Broadband and the road to 5G Contents

5Delivering gigabit connectivity at pace

79.There was a consistent message from the industry that the Government could be doing more to lower the costs and remove the barriers to speed up the roll-out of gigabit-capable infrastructure. The CBI told us:

This includes speeding up procurement timelines for the £5bn Outside-in programme so hard-to-reach areas aren’t left behind, ensuring Ofcom’s regulatory reform improves the business case for investors, reforming business rates, and eliminating on-the-ground challenges like land access and planning that slow the build.186

Procurement for the gigabit programme

80.One year on from the Government’s manifesto commitments on digital infrastructure, the procurement for the programme to deliver the outside-in strategy is still being finalised by the Building Digital UK (BDUK) team within DCMS. The Broadband Stakeholder Group told us that “the architecture of the ‘outside in’ procurement programme will be the determinant of whether the public funding intervention accelerates or hinders deployment”.187 It told us that DCMS needed to deliver:

Rapid resolution of the procurement process and state aid clearances enabling the bid process to commence well before the end of 2020, with majority of bid areas identified and all contracts awarded in the first quarter of 2021.188

However, it is not expected that the first contracts will be let until autumn 2021, assuming that there are no delays to securing state aid approval or otherwise finalising the procurement.189

81.Uncertainty about which areas will be subject to subsidy is holding commercial deployment back and slowing down roll-out, as infrastructure providers are reluctant to begin delivering to areas that might later be eligible for subsidy.190 Malcolm Corbett from INCA told us that uncertainty is holding up private investment and said “given that time is marching on, we need to get a better understanding pretty quickly”.191 It is also affecting consumers: Which? calls for the Government to “provide clarity to consumers in those hard-to-reach parts of the UK when they can expect to be connected with gigabit connectivity, so they can make an informed choice about whether to take a USO connection” at a cost.192 The Minister for Digital Infrastructure confirmed that he wants to get more information “out this year” and “publish more of it in detail in the coming months of the new year” to provide the clarity industry needs to plan.193 However he also stressed that the procurement’s design must be got right to deliver value for money and the programme’s objectives.194

Challenges for the design of the programme

Identifying eligible premises

82.Addressing that balance comes down to the design of the programme. The first challenge is determining which premises should attract subsidy. It is clear that public money should be spent only in areas that will not otherwise be served by commercial roll-out. Yet previous interventions indicate this is easier said than done. Dr Paolo Gerli and Professor Jason Whalley told us that the superfast broadband programme “did not necessarily invest in those areas most in need of public interventions” because “BT used public subsidies in areas that they would have covered anyway with their own funding”.195 The Minister told us that “identifying the hardest areas is not the difficult bit” because of data held by organisations such as Ofcom.196 However, the NAO observed that it is becoming more difficult to identify which premises are already covered by gigabit-capable broadband, or which suppliers plan to cover without subsidy, “as the number of suppliers increases and because there is no single map or database of current and planned broadband installations”.197 The NAO stated that DCMS “recognises data as a potential risk but is still planning how to address it”.198

83.CityFibre recognised the “sound policy reasons” for the Government’s outside-in approach; however, it also told us that the roll-out of gigabit-capable broadband was “likely to encounter not just a ‘rural’ problem, but a ‘small towns’ problem: significant numbers of premises will be uneconomic for commercial deployment, but not ‘rural’ enough for Outside-in funding”.199 This is echoed by techUK, which told us that “not all areas with poor connectivity can be found in rural areas. Many town centres, high streets and business parks also suffer from poor connectivity and we must ensure that they are picked up in the next rounds of deployment as well”.200 To address this problem, CityFibre recommended that some of the Government’s £5 billion be allocated to what it termed “an ‘Inside-Out’ approach”, aimed at extending commercial deployment into small towns and the edges of urban areas.201 This would also have the effect, it told us, of enabling it to bid for contracts under the gigabit programme because the subsidised build would be in addition to its commercial roll-out plans rather than competing with them. The Minister agreed that these semi-urban areas “are some of the most challenging places” to serve with gigabit-capable broadband and therefore “will be in our state intervention because there is not currently a sufficient commercial appetite to get it all done”.202

Prioritising those most in need

84.Having determined which premises will attract subsidy, DCMS must also determine which of the hardest-to-reach properties it will prioritise. Andrew Glover from ISPA told us there is a need to ensure “that the Government intervention is focused not necessarily on the broad 20% but on the final 5% first and then extend it to 10%”. Otherwise, he identified a danger that if the Government support for the final 20% “starts to impact at the 80% level” it will ultimately still leave out the very hardest 5%.203 He recommended that the Government therefore focuses subsidy “on the bits that we absolutely know are going to be uneconomic, and then expand it back from there.” In turn this will make more properties commercially viable for industry as:

if you start from there and work backwards, you hit industry coming the other way and, by definition, once they start going to those really hard bits, they will find other bits that all of a sudden make economic sense because they are doing them or going past them and near them anyway.204

