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Written evidence submitted by Vodafone UK
Digital, Culture, Media and Sport Select Committee inquiry- Broadband and the road to 5G
- Founded and based in Newbury, Vodafone is a proud British business. We are one of the few start-ups in the tech sector that have grown and remained British owned. Vodafone UK connects people, businesses and devices to help our customers benefit from digital innovation. Our services span mobile, fixed line connections, home and office broadband and the Internet of Things (IoT).
- Having made the UK’s first mobile phone call and sent the first text message, Vodafone has a history as a tech pioneer. In 2018 we made the UK’s first live holographic call using 5G, and were first to start carrying live 5G traffic from a site in Salford, Greater Manchester. We now have 5G live in multiple locations across the UK and the rest of Europe. Today we serve more than 18 million mobile and fixed line customers in the UK, with 4G network coverage at 99% of the population.
- We are part of Vodafone Group, one of the world’s largest technology communications companies, with mobile operations in 26 countries, partnerships with mobile networks in 55 more, and fixed broadband operations in 19 markets. Vodafone employs around 13,000 people across the UK and approximately 100,000 globally.
- These are difficult and worrying times due to the spread of coronavirus (COVID-19). Connectivity is now more important than ever and we are focussed on keeping the UK connected. We are working hard to support all our customers, whether that is other providers of critical national infrastructure, the public sector including the NHS, businesses both big and small, and our many mobile and broadband customers.
- To help people access health information, we have enabled all mobile customers to access NHS online sites for free and sent a government SMS with health advice to all of our customers. We are proactively giving, for 30 days initially, unlimited data to our customers who are either NHS workers or classed as vulnerable people. We have zero-rated the cost to access the non-emergency 101 police line, and have put measures in place to support customers with payments. We have also added extra capacity to our core networks so that they can deal with the increase in voice and data traffic and extended our capacity to critical networks such as the NHS 111 line.
- Our technology and ability to move fast mean we can play an instrumental role in this crisis. We can offer all the connectivity tools and services people need to continue communicating and doing business, from broadband to superfast 5G connectivity, videoconferencing to cloud hosting, virtual private networks to internet telephony.
- Our networks are robust – we’ve invested billions improving them over the last five years – and we have a 35-year pedigree as a technology communications leader. However, we need to ensure we have the right network for the future once we are through this national health crisis.
How realistic is the Government’s ambition of nationwide gigabit-capable broadband by 2025, and what measures (regulatory, financial, technical, other) will be needed to achieve it?
- As a leading provider of broadband and 5G services in the UK, Vodafone welcomes this inquiry. Gigabit capable networks, driven by full fibre and 5G will be crucial in underpinning the UK’s ability to grow our economy and compete on the global stage. We therefore welcome the Government’s ambition to accelerate the rollout of gigabit capable networks to every home in the UK by 2025.
- However, we will not be able to rely on BT alone to provide the kind of national full fibre rollout that delivers on the UK’s ambition. In order to attract the investment required, a clear plan is needed which reflects the policy goal of Gigabit Britain.
- It is estimated that at the end of December 2019, fibre to the home (FTTH) covered 3.6million premises, approximately 11% of the UK’s homes and businesses. In order to get to 90% coverage by 2025 we need to see build rates of approximately 4 million homes per year. In 2019, the year we have seen the largest addition to the FTTH network, we saw approximately 1 million homes passed with new network.
- In addition, current Ofcom policy encourages over build. For example, well-known industry analysts Enders estimate that over 60% of CityFibre’s FTTH network will overbuild Openreach’s network. We are therefore concerned that actual FTTH build rates experienced to date fall far behind the projections required. Even if build rates did improve, overbuild could reduce the geographic coverage of the incremental build.
- It should also be noted that Huawei kit has a significant presence in the Openreach network. The Government’s Supply Chain Review has placed long-term restrictions on the use of High Risk Vendors’ (including Huawei) kit in 5G and gigabit-capable networks. Therefore Openreach is having to make substantial changes to its network to comply with the Government’s decision at the same time as rolling out full fibre.
- It is important that the Government focuses equally on creating the right conditions for FTTH and 5G. As the gigabit capable networks strategy is being developed, it should be done in a way that supports 5G and enterprise and SME fibre access, not just FTTH.
- To achieve its ambition, government should make 5G eligible for the £5bn public funding it has committed to rolling out gigabit capable networks. For this to be effective, state aid clearance would be required to cover both the capital and operating expenditure of the rollout of 5G.
- Affordable and available fibre is crucial to the success of 5G. Government needs to ensure that the conditions attached to the receipt of the £5bn public funding support fibre for mobile backhaul and business. One area would be to ensure that any publicly funded fibre network grants unrestricted access to dark fibre for mobile backhaul, while also ensuring access to ducts and poles.
- The challenge is that FTTH will often not be built in the same place as fibre to the mast. This is because planning law discourages the placement of masts in those areas where FTTH fibre will be laid, for example in the middle of housing estates. The Government needs to recognise this difference and encourage the build of fibre hubs that can also be used by mobile infrastructure.
