BSG Reports

Demand for superfast broadband in the UK: a solid start

11 October 2012

Today the UK’s leading broadband advisory body, the Broadband Stakeholder Group (BSG) publishes a report that argues that initial demand for superfast broadband in the UK gives cause for optimism and confidence.

The study brings together public data on superfast broadband demand across various markets and probes headline figures to more fully understand actual consumer willingness to pay for superfast services.  Looking at the data from this new perspective, the report argues that, on the international stage: (more…)

ISPs launch Open Internet Code of Practice

Update, December 2014:

In the last quarter of 2014, EE, Vodafone and Virgin agreed to become signatories to the Open Internet Code. This is reflected in the list of signatories and contact details in Annex 1.

The updated version of the code can be found at: BSG – Open Internet Code of Practice amended November 2014.

Update, June 2013:

In July 2012, the Open Internet Code was published.  The full press release relating to this launch is set out below.

In May 2013 this code was amended to:

  • Clarify that signatories would not be infringing the code if they deployed content filtering or made available content filtering tools where appropriate for public wi-fi access
  • Publish details of how the voluntary system in support of commitment 2, relating to negative discrimination would operate

This updated code can be accessed here.

 

Original post:

Today leading internet service providers (ISPs) are signing a voluntary code of practice in support of the open internet.

The code commits ISPs to the provision of full and open internet access products and confirms that traffic management practices will not be used to target and degrade the services of a competitor.

This initiative builds on the transparency code of practice published in 2011 which ensures that clear, understandable and comparable information on traffic management practices is available to consumers. (more…)

Broadband providers launch new traffic management transparency code

New initiative will help consumers and policy makers make informed choices

Update, June 2013:

In March 2011, the BSG published, on behalf of the signatory ISPs, a code of practice on traffic management transparency.  The code can be downloaded here.

The press release accompanying its launch is set out below, explaining the commitment contained in the code.  In accordance with the code signatory ISPs subsequently published Key Facts Indicators in relation to their traffic management policies. Hyperlinks to this information from all signatory ISPs can be found here.

Please note that shortly after the issue of the below press release, EE signed up to the code in March 2011.

The latest version of the code, issued in May 2013, reflects the additional and subsequent signatories of the code: BE, giffgaff, KCOM, PlusNet and Tesco Mobile.

 

Orginal post:

BSkyB, BT, O2, TalkTalk, Three, Virgin Media and Vodafone will today sign up to a new voluntary commitment to provide better and more easily comparable information to consumers about traffic management. Together these companies account for 90% of all fixed-line broadband customers and 60% of all mobile customers in the UK. (more…)

New study highlights potential of wireless and satellite to deliver next generation broadband

The Broadband Stakeholder Group published a new study today by Analysys Mason on the costs and capabilities of wireless and satellite technologies.

The report provides a snapshot view looking forward to 2016 and finds that:

  • Terrestrial wireless can provide a cost effective alternative to fibre in some rural areas, but would require more masts to be built and the use of external antennas on residential buildings
  • Satellite will provide an effective solution for delivering next generation broadband in the hardest to reach locations
  • The release of more spectrum would further reduce the cost and increase the capability of wireless and satellite solutions. (more…)

BSG Position Paper on government intervention in NGA released

BSG has released a new position paper, ‘approach to government intervention in the deployment of next generation broadband’.

The paper provides a view on how the new coalition government should think about intervention in the deployment of NGA in the UK. There are many uncertainties and unknowns in the debate, and as the new government develops its broadband policy, it is important that the issues raised in this paper are considered and addressed should the government decide to intervene.

The paper also incorporates BSG’s response to the previous government’s next generation fund consultation, and its review of the fibre cost model.

Download BSG position paper

BIS Consultation on proposals for a Next Generation Fund

BSG and Value Partners publish new White Paper on Broadband Infrastructure

In the debate over the capability of broadband networks, the voice of companies and organisations that offer services and applications over the internet has been lost.

