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Ofcom Consults on the Proposed 10Mbps Broadband USO

Thursday, April 7th, 2016 (12:44 pm) - Score 1,099
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The UK telecoms regulator has today launched a new ‘Call for Inputs‘ to help inform the design of the Government’s proposed broadband Universal Service Obligation (USO), which would ensure that everybody could get a minimum Internet speed of 10Mbps (Megabits per second) by 2020.

The Government has itself already launched one consultation on the legally binding USO (here) and as part of that they’ve also asked Ofcom (read the DCMS letter) to investigate the proposed speed, technical measures, funding, scope and affordability of implementing such a provision.

The existing USO is comparatively weak and only requires that BT (or KCOM in Hull) deliver, following the “reasonable request of any End-user” (i.e. demand-led), a telephone service that includes the ability to offer “data rates that are sufficient to permit functional internet access” (here); strictly speaking this box can be ticked via ancient dialup (28.8Kbps) connections.

The current telephony USO also sets a cost threshold of £3,400. For connection costs below this, households pay a standard connection charge to BT of £130. For the most expensive to connect premises, consumers have the option of covering any construction charges over this threshold, alongside the standard connection charge. But expanding this to include a 10Mbps USO could quickly become very expensive for some remote areas.

Specification and scope of the USO

How should the minimum technical performance of the USO be specified?

1.7 We have said that 10Mbit/s is the appropriate level at present for a broadband USO. This is also the Government’s ambition for the USO. However, other factors will also affect how ‘decent’ a consumer’s or business’s broadband connection is. These may include upload speed, latency, jitter, contention and capacity.

1.8 We are interested in stakeholders’ views on the minimum download speed for a broadband USO, as well as which other aspects of technical performance should be specified, and at what level.

1.9 We recognise that a variety of technologies, including wireless, are capable of delivering download speeds of 10Mbit/s. We aim to encourage the deployment of the most appropriate technology for different local circumstances so as to achieve the goals of the USO in the most efficient way.

How should we ensure the USO is affordable?

1.10 European and UK legislation requires Ofcom to ensure the universal service is provided at an affordable price. We are therefore considering how we might best ensure that this is the case. Options for achieving this include requirements for uniform pricing of broadband services or caps on charges. We are interested in views and evidence on what measures it may be appropriate to impose, if any, to ensure that services provided under the USO are affordable.

Should there be a social tariff for broadband services?

1.11 A USO may also include particular measures for the benefit of those on low incomes or with special social needs. For example, BT (and KCOM in Hull) provides a ‘social tariff’ for consumers on certain income-related benefits. We are interested in evidence and views on the extent to which a social tariff for broadband services may also be appropriate.

The Government’s own consultation is due to run until 18th April 2016, while Ofcom’s Call for Inputs will be open until 23rd June 2016 and the regulator aims to “provide our final advice to Government” by the end of 2016. It will be interesting to see how many ISPs, other than BT and KCOM, will voluntarily put themselves forward for helping to deliver the USO (Virgin Media have already ruled themselves out).

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Mark Jackson
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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33 Responses
  1. Avatar Steve Jones

    One way to fund a USO would be to raise a levy off of all fixed broadband links and use that as a fund (administered by an independent body) to commission solutions in the difficult areas. If this was guaranteed for a minimum period (say 10 years). it would be possible to borrow against this income stream as much of the investment will have to be “up front”. I’d envisage this being done for areas which can’t be cost-effectively reached by existing operators. Also, such a body could make more strategic decisions as to how some areas could be provisioned (as doing properties one-by-one doesn’t make much sense).

    If the levy was at 50p per week per fixed link, at (say) 20m fixed links, this would provide about £120m a year (or £1.2bn over 10 years). At £1 it would be £2.4bn over 10 years.

    Of course this isn’t going to be popular with ISPs who don’t think it’s part of their function to support a USO, but it would not put any operator at a disadvantage as it would apply to all.

    • Avatar dragoneast

      A levy is fine if you just look at broadband in isolation. In the real world you have to take into account all the other levies the consumer will suffer across the board. Just because inflation has virtually disappeared doesn’t mean it will continue to do so. Everybody is not as affluent as the posters here. Again I suspect that more charges are on their way, for instance how else will the NHS deficits be tackled? Broadband or health? Now there’s a question. I know the answer of everyone on here will be “I’m in good health so I don’t care about anyone who isn’t; it’s broadband not health, of course”. We have an energy crunch too, and who will pay for any energy subsidies to heavy industry? Plant more of the fabled money trees, perhaps? The trouble is we don’t speak for everyone else, however much we’d like to.

