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UPDATE Budget 2015 – Osborn Pledges to Deliver 100Mbps Ultrafast Broadband

Wednesday, March 18th, 2015 (1:35 pm) - Score 4,007

The Chancellor of the Exchequer, George Osborne MP, has today set out the Government’s annual Budget 2015 report for the United Kingdom. Unlike past budgets this one is different because it comes immediately before a General Election and that usually means big promises, such as pledging 100Mbps “ultra-fast” broadband to “nearly all the homes in the country” and a possible 5Mbps+ USO.

At present the existing Broadband Delivery UK programme and related projects, which are broadly overseen by the Department for Culture Media & Sport (DCMS), aims to make fixed line “super-fast broadband” (24Mbps+) services available to 95% of the population by 2017 (rises to 99% by 2018 when you include mobile and other fixed wireless solutions).

In terms of the fixed line superfast broadband target, the first goal is to push related services out to reach 90% of the UK by “early 2016” (£530m from BDUK has been allocated to this) and this should benefit around 4.2 million premises (over 2 million have already been completed).

Since then another £250m from the BDUK budget has been allocated to push that target to 95% via the Superfast Extension Programme (details) and a big slice of all this investment comes from a small part of the BBC’s TV Licence Fee. Contracts for this second phase are already being signed and all should be agreed by the end of 2015.

So far most of this BDUK funding, which is also being matched by local authorities (i.e. a total public investment of around £1.7bn so far) and the private sector, has gone towards helping BT roll-out their “fibre broadband” (‘up to’ 80Mbps FTTC / VDSL2) network into more areas. A few places have also benefited from BT’s 330Mbps FTTP technology.

But tackling the final 5% (roughly 1.5 million premises), which are predominantly rural, remains more of a problem due to the high cost of delivery and low population density. Last year the Government launched a £10m Innovation Fund to investigate this, which is piloting 7 projects that aim to “test innovative solutions to deliver superfast broadband services to the most difficult to reach areas“. There have also been various other smaller schemes involving the use of public funding.

As a result it’s perhaps not surprising to find that the Government, while being mindful of the coming General Election, have chosen to use today’s budget announcement to tout their on-going plans for both tackling the final 5% and boosting future broadband performance so that “ultrafast100Mbps+ speeds will become available to “nearly all the homes in the country“. Some of the key highlights are summarised below.

The UK Budget 2015 – Broadband Highlights

* Supporting long-term investment in the UK’s digital communications infrastructure, including by setting out a new ambition that ultrafast broadband of at least 100 Megabits per second should be available to nearly all UK premises.

* The government will also take further action to support the delivery of broadband in rural areas, including looking to raise the Universal Service Obligation – the legal entitlement to a basic service – from dial-up speeds to 5Mbps broadband, and subsidising the costs of installing superfast capable satellite services (this must apparently also be an “affordable” service and the scheme will be launched “later this year”).

* The [business] broadband Connection Voucher scheme, extended at Autumn Statement to March 2016, will be available in a total of 50 cities by 1 April 2015.

* The government will provide up to £600 million to support the delivery of the change of use of 700MHz spectrum, which will further enhance the UK’s mobile broadband connectivity. These funds will support the infrastructure costs of clearing the spectrum frequency, including support to consumers where appropriate, and retuning broadcast transmitters to enable broadcasters to move into a lower frequency. This will free up 700MHz spectrum for 4G mobile communications use through an auction next Parliament. The government will also centralise the operational management of public sector spectrum, and will reset the release target.

But take that 100Mbps commitment with a pinch of salt until we see some real details (funding, timescale etc.), since right now it’s clear that the private sector is doing most of the work and not the Government.

Ultrafast Broadband

In terms of the Government’s new pledge, it’s worth pointing out that the private sector is already doing much of the leg work. As an example, Virgin Media’s 152Mbps capable cable platform is being expanded (here) to reach 17 million UK premises by 2020 (around 60% coverage) and another double speed boost is anticipated for the not too distant future (est. 300Mbps). On top of that there’s talk of a DOCSIS 3.1 upgrade within the next couple of years, which could eventually foster Gigabit levels of performance (1000Mbps etc.).