To address this, the Broadband Stakeholder Group (BSG) and Value Partners Management Consulting today launch a White Paper, Broadband Infrastructure: The Service and Application Providers’ View.

This White Paper provides insight into what companies and organisations that offer services and applications over the internet really think about the UK’s broadband infrastructure today and how it might evolve in the future. (more…)

Broadband in the time of swine flu

In a deep global recession the last thing the world needs is a new economic shock, but that seems to be exactly what we are facing. The World Health Organisation raised its flu pandemic alert level to 5 yesterday and governments around the world are stocking up on anti-viral drugs and face masks, however, broadband could prove to be just as important in helping the UK to cope with a flu pandemic.

In what turned out to be a highly prescient piece of work, the BSG explored the role of broadband in a global pandemic in its 2008 report on the value of next generation broadband to the UK. Broadband didn’t exist when the UK was last hit by a flu pandemic but its near universal availability today could prove vital in ensuring that the economy keeps going in the event of large numbers of people falling ill.

Many large organisations will already have flu pandemic contingency plans in place but almost all organisations should be thinking about how they could use broadband to help them cope with the disruption that could result if the flu virus really does take gripe in the UK.

The advice from government, if you notice symptoms, is to stay at home and call the NHS for advice. However, it is not only those who are sick who are likely to be staying at home. In an effort to reduce the spread of the virus through their staff, many companies will be recommending that employees avoid crowded offices and public transport and work remotely from home instead.

This should help many companies maintain a continuity of service but will also have an additional benefit of reducing the pressure on public transport systems, which will themselves face severe disruption as key staff fall ill.

Remote presence provides all sorts of options and flexibility for coping with a pandemic which may well require draconian social distancing measures to be put in place.

For instance, while many school children and no doubt some teachers will relish the thought of schools being closed, remote learning could be implemented so that children continue to be educated, even while school buildings are closed. Remote diagnosis and support could alleviate some of the pressure on the health service, while preventing the spread of the virus through facilitating treatment in the home (and avoiding infecting our invaluable healthcare professionals).

The 2008 BSG report went as far as trying to calculate the economic value that broadband would offer in a pandemic. Essentially we estimated that, based on the probability of a pandemic, a given mortality rate, the economic value of a life, and assuming next generation broadband could reduce the mortality rate by 5% by enabling more social distancing measures, the annual benefit in terms of avoided deaths would be £200m.

The role that broadband could play in the event of this pandemic becoming a reality should highlight to government the importance of ensuring everyone is connected – a ubiquitous broadband society has far more tools to deal with the pandemic threat than an equivalent less-connected society.

More than this, however, it should highlight the importance to government of ensuring their own services make full use of broadband and have the flexibility to continue to function and support society as events, such as pandemics, unfold.

Peter Shearman, Policy Manager, BSG

Broadband in the Budget

In yesterday’s Budget, Alastair Darling stated government’s support for the knowledge economy and the communications sector, and set out a number of policies affecting the broadband industry. Broadly, the top-line statements were as follows.

– Government re-iterates its support for the broadband universal service commitment set out in the Digital Britain Interim Report; will consult on using Digital Switchover Help Scheme underspend to fund the policy.

– Government will review the powers and duties of Ofcom “in advance of the Digital Britain Report” so that it can “strike the right balance between delivering competition and encouraging investment”.

– Government’s doubling of the capital cost allowances to 40% could aid up to £10bn on investment in communications infrastructure.

– Government has approved the South Yorkshire Digital Region next generation broadband project.

The BSG has published its response to these measures. While we support the government’s commitment to the broadband universal service commitment, we are concerned that the proposals set out on next generation broadband will not support more widespread investment and coverage than current market commitments.

It is not clear that the one year capital cost allowances increase, while providing a useful stimulus for existing investment commitment, will incentivise next generation broadband deployment given the timescales of investment and deployment, which will take many years (although it may have some limited impact in incentivising Virgin Media to invest, who are planning small expansions to their footprint over the next year).

