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SMEs to See Median Broadband Speed Demand of Just 8.1Mbps by 2025

Thursday, September 3rd, 2015 (8:43 am) - Score 879

The Broadband Stakeholders Group, which advises the Government on broadband matters, has published a new report that aims to predict the future requirements of small UK businesses (SMEs). The conclusion finds that SMEs will see median downstream demand rise from 5Mbps in 2015 to just 8.1Mbps by 2025, but the overall picture is more complex.

Rarely a month seems to go by without business groups (e.g. FSB) warning that the country’s current broadband infrastructure still isn’t capable of meeting their future needs, with many continuing to complain of poor connectivity, performance woes and of being missed out by the Broadband Delivery UK roll-out. At the same time many businesses are benefitting from new connectivity, but the picture is mixed.

In that sense it might rightly surprise some readers to find that the BSG’s new report is predicting that the median download speed demand for small business premises will rise from 5Mbps in 2015 to just 8.1Mbps in 2025, while demand for the 95th percentile will rise at a seemingly more respectable rate from 12.9 Mbps to 41.1Mbps over the same period.

Similarly upload speed can also be very important to businesses, although the BSG predicts that median upstream premise demand is currently only 1.2Mbps and that rises to 7.2Mbps for the 95th percentile; by 2025 both of these will rise to 2.3Mbps and 36Mbps respectively.

business uk broadband bandwidth demands - 2025 bsg

So far, so slow. However the BSG’s study points out that small businesses are a very diverse bunch and their usage patterns tend to vary depending upon the nature and size of the business. For example, over 90% of the firms have between just 0-4 employees and the BSG claims that this puts the 5Mbps estimate “in line with industry rules of thumb of under 1Mbps per employee” (we’ve not seen that before).

On top of that the study notes that approximately half of small business employees should be classified as “low users“, with limited professional reason to be online at work (i.e. not all employees actually use or need Internet access while at work). Likewise often those that do go online may only require basic email and web access.

Put another way, somebody working underground in a coal mine, gardening or collecting rubbish won’t have particularly high data demands, if any at all, and all of this weights into the assumptions. For example, one person food manufacturers were found to require just 6Mbps downstream by 2025, but a 49 person software business will need 193Mbps by the same date.

business downstream demand by uk premises size

At this point the BSG admits that their model makes a “number of assumptions that are open to interrogation” (e.g. assumptions about the applications used by employees and visitors), although it also uses data from known sources and studies of actual usage and behavior (e.g. Ofcom).

In conclusion the BSG dubiously states that, as of 2015, “average ADSL is sufficient for the downstream needs of 91% of small business premises“. However the report bases this on ADSL’s average download speed of around 11Mbps and 1Mbps upload, which they admit is far from perfect because ADSL is notorious for suffering “significant variation” in its service speeds.

For example, Ofcom’s research found that 24% of premises in SME-only postcodes had broadband speeds of less than 5Mbps. On top of that the BSG also notes that ADSL provides sufficient upstream bandwidth for “only a minority of small businesses” (43.7%) and this is sensitive to some of the model’s assumptions (e.g. it rises to 49% if BitTorrent P2P is excluded).

But just because many business may only have lower bandwidth requirements doesn’t mean to say that the infrastructure we build must only cater to the lowest common denominator, particularly given that the 95th percentile / larger firms are likely to generate a greater proportion of the overall wealth and these can exist in both urban and rural areas.

Report Extract

Turning to superfast technologies, both FTTC and DOCSIS 3.0 appear to be sufficient for virtually all small businesses today. By 2025, their upstream capabilities will be inadequate for the (unconstrained) demand of a little under 20% of small businesses.

However by 2025 next generation technologies such as G.fast and DOCSIS 3.1 (being tested today by BT and Virgin respectively) are likely to be deployed. These, along with FTTH, will each have ample capacity to meet our forecast demand, in the areas where they have been rolled out.

Today, the model suggests that 14% of small business employees work in premises requiring more than 20 Mbps – for this group, even good ADSL is unlikely to be adequate. By 2025 approximately half of employees will work in such premises. This highlights the importance for small businesses of FTTC, G.fast, HFC, FTTH and other technologies which can deliver faster speeds than ADSL.

