas and the mixed economy rural areas

FibreSpeed is an excellent platform from which to pilot solutions as it already delivers a Fibre Core backhaul solution as far as Pwllheli. FibreSpeed and Geo welcomed the announcement by the Chancellor of the funding for a 5th BDUK pilot in Pwllheli and the Lleyn peninsular, during his visit to Wrexham on 10 February 2011, however we now understand that the Welsh Assembly Government do not intend to progress the pilot.

UK Government Strategy alignment to Welsh Assembly priorities

The UK Government and BDUK are adopting a different intervention approach to that compared with the Welsh Assembly Government. In Wales, it is unlikely that BDUK will run trials or regional NGA deployments as the Welsh Assembly Government’s Digital Wales objectives are already advanced and currently in competitive dialogue procedure with potential suppliers.

Digital Inclusion

Next generation networks are only as good as the people who use them and the skills they have to navigate the internet. We believe that the success of any next generation network is reliant on public take up and people’s skills to maximise the benefits.

The disadvantages of being off line both socially and economically are so great that we need to act quickly to close the poverty gap, improve standards of living and give everyone equal opportunities.

Provision of Broadband Infrastructure

It is widely accepted that within Wales the delivery of broadband has been slower than in other parts of the United Kingdom and that if Wales is not to be left behind in the roll-out of NGA networks, then Government intervention will be required in certain areas.

To create a step-change in the capability of networks then increased deployment of Fibre to the Home (FTTH) would be required. A substantial cost reduction can be achieved through the use of existing infrastructure, such as BT ducts and poles. There is currently consultation ongoing with BT, however the current arrangements and pricing of the offer would not be sustainable.

Summary

4 There is a requirement for Government intervention in the deployment of NGA networks if the power of the internet is going to be harnessed for both economic growth and social cohesion. The approach that should be adopted will vary from region to region and should be designed to meet the local circumstances.

5 There is a once in a generation opportunity to invest in the networks, and all infrastructure being deployed should have a long life cycle, such as fibre which should last 40 years, and be reusable. Geo and FibreSpeed strongly support investment in the passive network, consisting of fibre, co-location facilities and mast infrastructure, as a truly open access infrastructure platform that can be reused by multiple service provider for each technology cycle thus ensuring a long term benefit that will not become obsolete within a few years.

FibreSpeed in wales

 

6 The Welsh Assembly Government recognises FibreSpeed as a successful intervention project, a view which is widely shared across the telecommunications industry. FibreSpeed and Geo have been consulted by other regions wishing to replicate its success. Key to our success is the far-sighted open access and structurally separated organisation which was designed and specified during the procurement and is widely accepted as best practice for any NGA intervention project.

7 The open access model creates maximum competition in the market place, lowers the barrier to entry by allowing operators to engage and compete at the most cost effective level of the network, resulting in competitive prices, greater levels of innovation and more choice for consumers. The open access model is consistent with the European Commission’s regulatory Framework and the State Aid Guidelines for investment in NGA networks using public funds and should be a key part of any government funded solution for NGA network deployment.

8 FibreSpeed services were targeted initially at strategic business parks, but with an understanding and intention that by deploying an open access wholesale fibre network, then it would benefit businesses outside of the business parks and improve services for communities, citizens and the public sector.

9 The achievements from FibreSpeed’s initial focus on North Wales strategic business parks are:

Maximising the competitive benefits for businesses and consumers due to the presence of twelve Service Providers contracted in the 2 years since live services commenced.

Helping to drive down the pricing of incumbent providers, which was between three and seven times greater than the most competitive regions of the UK, to a point where it is now no higher.

Increased economic activity as service providers invest and grow their businesses and local businesses expand locally rather than relocate.

10 As the project has "Spread its Wings" beyond the initial focus, as envisaged during the concept phase of the project, a number of further benefits have been realised:

Three service providers are currently rolling out wireless broadband solutions to SME businesses and consumers, including many in "not-spots";

Three projects have now been announced delivering direct connectivity to Ireland with subsea cables to Dublin expected to utilise and benefit from the FibreSpeed network.

11 The numbers of businesses and consumers benefiting are growing by the month, and are currently:

Number of directly connected premises: 41

Forecast number of connected premises by March 2012: 70

Number of businesses receiving services at their business premises on a FibreSpeed connection: over 100.

Number of businesses receiving business services remotely through a FibreSpeed connection: over 1000.

Estimated number of businesses within reach of FibreSpeed’s masts: 9,000, representing circa 40% of all the businesses located in North Wales.

Estimated population covered by FibreSpeed’s masts: 270,000, representing circa 40% of all population living in North Wales.

