Written evidence submitted by Federation of Small Businesses
[RBB 0079]
RE: EFRA committee inquiry into rural broadband and digital-only services.
The Federation of Small Businesses (FSB) welcomes the opportunity to respond to the above inquiry.
The FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political, and with around 200,000 members, it is also the largest organisation representing small and medium sized businesses in the UK.
Small businesses make up 99.3 per cent of all businesses in the UK, and make a huge contribution to the UK economy. They contribute 51 per cent of GDP and employ 58 per cent of the private sector workforce. 94 per cent of small businesses already view a reliable internet connection as vital to the success of their business and as business practices and technology evolves, their dependence on high quality, super fast broadband will only increase – regardless of the sector or industry in which the business operates.[1]
Our research has found that many of our members do not have access to the services they require. Of particular concern are small firms - particularly those in a rural setting - which are now increasingly being asked to interact with the Government online, but who may lack the connectivity or the skills to do so.
If the Government is going to require businesses to carry out transactions online, it must ensure that small businesses have both the skills and the connectivity to do so.
A step change in ambition for digital coverage is therefore required, alongside a fundamental review of whether the current market structure and regulatory framework are delivering the services small businesses need. More attention needs to be paid to the needs of small businesses by both Government and regulators. We remain concerned that the existing market structure is hindering competition and failing to deliver for the small business sector. In turn, lack of access to ‘fit for purpose’ broadband is limiting the potential of small firms across the UK and acting as drag on productivity and growth.
Any infrastructure plan must be future-proofed and based on the assumption that demand and use will escalate considerably in future. Unless this happens, small businesses will increasingly struggle to compete in the global marketplace and UK PLC will therefore fail to reap the full economic benefits on offer.
Whilst the implementation of the above recommendations would help to deliver improved digital services across the country, they will have the most impact in the rural areas which have not experienced improvements in quality to the extent that urban areas have in recent years.
We trust that you will find our comments helpful and that they will be taken into consideration.
Mike Cherry LIWSc FRSA
- The extent of broadband coverage in hardest to reach rural areas
The FSB’s Fourth Utility report investigated the provision of broadband services across the country and found a significant gap between the needs of small businesses and the services they are able to access. Small businesses, in both urban and rural areas, now rely on the internet to run their businesses effectively. 94 per cent of firms viewed an internet connection as critical to the operations of their business.[2]
Businesses view both upload and download speeds as important, and need services which are reliable, resilient and priced competitively. The evidence contained in our report shows that many small businesses are not able to access these services.
The FSB has recognised that it will not be economically viable for the market to provide fixed line broadband services to the hardest to reach rural areas. As a result, the Government must step in to provide funding for location- appropriate broadband services to be delivered in these areas. We do not believe that the current strategy is working and that the Government must therefore be more ambitious. A continuing failure to deliver fit for purpose broadband services to rural areas will result in the further development of a two-speed economy.
This is not just an issue affecting fixed line broadband. In the context of this inquiry, mobile connectivity must be taken into account as well. Farmers making BPS applications will be required to use digital services whilst out on their farm. As a result, they will need strong and reliable mobile connectivity in order to complete these applications. The data shown below illustrates how significant a challenge this will be for farmers, with low levels of satisfaction being reported by many of our members. Geographic as well as premise coverage must increasingly become the key metric for measuring the success of digital roll-out across the UK.
Recent survey data from Ofcom has highlighted the relatively low levels of satisfaction with fixed line and mobile broadband services in rural and remote rural locations. Less than two thirds of SMEs in rural and remote rural locations were satisfied with their fixed broadband connection. Similar figures were reported for SME satisfaction with the extent of geographic coverage for both mobile voice and mobile internet.[3]
Our research suggested that satisfaction levels were even lower than those reported by Ofcom. Our research found that only 36 per cent of our members were satisfied with the provision of mobile broadband in their area.
Mobile voice services are also important to the rural economy
Ofcom has found that geographic mobile coverage is lacking in many areas. They have published the following information when asking respondents how often they experienced issues resulting from a lack of mobile phone signal:[4]
This chart illustrates the extent to which rural and remote areas are not receiving the mobile coverage that more urban areas get. Almost half of residents in remote rural locations experience a lack of mobile coverage at least once a week, with 28 per cent experiencing problems every day. Only 12 per cent of these respondents never experience mobile coverage issues. This is clearly unacceptable.
Whilst the above chart asks about mobile voice services, it is reasonable to assume that the geographic coverage of 3G and 4G services will be even poorer.
The FSB found that nationally, only 39 per cent of our members rarely or never experienced problems with their mobile service as a result of poor signal. London was the only region in the UK where less than half of respondents said they experienced issues very often or quite often. This figure still stood at 49 per cent however. In all other regions, the percentage of people experiencing frequent problems with using their mobile for business purposes was substantially higher.
Rural digital connectivity is important for firms beyond interacting with Government
Digital only Government programmes make digital connectivity increasingly important for businesses in both rural and urban areas. However, digital connectivity is not just helpful in allowing businesses to interact with Government. Rural businesses require broadband services to fill a range of vital business functions.