Similarly BT’s existing ‘up to’ 80Mbps FTTC “fibre broadband” platform already has the technical capability to deliver 100Mbps+, although they’ve also announced a decade long deployment plan for G.fast technology and more FTTP (here). This, they claim, will bring speeds of 500Mbps to “most homes” and some will even get 1000Mbps.

In other words the private sector has already made a major commitment to improving broadband performance beyond the current levels. But historically the commercial interests of such firms usually only extends to the first 70% or so of the country, which means that many in rural and suburban areas (note: this includes some pretty busy places) could be left to wait and this is where state aid through Broadband Delivery UK tends to make the difference.

Indeed the Government had already signalled its intention to improve connectivity by proposing a new Digital Communications Infrastructure Strategy (the full strategy is published today), which is looking some 10-15 years ahead to see what kind of services we might all require in the more distant future (here and here); today’s announcement is part of that same approach.

The Other Bits

Another key highlight of today’s announcement is the move to add broadband with a minimum download speed of 5Mbps into Ofcom’s legally-binding Universal Service Obligation (USO), which is something that respondents to our recent survey broadly supported, so long as they didn’t have to pay extra for it. But for now the are only “looking” at it, which leaves the door open for a rejection or change.

However the USO commitment also came in the same paragraph as a call for “subsidising the costs of installing superfast capable satellite services“, which is more of a worry. Satellite certainly ticks the speed and coverage box, and cheaply too, but it’s also an approach that has many flaws (network congestion, expensive usage allowances, high latency etc.) and this is thus unlikely to please rural villages.

A decent fixed line or fixed wireless broadband solution would have been a far more palatable option to such communities. It’s hard not to see Satellite as a cheap quick-fix, one that people can already buy privately themselves. The job on this front is not being done properly.

Elsewhere the move to extend Connection Voucher‘s to 50 cities and allow it to run until March 2016, which offer grants worth up to £3,000 in order to help small and medium sized businesses around 22 cities across the United Kingdom to gain access to a superfast broadband (30Mbps+) service, is technically nothing new (here). But the new city additions are listed below.

Connection Voucher Cities

Existing cities in which the voucher scheme is already operating (and will continue to do so):

Aberdeen, Belfast, Birmingham, Bradford, Brighton & Hove, Bristol, Cambridge, Cardiff, Coventry, Derby, Derry / Londonderry, Edinburgh, Leeds, London , Manchester, Newcastle, Newport, Oxford, Perth, Portsmouth, Salford, York.

New cities in which the voucher scheme will be offered from April 1, 2015:

Bournemouth, Chelmsford, Dundee, Exeter, Glasgow, Gloucester, Hull, Inverness, Ipswich, Leicester, Liverpool, Middlesbrough, Milton Keynes, Norwich, Nottingham, Peterborough, Plymouth, Preston, Reading, Sheffield, Southampton, Southend on Sea, Stirling, Stoke on Trent, Sunderland, Swansea, Swindon, Wolverhampton

UPDATE 2:14pm

The new Digital Communications Infrastructure Strategy (DCIS) document reveals that the Government has “prequalified the expansion of Virgin Media’s ultrafast broadband network for the UK Guarantees Scheme” (mentioned above), which works by providing a sovereign-backed guarantee to help projects access finance.

The Guarantees are apparently provided on a commercial basis, with pricing depending on the risk and structure of a particular project. Guarantees for up to £40 billion in aggregate can be offered.

UK Guarantees Scheme for Virgin Media

Government can also act directly to ensure that it enables the rollout of ultrafast broadband. One example is through the UK Guarantees Scheme, which is in place to help infrastructure projects raise debt finance; the government has announced that it has prequalified the expansion of Virgin Media’s ultrafast broadband network for the UK Guarantees Scheme, supporting Virgin’s proposed £3 billion investment.