12 The coverage area, with population mapped to ward centres, from the current FibreSpeed Phase 1 network is shown in Figure 1 below. The areas circled, in Gwynedd and Anglesey, are expected to be covered once final approvals are received for existing plans.

Figure 1 Current FibreSpeed coverage (including in development) in North Wales

13 FibreSpeed is in discussions with the Welsh Assembly Government of how to extend the benefits from FibreSpeed to the wider geographic area in North Wales in order to complete Phase 1 of the envisaged FibreSpeed network. The factors being considered include:

Extension of customer connection footprint

New and extended towers at existing business parks

Additional towers on or near network to enhance coverage

Infrastructure access points for 3rd party infrastructure connection.

Targeted extensions to redevelopment areas to meet wider economic agenda.

Completion of the Network with full resilience for the six North Wales counties

14 The benefits of this network growth plan for North Wales include:

Early mobilisation to deliver services and economics benefits quickly.

Providing access to 30 Mbps to 95% of businesses and residents by the end of 2013.

Ability to maximise use of ERDF funding in final years of programme in Wales.

Enhancing the economic benefit from existing network as service providers grow.

Attracts diverse service providers and private investment in a growing market demand area.

Leverages market innovations over increased coverage area.

15 The potential opportunity from the development under consideration would be to increase the coverage in North Wales to 96% for both business and citizens and attract significant private sector investment to deliver the retail services ensuring that the step change in benefits is extended from the coverage area to a much wider community.

16 The potential coverage area, with population mapped to ward centres, from a complete FibreSpeed Phase 1 network is shown in Figure 2 below:

Figure 2 Potential coverage from the complete FibreSpeed Phase 1 network.

17 In summary, FibreSpeed is a successful government intervention project that is delivering NGA services to businesses and citizens in North Wales today that meet the European Commission’s NGA targets today and the Welsh Assembly Government aspirations for 2016 and 2020, within its coverage area. It is also an exemplar of Government intervention that should be replicated for future NGA interventions.

18 Generally, intervention through networks, where retail service provision and wholesale operations are structurally separated, and service providers have open access to the passive (fibre, masts and co-location) elements of the network will support the expansion of competition in retail services in Wales and ensure that Wales can be an exemplar of both ICT services and Government intervention.

19 Within this paper and the attachments, we have set-out some of the key issues that should inform your inquiry into Broadband in Wales and be considered in any Government intervention in NGA.

Inquiry areas of interest

 

Current provision of broadband services in wales

   

20 It is widely recognised that there is limited competition in the provision of broadband services in much of Wales and that despite intervention of the Welsh Assembly Government, through BT and the Regional Innovative Broadband Support (RIBS) project, there remains a significant number of businesses and premises that cannot receive basic broadband, let alone competition from different retail service providers.

21 The penetration of alternative broadband service providers, ensuring true competition through Local Loop Unbundling, and retail business service providers is confined to the more densely populated regions of Wales. In North Wales, this is predominantly restricted to the Flintshire and Wrexham, due to the close proximity to England.

22 Through FibreSpeed and the support of the recently introduced the Broadband Support Scheme, a number of "not-spot" villages are being connected and services are being delivered via at least 3 different FibreSpeed service providers. It is envisaged that more communities will be connected over the coming months as the solutions are designed and approved through the scheme and the service providers continue to invest in the network.

23 FibreSpeed’s retail service providers were not active in the connectivity market in Wales, prior to the availability of FibreSpeed. A recent press release by one service provider indicated that they were investing £450k in their network deployment and combined with estimates of other service provider investments that aggregate to a similar sum, demonstrates the investment attracted and that the level of services will continue to improve following the FibreSpeed intervention.

UK Government’s Broadband strategy

24 The UK Government’s broadband strategy is to introduce new Universal Service Commitment (USC) of 2Mbps across the UK by 2015. The UK Government has set up Broadband Delivery UK (BDUK) to procure from the market the appropriate services to deliver USC to the currently underserved areas of the UK.

25 The ambitions of BDUK and Digital Wales share three common challenges in relation to universal broadband access:

Widespread geographical coverage;

High quality or bandwidth;

Affordability.

26 The Welsh Assembly Government’s existing actions to address the availability of basic broadband services include the Regional Innovative Broadband Support (RIBS) scheme which has been supplemented by the introduction of an infill Broadband Support grant scheme. The Welsh Assembly Government’s stated aim is to achieve near universal access to a basic level of broadband throughout Wales by the time that a new UK Government wide universal service commitment for broadband is introduced, while they progress with the next phase procurement through Digital Wales. An issue with this approach is that a number of businesses and residents continue to have no or poor quality access to broadband services.