    • The problem with a levy (others may simply call it a tax) is in how you ensure fair use and distribution of the money without fostering market distortion and reinforcing BT’s dominant position. It could also be quite complicated and arguably doing it through direct taxation would be an easier approach, albeit politically tedious. On the other hand BT could fund it themselves and pigs may fly.

      Governments are also notorious for re-purposing such things towards different non-broadband uses at a later date, so there would need to be a firm commitment not to do that. Such a levy would also need to exempt those on social tariffs from paying in order to avoid hitting poorer / jobless people.

    • Avatar Steve Jones

      Which is why I suggested the levy money would go to an independent bodt to administer and commission solutions with whatever supplier and technology they saw fit to use. Of course, it’s not so different to BDUK in that way (albeit more like the trials with independents). It would also, of course, have to comply with state aid rules but it would allow for some more imaginative solutions.

  2. Avatar Lee

    It should be 10meg today, in 4 years time that may be the equivalent of 2eg today. They’re being short sighted and should be aiming for something more like 20meg USO by 2020.

  3. Avatar DTMark

    I can’t see this going anywhere.

    BT have already picked and done the bits they wanted, abandoning FTTP and just doing “the bits where it will work with cabinets” leaving non-contiguous swathes of areas with speeds that would need to be upgraded to meet this new proposed USO.

    Alt-nets could step forward, but then you’d be using public money to overbuild networks built with public money.

    Which makes the assumption that public money would be on offer.

    The attractiveness of investment by private operators was trashed with the BDUK project in round one. We deliberately decided not to spend money on any form of longer term solution.

    Getting to the “end” – decent nationwide availability of modest speeds like 10Mbps down (no mention of up?) was always going to cost more doing it “in steps” (2Mbps, then 10Mbps minimums), allowing the BDUK project money to be put into separate “pots” (superfast/2Mbps), and pushing out potential investors.

    When BT tells the government how much money it wants to provide this USO the idea will, I suspect, be quietly dropped.

    So by 2020 the numbers of people with pitiable then-modern-day speeds could well be higher than it was at the start of the BDUK farce, and thanks to EU State Aid rules and not wanting to engender competition which might undo any of the good done with BT’s pensions, the number of options to resolve it may well be a choice of one: pay BT whatever BT demands.

    There really was no need to get into this completely predictable situation.

    • Avatar FibreFred

      Why should a USO be BT’s sole responsibility?

      It shouldn’t.

    • Avatar DTMark

      That’s the problem with the State Aid rules, though isn’t it?

      It now has to be.

      Otherwise you have an alt-net overbuilding an area which has VDSL.

      Government overbuilds government.

      Unless you can persuade the alt-net to invest commercially.

      Except you can’t as the area will be close to others with higher VDSL speeds so it is less viable/not at all viable.

  4. Avatar NGA for all

    We only need to reference BT’s written evidence to the CMS select inquiry Feb9th.

    £1bn left of BDUK funds before we dispute BT’s capital and this is what BT say,

    ‘The remaining 1.1m premises to get the overall 5 million current planned total are expected to cost £1bn ( or approximately £879 per premises) as we have completed the cheapest premises first. These remaining premises are planned to include a much large percentage of FTTP connections than the current build that will be reflected in the cost.’

    Apply the existing £3,400 limit and you can move straight to FTTP

    The £230 per premise in the same evidence for FTTC must be challenged as it take the average cabinet cost over £40k (200x£230) yet the cabinet is reported at £26k.

    • Avatar TheManStan

      @NGA

      So why aren’t you calling the CallFlow BDUK contract into question?

      11 cabinets with £415k BDUK and local authority cash… £37.7K state aid per cabinet… with CallFlow contributing £120k, that makes the complete cost per cabinet £48.6k…

      And as been revealed by NAO, not all allowable costs are considered in the published cabinet costs.

    • Avatar NGA for all

      @themanstan Sorry -see below.

  5. Avatar NGA for all

    @The Stan Man where does the NAO say that not all allowable costs were considered? NAO data based on all invoices available, but the presence of BT capital was not checked.