There is capacity within the £40 billion scheme to support significant further investment, and we are actively engaging with UK broadband operators to explore how the UK Guarantees Scheme can be used to support and accelerate their respective investment programmes.

The DCIS also revealed that the Government is inviting industry to highlight particular barriers to private investment in new ultrafast infrastructure and they will explore, with providers of both the networks and the finance, how these might be overcome, perhaps through innovative financial and commercial models.

On top of that the Government has said that they will be implementing the European Broadband Directive to reduce the cost of rollout, which was expected. Apparently the Government will bring forward a consultation on implementation this year.

UPDATE 2:25pm

It’s noted in the DCIS that the Satellite subsidy scheme “will build on the government’s commitment that there will be at least 95% superfast broadband coverage by 2017 by offering a superfast capable solution to around a further 1% of premises, and help to ensure that no one is left behind” (so it’s not a fix for the whole of the final 5%).

However the Government also said that they would carry out a further assessment in 2018 of general broadband coverage levels, use and demand. This assessment will include taking account of the impact of the deployment of both fixed and mobile services across the UK, and “will ensure that everyone has access to the services they need“.

UPDATE 2:31pm

On the 100Mbps commitment the Government has said that it “wants to maintain the principle that intervention should be limited to that which is required for the market to function effectively. In the case of ultrafast broadband, this market is only just beginning to emerge.” But they do claim to have identified a number of areas where “action can help support”, such as by employing the aforementioned UK Guarantees Scheme, but it still sounds as if they’re trying to claim credit for work done by the private sector.

Otherwise almost everything else boasted about today references projects and strategies that have already been announced before.

UPDATE 3:33pm

Consultation responses for the DCIS have been published online (here) and it’s interesting to note some of BT’s comments, not least how they “feel it is reasonable to expect that even low demand (perhaps single occupant) households will require a 10Mb/s speed in 2025.” But their opinions of medium demand households are a bit more useful.

For most family and larger households, although these represent a minority of the total UK households we expect their concurrent TV/video to drive higher bandwidth demand to be above any “median” figure. We note that the Broadband Stakeholder Group (BSG) recently estimated that for the median household download demand for 2023 would be roughly 19Mb/s, but believe that a figure of 35Mb/s (representive of the 99th percentile of BSG’s analysis) is a more cautiously appropriate estimate for what could potentially be desired by most families.”

BT does however acknowledge that “any prediction may ultimately prove spurious” and have said that their G.fast deployment, with speeds of 500Mbps+ being promised, should be able to tackle most performance needs.

UPDATE 4:07pm

BDUK has kindly furnished us with a full list of the new Connection Voucher cities, added above.

UPDATE 4:22pm

A comment from CityFibre and the ISPA.

Greg Mesch, CEO of CityFibre, said:

We welcome also the government’s ambition for ultrafast broadband, encouraging investment in faster connectivity to homes and businesses nationwide. However the target of at least 100 megabits per second is too low. As the British economy becomes more digitally based, it is vital that even faster Gigabit speeds are achieved.

In infrastructure terms, the UK communications market is under performing, with one of the lowest shares of fibre-connected buildings in Europe, a result of a decade of underinvestment by BT. Investment in fibre infrastructure is critical for sustainable economic growth and future prosperity. Therefore, it is vital the government does all it can to encourage a competitive environment for fibre investment. CityFibre is one of the few companies that is both investing and building truly next generation ultrafast infrastructure with our rollout of UK Gigabit Cities.

A level playing field that enables the new generation of fibre infrastructure builders to invest in ultrafast broadband networks will generate greater levels of innovation, services, and GVA growth for towns and cities across the UK.”

Nicholas Lansman, UK ISPA Secretary General, said:

The new Government ambitions for broadband are good news. ISPA will be working with the Government to understand how these ambitious plans will be delivered. Government will only be able to do so in tandem with the breadth of industry, to ensure Government support is properly targeted and fosters competition.”

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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