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Written evidence submitted by Gigaclear

 

 

Response to Digital Culture Media and Sport (DCMS) Committee inquiry into Broadband and the Road to 5G

 

About Gigaclear

Based in rural Oxfordshire, Gigaclear was established in 2012 to address demand from rural homes and businesses for access to fast, reliable internet connectivity. These areas often suffered from very poor broadband speeds, due to the very long lengths of copper cable being used to deliver broadband in rural areas and other network operators prioritising network investment in cities and towns with higher population densities.

This environment created the opportunity to use new FTTP, ‘full fibre’ network technology, where distance has effectively no impact on performance, to deliver a multi-gigabit capable, future proofed service to customers who were willing to pay for superior connectivity. Whilst our initial network builds were purely commercial, Gigaclear subsequently secured and delivered BDUK contracts in Essex, Berkshire and Gloucestershire; the first wholly full-fibre state aid contracts secured under the BDUK programme.

 

Gigaclear’s network currently passes 150,000 premises and has recently secured a £525m funding mechanism to expand that footprint to over 500,000 premises by 2025/2026. Gigaclear currently operates 15 BDUK contracts delivering full fibre connectivity across the South of England. The most of any operator after BT Openreach.

 

 

Introduction

Gigaclear welcomes the opportunity to respond to the DCMS Committee’s inquiry. Now, more than ever, telecommunications services play a critical role in our every day lives. Throughout lockdown fixed networks have seen increased demand, as more of us have worked from home and schooling services have moved online. Despite this increased demand, the UK’s telecommunication networks maintained resilience and capacity to serve these needs. This performance is testament to the investment made by multiple operators to build network capacity ahead of demand, in order to address future needs for bandwidth and address unexpected spikes. Without this investment in connectivity, there is no doubt that the impact of the lockdown on our economy and wider society would have been far more severe. We then warmly welcome the Government’s ambition to further incentivise investment and accelerate the rollout of gigabit capable networks in order to achieve nationwide coverage by 2025.

 

During the nationwide lockdown, both mobile and fixed networks have worked in collaboration with DCMS, other Whitehall departments and Ofcom. Network operators have developed products and services to provide additional support to vulnerable customers, key workers and public sector organisations leading the fight against coronavirus. This was all enabled through the Government identifying our engineer teams as key workers and ensuring that dependencies such as power supply operators appropriately supported our efforts to maintain and continually upgrade our networks. DCMS also actively intervened where, in the early phases of lockdown, some Local Authorities attempted to suspended highways work permits which would have left us unable to fix network faults.  Together, these measures evidence that close collaboration between private sector investment and public sector support can deliver positive outcomes for both our economy and society as a whole. It is this spirit that we provide this submission.

 

Q1. 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?

 

Whilst the Government’s commitment to accelerating the rollout of gigabit capable networks to achieve nationwide coverage by 2025 is welcome, it is an extremely ambitious goal.

The Future Telecoms Infrastructure Review (FTIR)[1] had proposed 2033 as the target date for gigabit capable nationwide coverage. To accelerate an already ambitious timeframe by 8 years will then require a step change in policy approach.

Current DCMS activity continues to pursue the core policy measures set out within the FTIR, namely to review legislation around streetworks, land access, labour skills, standards in new build homes and business rates. In response to question 2, we consider how effectively this current work addresses the barriers network operators face in rolling out their networks.

With that said, whilst these are all critical areas of policy where changes could deliver material benefits to the speed of network rollout, it is important to note that they are all policy levers that were envisioned as tools to meet the FTIR’s original target of 2033.

If the 2025 target is to then be met, policy considerations beyond those set out within the FTIR will need to be considered.

With this in mind, industry members acting through the Broadband Stakeholder Group (BSG) recently commissioned a report comparing how other countries have sought to accelerate full fibre deployment.[2] We would urge DCMS to review this inform considering policy areas beyond that which were referenced in the FTIR.

We also advise that DCMS review an area of policy that we feel has been overlooked as an opportunity to drive accelerated rollout; that being the transparency of rollout schedules.

The FTIR highlighted the ‘hold up problem’. This is where network operators were resistant to delivering gigabit capable infrastructure in an area that could only sustain a single network operator for fear than another operator may do the same. This is because such an outcome would undermine both operators’ business case for investment and/or leaving their network infrastructure as stranded assets.