    If BT had revealed the £26k earlier in the process, or this information was available to BDUK or Kent, then Call Flow would not have won any bids! How could they?

    The question is what was BT doing that it could lose to a supplier reliant on SLU inputs and cabinets with less discount? And BT investing the first £65 in capital? This needs explaining.

    • Avatar themanstan

      The FOI that I pasted in a comment to you in the past, which you acknowledged.

      From: Paul Keane Director, DCMS Financial Audit, NAO.

      “cost per cabinet includes costs such as:

      Handover costs (which include headends, cards and testers, plus labour to install)
      Cost of the actual green cabinet
      Lock
      Plinth
      Planning
      Installation costs
      Power to the cabinet
      New ducting
      Electronic safety testing
      Digitisation of records

      It doesn’t include improvements to backhaul / core network, infill or the capital costs associated with connecting a premise to a cabinet.”

    • Avatar NGA for all

      @themanstan – core cost is referenced in the second audit – too small to mention and the customer cost is borne by the ISP.

      Surely this is to be celebrated and the transparency allows some of the ambition to be recovered, with more FTTP for the final 5%, provided the state aid on intervention areas has not been screwed up.

      How or why did BT lose to Callflow given BT can only claim the gap funding needed?

    • Avatar TheManStan

      Core costs I agree, but the backhaul component?

      There are likely to be quite a few exchanges where hardware needs to be upgraded to accommodate the higher capacity requirements.

      If you recall the CallFlow contract is something that both of us were hoping for, as a small project would allow us to dissect allowable costs and ascertain whether cabinet costs incorporated all costs with the project.

      It is quite clear from the CallFlow contract that all costs for BT and CallFlow are not addressed in the cabinet costs.

      I can’t see BT having a ~50% better costings irrespective of their size. As you have said yourself the hardware costs themselves are not huge and from the cabinet costs that BT has invoiced the labour component is not huge either… clearly there are significant other elements that are not being analysed in the audit.

    • Avatar NGA for all

      @Themanstan – BDUK pay for the spine to the handover point and pay for new handover points to be established where needed.
      These Handover points are likely to be existing larger BT exchanges which you would expect to have sufficient fibre available.
      It should be easy to itemise any incremental cost and produce the invoice for incremental cable installations and associated contractor costs. The job numbers can be tracked.
      Call Flow itemisation was available early on, so it remains to be explained how a procurement process can pick a supplier with higher costs, unless the alternative were withheld for reasons best known to those doing the withholding.

    • Avatar TheManStan

      @NGA

      Backhaul between exchange and CORE is not Openreach, but BT and as alluded to in the FOI response I have is an allowed cost to BT.

      I think we’ve identified an area where capital is committed by BT rather than Openreach, but which is not invoiced… but forms part of their capital contribution.

    • Avatar NGA for all

      @themanstan, Maybe but I am pretty certain the costs of the new transmission chains into H&I and Herefordshire were all included in the mix. The £26k includes the H&I & Herefordshire transmission chains. The numbers are being submitted by BT Group. In H&I the gap funding was no more than 10% anyway, so it will be interesting to see how this stacks up.

      More than half the BT capital referenced is forecast for this year (Feb 9th submission) so it may yet appear as an increase in a q4 capital accrual owed to BDUK.

    • Avatar TheManStan

      Another thing which i’ve been pondering is the FTTP cost for the ~36,000 connected properties.

      Given BT own admission that the way they do it is expensive, especially compared to other operators. i.e. Gigaclear use connectors, recently BT is trialling as a method lowering cost (but also reducing the skills requirement for greater field force utility).

      We can take Gigaclear with their ~£1,500 efficient cost and extrapolate BTs inefficient cost. I would not be surprised if per connection cost is north of £2,500. Which would be not far off £100M…

    • Avatar NGA for all

      @themanstan, 36,000 FTTP connections at £100m!

    • Avatar themanstan

      Why not?

      These would be some of the most hard to reach places… using their fibre splicing rather connectors, which would require their most experienced(expensive) workforce…

      Even taking the Gigaclears best costing of 1500GBP per connection it´ll be not far off 60M GBP…

    • Avatar NGA for all

      @themanstan, I think there is a ceiling of £1,700 in operation and I believe planning clusters means the unit cost is <£1,000. You will want proof, but that will take a while to get into public domain in a form that does offend folk.