85.When asked whether the outside-in approach will start from the 99th percentile as ISPA recommended or the relatively easier 80th percentile, the Minister told us that “the provision of better digital access is a fundamental part of the Government’s levelling-up agenda” and therefore while “there is a really important balance” to be struck, he is focused on “people who do not have decent broadband”. He therefore confirmed that the initial phase of the outside-in programme would deliver gigabit broadband to those “who have the least connectivity” at present.205

Specifying the optimal contract size

86.Designing the procurement means determining not just which areas will be covered by subsidy and when, but how many premises providers will be expected to supply under each contract. This will determine how many different providers are able to compete for, and secure, contracts to deliver gigabit-capable infrastructure. Yet different providers had different views on the optimal lot size. INCA told us it is important that DCMS got “the balance right between lot sizes and the overall number of procurements” and:

In general, large providers like Openreach prefer a small number of larger procurements. Smaller, more regional operators prefer lot sizes that best meet their local footprint and will prefer to bid on a number of smaller lots.206

87.The Minister told us that the success of the procurement would be measured by the number of providers who were able to bid successfully for contracts and therefore “the single most important factor is getting the lot size […] right in the right place”.207 Openreach agreed that it was “important that this funding is attractive for operators of all size—as a project of this size and complexity cannot be delivered by a single operator”.208 This is a direct learning from the first phase of the superfast programme, which saw “limited competition in the infrastructure market” because BT was the only provider to bid for and win contracts, which in turn “limited the ability of public authorities to effectively control the cost of BDUK-funded deployments, thereby compromising the value-for-money of the programme”.209 Indeed, INCA told us that “failing to identify the appropriate lot sizes would risk repeating the mistakes that were made with the BDUK superfast programme and would seriously undermine competition in the market”.210

88.Getting the design of the gigabit programme right is absolutely essential, especially as its budget for the next four years will be only 25% of what was expected. Some parts of the country will still get left behind when it comes to the roll-out of gigabit-capable broadband, the consequences of which have been magnified during the COVID-19 outbreak. Ensuring people can work remotely, wherever they live, will spread the economic benefits of digital connectivity to the whole country.

89.The Government should outline in its response to this Report, if not before, what the Spending Review and 85% target mean for its ‘outside-in’ ambition and its strategy for delivering to those semi-urban areas unlikely to benefit from commercial roll-out. Given the centrality of the principle of levelling-up to the Government and its National Infrastructure Strategy, we recommend it continues to prioritise those with worst connectivity.

Clarifying the role for local authorities

90.During the superfast programme, DCMS allocated grant funding to local bodies, which then secured additional funding and procured the suppliers to build and operate superfast broadband networks. In contrast, the gigabit programme will be managed centrally. The Local Government Association told us of “a concern amongst councils as to the potential risks of centralising the roll-out of publicly funded gigabit broadband, especially when set against the success of the councils roll-out of the superfast broadband programme”.211 Similarly, Malcolm Corbett from INCA told us that “if local authorities are not involved, it would be missing a really big trick. They need to be engaged, but at the moment it is not clear how”.212 The Minister told us that “the scale of these kinds of contracts and the complexity of doing that means that a central model will deliver a faster rollout than that local model”; however, he acknowledged that the expertise local authorities “have built up over the superfast programme is really important, and we of course are not going to lose that”.213

91.The gigabit programme will place considerable demand on local authorities, and the Black Country Local Enterprise Partnership called for the Government to help to “mitigate the one-off surge in capacity required of council services such as highways teams, when rolling out full-fibre”.214 Dr Paolo Gerli and Professor Jason Whalley told us that “local authorities must be equipped with adequate human and financial resources to oversee” the roll-out of gigabit-capable technologies.215 The Minister told us that he would like to see local digital champions but there is a need to ensure the Government gets “the maximum possible value” from such initiatives.216

92.The roll-out of gigabit-capable networks will put considerable strain on local authorities, which are already facing considerable pressures on their budgets. The Government must retain the expertise gained through the superfast programme and ensure local authorities are resourced sufficiently to support the roll-out of gigabit-capable connectivity at pace.

