Written evidence submitted by BT

Thank you for your letter of 28 March. I was pleased to be able to appear before the Committee on behalf of BT Group as part of your inquiry into Critical National Infrastructure and Climate Adaptation. We recognise fully the challenge that climate change poses to our telecommunications networks, and we’re committed to meeting that challenge head on.

I am responding to your request for further information on BT’s adoption of technological innovations and the relationship between resilience expenditure and customer bills. I also wanted to update you on our recent decision to pause the migration to Digital Voice and the retirement of the Public Switched Telephone Network (PSTN). Please find my responses below.

Technological Innovation

We recognise the value that technology offers in supporting our network resilience management and we already utilise a range of existing and emerging tools to help us understand and mitigate vulnerability risks. These technologies provide support in three areas: managing service issues, predicting future risk and improving reporting mechanisms. Some notable examples are as follows:

         Our assets are included in the Environment Agency’s Targeted Flood Warning Service (TFWS) to provide advanced warning of potential flood risk to our operational estate;

         Application Programming Interfaces (APIs) provide us with near real-time flood warnings from the Environment Agency that we consume and share across our business to enable decision-making on risk mitigations. We have similar APIs in place with the Met Office to warn of impending storms;

         We utilise the Extreme Flood Outline database to support our assessment of critical BT sites at risk (using the data to establish and define appropriate risk thresholds). This has resulted in 77 sites being identified, all subject to detailed survey and action plan;

         We have engaged a specialist business to combine International Panel on Climate Change (IPCC) scenarios with other data sources to create a view of the change in evolving flood risk to our operational estate. We are now analysing that data to identify gaps to our existing defences and take appropriate action;

         In terms of reporting, we have developed a weather based geo-spatial Service Predictor Tool specifically for BT assets. We also used GIS Analysis tools created for flood and extreme weather impact analysis.

We believe there is greater potential to exploit digital innovation – in particular digital twins – to improve interoperability between BT and other CNI operators such as power and water companies and we are continuing to explore the potential ‘real-world’ application of this technology. One example is the Climate Resilience Demonstrator (CReDo) pilot. This partnership between BT and major utilities providers, Anglian Water and UK Power Networks, aims to develop a utilities digital twin to increase climate resilience in the face of changing and unpredictable weather patterns. With the help of the National Digital Twin programme (NDTp), the collaboration is helping to build a digital twin across energy, water, and telecoms networks. Each partner knows that flooding events affect their operations, and the ability to predict where and how severely those events will happen would allow them to plan accordingly and to be able to optimize service delivery. A digital twin can therefore be fed with weather data and flood event predictions. The digital twin environment will then provide a view of how the service network would respond to such disruption. The processes that are in place to maintain and restore service delivery can be tested and optimized with a view of how to respond to those incidents. Although this is still being piloted, the demonstrated benefits could serve as a paradigm for a national infrastructure digital twin eco-system.

Resilience expenditure and customer bills

We understand the challenge that our customer face in the current economic climate with the rising cost of living. We consider carefully the balance between investment in resilience versus costs to the customer of using a service, particularly those who are vulnerable. For these customers we provide social tariffs for fibre broadband and call packages to those who are in receipt of Universal Credit and other legacy benefits, and we do that at cost.

However, like other consumer providers we have taken the decision to increase our prices for the year 2022/23 - by 9.3% for most customers (equivalent to an average monthly increase of £3.50). One of the main drivers for this is the significant increase in customer data usage: even as fixed data consumption increases at around 30% year-on-year, the cost per gigabyte (GB) is falling by 25-30% each year and was around 11p/GB in 2020. This exceptional value to UK telecoms customers is underscored by international comparisons: UK broadband is 40% cheaper than in the US and c.30% cheaper than in Germany and Spain. This is also in stark contrast to most other utilities, where consumption is broadly flat or declining whilst prices increase. Further, it’s worth highlighting that this follows two years of significantly smaller price rises: in 2020 we increased prices by just 1.3% (CPI) and in 2019 we froze prices entirely – an approach we chose in order to reset our overall value proposition. While we understand this is difficult, it is necessary to ensure we can continue to invest in the network to meet increasing demand, deliver great customer experience, and maintain and improve the reliability of our network.

In recent years we have changed the way we implement price changes to provide more certainty and predictability for our customers. Instead of unexpected, and inconsistent price changes throughout the year, we introduced a single contracted price rise, that would happen annually from 31 March, and would reflect the rising costs to the business, and inflation - measured at CPI, and for those who’ve joined since September 2020, CPI+ 3.9%.

Although we do not publish specific information on our resilience expenditure per se, a breakdown of our Group costs can be accessed here. This capital expenditure will include investment in the resilience of our existing network as well as the expansion of our network with new, more reliable deployment across mobile and fixed broadband in including full fibre and 5G.

We will continue to ensure that our investment is efficient, proportionate, based on the best value-for-money and maximises the potential economies of scale through industry collaboration, while protecting those customers who need the most support.

Digital Voice migration

During the evidence session, I set out our plans to migrate customers to Digital Voice and the resilience measures we’re implementing to support vulnerable customers and those in rural areas. On 29 March, we took the decision to pause all further Digital Voice switch-overs for customers who don’t want to move to the new technology straight away.

We’ve listened to the feedback from our customers and realise we underestimated the impact that this technology upgrade could have for some of them, particularly those who live in power cut-prone areas or places with poor mobile reception.

Whilst we have alternatives for this in place, we appreciate that these are not yet as good as they could be for all circumstances. This was thrown into sharp relief during the recent storms when some households had to endure long periods without electricity.

We’ll restart the programme once we have key products in place to provide our customers with more resilient connectivity when they need it.

This will include the roll-out of longer-lasting battery back-up units for use in the event of a power cut, home mobile landlines for people without broadband and hybrid home phones (for customers not comfortable using a mobile, but which can connect via the mobile network if the fixed connection becomes unavailable and with an in-built back-up battery).  Customers who want the Digital Voice service can still request this upgrade during the pause period.

This pause in the programme will also enable us to drive a greater level of public awareness and understanding of the coming change.

This isn’t and can’t be a permanent halt to the programme. The PSTN is nearing the end of its life, is increasingly difficult to maintain and is becoming less and less reliable. The long-term resilience of landline phones needs the retirement of the PSTN and a shift to digital services with all the benefits this will provide including better scam call prevention and significantly reductions in electricity consumption. This change is happening in countries across the world.

But we know we need to do more to support our customers in the short term.  We’re working with organisations who support those most reliant on their landlines and those who live in rural communities so that we help everyone make the change to Digital Voice successfully. We plan to be in Parliament later in the year to demonstrate some of these technologies and show how we’re supporting constituents to make the change. 

I hope my response is a useful supplement to my oral evidence. Should you have any further questions or would like any further information then please do not hesitate to contact me.

Jim Dempsey

20 April 2022