What are the challenges to the roll-out of 5G and gigabit-capable networks? To what extent do existing legislative, regulatory and spending plans address them?
- We strongly support the Government’s ambition for the UK to be a leader on 5G. 5G is set to revolutionise the way we work, use public services, socialise and consume entertainment. It will change the way we live for the better and underpin future economic growth in all nations and regions of the UK.
- The 5G revolution is key to the Government’s One Nation agenda. It could transform the economic prospects of towns and cities in all parts of the UK and provide improved public services.
- Critical manufacturing industries could benefit from the higher flexibility and lower costs that quicker, more reliable 5G networks provide. 5G will also build on existing IoT products and services. It will enable new 5G technologies, including healthcare devices, connected buildings and vehicles, smart devices and smart transport infrastructure.
- The Government is right to be ambitious about 5G. However, the Government’s focus has so far been more on FTTH than 5G leadership. To achieve its targets, the Government needs to give more focus to 5G and refresh its 5G strategy.
- The strategy should be based on two main approaches, a government-wide procurement strategy and the removal of barriers to 5G rollout.
- To realise the full potential of our digital infrastructure and 5G technologies, we need to create the right investment environment. We need public and private sectors to adopt the technology. This will create a virtuous circle, where investment in new 5G infrastructure and technology results in new revenue streams, which provide further funding for 5G network investment.
- Government and industry must work in partnership to deliver the right conditions to maximise the potential of 5G. We need a policy framework that enables us to invest in, build, upgrade, run and maintain our network in a much more efficient way and grants access to available and affordable fibre.
- There are a number of areas in which Government incentives or legislation can help to create the right investment environment for us to achieve our shared ambition to be a world leader on 5G:
- Government procurement – Government to form a cross-departmental working group to produce a strategy to create the right market conditions for 5G, including public and private sector productivity and service delivery improvement gains. This should be supported by policy and procurement reform.
- Telecoms Security Requirements (TSR) - maintaining high quality, secure digital connectivity is of the utmost importance to Vodafone. Secure digital infrastructure and services are crucial to the UK economy, and we therefore support the Government’s intention to strengthen telecoms security through the new TSR. Cooperating with NCSC and government on the TSR is an important initiative that requires a significant amount of operational time, effort and resource. Due to the considerable demands that responding to COVID-19 is placing on the industry, our ability to review the proposals is limited. We are therefore seeking a delay to the finalisation of the TSR, and a more suitable glidepath for implementation so not to impact other critical activities. While we are still establishing the projected financial costs of implementing the TSR, it is clear that implementation will incur substantial costs. We need to make sure that the TSR help, rather than hinder the road to 5G. COVID-19 is likely to exacerbate the already substantial costs by causing prices to rise for network equipment – Government could help by factoring these considerations into the development of the TSR. The success and speed with which the UK can become fully 5G enabled is also dependent on changing consumer behaviour - ensuring that the public choose the most secure products will require concerted action from vendors, operators, regulators, retailers and Government.
- Dark fibre access – unrestricted dark fibre access from BT Openreach to provide the backhaul 5G requires. We want fibre investment in the UK to focus on areas where it is needed, i.e. connecting more homes. It is more cost and time efficient to use existing fibre that we have already paid to install than to build additional fibre to enable and deliver connectivity on our 5G network. Duct and pole access works for fibre to the home but not 5G backhaul where there is fibre already present, but restricted to a narrow range of Openreach services that restrict the freedom of 5G providers. Ofcom has proposed to implement a dark fibre remedy for 30% of the population. However, the whole country should benefit from the reduced cost of the transmission of mobile data that dark fibre brings. It is the environmentally responsible way to proceed, using less equipment, consuming less power and avoid duplicating assets that already exist.
- Business rates – relief for 5G small cells, which are for capacity uplift and do not raise revenue. Business rates represent a significant portion of operating costs and could make small cells uneconomic. Yet they are crucial for effective 5G rollout.
- Spectrum – create a level playing-field through defragmentation of the 3.4-3.8GHz band. Contiguous spectrum is key for efficient 5G rollout. Fragmented spectrum is damaging for the UK’s climate change credentials, as it results in network equipment working in a power-inefficient manner. Further, the UK’s aspirations to diversify the network equipment supply chain risks being damaged as only a very limited pool of vendors can support fragmented spectrum. Ofcom missed the opportunity to use the design of the 5G spectrum auction to resolve this issue, and has instead left it to industry to resolve it via private spectrum trades. Vodafone believes it is incumbent on both government and Ofcom to facilitate and incentivise the trading process so that its strategic goals are not compromised.
- A more considered balance needs to also be struck between revenue raising and finance available for network investment. Mobile operators have to pay for spectrum (whether by auction and in annual fees). There is no equivalent fee for fixed providers. Vodafone agrees the principle that auctioning spectrum results in it ending up in the hands of those who value it most: the most efficient outcome. However, we now face a situation of uncertain demand, making it difficult to assess the worth of spectrum, coupled with turmoil in the financial markets affecting mobile operators’ ability to raise capital to bid in auctions. These factors mean that an auction may not yield the most efficient outcome, and we have therefore suggested to both Ofcom and Government that for the remaining 5G spectrum a managed approach to allocating the spectrum should be adopted. Such an approach would also make the spectrum immediately available to expedite 5G rollout once this is practicable.