Embedding a technology-neutral approach

93.If it is to reflect the Government’s technology-agnostic approach, the gigabit programme will require joined-up policy making for both fixed and mobile telecoms. Given the potential overlap between the goals of the programme and the Shared Rural Network, for example, Dr Greig Paul from the University of Strathclyde told us “broadband and mobile connectivity should benefit from the same underlying infrastructure investments, as part of a single network” and Government “should deploy connectivity in a unified and coherent manner, rather than as a series of disconnected projects”.217 The Minister told us that within DCMS these teams are working “more closely than ever before”, and that he is “constantly pushing” for the Department “to think in those agnostic terms”.218

94.Fibre connectivity is an essential component of 5G networks, as it provides the backhaul connectivity that links mobile base stations, such as masts, to the core network. Mobile network operator Vodafone told us that “affordable and available fibre is crucial to the success of 5G” and therefore “Government needs to ensure that the conditions attached to the receipt of the £5bn public funding support fibre for mobile backhaul and business”.219 Similarly, techUK told us that “rural planning (in non-competitive areas) must include fibre planning for both fixed and 5G services, with an approach that maximizes the utilisation of deployed fibre assets”.220 Vodafone recommends that “any publicly funded fibre network grants unrestricted access to dark fibre for mobile backhaul, while also ensuring access to ducts and poles”.221 However, it also identifies that full-fibre networks for consumer broadband and for 5G are likely to be built in different places.222 The Minister told us that he is alive to the fact that in areas where wireless solutions are “part of pushing the network as far as it can go then there is no point in building a mast if there is not connectivity to that mast” and that DCMS is thinking about how best to “use wireless networks to stretch the fibre spine as far as it can go”.223

95.We are not convinced that the technology-agnostic approach to delivering gigabit-capable broadband extends much beyond ministerial pronouncements. The Government needs to take a more joined-up approach to fixed and mobile telecoms policy, especially when it comes to interventions for the hardest-to-reach properties. In its response to this Report, if not before, DCMS should clearly outline what technology-neutrality will mean in the gigabit programme and how it will be delivered.

Creating the right competitive and regulatory environment

96.The Government and industry broadly agree that “the most effective way to deliver nationwide gigabit-capable connectivity at pace is to promote competition and commercial investment where possible”.224 DCMS’s Statement of Strategic Priorities (SSP) sets out that Ofcom has a key role in promoting competition by “supporting market entry and expansion by alternative network operators through effective access to Openreach’s ducts and poles”, providing “stable and long-term regulation that incentivises network investment and ensures fair and effective competition between new and existing network operators” and overseeing “a switchover process to enable consumer migration to gigabit-capable services”.225 Ofcom is required to take the SSP into account as it exercises its regulatory function. Following a consultation on its Wholesale Fixed Telecoms Market Review 2021–26 (WFTMR), the regulator is expected to confirm how it will promote competition and investment in full-fibre networks through its regulatory framework for the fixed broadband market by spring 2021.226

97.Yet evidence submitted to this inquiry questions Ofcom’s track record in creating a regulatory environment favourable to competition and highlights areas where Government and Ofcom might be better aligned. ISPA’s Andrew Glover told us that although:

DCMS is becoming much clearer in what it is trying to achieve and what its overall objective is, Ofcom is lagging behind in terms of how it implements that, and there is still some discrepancy because what the two parties are trying to achieve. Ofcom is still trying to catch up from a regulatory framework that is all about giving consumers maximum choice and driving down price. Now, of course, the focus is changing to maintaining that while still trying to achieve this 100% target for gigabit-capability. There is still that discrepancy between the two, and that is what needs to get resolved.227

Furthermore, CityFibre has told us that “Ofcom will need to referee the market more rigorously than it has to date” but expressed concern that prioritising this aspect of its role will become “increasingly difficult as Ofcom’s overall remit expands to cover online harms”, as the Government is expected to announce in its forthcoming online harms legislation.228

Duct and Pole Access

98.DCMS recognises that “civil works and, in particular installing new ducts and poles, comprises around 70% of the cost of deploying full-fibre networks”.229 When rolling out infrastructure, providers can therefore use existing ducts and poles to bring down the costs and disruption of roll-out. As the incumbent, Openreach is obliged to make its passive infrastructure available to other providers to this end. DCMS told us:

Ofcom has improved the process by which alternative operators access Openreach’s national network of underground ducts and telegraph poles to deploy their own fibre networks. Government regards this as a key enabler of competitive network deployment and is monitoring this closely.230

99.However, Openreach’s competitors question how effectively Ofcom is enforcing these obligations around duct and pole access (DPA). For example, INCA told us that

the Openreach offering is cumbersome and difficult to access and Ofcom has so far resisted calls to review the obligations and ensure that alternative networks are provided with competitive access to Openreach ducts, masts and poles. Given that a working system around infrastructure access is a key cornerstone of both Ofcom and Government’s policy approach, we urge the Committee to investigate this further.231