In addition, the traditional view of farming as a low tech industry is increasingly obsolete. New technologies are allowing farms to digitalise their operations – including using machine to machine applications to track large volumes of data in real time. Many of these services require digital connectivity across the farm rather than just in the premise.
In order to ensure that rural SMEs and farms are able to compete in the modern economy through using the most efficient means of production - and to interact with suppliers, customers and external markets as well as with the Government - it is vital that more is done to help rural firms access fit for purpose broadband services.
- Digital access and experience of digital─only programmes, such as the new CAP system applications
Digital only business to Government transactions will require the delivery of fit for purpose broadband services across the country.
The introduction of digital-only services puts a further onus on Government to ensure that all citizens and firms have access to fit for purpose broadband services. We do not believe that the current broadband strategy from the Government is sufficient to achieve this goal.
Digital by default services offer clear value for money to Government, citizens and businesses alike. The Government must however consider the implications for small businesses if they are not able to access a secure or reliable broadband connection to carry out vital transactions with Government, for instance submitting tax returns to HMRC online. Many members already struggle with this requirement - without access to adequate provision, this will only get worse.
There is a cost to business if they are not able to process applications online due to a lack of connectivity. Some firms may receive financial penalties from Government as a result of late compliance with reporting obligations. Other firms might have to pay a third party to complete forms for them. In the case of the single farm payment, this represents the profit margin for many farmers in a financial year. If they fail to receive this payment due to difficulties with submitting the necessary paperwork, this would represent a significant financial burden.
The Common Agricultural Payment Information Service – to be used to process the new Basic Payments Scheme - is a good example of a Government transaction which requires effective broadband services to be processed. To successfully make a BPS application, farmers most obviously need reliable geographic coverage in order to document the contours of the hedges and fields on their property. They also need to be able to upload documents online. The ongoing asymmetry between upload and download speeds is an issue which affects many businesses which will often need to upload large files. Unfortunately, upload speed is an issue which frequently has been left out of the policy discussion – an omission which must be addressed in future.
Farmers applying for BPS need access to a secure, stable and reliable connection. As the documents on the BPS application cannot be downloaded, farmers need to be able complete the application in a single transaction. Whilst the bandwidth required to make an application may not necessarily be particularly high, it will be imperative that they are able to process a claim from start to finish without worrying that the connection will drop.
The different requirements for broadband services which are needed to process these BPS applications are common to many other Government transactions. If the Government is serious about moving business-to-Government transactions online, they need to ensure that businesses have access to the services which are needed to do this.
A single minister is needed to ensure digital policy is joined up across Government.
The decision by DEFRA and the RPA to introduce digital only applications for programmes such as the Common Agricultural Policy schemes, including the basic payment scheme, clearly demonstrates the need for closer central coordination between Government departments. The FSB has called for a single minister to oversee all aspects of the digital policy agenda, based within a single department.
The lack of this central coordinating minister means that departments introduce requirements such as digital by default transactions on businesses without fully considering whether these firms will have the skills or connectivity to carry out these transactions. This is true for transactions which affect all businesses, but also has significant impacts on businesses in a rural setting due to ongoing disparities in geographic coverage.
It is disappointing that different departments continue to introduce new requirements like this whilst assuming that businesses will have the connectivity to be able to process these transactions. This speaks to the lack of Government coordination on this issue. Having a single minister in charge would at least ensure that a view was taken across Government on the feasibility of introducing digital by default transactions.
- Support available for those required to use digital─only programmes
The increase in the uptake and prevalence of digital technologies in both rural and urban areas can mean that it is easy to forget that not all citizens will feel able or willing to use these technologies and develop their digital skills. The Government must recognise that not all citizens will be able to educate themselves to a level which would allow them to effectively use digital-only programmes.
As a result, further education and skills training is required in the long term. In the short term, DEFRA and other Government departments must ensure that they have sufficient numbers of staff who will be able to assist farmers and other citizens who lack the requisite skills to use digital only programmes.
This support must be bought directly to farmers to ensure that they can access support without being inconvenienced unnecessarily through making these applications. The current pledge to bring Digital Support Centres to within 30 miles of farmers still places an unnecessary burden on small farmers as they will need to travel considerable distances to submit a claim. The suggestion from the RPA that farmers hire an agent to process these claims on their behalf would similarly create an additional cost for small farmers which many farmers will not want to incur.
It would however be a mistake to view the need to simply provide in-person support as sufficient to resolve the upcoming difficulties which farmers will face in using the CAP Information Service. In many cases, this will primarily be an issue caused by a lack access to broadband services. If farmers cannot physically access the online services needed to carry out these transactions, no amount of skills support will allow them to successfully complete a given transaction.
Better signposting for skills support is also required as finding appropriate specialised support can be challenging. The FSB’s ‘Enterprise 2050’ paper counted around 900 different schemes, with little evaluation of their effectiveness, and while the Government has announced a streamlining of the process, along with more effective signposting, we are concerned that the current business support offer is not supporting businesses in the way it could.[5]
Any training must be easy to find and should also demonstrate a clear utility for businesses to participate in the training. If the training is to enable businesses to use a Government programme, it must be available to all businesses, no matter what their size or income.
November 2014