New INCA Framework to Help Small UK ISPs Benefit from Broadband Funds

The Independent Networks Cooperative Association, which supports the development of Next Generation Access networks around the United Kingdom, has revealed a new Framework that could help smaller ISPs (altnets) to challenge BT and benefit from state aid for deploying superfast broadband services into rural areas.

At present the government’s Broadband Delivery UK (BDUK) strategy, which is supported by an initial budget of £530m (not counting the funds for urban areas and mobile etc.), aims to deploy superfast broadband (24-30Mbps+) services to around 90% of the UK by 2015. By comparison Europe’s Digital Agenda expects 100% to have access to 30Mbps+ services by 2020 (50% must also be within reach of 100Mbps+).

On top of that another £300m has also been allocated from the BBC TV Licence fee for 2015-2017 (here), although the government has yet to define a clear strategy for this period. Never the less it’s widely expected that any new strategy would focus upon the “final 10%” of the country (i.e. hard to reach rural areas).

But so far smaller providers, short of building a very complex and thus potentially unworkable consortium, have been left feeling somewhat excluded from this endeavour. The BDUK Framework effectively set the economic bar too high for them to get involved. As a result BT has been left to dominate the process while their only approved competition, Fujitsu UK, has all but given up.

Meanwhile INCA, which first announced its intention to tackle the problem last July 2012 (here), has spent the past eight months working with a group of non-incumbent telecoms companies (e.g. Cable & Wireless Worldwide, Calix, CityFibre, Entanet, Gigaclear, UK Broadband (PCCW), Virgin Media and a few others) to develop a second framework that would “sit alongside” BDUK.

INCA Statement

We propose the establishment of a new Framework to overcome these issues, especially for the final ‘10%’ and also to accelerate ultrafast development towards the DAE 2020 targets.

It will sit alongside the existing BDUK Framework, which will continue to stimulate the existing incumbents to achieve the ‘bulk’ of the USC and superfast coverage. It will enable development beyond these existing plans by creating the conditions that encourage long-term investors, thus bringing greater competition and more innovation. It will do this through:

• Enabling different approaches to the commercial model;
• Providing alternative approaches to ‘kick start’ funding such as loans and guarantees, tax incentives and debt facilitation, including those not qualifying as state aid;
• Driving compatibility and integration between infrastructures;
• Updating the regulatory environment to incorporate and optimise the use of all existing and new infrastructure.
• Enabling service provider adoption through this compatibility and bringing interconnection points much closer to communities.

INCA states that smaller ISPs do not want grant (gap) funding, though they would like to see the £300m being spent in support of long term loans, guarantees and other instruments that could lower their cost of capital and thus make related networks more economically viable to deploy. The group believes that “funding in these forms will unlock additional private investment with a 3:1 multiplier on state investment” (i.e. BDUK anticipates a “state aid intensity” of 53-89% but INCA’s framework expects something closer to 25%).

The group claims to have already held a “very productive” meeting with Maria Miller (MP), DCMS Secretary of State, during January 2013 and believes that the new model could be built with only “limited financial support” from the government. INCA expects that it could establish the new framework within 6 – 12 months via a budget of £600,000 and the first “tangible improvements in competition, investment and innovation” would then be demonstrated 18 months from approval.

Sadly, without more detail, it’s very difficult to judge how tangible this plan really is. For example, INCA works to encourage open access platforms but there’s no clear mention of whether or not this principal would become a firm requirement of the framework. The central government has also built up a history of showing little practical interest in alternative models, some of which were not dissimilar to a few of INCA’s proposals.

It’s also painfully easy to dismiss such proposals as being too little too late, although in reality INCA are more focused on the EU’s 2020 target than the UK strategy for 2015. In this context there’s still a chance to do something different but it will take more than a single meeting with Maria Miller to achieve that. One to watch.