Similarly, CityFibre told us that because “Openreach is motivated to frustrate the development of DPA, which would otherwise lead to a loss of market share […] it is now time to consider more radical interventions”, which it thinks could include “forcing Openreach to consume DPA on a strictly equivalent basis as its competitors” or “the separation of Openreach’s ducts and poles into a functionally separated business unit”.232 It concludes “regardless of the solution, it’s now time for Ofcom, encouraged by Government, to make resolution of the DPA impasse a strategic priority”.233

Regulation that incentivises investment

100.In the WFTMR, Ofcom proposes taking “different approaches to regulating Openreach’s residential broadband products in different parts of the UK [… ] depending on the level of current or prospective competition in a given area”.234 It splits the UK into three areas:

This is intended to remove regulation of Openreach in light of anticipated infrastructure competition, incentivise investment in full-fibre and ensure that lower regulated prices for slower broadband services do not discourage consumers from moving to unregulated full-fibre services.235

101.Yet there is uncertainty about how this approach will interact with the Government’s outside-in programme. GreySky Consulting told us:

Alignment and cooperation between UK government stakeholders (DCMS, Ofcom, local authorities) appears poor. The DCMS development of the outside in programme appears likely to be undermined by Ofcom interventions in Area 3. Even the definition of the Final 20% and Area 3 appear to have been undertaken independently—leading to confusion and poor coordination of remedies.236

For example, fibre providers say that, as things stand, Ofcom’s proposals mean “BT will effectively get to ‘double dip’. It can bid for BDUK money, but, if it doesn’t win, it can then overbuild and undercut whoever does win”.237 TalkTalk is also concerned that Ofcom’s plans for Area 3 “could see consumers pay higher prices in areas where Openreach will never roll-out a new network, or on the flip side could see Openreach receive a double subsidy from both the Government and from its increased regulated prices”.238

102.Ofcom’s CEO told us that determining which areas will fall into each category “is a little bit like piecing together a jigsaw puzzle […] but hopefully things will start to become clearer over the next few months.239 The Minister told us that if Ofcom gets its regulatory framework wrong, there is a risk that the Government will either waste public money or leave people with a sub-standard service. He told us that “Ofcom is rightly independent. […] But we do need to work with Ofcom to make sure that its interpretation of what is a commercial area is the same as the commercial world’s”.240

103.Smaller fibre network providers also feel as though they have been overlooked by Ofcom’s designation of Area 3, where no competition between fibre networks is expected. Truespeed Communications, which operates fibre networks in the south west, told us the review shows that “Ofcom is fundamentally hostile to the independent sector”.241 INCA explained that this is because:

Ofcom’s view, despite the recent investment commitments from alternative networks, is that there will be no serious competition to BT/Openreach in this final Area 3, and that an independent network would not be capable of achieving ubiquitously roll-out in these areas. INCA’s members strongly challenge this view given the £6.6bn cumulative investment committed to the independent sector for the period to 2025.242

Malcolm Corbett told us that Ofcom “is reluctant to work out or gather the evidence on who is building networks in areas that it thinks are not competitive. Given that a whole swathe of INCA’s members are focusing on […] trying to deliver new fibre networks in rural areas, it seems Ofcom is missing a bit of a trick there”.243 Even BT Group, with different commercial interests, told us that “telecoms markets are much more competitive than Ofcom has reflected in the WFTMR”.244

Potential for co-investment

104.In some European countries with considerably larger full-fibre networks, co-investment between commercial operators has been used to deliver infrastructure to non-competitive areas. In France, for example, internet service providers pay upfront when a wholesale infrastructure network is being built and then receive significant discounts on using that network over time..245 CityFibre observes that co-investment “could be a solution where deployment is viable for a single full-fibre network but cannot support two competing full-fibre networks, meaning that operators hold off from deployment for fear that overbuilding by a rival will fatally undermine the investment case”.246

105.In the SSP, the Government stated that it was “important that firms are able to agree appropriate commercial deals that share the risks and gains from network deployment to support investment. There should be flexibility for firms to develop new approaches to reduce deployment costs and manage risks through commercial risk sharing and co-investment arrangements”. The Government then asked Ofcom to step in, stating that “although these will be commercial decisions for operators, the Government expects Ofcom to play a role in facilitating such arrangements where appropriate”.247

106.BT Group told us that “commercial deals and partnerships that share the risks and gains of network investment are being struck (or negotiated) widely”.248 However, CityFibre told us that “industry is wary of engaging in meaningful discussions for fear of inadvertently breaching competition law” and that it is not aware of Ofcom having “taken any steps to facilitate co-investment in the UK”. It therefore called on the Government “to use its convening power to create a ‘safe harbour’ for legitimate discussions between operators and regulators in the fixed market”.249

