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Written evidence submitted by the CBI
DCMS Select Committee Inquiry: Broadband and the Road to 5G
The CBI welcomes the opportunity to respond to the DCMS Select Committee Inquiry on Broadband and the road to 5G. The CBI is the UK’s leading business organisation, speaking for some 190,000 businesses of all sectors, sizes and regions that together employ around a third of the private sector workforce.
The UK is sitting on an untapped opportunity to supercharge productivity and drive the Covid-19 economic recovery by delivering seamless digital connectivity to every home and business; nationwide full fibre is estimated to boost productivity by £59bn by 2025. Better connectivity will level-up regional economic growth, cement flexible working and lay the foundation for every company to innovate. Now more than ever, fast and reliable digital infrastructure is a ‘business basic’.
Covid-19 has highlighted the crucial need for world-class digital connectivity across the UK. Not only is digital connectivity underpinning economic and social inclusion, widespread home working and technology adoption today, it will also drive the economic recovery going forward.
The UK is at a critical juncture for broadband and 5G deployment. Whilst the UK has made significant strides to improve the availability of gigabit-capable broadband and support commercial 5G rollout, further policy action is required to enable network providers to go further, faster and to stimulate UK-wide uptake. The policy changes highlighted in this response will be vital to help industry recover and continue to quickly deliver gigabit-capable connectivity UK-wide. These policy changes require greater ambition, momentum across government, and fast decision-making to ensure the measures make a tangible difference to the rollout of gigabit-capable connectivity.
The CBI will also provide supplementary evidence to the Committee in June, once the impact of Covid-19 on the industry and the timeline for gigabit-capable connectivity rollout become clearer.
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?
1.1 Fast, reliable digital connectivity offers unprecedented opportunities for businesses and consumers across the UK. With the rise of new technology, modern business practices, and a significant demand for flexible working, seamless digital connectivity can enhance productivity, innovation and future-proof the digital revolution.
1.2 Businesses welcome government’s vision for gigabit-capable connectivity to every home and business by 2025 and 5G to the majority of the UK by 2027. This vision is ambitious but achievable if there is a concerted policy effort to help industry unlock the billions of private investment required to deploy these networks; Covid-19 has made quick policy action even more crucial. This includes evaluating the government’s current broadband policy plans to account for the accelerated 2025 timeline and refreshing the government’s 5G strategy.
1.3 A range of policy barriers remain to the rollout of gigabit-capable broadband and 5G. These include access limitations especially in flat blocks, and regulations that slow the rollout of infrastructure, such as planning restrictions on 5G and road works limitations.
1.4 There are four concrete steps that must be taken concurrently – on legislation, investment, talent and stimulating demand - to deliver world-class digital connectivity across the UK.
1.4.1 Legislation: HM Treasury, DCMS and Ofcom to fast-track policy to make the UK a leader in gigabit speeds
1.4.2 Fiscal policy: support industry roll-out through business rates reform and public funding for uncompetitive areas
1.4.3 Talent: Ensure access to skilled workers through a new immigration system that is open to the best engineering talent
1.4.4 Uptake: Government should form a grand coalition to develop a strategy to spur uptake of gigabit connectivity across businesses and consumers
Further details are outlined below.
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?
What needs to happen to ensure the Government’s ‘outside in’ approach successfully addresses the digital divide while also delivering value for money?
2.1 Firms welcome the quick action government and Ofcom have taken so far to unlock the barriers to gigabit-capable broadband and 5G, such as the Telecommunications Infrastructure (Leasehold Property) Bill to give better access to tenant properties, the joint industry-government Shared Rural Network agreement to eliminate mobile not-spots and Ofcom’s Wholesale Fixed Telecoms Market Review 2021-2026 which will use regulatory change to unlock the long-term business case for gigabit-capable broadband rollout.
2.2 To reach government’s ambitious 2025 target, these actions must now be made as effective as possible, fast-tracked and form part of a wider suite of policy action. It is vital that these policies begin to make a difference to rollout plans from 2021 onwards. Policies that are implemented slowly will have a limited impact on the pace and effectiveness of gigabit-capable broadband and 5G rollout. Policies should include:
2.3 Legislation and regulation: HM Treasury, DCMS and Ofcom to fast-track policy to make the UK a leader in gigabit speeds
2.3.1 Firms welcome the government action taken through the Telecoms Infrastructure (Leasehold Property) Bill to provide better access to tenant properties and plans to mandate gigabit connectivity in new build developments by amending building regulations. These measures are helpful to support rollout but must be built upon to deliver effective and widespread reform. For example, whilst the Telecoms Infrastructure (Leasehold Property) Bill effectively targets unresponsive landlords, the Bill still allows landlords to refuse operators access to the property, even when a tenant has requested the connectivity. This falls short of the government’s ambition in the Future Telecoms Infrastructure Review to bring telecoms operators in line with the gas, energy and water sectors by providing a ‘right to entry’. Government must also continue to look at wider access issues so that providers can deliver the gigabit connectivity that businesses and consumers need. This should include eliminating exclusivity agreements in new build developments, which can leave consumers with low speeds and expensive broadband, as part of upcoming changes to building regulations.
