Government

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 responds to DCMS product placement consultation

The BSG has responded to the DCMS consultation on whether or not to allow product placement on television.

The BSG supports the introduction of product placement in the UK. As traditional ad revenues and business models come under challenge as the result of the convergence of digital media, it is important that the industry can explore the potential commercial benefit of product placement to ensure sustained investment in content.

The BSG recognises the concern that any introduction of product placement does not lead to negative outcomes for consumers. However we believe the protections required of the Audiovisual Media Services (AVMS) Directive, which allows the UK to permit product placement for some types of programmes, will be sufficient to ensure that consumers are protected and are armed with the information they need to make informed choices.

BSG response to DCMS consultation on product placement

BSG responds to overhead deployment of telecoms cables consultation

BSG today submitted its response to the government’s consultation on overhead deployment of telecommunications cables. The key points from the response are:

  • Permitting new overhead distribution could have a significant impact on the investment case in some locations; however, it is unlikely to be a panacea for rural deployment.
  • Due to a number of factors, it is unlikely that increased aerial deployment would be beneficial in urban areas; it is likely that the benefit would predominantly be for rural deployments.
  • In terms of the impact on the ‘final third’, indicative analysis suggests that up to 1m homes could be brought into the market-led first two-thirds of homes.
  • Visual amenity is an issue that should be considered; however, government will need to consider the trade-off between improved communications infrastructure and the impact on the visual amenity of a locality.
  • Access to existing infrastructure that can support aerial deployment should also be considered by government as part of this exercise.

BSG response to BIS consultation on overhead deployment of telecoms cables

BIS consultation on overhead deployment of telecoms cables

Digital Confusion

The Digital Britain Report was finally released on Tuesday, and despite the build up, reactions to it have been mixed and, particularly where the broadband measures are concerned, somewhat confused. (Although given that few journalists would have had time to read the 240 page report before filing their copy, this level of confusion is perhaps excusable.)

The national media have been critical of a ‘broadband tax’ and questioned the logic of whether broadband for all is an appropriate policy goal; the public are confused about what exactly the proposals are; and even rural fibre advocates appear displeased.

Here we will attempt to unravel the ideas set out by Lord Carter. The report sets out two strands to government’s approach to broadband infrastructure.

First, the universal service commitment will ensure that every household has access to a 2Mbps service by 2012. This will be paid for using funds left over from the Digital Switchover Help Scheme, a contribution from the government’s Strategic Investment Fund, and contributions from the private sector and other public organisations.

This will be delivered by a range of solutions: in some cases a simple improvement in home wiring will be sufficient; others may require wireless technologies such as satellite; and others may require new fibre infrastructure.

Second, the Final Third Project aims to ensure next generation broadband coverage to at least 90% of households by 2017. It is called the Final Third Project as cost modelling suggests that the market should deliver next generation broadband to two-thirds of UK households, mainly in the most densely populated areas of the UK. The project would support rollout to the final third of homes unserved by the market.

How superfast broadband will be delivered in the UK

It seeks to do this by providing a subsidy in those areas where the high costs of deployment make commercial investment difficult. The subsidy should bring the cost of deployment down to the cost in urban areas, at which point the investment should be commercially viable. This will be paid for by a 50p a month levy on all fixed lines (including DSL and cable) that will go into a Next Generation Fund, which would raise around £150m per year.

How the Final Third Project could work

These two policies (the universal service commitment and the Final Third Project) will work together to ensure that the most appropriate solutions are developed in each case. For example, in the report the government sets out that the universal service commitment may have to use a fibre to the cabinet solution as the most cost-effective and efficient solution for around 420,000 homes – delivering on both the universal service and Final Third goals.

The benefits of ensuring everyone has access to superfast broadband will be substantial: supporting rural businesses, particularly SMEs; strengthening communities; and enabling genuine transformation of public services in areas where it could make the most impact. A failure to act risks leaving behind remote, rural and even some suburban communities as the UK moves into a 21st century global digital economy.

It is important to emphasise that this is not simply about providing next generation broadband in deep rural areas, however. As the map below demonstrates, the benefits would be felt across the UK (the areas in green will likely see investment by the market; those areas in yellow and red are likely to require support from the proposed Next Generation Fund).

