The High Cost of Broadband for USO Excluded UK Communities

The elephant in the room of the UK Government’s broadband centric Universal Service Obligation (USO) has always been the fact that it isn’t truly “universal” and tens of thousands of premises have fallen outside of its scope. In other words, getting a minimum speed of 10Mbps can become very expensive for some.

Assuming you were all following the development of the new USO on ISPreview.co.uk, then you probably already know about the pricey catch-22 of its design, but since the obligation was implemented in March 2020 many people are now finding out about this for the first time. Needless to say, the high cost of deployment is quickly being brought into a sharp focus.

Before we get started it’s important to understand what the USO is and how it works. Essentially, those who live in an area where download speeds of at least 10Mbps (1Mbps upload) aren’t achievable have gained the “legal right” to “request” a 10Mbps+ capable connection from BT (or KCOM if you live in Hull). Meanwhile areas that are due to benefit from a “publicly funded broadband rollout plan within the next 12 months” remain excluded.

A cost threshold of £3,400 per premises applies to the USO. In other words, if the cost of building or upgrading your share of the network connection is £3,400 or less, then you won’t have to pay for this work to be done. If it costs more than that to connect your home, and you still want a connection, then you can choose to pay the excess costs or forget it. The build itself is expected to take 12 months, but may take up to 24 months for some.

Originally the expectation was that this would be delivered using fixed line broadband ISP solutions, such as FTTC or FTTP, but Ofcom’s decision to allow 4G (mobile broadband) into the mix has changed things (see above). Despite this, there are still some areas where neither 4G nor fixed lines can reach at 10Mbps. BT previously estimated that 110,000 premises could end up being too expensive for even the USO to solve.

Expensive Civil Engineering

In order to understand how expensive it is to connect remote communities we have to look back at a few practical examples, including some by other operators. One such scheme was the excellent Balquhidder deployment in rural Scotland (here), which aimed to connect c.200 premises (mostly homes) around Loch Doine and Loch Voil with FTTP. This cost over £400,000 (£2,000 per premises) due, in part, to the sparse and rugged terrain.

Other recent examples include the Michaelston-y-Fedw community project in rural Wales (here), which at the time was working to a budget of around £260,000 (€300,000) in order to connect roughly 70 properties, but they’ve since raised this to 200 with FTTP – this equates to a per premises cost of around £1,300-£1,400.

At the cheaper end of the spectrum there are examples like the Openreach (BT) based Community Fibre Partnership (CFP) in the rural Welsh village of Llancarfan (here), which was quoted about £67,000 to cover 129 properties (£519 per premises). Meanwhile another Openreach build to connect just 5 remote rural homes around Morton Farm (here), just south of Tayport in Fife (Scotland), was quoted around £23,000 (£4,600 per premises).

Crucially some community projects can save a lot of money by involving volunteers to help build the network and encouraging local land owners (e.g. farmers) to waive their right to wayleave fees, but other locations aren’t so lucky. Suffice to say that every area is different, but it’s a well established fact that connecting up smaller rural communities is a slow and expensive business (hence why they’re usually the last to benefit).

Openreach has previously estimated that some rural communities in the final 10% of areas could require an “outlay of around £4,000 each to pass” with FTTP (here), which compares with build costs of £300-£400 for the first 50% of more commercially viable UK premises. Meanwhile Ofcom’s more optimistic model indicated that the capital expenditure needed to do FTTP for the first c.20 million UK premises is under £500 per premises, but above that point it quickly rises to around £2,500 (here).

Costs for the USO Excluded

The above examples seem to indicate that a cost threshold of £3,400 per premises should be enough to help cover the bulk of costs for many USO communities that exist without access to either a viable fixed line or 4G solution, although clearly BT expects that quite a few areas will still be more expensive than this to tackle. Indeed some extremes will exist that go way above that level.

According to one of Ofcom’s documents on the USO design from March 2018 (here), “The final 1% of UK premises are materially more expensive to connect than premises in the rest of the country, and within this, that the most expensive premises to connect could cost £45,000 or more” (a specific broadband technology isn’t mentioned for this estimate).

The regulator also stated that a £3,400 threshold should achieve 99.8% coverage “while avoiding the exponential costs of the most expensive to reach premises“, which the Local Government Association (LGA) estimates would leave c.60,000 unserved by the USO (this is below BT’s estimate but still in roughly the same sort of ballpark).

The USO has now been in operation for several months, albeit at reduced effectiveness due to the COVID-19 crisis, and as a result we’re starting to see a growing list of USO requests that seem to fall outside of the cost threshold. The following examples represent those that cost more than the per premises threshold (i.e. the quotes have already subtracted the cost threshold, leaving a bigger bill left to pay).

Example USO Quotes (those not fully covered by the £3,400):

➠ Llangwm (Monmouthshire), home to about 20 properties within a 200 metre radius of the quoted premises (100+ properties across the entire area), was quoted £30,000 to one resident.

➠ Pandy (Ceiriog Valley, Wrexham) saw 11 individual properties each being quoted figures between £11,000 and £30,000. Most were about 4km from the nearest known fibre, but only two got the £30k quote and oddly they were 2km closer to that fibre than the others.

USO Quotes Received
£11,782
£11,000
£11,782
£11,782
£12,000
£11,782
£12,000
£11,782
£11,782
£30,000
£30,000
TOTAL: £165,692.00

Locals were later informed that the community partnership (CFP) scheme was their only way forward – instead of the USO – and they, by comparison, had an initial quote of £150k for 58 properties. Residents noted that many of those 58 properties were miles away up in the hills on completely different circuits (often also with good 4G) and other properties did not exist (i.e. just plots or old sheds).

Residents have since updated Openreach with the correct information and added a few premises they missed. Once gigabit vouchers are added (only under a CFP) then the final quote is expected to be less than half the original, which just goes to show that you can never fully rely on the first quote to be accurate (i.e. if you can, do your own checking as a community first).

➠ Brentor (Devon), home to around 400 people (100+ premises), saw some individuals being given quotes of £42,000 to £45,000.

➠ Strathconon [general area] (Highlands), an extremely remote location in Scotland with 21 premises (mostly holiday cottages), saw one individual (John) being given a quote of £1.1m (let that sink in!). Despite this John was previously given a separate CFP quote by Openreach for the same area and that came in at £535k, although it also included two other nearby communities (80+ premises).

Meanwhile a “neighbour” about 2.8 miles away (via road) got a USO quote for only £160k, which reflected about 18 properties and is similarly remote. However, it’s hoped that Scotland’s 4G Infill Programme will soon complete a new mobile mast, which looks as if it may serve the area (it remains to be seen if that delivers 10Mbps+).

We have also seen various other quotes, but we don’t yet have enough information about all of them and in any case the trend is often similar to those listed above. Crucially, the process for handling these has revealed that BT’s messaging still needs some significant improvement.

In order to better illustrate these issues we’re going to pick out one example from Colin Dawes, who lives in the rural village of Brentor (mentioned above) on the edge of Dartmoor in Devon and take you through some of his story. A lot of what Colin has experienced is shared in common with others who have found themselves in this same boat.

Example USO Complaint from Rural Devon

Colin lives across an area of moorland currently served by a buried copper cable that also serves the rest of the village, but at present the best fixed broadband speed at his location is less than 5Mbps and there’s no viable mobile signal. Airband’s fixed wireless network is also nearby-ish but, due to tall trees, that isn’t an option for everybody.

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