Despite the FTIR identifying the hold up problem as the most significant barrier to rollout in harder to reach (non-urban) areas, comparatively little policy development has come forward to address this problem.

Whilst operators have made voluntary commitments to declare where they intend to deliver network upgrades, these are often not to a granularity that could be useful in informing network build. Further, operators that do make such a declaration each do this in their own way, using different terminology and timeframes to set out where they intend to build. It is then difficult to effectively compare these plans in order to avoid the inefficient network overbuild associated with the hold up problem.

To address this, we ask that DCMS, in collaboration with Ofcom, consider the creation of a Code of Practice that would set out a commitment for signatories to declare their future build intentions. The Code would function to standardise planned network rollout declarations, in order to inform future investment decisions.

Such a Code would need to balance the benefits of enabling efficient build with preserving the benefits of a competitive market. We would then recommend that it be targeted only to areas that can only sustain a single gigabit capable network operator. Ofcom’s recent work in its Wholesale Fixed Telecoms Market Review and BDUK’s market analysis for the ‘Outside In’ programme could assist in identifying which geographic areas would be appropriate for this designation.

Such a Code could also operate as a means of transposing the European Electronic Communications Code, which sets out how such a transparency measure could assist network rollout in areas where no operator declares an intention to build within a 3 year timeframe.

If the Code could function to reassure network operators that no signatory to the code intended to build within a defined geography within a 3 year time, it would radically improve the investability of that area and thereby encourage accelerated roll out in the most difficult areas to serve.

 

Q2. 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?

 

Wayleaves

DCMS recently introduced the Telecommunications Infrastructure (Leasehold Property) Bill, as part of its work to address what the FTIR identified as a difficulty for network operators in securing the land access required in order to rollout their network.

 

Whilst this problem is systemic to the telecommunications industry and is the primary cause of delays to network rollout, the Bill itself only addresses the specific scenario of where a landlord does not respond to a network operators request to secure access to their property and a tenant on that property has expressed an interest in the service. Unfortunately the far more common problem is where network operators seek to cross land not to serve a tenant, but properties beyond that specific plot of land. Whilst DCMS has received evidence stressing that this scenario is the more pressing issue; this issue of third party land access is perceived to be a more contentious problem to solve.

 

Whilst the Bill is then a welcome step in the right direction, it is only that. To more effectively address the delay to rollout caused by unresponsive landlords, we would urge DCMS to consider placing an obligation upon all landlords to meaningfully engage with network operators when they seek access in order to rollout gigabit capable infrastructure, in the same manner that other utility operators have the ‘right of entry’. Given that this was the initial ambition set out within the FTIR, it is disappointing that the current Bill has such limited scope.

To be clear, the impact of unresponsive landlords can be dramatic, particularly in rural areas such as where Gigaclear operates. If network operators cannot route network through land where our initial designs had planned , entire build plans can require redesigning in order to find an alternative (often more expensive) route, which then leads to delays and the more expensive parts of the planned build being descoped due to the higher than expected costs.

Streetworks

As members will be aware, local authorities carry the responsibility to manage access and maintenance of the local highway. This is increasingly operated through a permit scheme, whereby network operators apply for and pay for a permit to conduct works in the highway. A substantial barrier to effective and prompt network delivery is the operational process of securing and administering said access. Historically such access was not charged for and network operators simply had to give notice of such plans. However local authorities have increasing moved to charging for permitting access. Whilst such charges are only permitted to cover the costs of administering a permit scheme, we continue to see local authorities increasing their permitting charging, as well requesting additional funding from operators (on top of the permit charges we already pay) in order to secure access to the highway. Some local authorities have even required network operators to fund additional headcount within the local authority, as well as paying permit fees, before they would provide highways access. We are increasingly sceptical that these inflating costs are wholly used to recover the costs of operating the permitting scheme. We then recommend that additional guidance is issued to highways authorities and that they be obliged to run an annual review of fee income against allowable costs to be undertaken, with any surplus used to reduce fees charged in subsequent years.