The key wording above is “in the areas where they have been rolled out“, since at present there seem to be no plans for taking any of the future new technologies much beyond the existing commercial footprint (around 60-70% of UK coverage). Admittedly some FTTH/P providers are reaching into rural areas, but their overall impact in that final 30-40% is very small.

However the BSG suggests that the diversity of small business requirements perhaps “argues against a one-size-fits-all for broadband provision” and adds that “an intervention to (say) provide 100Mbps for all would represent a substantial overprovision for most such businesses“, which will no doubt please the Government to hear.

Matthew Evans, CEO of the BSG, said:

This report greatly adds to our understanding of small businesses connectivity requirements. Although standard broadband is adequate for most firms, some firms are already constrained. All small businesses will need access to superfast speeds in the next five years, and large numbers will soon need the ultrafast speeds that the Government committed to delivering in the recent Productivity Plan.”

At this point it’s probably a good idea to note the limits of the model’s scope, which is focused on being a forecast of technical bandwidth requirements. However businesses may choose to buy more or less bandwidth than they technically require and other product characteristics, such as service levels, usage allowances, reliability and latency, haven’t really been given much or any consideration.

For example, you could in theory cater for a lot of small business requirements by using Satellite, but this won’t work for everybody where the usage limits, rental costs and latency constraints might create problems. On the flip side we must also consider that a lot of smaller firms might perhaps expand faster and become more prosperous if they are able to access even faster connectivity than exists today.

Small businesses ultimately provide 39% of UK employment and 32% of UK turnover. Related businesses are also heavily skewed to the private sector, and thus provide 48% of UK private sector employment. As such we should perhaps be aiming to deliver the best forms of connectivity so that no firms are left at a disadvantage.

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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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20 Responses
  1. Steve Jones says:

    “As such we should perhaps be aiming to deliver the best forms of connectivity so that no firms are left at a disadvantage, regardless of size or location.”

    That, frankly, is dubious economics. Providing a gold-plated broadband service irrespective of location is not necessarily the best use of economic resources. At a certain point the cost of provision will greatly outweigh the economic benefit.

    Yes, there’s a good social argument for broadband provision to a level which provides for a decent level of service for major functions. However, that’s very different from insisting all locations should have the same provision (or at least, the same provision without having to bear the full economic cost). To say we have to provide the best possible connection at any location (which implies subsidies) so, for instance, a video production company can be based anywhere, is not a great use of public money. We do not, after all, provide rail or road infrastructure such that a warehousing facility can be based just anywhere. There are similar restrictions on other utilities such that it’s impractical or not cost-effective to place some businesses irrespective of location. (If you have a very power hungry business you can expect a very, very large bill if a major uplift to the electricity distribution system is required).

    So in choosing a location for a bandwidth-heavy business on the basis of local provision is surely just part of the normal considerations. Businesses are placed on many other such criteria.

    1. Mark Jackson says:

      I’d be willing to bet the economic benefits to GDP would eventually still massively out-way HS2’s spiraling development costs and it would be a lot cheaper to deploy. Government’s spend considerably more on services and schemes that don’t return a significant economic benefit, but broadband is one area where there appears to be a good correlation with an economic / social boost.

      Take note I do say “best forms of connectivity”, I’m not strictly saying FTTH/P for all here. It’s somewhat open to interpretation as in some areas an ultrafast fixed wireless network would qualify, while in most urban areas G.fast and DOCSIS 3.1 might do the job just fine so long as you can get the headline speeds.

    2. Steve Jones says:

      Certainly the economic case for HS2 (rather than railways in general) are questionable. It does look very much like a vanity project. I’m just drawing a line (admittedly not well defined) between the sort of provision required for the vast majority of businesses and those which I might typify as “bandwidth heavy”. For instance, I can see a good case for normal business activities, like video conferencing. Where, however, much more intensive bandwidth activities are required than arguably, the full costs should be incurred.

      Now it may well be that regional authorities might wish to encourage such businesses, but perhaps that should be up to regional authorities to decide, and not national ones. I’m just dubious about the gigabit or nothing crowd. We’ve seen in Australia how grand ambitions have had to be wound back to something more affordable. On a much smaller scale, we’ve even seen the tiny Island of Jersey reign back its roll-out, even though the whole infrastructure is already effectively under the control of local politicians.