More importantly, the characteristics of the costs of deployment mean that specific, targeted measures are required in areas where market-led deployment will not reach, rather than a blanket subsidy across all areas including those that are already commercially viable.

However, a potentially more significant development is the review of Ofcom’s powers and duties. Essentially, this would appear to come down to re-focusing Ofcom more towards promoting investment, as opposed to promoting competition. While not necessarily opposing principles (stronger competition should spur investment), there is certainly a balance to be struck, particularly given the scale of the investment required for next generation broadband.

This reflects an issue the BSG raised in January 2004 in its 3rd Annual Report (pp116-121). There was a concern then that the focus on short-term consumer interest could drive static efficiency in the market, at the expense of the dynamic efficiencies of investment.

The announcement of this review could be a sign that this argument has found support amongst senior policymakers.

Peter Shearman, Policy Manager, BSG

BSG publishes costs of deploying fibre based superfast broadband

The Broadband Stakeholder Group (BSG) – the government’s advisory group on broadband – will today publish a report on the costs of deploying fibre based next generation broadband in the UK.

The report, produced by Analysys Mason for the BSG, sets out the costs of the various technology options in detail and explains how those costs mount up as fibre is pushed out across the country. It suggests that rolling out fibre nationwide would cost between £5.1bn and £28.8bn (depending on the technology used) and that the costs of deploying in rural areas will far exceed the costs in urban areas.

“This is the most comprehensive analysis produced to date on the costs of deploying fibre in the UK”, said Antony Walker Chief Executive of the BSG. “The scale of the costs looks daunting but the report does shed light on how some of these costs can be reduced and what the likely extent of commercial rollout will be. It should focus minds of commercial players, policy makers and regulators on the potential solutions to these challenges.”

The model demonstrates that national deployment of fibre to the cabinet (the cheapest technology option) would cost £5.1bn – this is three or four times more than the telecoms sector spent deploying today’s broadband services. Taking fibre to every UK home (using point to point fibre – the most expensive technology option) would cost as much as £28.8 bn.

The largest single cost component is the civil infrastructure (the cost of deploying and installing the fibre in new or existing ducts). The report suggests that these high civil infrastructure costs could be significantly reduced by the re-use of existing telecommunications ducts; the sharing of alternative infrastructure owned by other utilities, such as water companies; and the use of overhead fibre distribution in some areas.

The report also suggests that deployment costs will be relatively constant across higher density areas. This implies that, if a commercial case for deployment exists, the market should be able to deliver to approximately two thirds of the UK population. However, the costs of deploying in more sparsely populated areas will be significantly higher, making the commercial deployment to the last third of UK households much more difficult. “If rural areas are to be served in a reasonable time frame, thinking needs to start now about creative solutions for making them more attractive to investment”, said Walker.

The BSG’s earlier research on public sector interventions showed that there are many models for how this can be done that stop far short of large-scale subsidy, but do require the private sector to work closely with public bodies and local communities. In particular, demand stimulation initiatives, such as pre-registration schemes, localised to the level of individual streets or cabinets could prove highly effective in extending the reach of these networks.

Each technology has a high proportion of fixed costs that are incurred regardless of how many users take the service. This means that the cost per home connected (and therefore the commercial viability of the service) is highly dependent on the level of take-up. “If operators could achieve a higher than expected level of take-up in rural areas, then the business case for deployment in those areas could improve significantly”, said Walker.

“The magnitude of the costs, and how the costs differ between urban and rural areas, will be important for operators, media players and public sector organisations looking to develop their future broadband strategies” said Matt Yardley, Partner at Analysys Mason, who directed the work.

BSG Report – The costs of deploying fibre-based next-generation broadband infrastructure

BSG publishes costs of deploying fibre based superfast broadband – full press release

So what are the benefits of next generation broadband? The economic story part II

Following the earlier piece, I thought I’d briefly set out what the economic benefits are that are identified in our ‘A Framework’ report, in order to illustrate where we think value would accrue.