27 The primary objective of BDUK is to deliver USC to the rural and remote areas of the UK. BDUK believe that intervention, on a regional basis, is necessary to deliver USC to underserved areas. They await proposals from the market on how to deliver this, but it is unlikely that an infill grant scheme will be part of the intervention strategy or deal structure with suppliers as it cannot guarantee broadband services to those that need it most.

28 Although, BDUK clearly distinguish between USC and NGA delivery, they are seeking solutions from the market that deliver a day 1 solution to USC with a migration path that climbs to NGA over time. BDUK’s regional approach to intervention to deliver USC and future NGA solutions contrasts significantly with the Welsh Assembly Government’s ambitions to deliver NGA on a pan-Wales basis. This is the key difference between the two broadband strategies. The advantages and disadvantages of these contrasting approaches are detailed in Section 3.3 of this response.

Next Generation Access delivery Pilot projects

29 We have set-out above the success of FibreSpeed and strongly support this approach in underpinning NGA networks, however there have also been other projects in the UK and abroad, on varying scales such as "Cyber Moor" at Alston Moor in Cumbria and the Fibre to the Home (FTTH) network deployed in Nuenen, in the Netherlands, from which Reggefiber has grown to deliver FTTH networks in 40 towns across the Netherlands; these have shown differing approaches and how private and public sector can cooperate in tackling the delivery of the NGA networks.

30 We strongly support the UK Government’s pilots, as we believe that there are lessons that can be learnt which would then be applied across the UK, in particular as the contracting bodies will have limited experience of the business and dynamics of intervention in this market.

31 The dynamics and costs of intervention needed vary dependent on a number of factors, in particular geography and population density, and these will only be fully understood through the pilots and the resolution of permitting access to BT Ducts and Poles, through "Physical Infrastructure Access" (PIA), which we address later.

32 Adopting a regional approach to intervention after the assessment of the pilot projects, would seem a logical approach to ensure best value for money, innovation in solutions and risk management. It is important to strike a balance between driving economies of scale and supporting innovation and bespoke solutions for unique local circumstances.

33 Within Wales we believe there would be benefit from pilots, due to the diversity of issues that are encountered and the potential for significant variation to solutions between the more deprived post-industrial areas and the mixed economy rural areas. However, the Assembly Government have adopted a Pan-Wales approach, which may favour larger operators due to complexity and size of the solution. While potentially reducing the total level of intervention, it potentially risks excluding the last 5 – 10% of the population from the solution.

34 In summary, addressing the problem of poor Broadband in Wales will not be achieved through one size fits all approach and the pilots are mechanisms for sourcing the most cost effective solution for each area. The key areas for focusing intervention are the rural areas where there is a clear lack of market presence and competition to deliver broadband services, which restricts the services offered and makes those services offered more expensive for the end user.

35 FibreSpeed is an excellent platform from which to pilot solutions as it already delivers the Fibre Core backhaul solution as far as Pwllheli. FibreSpeed and Geo welcomed the announcement by the Chancellor of the funding for a 5th BDUK pilot in Pwllheli and the Lleyn peninsular, during his visit to Wrexham on 10 February 2011, however we now understand that the Welsh Assembly Government do not intend to progress the pilot but intend to use the funding within its wider Digital Wales procurement, which we believe would be a missed opportunity to test the solutions and accelerate the roll-out to a key region of Wales.

36 Geo responded to the BD UK USC Theoretical Exercise in June 2010. An extract is included at Appendix B [1] that describes an open access hybrid fibre and wireless broadband solution for remote areas to address market failure and provide a step change in service delivery for the consumer. Geo is engaged with the UK pilots and will be bidding to deliver some of them.

UK Govt Strategy alignment to Welsh Assembly priorities

37 The UK Government and BDUK are adopting a different intervention approach to that compared with the Welsh Assembly Government. In Wales, and we understand that BDUK will not run trials or regional NGA deployments, as the Welsh Assembly Government’s Digital Wales objectives are already advanced and currently in competitive dialogue procedure with potential suppliers.

38 The UK Government did announce, as part of the Spending Review, a £10m investment in Pwllheli, North Wales, in late 2010. However, no NGA trial has been announced in Pwllheli, which would indicate that this public investment will contribute to the Welsh Assembly Government’s wider pan-Wales Digital Wales procurement process.

39 As a result, BDUK may not directly influence the Welsh Assembly Government’s approach and instead any money made available by UK Government for public investment in NGA in Wales, is likely to be combined with its other funding sources to deliver a pan-Wales solution. However, overall the delivery of better broadband to non-competitive areas remains a consistent theme.