      So to emphasise again, I can see the benefit of some form of universal provision – perhaps in the 10mbps region, but not one that means no business is disadvantaged on location irrespective of it’s type.

    3. MikeW says:

      The studies show that improvement of broadband up to superfast speeds does indeed correlate to good economic improvements … no problem on that aspect.

      However, there hasn’t really been much to show what economic gain there would be for going any faster than mere “superfast”. Is there anything extra to be gained? How long before any significant gain materialises? Reports like the BSG one here suggest it would be a while; the recent Nesta report didn’t seem to find much either.

      If we’re going to demand government involvement (whether by dropping HS2 or something else), I’m still pretty convinced it should be in making superfast access even more widespread, and by eliminating the sub-30Mbps parts where the rollout hasn’t fully helped, than in anything ultrafast.

      Incidentally, I love the fact that it is always the HS2 project that gets dragged out for comparisons like this, with its nice fat, juicy budget of £50bn (incl trains and contingency) just waiting to be stolen.

      There are 3 other rail improvement projects running (Thameslink, Crossrail and Crossrail 2) that also happen to cost £50 billion (including trains and contingency, too) … and “all” they achieve is getting Londoners from one side of town to the other.

      Why don’t the insular London-centric projects get picked on? Or does the country want to continue investing most into the South East?

      Or the £10bn that is being spent upgrading the Great Western line, and the new trains to run on it? (Though those trains will also go onto the east coast line too).

    4. Steve Jones says:

      @MIKEW

      The Cross-rail project is not just about getting Londoners from one side of town to the other. It’s actually the little matter of enabling commuter access from large parts of the South East.

      In any event, Crossrail will payback, and not just through imaginative bits of thinking by economists. It will payback in terms of actual usage, fares and the (very large) direct contribution being made by businesses in London through the Crossrail Business Rate Supplement (BRS), section 106 and the Community Infrastructure Levy (CIL). There is also the little matter that (as recent new reports have confirmed), London and South East commuters are subsidising the rest of the network through elevated ticket prices. Given the hell that is commuting into London, shouldn’t those passengers be allowed at least the privilege of seeing some of their inflated ticket prices actually expended on reducing the congestion which is arising as a result of increased demand as the areas population grows?

      http://www.telegraph.co.uk/news/uknews/road-and-rail-transport/11829610/Northern-rail-services-cost-commuters-1-billion.html

      As for Crossrail 2, it’s only a proposal at the moment.

    5. MikeW says:

      @steve

      I know all the stuff you’ve written. And, for the record I’m not against any of the improvements – cross-London, HS2 or electrification of the GWR. Or indeed the Northern Hub projects that have been put on-hold.

      I was merely being as facetious as the anti-HS2 crowd who attempt to label it as “only” knocking 10 minutes off the time to Birmingham. Both “only”‘s miss so much context…

      However, for those who argue that FTTH would reduce travelling: if FTTH really were going to reduce the number of travellers, you’d think it would be the cross-London/commuter classes that would be affected more than long distance cross-country classes.

      As for crossrail 2, it is indeed only a proposal at the moment – quite like phase 2 of HS2. It does have some good synergies with HS2, creating a direct connection between the SWML and HS2. If Old Oak Common is kept, there suddenly becomes a lot of direct connectivity between the country’s main intercity rail routes that currently require tedious connection via the tube.

      Having experienced the best trains the south-east commuters get, alongside the worst conditions, and compared it against the c@rp hand-me-downs that end up plastered across the northern network, I can safely say that all the projects are worthwhile. The northern projects especially, with the aim to reduce ridiculous travel times, and to get rid of the ludicrous Pacers, might attract enough commuters to make them start to pay the treasury back.

  2. “Matthew Evans, CEO of the CEO, said:”

    Matthew sounds like an important dude! 🙂

  3. I would guess that the growth in demand from SMEs will depend a lot on two things:

    1) how SMEs “embrace” the use of the cloud – or at least get sucked into using it more and more by necessity etc

    2) the extent to which SMEs find that they need/want/cannot stop the use of video streaming by employees

    1. FibreFred says:

      Indeed I think the cloud is very important for SME’s where they cannot get superfast , even those with superfast should look into it, pair that up with some WAN Op like Riverbed and you would have a decent setup

    2. Ignition says:

      I would’ve thought the cloud would be made more usable by superfast? A big attraction for businesses and homes of superfast is the ability to use SaaS / IaaS?