Map of South West UK showing the areas requiring next generation fund support

This is a challenge that governments around the world are attempting to address, and a variety of solutions have been proposed, usually involving large scale government funding. We feel that this approach is a forward-looking solution in that it is targeted, proportionate, and smart.

It is targeted as the subsidies are aimed at those areas that require them because they are currently unattractive to investors. Blanket subsidies end up subsidising deployments that the market would have made anyway, wasting valuable public resource.

At the same time, the subsidy itself is proportionate, in that it is at the right level to be able to tip the balance in favour of investment in many areas, without crowding out private investment.

Finally, payment through a levy is smart in that it places no further burden on the UK’s already-strained public finances, and the level of the levy, at the price of a cinema ticket a year, is comparatively cheap compared to the level of taxpayer funding found in other markets.

As with all of these ideas, however, the devil will be in the detail. There will be a need to ensure that the proposal doesn’t favour any one operator; that it leads to open access networks; that it is technology neutral; that it is properly targeted at areas that genuinely need subsidy; that it has no negative impact on broadband take-up; and that an appropriate role and remit is set out for the design group charged with structuring the and delivering both the Final Third Project and the universal service commitment. Government will consult on these and other issues in the autumn.

It is perhaps worth considering that ultimately consumers will pay for this investment one way or the other, whether through higher prices for current broadband, through general taxation, or through the proposed levy, which is perhaps more transparent than funding from general taxation.

Many governments have committed to expansive public projects, using significant levels of public funding.
– The Australian government is committed to a A$43bn (£21bn) fibre to the home project to 90% of the population, with 12Mbps to the remaining 10%.
– New Zealand are spending NZ$1.5bn (£0.6bn) of public money on fibre to the home to 75% of the population.
– Singapore have committed public funds of $0.75bn (£0.46bn) to their fibre to the home project.
– In the EU, Finland and Greece have both recently proposed spending significant levels of public money on superfast broadband.

On a per home basis, the UK’s commitment is one of the cheapest of those made across the world, demonstrated below (note: the US intervention is mainly to expand coverage of current generation broadband).

Cost of interventions per household in other markets

During the height of the economic stimulus discussions late last year superfast broadband networks were touted by many commentators as one of the best infrastructure investments to make – the Keynesian solution for the 21st century.

Now that government has accepted its importance and made a commitment to ensuring coverage of superfast broadband for at least 90% of households, ire has turned towards how it is to be funded.

However, it is not possible to have our cake and it eat it. Funding and investment will ultimately come from us as consumers in one way or another if we are to deliver this critical enabling infrastructure for the entire UK.

Digital Britain Report

Peter Shearman, Policy Manager, BSG

BSG comments on Next Generation Fund in Digital Britain

Forward looking, innovative and proportionate proposal that will benefit all

The Broadband Stakeholder Group, the UK’s leading advisory group on broadband, believes Lord Carter’s proposed Next Generation Fund provides an innovative solution to a problem that governments around the world are struggling to address – how to extend the reach of next generation broadband networks beyond just towns and cities.

“The challenge is to find the intervention sweet spot, not so much as to be heavy handed and not so little as to be ineffective. This intervention could be just enough to incentivise investors in areas that would otherwise be considered commercially unviable,??? comments Antony Walker, Chief Executive of the Broadband Stakeholder Group.

These proposals set out a smart and proportionate approach to ensuring that families, businesses and communities across the UK have access to the broadband they need now and will need in the future.

They are smart because they recognise the wider national financial constraints and take the pressure off public finances.

They are proportionate because they only address areas where commercial interest is unlikely. As a result the scale of the intervention is smaller than in other markets we have seen around the world.

“The cost to consumers is relatively small: less than the price of one cinema ticket per year. But the scheme would generate sufficient funds to tip the balance of investment in many areas that would otherwise face an indefinite wait for next generation broadband,??? says Walker. “This is the kind of forward looking, innovative and proportionate response that the BSG has been calling for over the last two years.???

How would it work?

“Our initial assessment is that the 50p levy could generate around £150 million per year, or around £1billion over seven years. We believe this funding could ensure that many of the 8 or 9 million homes that are otherwise unlikely to be served in the medium to long term get next generation broadband.

“When you look at a map of Britain you can see that these households are not just in remote areas, in fact they are all over the country – we are talking about the edges of towns as well as villages and the countryside – and make up a third of all UK homes,??? continues Walker.