Switching off the copper network

107.Before Openreach is able to retire its copper network, consumers will need to be migrated, voluntarily or otherwise, onto gigabit-capable networks. This copper switch-off will also be important for generating customer demand for faster broadband. Ofcom states that “protecting customers during this phased transition will be essential” and proposes removing “regulation on Openreach’s copper products in an exchange area when fibre is built there”, and transferring that regulation from copper to fibre services so that Openreach does “not have to incur unnecessary costs in running two parallel networks”.250

108.Yet CityFibre told us that Ofcom’s proposed approach seems entirely focused on “the migration of consumers from Openreach’s copper to Openreach’s fibre” and does not consider:

how the migration will take place in areas where—in line with its own strategy for competition—Openreach has not deployed fibre networks but competitors have (which could constitute millions of properties) or where Openreach’s fibre will be competing directly with fibre from an alternative provider.251

It therefore called for Ofcom and the Government to develop a “competitor neutral copper switch-off strategy”.252 TalkTalk also questioned Ofcom’s plans to protect consumers, especially those who “will not voluntarily migrate” and for whom even an entry-level gigabit-capable service “could represent a significant price increase […] compared to the price they pay for a copper line”. TalkTalk recommended that “Ofcom should be clear about how it intends to protect customer interests by setting out the principles which should underpin any switchover process”.253

109.We are concerned that Ofcom has significant catching up to do for its regulatory regime to deliver the Government’s goals and protect consumers. The regulatory framework proposed in the Wholesale Fixed Telecoms Market Review has the potential to undermine the Government’s £5 billion subsidy for hard-to-reach areas and does not accurately reflect the competitive landscape for fixed telecoms. Consideration will also have to be given to the potential impact of the Government’s new target and spending plans. We expect Ofcom to address these issues in its final statement on the Wholesale Fixed Telecoms Market Review 2021–26 and to write to us explicitly outlining how it has done so.

Legislating to remove barriers to roll-out

110.In 2017, DCMS launched a ‘Barrier Busting Taskforce’ to find legislative and non-legislative solutions to making infrastructure deployment as cheap, quick and easy as possible. Although the Minister was unable to quantify what barriers it had identified or how many had been “busted”, he told us that “we have already done some, we have already started to lay out our thinking on others, and we will go as fast as we can”.254 He explained that this included consulting on reforms to the Electronic Communications Code, which sets out the relationship between operators and landowners, “before Christmas”.255

111.Yet the pace of action has been criticised, with Three telling us that there were “still too often delays of months and years bringing legislation or regulation forward” and that this was “catastrophic in a sector which is characterised by fast-moving technical changes”. For example, Three argued it was “telling” that DCMS and the Ministry of Housing, Communities and Local Government took eight months to respond to their joint consultation on permitted development rights for mobile infrastructure, leading to calls for “a more effective way of handling and scrutinising such joint decision-making processes, to ensure that reforms can still be brought forward in a timely manner”.256 TechUK also endorsed a “cross-Whitehall approach” that prioritised infrastructure roll-out “over other public policy targets during this build phase”.257

Unresponsive landlords and new build properties

112.The costs, delays and difficulty of obtaining wayleaves (a right of way granted by a landowner) have long been cited as a barrier to the roll-out of telecoms infrastructure. In the FTIR, the Government expressed an aim “to bring telecoms operators in line with the gas, energy and water sectors by providing a ‘right to entry’, where a landlord is given notification of an operator’s intention to access a property, with a magistrate providing the warrant to entry”.258 CityFibre suggested that the importance of digital connectivity during the COVID-19 outbreak and the difficulty in gaining access to premises inhabited by vulnerable people made the case for “granting enhanced wayleave rights to fibre builders to these types of premises for a time limited period up to 2025”.259

113.DCMS stated that the Telecommunications Infrastructure (Leasehold Property) Bill, which is awaiting Third Reading in the Lords, was intended to “make it easier for network builders to access blocks of flats where a landlord repeatedly fails to respond to requests for access”.260 However, ISPA told us that the Bill does not sufficiently address all the challenges around wayleaves and “is therefore considerably diluted from the original policy ambition set out” in the FTIR.261 For example:

Whilst the Bill seeks to address a very specific scenario where unresponsive landlords can cause undue delay to connections, it does not tackle many of the issues around wayleaves more generally, which will continue to pose barriers to the deployment of gigabit-capable infrastructure.262

Those issues include “where landlords are responsive but uncooperative and refuse access” and “situations where an unresponsive landlord impedes wider network roll-out rather than specific connection to a tenant”. Gigaclear argued that the latter issue, “where network operators seek to cross land not to serve a tenant, but properties beyond that specific plot of land”, was more pressing and yet more contentious than the problem of unresponsive landlords.263