 

Each local authority running its own permitting scheme also creates unhelpful regional variation. The delivery of gigabit capable infrastructure requires a rollout programme that will inevitably cross local authority boundaries. In fact a single road can often weave in and out of such a boundary multiple times. Variation in permitting schemes, be that in rates, lead times and coordination with neighbouring authorities often results in inefficiencies, where a delay to the provision of a single permit with one local authority causes a knock-on effect with others. Avoiding this chain reaction is made even more complex by each local authority having its own scheme, requiring our teams to navigate multiple variants of permitting schemes across the planned build area.

 

To their credit, these are issues that DCMS has taken some positive steps to address. The recent update to the Specification for Reinstatement of Openings in Highways (SROH) encourages standardisation of permit schemes through the permitting of new materials and allowing techniques trialled in one authority to be used across the country without negotiating the same permission in every authority.

We would encourage DCMS to continue this trend of standardisation, reducing variation of permitting schemes across local authorities. A notable success story is that of the Yorkshire Common Permit Scheme, where multiple neighbouring highways authorities aligned their permitting rules to encourage network investment in the area.

Without standardisation, a fragmented permitting scheme continues to impact our pace of rollout. As a pertinent example, during the early phase of lockdown some Local Authorities asked network operators to accelerate build plans and accepted the importance of prioritising network fixes. Whereas others initially banned all works. This resulted in some faults not being fixed as quickly as they could have been.

Skills

To achieve the level of network rollout acceleration required to deliver nationwide gigabit capable coverage by 2025, there will need to be a substantial increase in the labour supply of network engineers. At present, many of the contractors that provide this service are heavily reliant on an EU migrant workforce. This is driven by some EU member countries having a pre-existing labour supply of network engineers, resulting in excess labour now attracted to UK market as fibre network investment increases here.

The sector is then extremely concerned by the proposed Immigration Bill. The industry is concerned that the where salary thresholds, would either prevent the necessary engineering skills from entering the UK or significantly drive up the cost of this labour, which would have a consequential knock on inflationary pressure in the cost of network rollout.

Whilst the industry continues to invest in recruitment and training a UK workforce in line with the FTIR’s goal, it is counter-intuitive to set a goal of increasing network rollout and then limiting the supply of labour required to do this task. If government is serious about its goal, we would urge it to consider how the Immigration Bill will interact with the ambition for 2025 nationwide gigabit capable coverage.

New Build Homes

A further element considered in the FTIR is developing legislation that will ensure that new build homes come with gigabit capable connectivity. This is an area where DCMS have made significant improvements, through the development of legislation that would oblige developers to ensure that gigabit capable connectivity is provided in all newly built homes.

DCMS is engaging with industry in how this legislation would function at an operational level and should be commended for the focus it is placing on ensuring that this process does not unfairly discriminate against either homes developers or network operators.

 

Business Rates

The Telecommunications Infrastructure (Relief from Non-Domestic Rates) Act 2017 granted a 5 year business rate exemption for all newly built fibre between 2017 and 2022. Whilst this is a welcome move, it is a relatively short lived benefit.  Returns on fibre investment are often over 10 years. The 5-year exemption is then of a limited benefit. We would then ask that DCMS consider extending the exemption to 2025 in order to align with the Government’s ambition.

Q3. What needs to happen to ensure the Government’s ‘outside in’ approach successfully addresses the digital divide while also delivering value for money? 

We do not yet know the final details of the ‘Outside In’ programme and the procurement process is still being constructed. With that said, the procurement process should take learnings from the experience of previous BDUK state aid programmes.

In previous tenders, bidding network operators were asked to disclose their commercial rollout plans, so that state aid could be targeted to areas that were not deemed to be commercially viable. Yet once contracts were awarded, there have been multiple occurrences where the network operator that did not secure the contract would then alter their rollout plans, to then connect parts of the intervention area they had previously declared as not-commercially viable. This would often result in the network operator that was awarded the contract having to then amend their own rollout plans accordingly.

This issue is, to date, the most common cause of severe delays to BDUK sponsored network rollout. To mitigate this risk, DCMS should explore bringing enforcement ‘teeth’ to the gathering of information relating to network rollout plans, which would deter network operators from altering their plans in order to undermine the state aid intervention process.

Q4. 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?