Digital Inclusion

40 We responded to a Welsh Assembly Government consultation on Digital Inclusion and attach the response for your consideration [1] .

41 In summary, Next Generation Networks are only as good as the people who use them and the skills they have to navigate the internet. We believe that the success of any next generation network is reliant on public take up and people’s skills to maximise the benefits.

42 Internet and ICT skills bring countless benefits including consumer benefits, education benefits, employment benefits and overall improved community and Government benefits. Notwithstanding this, over 10 million adults in the UK have never used the internet. [2] Statistics show that use of the web decreases with age and increases with income. The links between social disadvantage and internet take up are strong and it is estimated that around four million of the non-users are among the socially disadvantaged people in the UK, of whom 39% are over 65, 38% are unemployed and 19% are adults in families with children. [3]

43 The advantages of being online are countless from both a social and economic basis, people have greater choice of goods and services, transactions and communications happen instantaneously saving people time and money. The internet creates countless efficiency in all areas of life from home working to online shopping, access to friends family and daily news. Further the sheer volume of resources available to someone who is online compared to someone who is not is vast. The disadvantages of being off line both socially and economically are so great that we need to act quickly to close the poverty gap, improve standards of living and give everyone equal opportunities.  

Provision of broadband infrastructure

44 It is widely accepted that within Wales the delivery of broadband has been slower than other parts of the United Kingdom and that if Wales is not to be left behind in the roll-out of NGA networks, then Government intervention will be required in certain areas.

45 As previously highlighted, the FibreSpeed project is already delivering benefits to communities in North Wales. FibreSpeed has seen improving coverage of rural North Wales through the deployment of wireless solutions with 2 service providers: AB Internet and exwavia, providing residential and SME solutions starting from £19.99 a month to slow and Not Spots, with services at 30 Mbit/s available and operational. One Flintshire hotel that now has a 30 Mbit/s through AAB Internet and FibreSpeed, reported in the press that it had lost a corporate contract worth £70,000 in 2010 due to non-availability of broadband.

46 The deployment of these networks is being funded by private investors, however they are also receiving some funding through the Welsh Assembly Government’s Broadband Support Grants, which is enabling faster roll-out and a greater mix of solutions. The use of grants focused on end-user businesses and citizens is an effective way of targeting funding to the area of highest need and for developing innovative solutions that address local circumstances.

Market Review

47 Under the Welsh Assembly Government’s Digital Wales procurement, they are conducting a Market review as required by EC guidelines. Geo has responded and we attach a copy of the response for your information [1] .

Regulatory Remedies – Physical Infrastructure Access

48 To create a step-change in the capability of networks then increased deployment of Fibre to the Home (FTTH) would be required. A substantial cost reduction can be achieved through the use of existing infrastructure and the industry has lobbied for access to the BT pole and duct infrastructure. There is consultation and negotiations ongoing with regard to the Physical Infrastructure Access (PIA) product that has been offered by BT, which will permit access to BT ducts and poles.

49 However, the industry believes that the current arrangements and pricing of the offer will not achieve the aims, in particular the following key issues need to be addressed:

Initial pricing is not reflective of the cost to BT and does not make the product commercially viable.

Restrictions on use for leased lines to businesses substantially reduces the services available and investment return.

Restrictions on use for Fixed or Wireless backhaul substantially reduces the services available and investment return.

50 Until a viable PIA product is agreed and available, there is likely to be slow progress on the roll-out of new NGA networks. From the experience of the introduction of Local Loop Unbundling products, which took 2 years to develop, thus early conclusion of the current negotiations is unlikely and it is likely that OFCOM will be required to formally regulate. Delays to the agreements on PIA may impact the success and benefits of the BDUK pilots.

Improving Mobile Broadband coverage

51 We have set-out some of the issues relating to Mobile broadband Appendix B [1] , relating to the Pilot projects. Further to this information, consideration also needs to be given to addressing the following issues:

Provision of the additional spectrum following digital switch over at affordable pricing for rural areas.

Removal of the exclusion of backhaul from wireless and mobile masts in the use of the BT PIA product.

52 Addressing these issues, in conjunction with tackling the wider broadband coverage should provide a platform for mobile operators to increase coverage, although we are not well placed to discuss their investment decision making criteria.


[1] Tihs is not published on the Committee website.

[1] This information is not published on the Committee website.

[1] This information is not published on the Committee website.

[2] http://raceonline2012.org/sites/default/files/resources/manifesto_for_a_networked_nation_-_race_online_2012.pdf Page 17

[3] Ibid page 19

[1] This information is not published on the Committee website.

[1] This information is not published on the Committee website.

Prepared 29th June 2011