“Establishing world-class connectivity”, Culture Media and Sports Committee publishes report today

“Establishing world-class connectivity”, Culture Media and Sports Committee publishes report today

In July 2015, the Culture Media and Sports (CMS) Committee launched a public inquiry into the coverage, delivery and performance of superfast broadband in the UK and progress made in improving digital connectivity. The report published today concluded that the “UK has done well” compared with other EU countries on the delivery of superfast broadband thanks to a competitive market. However, it also raised concerns about the willingness of the BT Group to invest in maintaining, upgrading and supporting Openreach’s fibre infrastructure.

The Broadband Stakeholder Group provided evidence to the Committee on various issues including the delivery of superfast broadband in the hardest-to reach premises, the role that Ofcom and Government could play in facilitating deployment and the challenges of implementing a Universal Service Obligation. Following BSG Chairman Richard Hooper’s oral evidence to the Committee, the BSG supplied additional information on some other EU countries’ funding plans for superfast broadband deployment.

The Select Committee’s report identified issues with the delivery of the BDUK programme which it predominantly attributes to the relationship of the BT Group with Openreach. It considered that Openreach’s costs and deployment plans lacked transparency and that the Group was unable to make continuous improvements to its service.

The Committee supports Ofcom recommendations in the Initial Conclusions of its Digital Communications Review (DCR) concerning the status of BT/Openreach and the legal and structural separation of BT Group as a potential option (though ruling it out for the moment). Amongst its recommendations, the Committee calls for Openreach to be required to publish a 5-year strategic investment plan to increase transparency. And should Openreach remain part of the BT Group, for BT to be asked to allow Openreach “to raise finance independently in the capital markets in its own right, and to make investments that meet the business’s own cost of capital”. This would, according to the report “facilitate increased investment in infrastructure”.

Another key element of the report relates to the nature of the regulatory framework for the communications market. The Committee recognised that regulating the broadband market in the same way as other traditional utility services would be inappropriate and such an approach would risk impeding competition. A point the BSG has made previously.

The Committee’s report also considered a Broadband Universal Service Obligation (USO) as a possible tool to achieving universal coverage of superfast broadband. It states that the proposed Government target of 10Mbit/s could be raised to 30Mbit/s by 2022.

The BSG believes that there are a number of issues with this recommendation. At a time where commercial and BDUK roll-out programmes are still ongoing, it seems premature to suggest that a USO would provide the adequate solution to universal coverage of good quality broadband. Ofcom’s consultation on the design of the proposed USO (of 10Mbit/s) and speakers at a debate hosted by the BSG rightfully highlighted the complexity of the debate; the specification, objectives and timing of the implementation of a USO imply a careful assessment of its associated funding mechanism and risk of disruption of the market. In this context, it is therefore unrealistic to recommend a USO of 30 Mbit/s by 2022.

Regarding mobile coverage, the Committee recognised Government and Ofcom’s success in securing investment from the mobile network operators to achieve agreement to reach 90% geographical coverage by 2017. Similarly to Ofcom in its DCR, it called for future spectrum auctions to look at stricter coverage obligation and a focus for Government to continue to cut red tape “to provide a conducive environment to investment, and easy access to fairly-priced backhaul connectivity”.

It will be interesting to see how the new Ministers in DCMS respond to this report and how it influences the Government’s forthcoming Digital Strategy.

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