The Fund is not intended to cover the full cost of deployment in rural areas, but to provide sufficient additional funding to make areas that would otherwise be uneconomic more attractive to investment. Both existing players and new entrants would be able to bid for the funding to support investment in these locations.

The benefit of putting the fund in place now, is that companies, local authorities and even local communities can start planning and developing new solutions that should mean that next generation broadband deployment is extended in the most effective and efficient way possible.

Return on investment

Walker adds, “Our analysis shows that the Next Generation Fund would be worth around £1 billion by the end of the scheme in seven years time. There are several ways of measuring society’s return on investment for this money including improved healthcare, better access to education, greater employment, innovation within SMEs.

“We believe that even if you looked at just one of these areas alone you would see a return that will justify £1billion of investment in the medium to long term. However, these returns won’t happen automatically and the next challenge for government and industry is construct and implement the Next Generation Fund effectively. It will be important to ensure that it is both pro-competitive and supports technology neutrality, in line with the market.???

BSG response to Next Generation Fund in Digital Britain – full press release

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 provides submission to Welsh Affairs Select Committee inquiry in to digital inclusion in Wales

The BSG today submitted a report to the Welsh Affairs Select Committee as part of their inquiry in to digital inclusion in Wales.

Focusing on broadband availability and take-up, including the prospects for next generation broadband, the report highlights the challenges facing Wales, owing to the low population density and high proportion of rural communities.

BSG submission to Welsh Affairs Select Committee

BSG response to the Budget

Timely investment in next generation broadband will provide platform for innovation and productivity growth

The BSG welcomes the recognition given to the importance to the UK’s communications infrastructure in today’s budget and the confirmation of the government’s intention to make basic broadband services universally available across the UK.

However, the BSG is concerned that the budget announcements on next generation broadband do not yet provide grounds for confidence that such services will be made available beyond urban areas. The full benefits of next generation broadband will only be achieved through a combination of widespread availability and adoption.

Delivering the Universal Service Commitment

  • The BSG welcomes the confirmation of the government’s intention to implement the Universal Service Commitment for broadband and the suggestion that this could be part funded through the underspend from the Digital Switchover Help Scheme.
  • The BSG also welcomes the commitment to support the improvement of basic digital skills and the promotion of broadband take-up. Achieving the universal availability and take up of broadband is not only a matter of social equity but is also a necessary pre-condition for the eventual switch off of analogue public services which is the only way to ensure better and more affordable public service delivery in the future.

Next generation broadband

  • The BSG welcomes the doubling of capital allowances which should help to bring forward investment. However, the BSG is concerned that this will not, in itself be sufficient to ensure the timely and widespread availability of next generation broadband.
  • The BSG will be looking to the final Digital Britain report for further measures to ensure that next generation broadband deployment meets the needs of the wider economy. This could include more support for projects like South Yorkshire Digital Region that was endorsed in the budget report today.

“The key is to find the intervention sweet spot, just enough but not too much???, said Antony Walker, Chief Executive of the Broadband Stakeholder Group.

“The aim should be to provide a sufficient nudge to the market that enables it to deploy more quickly and more extensively that it would do otherwise. The announcement on capital allowances may help to bring forward investment but does not address the challenge of extending availability beyond urban areas.???

Although difficult to quantify, there is a growing body of evidence [see notes below] to suggest that the long-term benefit to the UK economy of a measured and carefully targeted intervention could potentially significantly exceed the cost to government.

Today’s budget announcement comes almost exactly two years after the BSG first highlighted the need for action in its Pipe Dreams report on next generation broadband. The rapid deterioration of the UK economy means that the potential for market investment in low density areas has become further constrained.

Without additional action next generation broadband will be rolled out more slowly and less extensively, meaning that many rural areas will be left behind and the net economic benefit to the economy will be smaller and slower to emerge.

Explaining the significance of next generation broadband, Antony Walker said “This is really about the future potential for innovation and productivity growth right across the UK economy. Broadband is what economists call a general purpose technology that is relevant to almost every aspect of economic activity. It provides the potential for households, businesses and governments to do things differently, more effectively and more efficiently. And for some key parts of the economy, such as the creative industries, it will be the platform for transformative change that will open up a global market for entirely new products, services and applications.???