    3. FibreFred says:

      Sure but superfast isn’t a requirement for it, well not if you invest in wan optimisation anyway

    4. Ignition says:

      That would be quite an odd business case, investing in the required resources to use WAN optimization for cloud services while being content with standard ADSL.

    5. FibreFred says:

      I thought people weren’t content?

    6. Ignition says:

      Indeed not.

      I can’t say that using WAN optimization to improve cloud performance for an office hanging off ADSL is one that I’ve seen much of. Internet access in general isn’t going to be pleasant.

      I suppose if there are no other options dedicating an ADSL line to it might be an option.

      I don’t envy the IT guy who has to find budget and set up the AWS / Azure / Turnkey / vCloud instance, license the software for that, and purchase hardware and/or software for the office itself.

  4. dragoneast says:

    I’m always amused, people in the IT/comms business pressing for faster broadband is like asking a dog if it wants a bone. It’s what they do. “What do you want a bone for, Fido?” “Give me a bone.”

    I’ve never met anyone (well except for me) though who travels less as a consequence of having faster broadband, in fact rather the reverse. I am always amazed though that, with the exception of the UK, everyone else seems to manage their IT needs however poor their broadband, and at least for me the correlation seems to be the higher quality of the IT service the poorer their broadband connection. Perhaps it’s because they’re not lazy. (Which does correlate, however, with some acquaintances in areas of poor broadband in the UK who are extremely proud of what they can achieve, and much more pleased than those with faster broadband, who sometimes seem to spend their time finding things to grumble about).

    I don’t have any problem with improving broadband, but it isn’t a priority above everything else and, as ever when humans are involved, the most important benefit is to the ego.

  5. AndrewH says:

    Hahahahahaha, hilarious. Have the BSG not heard of exponential growth? Maybe they should Google “Ray Kursweil”
    What a bunch of divets. By 2025 I’ll eat my hat (that I don’t even wear) if we don’t all have 1 Gbps connections or faster.
    Muppets!!!

  6. Since bandwidth demands vary tremendously for different types of business and work pattern, to postulate any sort of ‘median’ requirement across the sector is suspect, as the article alludes. It is also extremely difficult to predict what sort of services we will be using in 10 years and the bandwidth needs – except to say that history suggests need is likely to go up substantially. INCA members include many of the most innovative fibre and wireless providers in the country and they are having little difficulty persuading SMEs to take superfast and ultrafast services, often aggregating connection vouchers to better serve business parks with high speed FTTP and wireless networks.

    1. MikeW says:

      Well spoken, by a man who obviously hasn’t taken the time to look at the report, and checked its methodology.

      It actually takes a lot of trouble to break down different business types, different user types, and build up a picture of usage. Calculating a median is a trivial statistical operation, once you have a large enough pool of data to work from.

      Whether the nationwide median tells you anything useful is a different matter. Other statistics in the report are much more useful.

      Anyone running a business park might find he makes plans based on the 90th or 95th percentile rather than the 50th. That way he can attract more types of business.

      Anyone running a certain type of business can see the median for their business. Also useful.

      Anyone deploying network infrastructure for a selection of businesses can see what lifetime it is likely to have – and what business types it might appeal to at various different points in that life.

      You’re right that predicting new services in 10 years is difficult. But if we look back to 10 years ago, can we honestly say that where we are now was that hard to predict? Video streams, TV streams, running with a split of SD and HD resolution, but not much UHD … was that really so hard to predict? Some use of SaaS? I’m sure almost all of it would have been within the spectrum of guesses we could have made back then.

      It might be hard, but so worth doing.

    2. MikeW says:

      BTW Malcolm…

      How do you manage to aggregate connection vouchers to get FTTP and wireless networks to serve a business park?

      Aggregation suggests that the voucher goes to fund infrastructure upgrades … yet so many places say that vouchers cannot be used to fund infrastructure, just a connection. I just happened to be reading the same limitation expressed by the Rotherhithe community group.

      What is the distinction between “infrastructure upgrade” and “aggregation” that allows one but not the other?

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