- Net Neutrality – DCMS and Ofcom should review net neutrality rules to ensure they support, rather than hinder, 5G leadership ambitions.
- Even though the UK has now left the EU, we welcome the European Commission’s recent statement on Net Neutrality. The UK should continue to provide us with the flexibility we need to maintain critical services during the ongoing COVID-19 crisis.
- The BEREC guidelines currently followed by Ofcom hinder rather than support this effort. The European Commission also extracted undertakings from major content providers to reduce the bandwidth of their services. In the absence of such agreements in the UK, critical services could be threatened by services which contribute nothing to the vital network capacity they consume.
- To protect essential services we advise against encouraging expansion of data consumption.
- In addition, we need Government action to enable us to continue to improve and upgrade our existing network, which provides the basis for future 5G rollout:
- Planning reform – welcome changes have been made, but government needs to go further to support 5G rollout. Government has recently been consulting on planning reform, which should be delivered as soon as possible. Reforms should include the ability to build taller masts where required, removal of all prior approval conditions from the exercise of Permitted Development Rights in relation to mobile infrastructure, removal of limits on the width and thickness of mast equipment for the upgrade of sites. Complete parity between mobile and fixed line infrastructure in terms of how the Permitted Development Rights apply is needed. Developers should be obliged to offer space on the top of buildings where that building is the only suitable site for such infrastructure. These changes should be replicated in Scotland, Wales and Northern Ireland.
- Streetworks and permissions – reduction in bureaucracy for road closures, permits, traffic management etc. This will help to speed up network rollout and make maintenance easier.
- Public sector sites – access is needed in urban and rural areas. Government has made supportive announcements but there has been little progress in reality. Focus should be on improving coverage rather than raising revenue for the Exchequer. Government can show leadership by ensuring access to all public sector sites, including land, rooftops and buildings, is granted at Code rates.
- Reducing costs – the UK is still a difficult investment climate for digital infrastructure. Deployment is expensive and the burdens of regulation are significant. The UK’s competitive environment has seen prices in mobile come down by 4% as data usage has gone up by 214% since 2014. Taken together, and excluding the money we paid in the spectrum auction, we are paying multi millions of pounds a year to Government in various ways in order to build and run our network. This approximately equates to the capital and operating expenditure to cover the West Midlands. This model is unique and is not replicated in other parts of the telecoms industry or with other infrastructure providers. In addition, the burden on Vodafone of recent regulatory changes (not including GDPR) is multi millions of pounds over the period 2017-2020, money which could be invested in infrastructure.
What will be the impact on individuals and communities whose broadband and mobile connectivity fails to keep pace with the rest of the country over the next 10 years? What is the link with other DCMS policy concerns, such as changing patterns in the consumption of digital media?
- 84% of UK adults use the internet on the go. 79% of this use is on a mobile phone. Only 10% of the UK adult population are described as internet non-users. Clearly there is a reliance on internet access across the UK population at home, at work and on the move. Connectivity is important to business too and adoption of digital technology is increasing. 79% of businesses see digital transformation as a strategic priority. As more companies undergo digital transformation, there will be a greater dependence on gold-standard connectivity to allow access to the newest technologies to encourage productivity, efficiency and other benefits.
- While connectivity in the UK is improving constantly – we deliver 4G coverage to 99% of the UK population and the Shared Rural Network will deliver 95% 4G geographic coverage – it is important not to become complacent.
- Technology moves very quickly – there has been approximately ten years between the last three generations of mobile connectivity. As new technologies are developed, rolled out and adopted, older technologies become end of life. With the uptake of new technology at an all-time high, it is vital that communities are not allowed to fall behind. For individuals, lack of access to proper connectivity could mean increased social and economic isolation. For businesses, a fall in productivity, efficiency and revenue.
How effectively do the different stakeholders (UK and devolved governments, local authorities, Ofcom, industry) work together in both the mobile and broadband sectors? How might these relationships be improved to support gigabit-capable roll-out?
- Whilst certain areas of reform fall solely under UK Government powers, we also work closely with the devolved governments to drive change in areas such as planning, business rates and access to public sector sites.
- We welcome changes made to date by the devolved governments including introducing a Mobile Action plan in Wales and the Scottish Government’s 5G strategy and we are currently working with the UK Government, Scottish Government, Welsh Assembly and Northern Irish Assembly to ensure the success of the Shared Rural Network.
- However, in order to ensure we have the right policy environment to support digital infrastructure rollout, especially 5G, we would encourage further collaboration between the UK Government and the devolved governments to ensure they are aligned and share best practice amongst one another.
 ONS, Internet access – households and individuals, Great Britain: 2019, link.
 ONS, Exploring the UK’s digital divide, link.
 Vodafone UK, How digitalisation can help grow your business, link.