      There should be usable proof available from Cornwall where the unit cost for small clusters was less in many places to the provision of a cabinet.

  6. Avatar fastman

    Who says its only 26k — or is that the gap to the local authority — NGA selective as ever I see

    • Avatar NGA for all

      @Fastman It is in BT evidence written evidence to the CMS Select Committee – February 9th Phase 1 total average cost, cab, spine, power, tie cables, exchange etc

      BT cannot reference their capital, they are reduced to claiming ‘spend’ which now needs to be challenged.

      This is good news, the UK gets to go further, BT can refresh more of its network.

    • Avatar NGA for all

      @Fastman you are now free at last to quote the £26,000 average before gap funding which ought to be £65 per premise, as the former has been put in the public domain BT. The latter is still being work on.

    • Avatar TheFacts

      Presumably £26k is an average across all cabinets. And different when calculated across a small specific area.

    • Avatar NGA for all

      @The facts, indeed a sample of c20,000 phase 1 cabinets from £13k to those ones in the H&I which includes 18 submarine cables.

      And because the spines, handover points, submarine cables are paid, phase 2 is not that more expensive.

      BT maxed out 200 cabinets a week, what is your capacity for FTTdp in rural? It should be demand led xx per manifold before the work begins. You would kill the need for the USO pretty quick I should imagine given the money still available, that would just leave the towns and cities.

  7. Avatar Dave

    Oh why is this so complicated?
    I am so feed up with waiting for a usable broadband. I thought this was going to be sorted out years ago.
    And now I am left wondering will I ever get it even by 2020.
    (Oh there is always satellite at a min of £60 a month)

  8. Avatar Optimist

    I’m going to suggest something controversial – abandon the USO, and stop subsidies to install broadband.

    Providers like Openreach and VM would install fixed line broadband where profitable.

    In other areas, providers would install fixed wireless and other solutions, safe in the knowledge that the government or council would not “helpfully” fund a fixed line competitor which would destroy their business.

    Comments?

    • Avatar NGA for all

      Here’s the thing, it is comparatively so cheap compared to any other infrastructure you can use it to make marginable economic communities viable again.
      We are lacking manpower on this job and wherewithal, not money, there is a £1bn left plus an argument on BT’s capital contribution.
      Satellite and Wireless are needed, but fibre overlay, as evidence is showing is fraction of the costs that were originally portrayed. Fibre to the dp or manifold should feature.
      You need subsidy to force the issue. Most phase 1 payments should be recoverable, lower costs, higher demand pushing clawback, BT capital, and recovery of the proxy costs in Wales, Lancs, NYorks can all be recycled into final 5%. FTTP in final 5% shows no town or City should be without.

  9. Avatar Optimist

    You say “We are lacking manpower on this job and wherewithal, not money” and “You need subsidy to force the issue” – somewhat contradictory!

    Innovative solutions such as the wireless broadband installed by a farmer for himself and his neighbours would be encouraged if people realised there was no hope of the big boys installing fibre in their area.

    Technolgy improving all the time, when broadband started I knew someone living out in the wilds so ADSL would not work, a year later it tecnology has improved so he got it.

    In some areas wireless networks being set up using church steeples to install antennas on.

    Ways the government could help include ending business rates on ducts and generally getting out of the way.

    • Avatar NGA for all

      The manpower could be solved by folk doing their own civils aka BARN or Fell End or as you say Combos of FA and Fibre.

      The point I was trying to make but failing is that the opportunity is there to go much deeper.

      If we combine the money, with a revised DPA and Dark Fibre, the scenario your outlining is enriched further. The difficult bit is where BT is failing to do FTTP effectively, how do you extract the money that exists and get alt-nets to do more. Apart from Gigaclear, few others have stepped forward with any vigour. Other Fixed Wireless operators could be more ambitious..perhaps, but organisation and representation could be stronger. Some still want a monopoly and customers do not like monopolies big or small.

    • Avatar NGA for all

      @Optimist – sorry, the subsidy was needed to get BT out of bed, but most of phase 1 funds should be returned or returnable. With the money available they could have planned a more ambitious plan,.. more than 200 cabs a week nationally for c3 years.

      Such a plan leaves a huge in-fill problem which for most part needs variants of FTTdp, or FA where you have a big enough clusters.

      The problem remains, but so does the money to fix it, as long as the appetite remains to persist with the job.

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