114.The Minister told us that he “would never suggest that we have solved 100% of every single problem in this particular regard, but we have made a very significant dent in it”. Regarding third-party land, he said “we will need to watch and see when the Telecommunications Infrastructure (Leasehold Property) Bill comes into force whether there is a gap that will need to be addressed and the extent to which it does need to be addressed”.264 On the FTIR’s ambition for a right of entry, the Minister said that “broadband is different from water or electricity” in terms of the need for emergency access and therefore requires “a bespoke approach”.265 When pushed on whether the Government was prepared to take the steps necessary to meet the 2025 target, the Minister responded that the ambition could not “be used as an excuse to trample all over property rights that we have established over hundreds and hundreds of years”.266

115.The Government also intends to amend the Building Regulations 2010 to require all new build developments to have the physical infrastructure to support gigabit-capable connections, and to create a requirement on housing developers to work with network operators so that gigabit broadband is installed in new build developments, up to a cost cap.267 While Gigaclear says “DCMS have made significant improvements” through the development of this legislation,268 business campaign group London First told us that

according to the Government’s own figures, 81.4% of new homes already had full-fibre access built in at the design stage in 2019, meaning that mandating full-fibre for new builds would only have delivered full-fibre to just over an additional 32,000 homes in 2019. This legislation will therefore only have a marginal impact in speeding up full-fibre roll-out.269

116.When the cost of connecting a new build to gigabit-capable broadband exceeds the cost cap (set at £2,000 for developers and between £500-£1,400 for broadband providers), the building will be connected to the next best available broadband speed, such as superfast. However, with Cumbria County Council observing that the cap “will be breached in many rural areas”,270 the Local Government Association called this policy “short sighted” and recommended that the Government considers:

how public funding set aside for the gigabit roll-out programme could be used to ‘top up’ new build connection funding, in partnership with councils, to ensure all new builds are provided with gigabit connections as standard. This would provide much better value than creating new housing stock that will very quickly need to be retrofitted.271

117.Malcolm Corbett from INCA told the Committee that to strengthen the proposals:

It is important to ensure that all new builds get fibre connectivity and have the ability to ensure that that fibre can be delivered by different companies, rather than just expecting BT and Openreach to do the whole job. We think it is important to ensure that there is, first, guaranteed connectivity, irrespective of the number of premises involved in that development, and that it is not just seen as being a monopoly for Openreach to deliver it.272

Yet in its response to the consultation on the plans, the Government stated that although it wanted to “encourage competition and choice, we would not introduce a policy that removes the ability of vertically integrated network operators to deploy their networks to new builds”.273 Instead, it would “seek to mandate that every new build must have the physical infrastructure to support gigabit-capable infrastructure from multiple network operators at the same location”.274

118.Judging by the legislative measures to date, the scale of the Government’s efforts to tackle the most serious barriers to roll-out does not match the scale of its ambition for gigabit connectivity. Despite the challenges of the 2025 target, the Government intends to “wait and see” about complex problems such as third-party access instead of addressing them as a matter of priority. We recommend that the Government reforms the wayleave regime for telecommunications infrastructure in the next Parliamentary session to address unresponsive and/or uncooperative landlords in urban and rural settings, including third-party land.

Ensuring an adequate labour supply

119.We have heard concerns that the UK does not have a sufficient domestic labour supply for the roll-out of nationwide full-fibre and that changes to immigration law will limit the supply of skilled engineers from the EU at the exact point that the pace of network roll-out will need to increase to meet the 2025 target. The Communication Workers Union told us that “the success or otherwise of the Government’s broadband ambitions will rest largely on whether the labour force is in place with the right skills and training”,275 while Cumbria County Council told us that “at present there simply aren’t enough fibre engineers to deliver this programme and that’s before the impact of COVID-19 is taken into account”.276 This is supported by industry, which told us it has “already seen recruitment challenges following the inability of foreign engineers to enter the UK during the COVID crisis”.277 CityFibre stated that was “already experiencing a significant shortfall in the workforce required” to complete its roll-out, and that “this shortfall will increase if we cannot use DPA at scale (and are forced to use a greater number of underground operatives)”, a situation that would be exacerbated by changes to the immigration system. It told us that as other major operators share these concerns, “workforce shortage is therefore a significant risk to the full-fibre ambition”.278

120.While industry recognises the potential opportunities for training new engineers, it also told us that “improving the domestic talent pool is not something that can be fixed overnight”.279 Andrew Glover from ISPA said that the scale of the engineering challenge means the industry is “at the stage where we just need more people”. He also questioned whether migrant or domestic labour was the best way to address this need, as once the full-fibre network was completed the need would go away. He told us:

We are not going to dig up all the roads again, and we are not going to lay new fibre again. It is a short-term project in that sense. Although we are scaling up, recruiting lots of people and so on, if you consider a five or six-year job to be a short-term job, the numbers we need are for only a period of time, which begs the question of where to get them from. Training a whole load of people for a job that then disappears may or may not be the right thing to do, versus getting in labour that is experienced, can do it and will disappear again when it is no longer needed. That is part of the challenge. Which is best?280