2.3.2 Ofcom has made important progress on regulatory reform through the Wholesale Fixed Telecoms Market Review. This review must support long-term, high-risk private sector investment and incentivise infrastructure competition, which is fundamental to creating the right conditions for further rollout in the UK. Ofcom must now fast-track its proposals for regulatory change to unlock the long-term business case and go even further to set a longer-term regulatory framework. A greater emphasis on ‘fair bet’ would also provide investors with more confidence and impetus to invest over the long-term.
2.3.3 Government has also made progress on supporting 5G rollout across the UK. Existing proposals must now be fast-tracked, for example delivering the proposed changes to permitted development rights for 5G as set out in DCMS and MHCLG’s consultation in Autumn 2019, and working to harmonise planning law changes across the UK. Government should also consider refreshing the 5G strategy to focus on barrier busting and spurring demand through government procurement for 5G products and services.
2.3.4 Changing the government’s approach to high-risk vendors would impact the UK’s ability to meet its gigabit-capable connectivity targets. It is right that the network resilience of the UK’s supply chain is high on the agenda, and the Government has already undertaken steps to assess the supply chain. The approach set out in the Telecoms Supply Chain Review gives the UK access to cutting-edge technology, whilst building in appropriate checks and balances around security which are supported by the world-leading National Cyber Security Centre, and should be reviewed periodically to ensure they remain robust. Businesses are currently building government’s approach into their medium-term plans, including allocating resource to limit high-risk vendors to 35% of the network. Any policy change now would have a widespread economic impact, estimated to be between £4.5bn - £6.8bn, and would limit the UK’s opportunity to be a 5G world-leader.
2.4 Fiscal policy: support industry rollout through business rates reform and public support for uncompetitive areas
2.4.1 Nationwide gigabit-capable broadband rollout has been estimated to cost over £33bn, with the private sector fronting the majority of this cost. Yet the hardest-to-reach areas of the UK are commercially unviable and therefore require public investment to provide access to gigabit-capable networks. UK firms welcome the record £5bn government investment confirmed at Spring Budget 2020. Procurement for this funding must be conducted quickly to start making a difference to these areas from 2021 and must be reserved for the hardest-to-reach 20% premises in the UK. This funding must also support fibre backhaul for 5G. Government can also help create the right conditions for investment in the ‘potentially competitive’ or ‘missing middle’ areas of the UK, such as villages, business parks and small market towns. Delivering the policy changes mentioned in this response, including improving access to land, fast-tracking regulatory change, ensuring consumer telecoms regulation supports long-term investment, stimulating business and consumer demand, and reforming business rates, will make a difference to the business case for potentially competitive areas. Ultimately, barrier busting measures that reduce the average cost per premise will enable network builders to do more with the same financial resource and extend the number of commercially viable premises.
2.4.2 Business rates reform is also necessary to support gigabit-capable broadband rollout; lower business rates bills mean that firms will have more capital to invest quickly and therefore deliver gigabit connectivity more quickly. Government should use the fundamental business rates review announced at Spring Budget 2020 to assess the impact of business rates reform on the rollout of gigabit-capable connectivity and on infrastructure investment decisions. Telecoms business rates reform must be technology-neutral and cover all digital infrastructure, focusing on the outcome of gigabit speeds and greater reliability. In the short-term, government should provide assurances at the next fiscal event that it intends to extend the current business rates relief to align with Scotland, until wider reform takes place. There is also an opportunity to share evidence and insight on telecoms business rates with devolved nations so that the whole UK economy can benefit.
2.5 Talent: Ensure access to skilled workers through a new immigration system that is open to the best engineering talent
2.5.1 Designing a world class immigration and skills system that supports a dynamic technology sector is essential to delivering gigabit-capable connectivity. Meeting the 2025 target will require a faster pace of deployment than any comparable country, and therefore more engineers and groundworkers. The future immigration system must be made flexible and quickly adaptable, for example to bring in the groundworkers needed to deliver gigabit rollout by 2025, whilst network providers also train domestic talent.
What does take-up of broadband and mobile services indicate about consumer and business attitudes to digital connectivity? What needs to be learnt from this for the roll-out of, and switchover to, gigabit-capable networks?
3.1 The uptake of digital connectivity is equally crucial to support the long-term business case for widespread rollout of gigabit-capable technology and ensure businesses and consumers benefit. Currently, the UK ranks 4th in the G7 (excluding Japan) for uptake of 100Mbps broadband and Ofcom data suggests that take-up of existing superfast broadband has grown slowly; 57% premises with access to superfast broadband are now using it. Stronger take-up will provide a quicker return on investment and therefore continue to build the business case for faster gigabit-capable broadband rollout, as well as ensuring UK businesses and consumers benefit benefits quickly from the technology. Government has a role in supporting measures that deliver widespread uptake and ensure businesses and consumers benefit from the technology.