However, these benefits do not accrue automatically. The government will need to put as much effort into ensuring the rapid adoption and exploitation of these networks as it puts into ensuring their availability in the first place.

BSG response to Budget – full press release

BSG submits response to interim Digital Britain Report

The BSG today finalised its submission to the government’s interim Digital Britain Report.

The response recognises the ambition and rationale of the report, while noting the challenging timescales. It goes on to highlight a number of challenges and issues facing developments in each of the areas of the report, and makes a number of suggestions as to how to address the actions raised.

BSG response to interim Digital Britain Report

Andy calls time on product placement….?

Somewhat behind original timelines, the government has today given further indication of how it will proceed with implementing the Audiovisual Media Services Directive into UK law.

Today has seen the publication of a press release, Ministerial Statement from Andy Burnham, and a document giving an overview of responses to the original consultation.

An initial glance (so forgive me if a more detailed read thows up further information) shows that whilst the main thrust of the government approach is made clear, there is still a long way to go on the detail.

Today’s documents state that the government wishes to apply the Directive only to those “mass media services whose principal purpose is to provide television programming to the public on demand.”

The scope of services that will be captured by the Directive has been one of ongoing concern and where clarity is urgently required – as stated strongly in the BSG’s response to the AVMS consultation.

As ever the devil will be in the detail. Watch this space for details of the Statutory Instruments that will carry this into UK law….

What is clear however is that the Culture Secretary has not shifted from his initial view on product placement (something that the Directive allows Member States to permit, should they wish).

The title of the press release perhaps gives it away: “preserving standards will be cornerstone of UK media services”.

This release then goes on to say that “mindful of the need to maintain public trust in television broadcasters and British television’s reputation for high standards” that the government has decided to go with the status quo and continue to prohibit product placement.

What is interesting however, is that the release also clarifies that product placement will continue to be allowed in films and overseas programmes (which we knew) but also in programmes made by and for UK Video on Demand (VoD) services.

And VoD services are described as “TV-like” in the Directive……..

Now, these are just questions rather than a statement of view at this point:, but:

– Is the government response to a policy development that is trying to regulate for a converged media world, actually then drawing distinctions between how broadcast and on-demand TV should operate and be funded?
– Will that become an irrelevance to the consumer as people become used to accessing TV-like content on the mix between their mobile phone, TV and computer and also a mix between real-time and on-demand?

Such questions aside, the line drawn in the sand here will come as a blow for ITV and others that have been pushing the case for product placement with the government.

It also prompts one to consider how this decision will impact on the development of the Digital Britain report, which gives considerable emphasis to possible measures to address the challenges for digital content.

Today’s announcement does say that the government will review its position in 2011/2 on the back of further research by Ofcom on product placement.

As other Members States take advantage of the opportunity to implement product placement however, the question is, will this timescale be too late?

Pamela Learmonth, Policy Manager, BSG

Digital Britain Interim Report launched

The government’s Digital Britain Interim Report has been launched. The press release is available here, and the report itself is available here. The BSG press release responding to the launch is available here.

We have produced an initial analysis of the report in a special edition of our newsletter. We are keen to hear the views and opinions of members of the BSG community, and anyone else with an interest in the broadband value chain, on the issues raised in the report.

If you have any views you wish to share please either comment on this blog or send us an email. We will pass on all views to the government’s Digital Britain team.

Next Generation Broadband will be key to delivering Digital Britain

The BSG welcomed the publication today of the Digital Britain interim report.

Kip Meek, Chairman of the BSG said, “the Prime Minister made it very clear today that digital networks will be the driving force of the economy going forward. Next generation broadband is the biggest economic prize at stake in this report.

The government has set out the key issues and is stepping up to the task of setting a clear strategic framework that encourages the sector to invest – and the country as a whole to benefit.???

The report recognises the central importance of broadband to the UK economy and sets out three key challenges: firstly, to agree a minimum level of service that should be universally available; secondly to further drive the levels of take up; and thirdly to ensure the timely and widespread deployment of next generation broadband networks.