121.Following industry recommendations for telecoms engineers to be added to the shortage occupation list, or subject to visa exemptions until 2025, we asked the Minister whether the UK had enough engineers with the necessary skills to deliver the Government’s targets.281 He told us:

As we ramp up the rate of installation, labour supply is a very important part of the conversation. So, do we have what we need today for the rate that we are going at? Yes, we do. Do we need to keep an eye on making sure we are able to maintain that rate of acceleration so that we can get to where we need to get to? Yes, we absolutely do.282

On the issue of the migrant labour force, the Minister acknowledged that “historically, large numbers of the existing roll-out have been done by people from around the EU”.283 However, he drew a distinction between highly skilled telecoms workers, who are expected to reach income thresholds for visas, and the challenge for staffing the lesser skilled bits of roll-out. Asked whether the Government favoured training the domestic workforce rather than accepting skilled workers from overseas, the Minister said that the economic changes resulting from the COVID-19 outbreak meant the Government needed to “maximise the number of people we are training who are already in this country”.284 Ultimately, he told us, he did not think “that the roll-out of broadband is going to be inhibited by a lack of labour supply from the EU”.285

122.Again, the Government’s ‘wait and see’ approach to ensuring sufficient numbers of engineers does not reflect the scale of the infrastructure and industry challenge to meet its targets for rolling out nationwide full fibre. The Minister’s assertion that the UK has enough engineers for its current need contradicts what we have been told by industry and is scant reassurance when build rates need to increase four-fold to reach 85% of the country by 2025. We encourage the Government to introduce time-limited visa solutions that enable engineers from the EU to address the industry’s labour needs until such time that these can be met by the domestic workforce.

Addressing the business rates regime

123.The Telecommunications Infrastructure (Relief from Non-Domestic Rates) Act 2017 provided five years of 100% business rates relief for all newly built fibre from April 2017 to 2022. However, industry has called for the Government to extend this relief for new fibre beyond 2022, especially as much of the roll-out to meet the 2025 target will take place after this date. ISPA told us:

just at a time when the sector will need to speed up roll-out significantly, the end of the relief will have a significant dampening impact. To properly incentivise investment, an extension to the rates relief is therefore a crucial component in improving the sectors chances of hitting the 2025 target.286

TechUK drew a comparison with the Scottish Government’s rates relief, which lasts five years longer to 2029.287 Openreach stated that “replicating this across the whole of the UK would offer a real boost to investment”.288

124.ISPA also told us that the relief should “be expanded to accommodate all infrastructure involved in the building of new gigabit-capable networks” as “limiting the relief to fibre only goes against the Government’s technology-agnostic approach”.289 Similarly, Mobile UK recommended “that new mobile infrastructure should be afforded the same status as new fixed fibre investment and be given business rates holidays to stimulate investment” because “there is a clear payback to Government and to regions where improved mobile connectivity strengthens the productivity and the profitability of the broader tax base”.290

125.The Minister told us he was “sympathetic” to industry’s calls for extending the business rates exemption for new fibre broadband beyond 2022 but that “ultimately these are matters for the Treasury”.291 Moreover, because the Treasury is currently reviewing business rates more generally, the Minister felt “it would be a bit daft to try to tinker around the edges while we also have a broader commitment to fix what is a broken system”.292

126.Industry’s calls for regulatory and business rate reform, as well as removing barriers to roll-out, will not come as any surprise to Ministers; however, these long-standing policy recommendations demonstrate a gap between the Government’s ambition and the action it has taken to date. Even getting to 85% gigabit-capable coverage by 2025 will require a rapid rise in build rates and for industry to roll-out just as fast as under previous targets. Urgent action to address these barriers that stand in the way of them doing so is therefore as important as ever.

186 CBI (BRO0182), para 3.1.1

187 Broadband Stakeholder Group (BRO0126)

188 Broadband Stakeholder Group (BRO0126)

189 C&AG’s Report, Improving Broadband, Session 2019–121, HC 863, 16 October 2020, para 8 and Oral evidence taken before the Public Accounts Committee on 9 November 2020, HC (2019–21) 688, Qq29–34

190 GreySky Consulting (BRO0186) para 2.1.6

192 Which? (BRO0024) para 22

195 Dr Paolo Gerli and Professor Jason Whalley (BRO0033) para C1

197 C&AG’s Report, Improving Broadband, Session 2019–121, HC 863, 16 October 2020, para 19

198 C&AG’s Report, Improving Broadband, Session 2019–121, HC 863, 16 October 2020, para 16

199 CityFibre Holdings (BRO0112) para 5.2

200 techUK (BRO0122)