The largest categories of private value in the report are: doing things that we do now, but more efficiently; doing more of what we do now; and doing new things.

Each of these categories of value has the potential to be very significant. We make no attempt to quantify the last two, as it would be difficult (if not impossible) to do so.

Doing things more efficiently we have attempted to quantify. Based on 80% coverage, if 50% of broadband users saved 3% of their time, time savings worth £0.9bn per annum would be achieved (based on a value of leisure time used by government studies).

Note this is only an assumption, for indicative purposes. We would be interested in seeing any evidence that could refine this value, such as more detailed research on the activities consumers do online and how long they spend doing them.

The largest categories of wider economic value were: resilience, adaptability and policy options; and spill-over and virtual agglomeration. Again, these were not quantified as this was not appropriate, but we think these are likely to be significant in value.

The substitution possibilities created by next generation broadband would mean that the economy would be far more resilient and able to adapt to shocks, for example an oil price shock by providing alternative to travel. This also creates an additional range of options available to policy makers, which would be highly valuable in itself.

Virtual agglomeration had been identified as likely to be a big benefit from next generation broadband. Agglomeration refers to the productivity benefits of cities and clusters of activity – London, for example, has a higher productivity level than other areas in the UK. Through virtual agglomeration, next generation broadband could achieve some of the benefits of clusters and cities, and without some of the costs of cities such as congestion and pollution.

We also identified other categories of wider economic benefit, such as: an increase in competition in the economy; network effects as consumers and businesses both in the UK and across the world move to next generation broadband; reduced traffic congestion; the value created by the re-use of land and buildings no longer required by a next generation broadband network; reduced business travel; increased online backup; video distribution; and improved connectivity for SMEs. Some of these we did attempt to quantify, such as a reduction in business travel. For our estimations see section 5 of the report.

That’s the whistlestop tour of the categories of benefits we identified. We are keen to see these categories built on over time. We hope that as evidence emerges we will be able to more accurately populate this framework, to build up a more accurate quantitative picture of the benefit of next generation broadband.

Peter Shearman, Policy Manager, BSG

So what are the benefits of next generation broadband? The economic story

Following the launch of our report ‘A Framework’, I thought it would be worth setting down a few pieces about the benefits highlighted in the report. I’ll start with a general view of the economic impact the report sets out, which although substantial in terms of benefits, may be difficult in practice for investors to capture.

First, a brief note on the methodology. We have taken a bottom-up approach, examining where in the economy specific value could possibly accrue, rather than making general estimations of the impact of next generation broadband on productivity or GDP. For more on this in the report, it is worth looking at the section on ‘pseudo costs and benefits’. We also broke down economic value in to two categories – private value that accrues to investors and consumers, and wider economic value.

The report sets out a wide variety of categories where value would accrue. Some of these benefits would be captured upon deployment; others would take time, require transformations and would accrue in the medium to long term. In addition some of these benefits may be impacted by various policy agendas – for example, the role for next generation broadband in reducing carbon emissions is potentially significant depending on whether a carbon tax was introduced that encouraged substitution for emission-intensive activities.

The report suggests that these benefits are potentially very large, and in the long term likely to be larger than the cost of deploying the network. Particularly, there is likely to be significant private value that will be captured by investors and consumers. This does not mean, however, that the business case is made, and in reality there are difficulties for investors in trying to capture this value.

The report highlights three key constraints on investors’ ability to capture private value. First, to the extent that next generation broadband is an experience good consumers may not be willing to pay a premium for the service until they have experienced it. Second, creating this value may require the transformation of value chains, which may take time and would be disruptive. Third, investors do not yet have accurate knowledge of how much consumers are willing to pay, meaning that there will be difficulty in setting the correct pricing structures in order to maximise how much of the value they are able to capture.