  • Universal broadband: Kip Meek proposed the idea of a universal broadband commitment in a speech November. Broadband access is fast becoming an essential utility for families and business across the UK.The BSG welcomes the goal of setting a minimum level of broadband that should be available universally and will work with government to determine the scope of the universal service commitment and the potential mechanisms for funding it.
  • Driving take-up: The BSG’s own research has highlighted the importance of achieving high levels of adoption to maximise the social and economic benefits of broadband.Driving take-up significantly beyond current levels will require government engagement and effective collaboration across the sector. The BSG will support this process.
  • Next generation broadband: Economic conditions have changed significantly since publication of the Caio report making next generation broadband both more important to the economy and harder to deliver for the industry.The next few weeks provide an opportunity for government to set out a vision for how, where and when next generation broadband can be delivered.The BSG welcomes the announcement of a strategic review and will directly engage in this process to ensure a clear vision is established and that specific measures are identified to achieve it.

The BSG also welcomes the emphasis placed in the report on ensuring that consumers are empowered to navigate the digital future effectively. The BSG believes that a coordinated approach is required to ensure that consumers have trust and confidence in digital services and are comfortable with the rapid innovation taking place across the sector.

Proposed measures to improve levels of media literacy, and empower consumers to make informed choices through the provision of transparent information about the nature of content and the use of personal data are positive steps to achieve this important outcome.

The BSG has produced a special edition newsletter providing further comment and analysis on the contents of the report – available to download below. We are keen to hear the views of members of the BSG community on the ideas discussed in the report.

Full press release

Digital Britain Interim Report

DCMS/BERR Digital Britain Interim Report press release

Special edition BSG Digital Britain Newsletter

Carter’s Universal Broadband Commitment

At an event yesterday Communications Minister Stephen Carter discussed the idea of a universal broadband commitment of a 2Mbps service to be available to every household that wants it, by 2012. The commitment could be included in the interim Digital Britain Report, expected to be published at the end of January.

The proposal would see a reform of the existing universal service obligation on BT, and would make use of wireless networks as well as fixed to deliver the service. The idea follows similar recent developments in other markets such as France, Ireland and Finland.

Whilst this is clearly a significant development, many will ask what it means for next generation broadband deployment in the UK? In November last year BSG Chairman Kip Meek outlined the idea of a universal service commitment for broadband in his speech to the BSG Reception. Meek’s idea sought to bring together policy in current and next generation broadband – a universal service for current broadband while encouraging investment in next generation broadband.

If the aims of the digital Britain initiative are to deliver economic as well as social benefits then a coherent approach will be required that addresses both objectives. While Carter referenced the importance of enabling investment in next generation services, it remains unclear, what, if anything, the DBR interim report will say on the matter.

Peter Shearman, Policy Manger, BSG

Government to undertake Digital Britain Report

On Friday last week the government announced it would be undertaking a Digital Britain Report, led by the new minister for technology, communications and broadcasting Stephen Carter. This represents an opportunity for Government to tackle a range of issues in a coordinated, strategic way. Hopwever, doing so requires that the report is not a stock-taking exercise of ongoing issues, but a proactive plan of action that provides strong government direction.

The value of this report would be in bringing together the various activities going on in the area of convergence, across different departments, in a coordinated, strategic way. In doing so, government can provide a strong direction, with the ultimate aim of ensuring that the UK’s digital infrastructure (and the surrounding policy and regulatory frameworks) is fit for a world-leading knowledge economy.

Commenting on the report, Peter Mandelson stated that ‘the digital economy will be central’ to Britain getting through the worst of the current crisis and preparing for the upturn; with this focus the report could be a valuable contribution to the health of the sector and the economic activity that it supports.

Looking at the issues identified for the report, there are already numerous initiatives either completed or underway that are tackling these. Indeed, one key issue for government is how this report interacts with these ongoing activities such as the Convergence Think Tank or the implementation of the Audio Visual Media Services Directive. A report that simply reviews these various policy debates will be of limited value.

The opportunity here is to bring together a range of ongoing issues that all relate to convergence but often sit across a number of government departments and lack an overall coordination. Addressing these at a strategic level, with government providing strong direction and leadership would be of benefit to the development of the converging industries.

It is rare that a new minister already has a command of their brief upon entering a new role, but in Stephen Carter this is exactly what has happened. With his knowledge and experience he should be able to hit the ground running, and use the Digital Britain report to drive government action, rather than simply set the scene for further reviews.

Peter Shearman, Policy Manager, BSG