Universality and Value for Money: Government Options for Designing the Broadband Universal Service Obligation

Universality and Value for Money: Government Options for Designing the Broadband Universal Service Obligation

The Broadband Stakeholder Group (BSG) publishes report on the design considerations for a broadband Universal Service Obligation (USO)

  • Designing the USO is extremely complicated but the cost threshold for each premise is extremely sensitive
  • BSG research shows that a cost threshold of between £1500-3000 maximises the net public benefit to the UK
  • To maximise the number of premises that can get access to good quality broadband through the USO demand, aggregation is needed
  • Where the cost of connecting premises is above the cost threshold then an alternative measure should be made available

The Broadband Stakeholder Group (BSG) has today launched Impact of a Broadband USO in the UK, a report commissioned from Plum Consulting to analyse the impact of the design considerations of a potential broadband USO in the UK. This report complements the technical advice produced by Ofcom in December 2016 for Government.

The Government announced in 2015 that it intended to give people the legal right to request a broadband connection that would deliver them a minimum speed of 10Mbit/s no matter where they lived through a broadband universal service obligation (USO). Last week, the Digital Economy Act was passed and confirmed this commitment but the exact specifications and funding mechanism have yet to be agreed.

The BSG is supportive of the goal of universally available, good quality broadband access. The report serves to highlight the difficulty in designing a USO that meets this goal whilst providing value for money and limiting competitive distortion.  In particular, the report demonstrates that the level at which the cost threshold is set is critical to the success of the USO, the scale of the funding needed but also the number of premises that the USO service would ultimately connect.

The report estimated what the net costs would be to deliver a broadband USO service set at 10Mbit/s and at 30Mbit/s with various levels of data usage and the outcomes possible in terms of achieving universal coverage:

Key Findings

The report also found that further information is needed to assess the economic benefit for each USO connection and in order to provide an accurate cost-benefit analysis, as part of the Government’s approach to designing the USO.

Richard Hooper, Chair of the Broadband Stakeholder Group, said:

“This reports rightly highlights the complexity of designing a broadband USO that is both cost-effective and built to achieve digital inclusion across the country. Our report adds to the evidence base on the best way that a USO can positively contribute to the goal of universal good quality broadband and we look forward in engaging further in this debate with Government.”

The report is available here.

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Cost Threshold

The cost threshold is the maximum cost per premise at which the Universal Service Provider (USP) would be required to provide the broadband USO service, and is capped to ensure its cost-effectiveness. This means that where the cost per premise is higher than the cost threshold, the USP could decline to provide the broadband connection and the customer could volunteer to pay the difference in order to be served or could choose a service with a lower specification than the USO offered elsewhere.

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