Generally, the report calls for further work that would address these and other uncertainties. Resolving these uncertainties will be key to creating a business case that is acceptable to investors. The BSG is continuing its work programme that will hopefully shed some light on these and other issues. We are keen that further evidence is put forward that can help illuminate these, and would be interested to see any evidence others have to this end.

The debate in Australia

Our recent report on the value of next generation broadband created a minor debate on itWire in Australia following a good blog article from Stuart Corner. The article captures the essence of our message on next generation broadband deployment from our recent research: it is more important to do this right than to do it now.

The size of the investment required to roll out next generation broadband in any country, the irreversibility of that investment, and the likely importance to that country’s economy and society of superfast broadband mean that the costs of getting it wrong could be significant, and that investment should occur at the most optimal time possible in order to maximise the benefits.

For the UK, our report suggests, the most optimal time is not necessarily now. There are a number of uncertainities for investors that create a large value in waiting, such as a lack of evidence of consumer willingness to pay and the current regulatory uncertainty. Over time, this value will reduce as evidence emerges and some of the uncertainties are resolved – we believe over the next 18 months or so.

Ultimately, we still believe the market is best placed to decide when and how investment in next generation broadband should be made. But this doesn’t mean we should be complacent. It is important that the work that is being done continues, including Ofcom’s work to provide regulatory certainty, the Caio review, and the work of the BSG, so that in 18 months’ time we really do have a clearer picture.

Will next generation broadband deliver next generation benefits?

New report examines economic and social value of next generation broadband and concludes there’s more value in doing it right than doing it now.

The UK could reap significant social and economic value from the wide-spread deployment of next generation broadband, according to a new report that studies how to weigh up the costs and benefits, from the Broadband Stakeholder Group (BSG), the government’s leading advisory group on broadband and digital convergence.

By looking at the potential private value (value accruing to commercial investors and consumers) and the wider economic and social value, the BSG has found that the long-term benefits to the UK associated with the wide-scale deployment could outweigh the cost of deployment, which could be as much as £16bn (to reach 80 per cent of UK homes).

However, the report does not conclude that operators should invest now. There is still real uncertainty about the extent to which investors will be able to realise enough of this value to justify investment. The BSG believes that in the short-term, there are unlikely to be significant costs associated with delaying deployment and there may actually be considerable value in waiting for a limited period in order for more information to emerge, before investing.

But the value in waiting will diminish over time and the report recommends that commercial providers, government and regulators continue to work to create an environment that is conducive to timely and efficient investment.

Antony Walker, CEO of the Broadband Stakeholder Group explains: “Next generation broadband has the potential to transform the way we do things as individuals, businesses and as a nation as a whole. It is tempting to jump in feet-first but it matters more to do this right than to do it now. There is a lot of uncertainty about issues on both the demand and supply side and much that we can learn from experience elsewhere without adverse affects in the short-term. On the other hand, the UK can’t wait too long. If widespread network deployment didn’t happen in the medium term (perhaps three to five years), then this report suggests that the UK could be losing out.

The report also warns that it will take longer to deploy next generation broadband than it took to deploy the current generation and that some areas might be beyond the reach of market forces. Communities and individuals that remain beyond the reach of commercial deployment in the long-term will be disadvantaged. Close attention must therefore be paid to the emergence of a new digital divide.

The report follows the BSG’s Pipe Dreams report published in April last year which said the UK needs to start preparing for next generation broadband by 2009. The current report, along with another on models for public sector intervention in the deployment of next generation broadband, will be launched at the BSG’s conference: Beyond Pipe Dreams in London on Monday 9 June.

CORRECTION – 23 June 2008

Please note that the version of the report launched at the conference contained an incorrection calculation of the value of spectrum efficiency. This has been recalculated as £5bn, rather than the £9bn stated in the launch version. The tables and charts refering to this figure have been altered, and the corrected report is now available on the website.

BSG report – A Framework for Evaluating the Value of Next Generation Broadband

Press release in full