Due to the long lead times of build and ultimately return on investment, network operators build network capability ahead of current demand. If it did not do this, it would not be able to meet unexpected increases in demand, such as those experienced during lockdown. Yet this raises challenges when presenting the business case for new investment, especially with the acceleration of the target from 2033 to 2025. Fibre networks have a long pay off window, often over 10 years. Yet we know that where superfast or higher (30mbps +) services are available, only 57% of premises currently take the service.[3] At present then, there is relative comfort with current speeds provided.

The crucial learning from this is that gigabit capable networks are not then designed to meet current capacity, but to be ready to serve future bandwidth demands. Lockdown has provided a glimpse of what this may look like, where anecdotally network operators have reported a 15% increase in data transfers across their networks compared to pre-lockdown levels. Network operators will be nervous of accelerating rollout to areas where demand may not materialise for several years. We would then ask that DCMS reflect this consideration in how it attempts to make the case for full fibre investment more attractive, such as through the design of business rates or state aid allocation.

Q5. 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?

If the 2025 ambition is not achieved and rural areas are left without gigabit capable infrastructure, the consequences will be stark. Whilst many of these areas may be served by ‘superfast’ infrastructure, the actual speeds experienced in rural areas will remain low due to the presence of copper infrastructure within these connections. Unlike over fibre, download speeds over copper degrade over distance. This is why rural areas (and the long lines required to serve rural premises) suffer from poor broadband speeds. It would then be reasonable to conclude that those most in need of gigabit capable infrastructure are those who are most likely to not receive it due to the higher costs involved with connecting these premises.

As an exclusively rural network operator, we have seen the impact of the above in the communities where we are delivering our network but our services are not yet live. With low download speeds, working from home is almost impossible, forcing many people to commute for work. This has a knock-on effect to the local economy, as the absence of connectivity deters regional investment. This then reduces employment opportunities in the area.

To address this issue, we would encourage the Outside In programme to prioritise areas where pre-existing speeds are particularly low and where commercial invest alone is unlikely to materialise. The transparency mechanism that we set out in response to question 1 would further compliment this measure, as it would allow the market to more readily identify which areas are unlikely to see commercial investment.

 

Q6. 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?

The roll out of telecommunications networks is influenced by a large group of different stakeholders, be that investors, contractors, local authorities, Whitehall departments, Ofcom, landowners and industry forums. 

 

Leadership and coordination are then vital to ensure efficient collaboration. We then warmly welcomed the FTIR, as it set a clear direction for future DCMS policy and also resulted in DCMS utilising the Statement of Strategic Priorities to instruct Ofcom to give due consideration to the priorities DCMS had set out within the FTIR.

 

With that said, action on delivering the FTIR has been tentative, as discussed in response to the above questions. Further, the FTIR was designed to meet the ambition of a 2033 nationwide coverage target, not 2025. It is then clear that DCMS must not only accelerate delivering the measures it set out within the FTIR, but consider further measures to accelerate rollout, such as the proposed transparency mechanism to address the hold up problem and the measures discussed in the BSG’s recent publication. We would welcome a direction from Government as to what policy areas it would explore, beyond the FTIR, to achieve its 2025 ambition.

 

We should also stress that we are conscious that delivery of actions is rarely in the sole gift of DCMS. Both MHCLG and HMT are critical partners to delivering the goals of the FTIR, so a cross-Whitehall commitment to the 2025 ambition is then necessary to enable industry to accelerate roll out most effectively.

Regarding the relationship between DCMS and Ofcom, this is where we have most cause for concern. In Ofcom’s recent Wholesale Fixed Telecoms Market Review, Ofcom proposed regulatory remedies that would reduce the regulated costs of BT’s ‘superfast’ (copper based) products in geographic areas where DCMS is trying to encourage full fibre investment. These goals are contradictory. If copper based broadband is regulated down to cost, it will deter customers from moving from copper broadband to full fibre broadband, as full fibre broadband will be comparatively more expensive. We remain hopeful that Ofcom will amend these proposals in light of the evidence it has received during the consultation but continue to urge both DCMS and Ofcom to avoid this risk of policy clash.

 

 

 


[1] https://www.gov.uk/government/publications/future-telecoms-infrastructure-review

[2] http://www.broadbanduk.org/wp-content/uploads/2020/06/WIK-report_BSG_02062020_final.pdf

[3] https://www.ofcom.org.uk/__data/assets/pdf_file/0023/186413/Connected-Nations-2019-UK-final.pdf