3.2 The CBI’s Ready Set Connect report in 2018 outlined reasons for low uptake:
3.2.1 Businesses have faced a wide array of technology adoption challenges, as the CBI set out in the 2017 report From Ostrich to Magpie, including on the adoption of futureproof digital connectivity. Low performance on technology adoption can translate into a lag between provision of digital connectivity technology in an area and uptake by businesses, ultimately limiting the productivity of firms, their ability to engage customers and their global exporting opportunities. The recent spike in business adoption of tried and tested technologies due to COVID-19, alongside greater working from home, offers an opportunity to build on these successes and share best practice to support greater technology adoption in the future.
3.2.2 Businesses need more insight and opportunity to explore the potential of digital connectivity for their business, for example exploring what new business models and uses may look like, return on investment, and how to address challenges such as cybersecurity.
3.2.3 The length of time needed to install new connections also stalls business connectivity. Tackling the barriers to network rollout such as land access issues can reduce lag-times. This is particularly crucial where businesses require short-term connectivity, for example to a building site.
3.3 Government should form a grand coalition to develop a strategy to spur uptake of gigabit-capable digital connectivity – including 5G – across businesses and consumers
3.3.1 This coalition would advise on a strategic and evidence-based approach to stimulate business and consumer demand for gigabit-capable broadband connections and 5G. As an early priority, the coalition should consider how best to learn from, and potentially use, the BEIS Business Basics initiative to support business adoption of gigabit-capable connectivity as well as lessons learned on recent business technology adoption due to Covid-19 (see section 4.1.2).
3.3.2 The coalition should include ministerial, departmental (including HM Treasury, BEIS and DCMS) and devolved administration representation, as well as business groups, Ofcom, Be the Business and consumer groups such as Which. The CBI would be interested in co-chairing the coalition and bringing business insight to inform an effective strategy. The coalition should report by mid-2021 and government should implement a strategy by the end of 2021.
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?
4.1 Gigabit connectivity plays a significant role in the levelling up agenda, adding real economic value to all parts of the country and ending the digital divide which holds many rural areas back
4.1.1 Digital connectivity underpins regional economic growth and greater productivity by supporting technology adoption amongst businesses and consumers. Digital connectivity can enable greater adoption of tried and tested technologies amongst the long-tail of low-productivity businesses in the UK. The Made Smarter Review found that slow internet connection speeds are a key barrier to industrial digital adoption, particularly amongst SMEs, whilst 81% commercial building tenants deem good connectivity to be vital for business performance.
4.1.2 BEIS has long engaged in policy work to support greater technology adoption amongst SMEs businesses, most recently through its Productivity Review, the Business Basics Programme, and its support for Be the Business, a non-profit helping firms increase their productivity. As Covid-19 has shown, digital connectivity is a key technology for all businesses to adopt and it therefore must be included within broader government policy that aims to reduce the business barriers to technology adoption, such as the Business Basics Programme. BEIS and DCMS must join up their workstreams to create a cohesive package for business adoption of gigabit-capable technologies, including 5G.
4.1.3 Gigabit-capable networks will also play a role in addressing wider societal issues such as cutting carbon emissions by reducing the need to commute. Nationwide gigabit-capable connectivity could allow 400,000 more people to work from home and give people greater flexibility in where they live. This means 270,000 more people could move to rural areas, reducing pressure on transport networks and urban housing. In addition, many of the future technologies aimed at reducing emissions will require gigabit-capable connectivity, making the upgrade of the UK’s digital connectivity a key part of the Government’s roadmap to net zero.
4.2 Digital connectivity also underpins a range of other cross-government initiatives, from HMRC’s Making Tax Digital programme to DCMS’ digital skills and inclusion agenda. Fast, reliable digital connectivity is the cornerstone of these initiatives, necessary to help citizens and businesses use technology to connect with others, do their banking and grocery shopping online, increasingly access public services such as libraries and GP appointments, and for small business to do their taxes. Ultimately, fast, reliable, gigabit-capable networks underpin people’s ability to engage in the economy and society. Ensuring that businesses and consumers across the UK have access to, and take up, these connectivity technologies will help drive the UK’s recovery from Covid-19.
 Cebr & Openreach, Full Fibre Broadband: a platform for growth (2019).
 CBI Ready Set Connect (2018).
 CBI, Forthcoming, Equipping the UK to Win on Innovation and the Digital Economy
 DCMS, Future Telecoms Infrastructure Review (2018).
 National Infrastructure Commission National Infrastructure Assessment, (2018).
 Measured by fixed broadband subscriptions over 100mbps per 100 inhabitants as of December 2018. Data from OECD, Broadband portal.
 Ofcom, Connected Nations (2019).
 CBI, From Ostrich to Magpie: Increasing business uptake of proven ideas and technologies (2017).
 Made Smarter Review, (2017), led by Jurgen Maier.
 Cluttons, The Connectivity Commercial Impact Report (2019).
 Oxera, Gigabit broadband: what does it mean for consumers and society? (2019) Prepared for Liberty Global.
 Cebr & Openreach, Full Fibre Broadband: a platform for growth (2019).