201 CityFibre Holdings (BRO0112) para 5.2

206 Independent Networks Co-operative Association (BRO0198) para 5.3

208 Openreach (BRO0194) para 31

209 Dr Paolo Gerli and Professor Jason Whalley (BRO0033) para B3

210 Independent Networks Co-operative Association (BRO0198) para 5.3

211 Local Government Association (BRO0075) para 5.5

214 Black Country Local Enterprise Partnership (BRO0153)

215 Dr Paolo Gerli and Professor Jason Whalley (BRO0033) para F2

217 University of Strathclyde (BRO0200)

219 Vodafone UK (BRO0093) para 15

220 techUK (BRO0122)

221 Vodafone UK (BRO0093) para 15

222 Vodafone UK (BRO0093) para 16

224 Department for Digital, Culture, Media and Sport, ‘Statement of Strategic Priorities for telecommunications, the management of radio spectrum, and postal services’, (29 October 2019), p 6

225 Department for Digital, Culture, Media and Sport, ‘Statement of Strategic Priorities for telecommunications, the management of radio spectrum, and postal services’, (29 October 2019), p 6

228 CityFibre Holdings (BRO0112) para 8

229 Department for Digital, Culture, Media and Sport (BRO0077) para 17

230 Department for Digital, Culture, Media and Sport (BRO0077) para 17

231 Independent Networks Co-operative Association (BRO0198) para 4.9

232 CityFibre Holdings (BRO0112) para 4.4

233 CityFibre Holdings (BRO0112) para 4.4

235 TalkTalk (BRO0210)

236 GreySky Consulting (BRO0186) para 2.6.1

237 Octopus, Jurassic Fibre Limited and Swish Fibre Limited (BRO0214) para 3.2

238 TalkTalk (BRO0210)

239 Oral evidence taken on 23 June 2020, HC (2019–21) 439, Q41

241 Truespeed Communications Ltd (BRO0197) para 3.1

242 Independent Networks Co-operative Association (BRO0198) para 4.3

244 BT Group (BRO0188) para 19

245 Wik Consult and Broadband Stakeholder Group, ‘Moving to a fibre-enabled UK: International experiences on barriers to gigabit adoption, (June 2020), p 63

246 CityFibre Holdings (BRO0112) para 5.2.3

247 Department for Digital, Culture, Media and Sport, ‘Statement of Strategic Priorities for telecommunications, the management of radio spectrum, and postal services’, (29 October 2019), p 9

248 BT Group (BRO0188) para 21

249 CityFibre Holdings (BRO0112) para 5.2.3

251 CityFibre Holdings (BRO0112) para 7.3

252 CityFibre Holdings (BRO0112) para 7.3

253 TalkTalk (BRO0210)

255 Q124, BT Group (BRO0188) para 54

256 Three (BRO0072)

257 techUK (BRO0122)

258 Department for Digital, Culture, Media and Sport, Future Telecoms Infrastructure Review, (28 July 2018), p 30

259 CityFibre Holdings (BRO0112) para 6.1

260 Department for Digital, Culture, Media and Sport (BRO0077) para 13

261 The Internet Service Providers’ Association (ISPA) (BRO0169) para 3.6

262 The Internet Service Providers’ Association (ISPA) (BRO0169) para 3.5

263 Gigaclear (BRO0202)

267 Department for Digital, Culture, Media and Sport, New Build Developments: Consultation on delivering gigabit-capable connections Government response, (March 2020), p 3

268 Gigaclear (BRO0202)

269 London First (BRO0199) para 12

270 Cumbria County Council (BRO0058)

271 Local Government Association (BRO0075) para 4.4

273 ‘Vertically integrated network operators’ are those that provide the physical network and the internet service (e.g. Virgin Media).

274 Department for Digital, Culture, Media and Sport, New Build Developments: Consultation on delivering gigabit-capable connections Government response, (March 2020), p 29

275 Communication Workers Union (BRO0025) para 9

276 Cumbria County Council (BRO0058)

277 Octopus, Jurassic Fibre Limited and Swish Fibre Limited (BRO0214) para 1.9

278 CityFibre Holdings (BRO0112) para 1.4

279 Virgin Media (BRO0176) para 2.9

281 Virgin Media (BRO0176) para 2.9, CityFibre Holdings (BRO0112) para 1.4

286 The Internet Service Providers’ Association (ISPA) (BRO0169) para 3.13

287 techUK (BRO0122)

288 Openreach (BRO0194) para 37

289 The Internet Service Providers’ Association (ISPA) (BRO0169) para 3.13

290 Mobile UK (BRO0215) para 25

Published: 22 December 2020 Site information    Accessibility statement