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UPDATE UK Gov Reach New Rural Broadband EU State Aid Agreement

Thursday, May 26th, 2016 (11:59 am) - Score 1,994
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The Government’s Broadband Delivery UK scheme has today established a new EU State Aid umbrella agreement, which will encourage smaller altnet ISPs to take part and allow new contracts to be signed as part of efforts to expand superfast broadband (30Mbps+) towards and beyond the 95% coverage goal.

Work on the new NBS agreement for the 2016 to 2020 period has been taking place since the old one expired at the end of June 2015 (details). BDUK’s CEO, Chris Townsend, recently indicated that the path to a deal hasn’t been easy, with the European Commission pushing for ALL suppliers in the bidding process to provide “full open access” networks (i.e. share cable ducts, masts, local loops) and for ALL bidders to share information on their existing infrastructure in the relevant intervention areas (details).

The EC also want to see procurements being as pro-competitive as possible (details), which among other things has fostered a greater focus on encouraging the involvement of smaller alternative network (altnet) ISPs that have previously struggled to be recognised.

Some altnet ISPs, such as Gigaclear, Call Flow and AB Internet, have already won BDUK contracts and this could now become more common as we start to move away from BT dominated deals. Mind you BT probably won’t shed too many tears as remote rural areas are very expensive to serve (extremely long payback period) and they can still take part where it makes economic sense.

Today’s decision also recognises the scheme as being compliant with EU competition law, and public bodies in the UK will not need to notify the Commission each time they wish to run a broadband procurement. Instead, they just need to demonstrate compliance with the scheme to BDUK. The new UK National Broadband Scheme will run until the end of 2020.

Ed Vaizey, Digital Economy Minister, said:

“Nine out of ten homes and businesses in the UK can already get superfast broadband and we are reaching thousands more every week. The Commission’s decision will help us to reach more properties more quickly, bringing a welcome boost in broadband speeds to communities across the UK.”

Margrethe Vestager, EC Commissioner for Competition, said:

“Today’s decision endorses UK plans to support the roll-out of high speed broadband infrastructure – it aims to bring faster internet to UK consumers and businesses in line with EU state aid rules.”

The delay in reaching an agreement has sadly left some local broadband improvement contracts in limbo and we should now expect to see quite a bit activity on this front, with councils pushing their plans through the tender process and signing off new deals accordingly.

We should also add that the new deal appears to define “superfast” as 30Mbps+ and not 24Mbps+ (the latter was used in many earlier BDUK contracts), which is in keeping with the EU’s Digital Agenda and recent tender proposals. In practical terms this only makes a very small difference to coverage (around 1% less UK coverage when using the 30Mbps+ figure vs 24Mbps+).

Summary of Key NBS Agreement Points

* Public money will be spent on underserved areas: The UK can fully fund the investment to roll-out NGA broadband in areas where no NGA infrastructure exists and where no private operator is willing to invest in such infrastructure without state aid in the next three years.

* To further ensure that public investment does not crowd out private investment, detailed mapping and public consultation exercises will be carried out with interested private operators.

* Fair chances for all bidders – big and small, regardless of technology: Aid will be awarded by way of tenders compliant with EU public procurement rules, respecting the principles of technological neutrality and also facilitating bids by smaller operators. This will ensure that the most advantageous offer is selected.

* Fair access to subsidised infrastructure through open access tenders: All interested operators should be able to access the subsidised infrastructure on equal and non-discriminatory terms. Furthermore, various mechanisms are in place to prevent wholesale access prices from being excessive. This will allow several network operators to obtain wholesale access and use the subsidised infrastructure to compete on services to the end consumers. The increase in network capacity is expected to stimulate market entry by service providers and the provision of a greater variety of services.

* Some areas may struggle to attract open access bids and if that happens then BDUK states that “reduced access” bids may be considered, although this is still subject to review until the end of 2016 and the details are not yet set in stone (here).

However one possible downside is that the new process seems to have become more complicated than the old one, which could create new headaches. Similarly smaller altnet providers tend to prefer closed networks as a means of protecting their otherwise vulnerable investment, but those wishing to bid will have to make sacrifices on that front and this might hamper interest.

Similarly there may be some concern that certain operators could enter the process and use it purely as a mechanism to see what infrastructure their rivals already have in a given area, which might conceivably discourage some operators from taking part.

Otherwise a non-confidential version of the new decision will be made available under the case number SA.40720 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved.

UPDATE 27th May 2016

Cable operator Virgin Media, which runs a closed network and doesn’t have the burden of needing to cater for the whole country (they only focus on the most lucrative 60% or so in urban areas), has criticised the new agreement.

Tom Mockridge, CEO of Virgin Media, said:

“The Government is doing the wrong thing using taxpayers’ money to subsidise BT when Virgin Media and many other operators are increasing the supply of superfast broadband with private capital. And BT is doing the wrong thing taking the money from a Government borrowing £72 billion this year.”

Virgin’s comment also overlooks how the new deal is focused more towards smaller altnet ISPs, although it remains to be seen how many providers are attracted to take it up.

Leave a Comment
43 Responses
  1. Avatar MikeW

    Its taken its time to arrive, and the headlines suggest it will be complicated.

    A while back, there were plans to allow for bids to be “non open-access”, and to be considered if no “open access” tenders had been made. In some ways, the actual approval seems to have gone the other way – you have to start making your existing network open-access to even be allowed to bid.

  2. Avatar Patrick Cosgrove

    Have I got this right regarding open access? To make it worthwhile for potential network builders to move in to an area, they will have to first gain some form of commitment from residents and businesses in that area to sign up to them, otherwise they could do all the infrastructure work, but someone else with slicker marketing or lower costs can then piggy back on the infrastructure and pick up all the business.

    • Avatar MikeW

      Yup. That struck me too.

      As described, there are elements that bidders – large and small – might run a mile from.

    • Avatar All open

      Open acces does not mean free access. Regardless of who offers service the infrastructure builder will get their monthly line rental. This means the infrastructure builder always wins, regardless who is the retail ISP.

  3. Avatar Steve Jones

    Yup, make it even more bureaucratic in the areas which are now the most difficult to serve. That’s going to work well…

  4. Avatar chris conder

    You couldn’t make it all up.
    Superfarce.

  5. Avatar FibreFred

    I don’t see this enticing alt-nets.

    It’s already expensive to deploy in these locations and on top of that they have to share everything they put in that received state aid.

    Nothing wrong with that on paper but I don’t expect we’ll see alt-nets flocking to this at all.

    • Avatar Steve Jones

      To be honest I really don’t see any altnets ever being required to share their passive infrastructure. It would surely be very clunky. In any event, these state aid areas are going to be in the most difficult and expensive to reach areas which is pretty well precisely the areas where infrastructure competition makes the least financial sense.

      I suppose if we ever have a state-subsidised “ultrafast” network to overlay the “superfast” one, then they could re-use the framework. However, if that’s ever a (I think it unlikely), then it’s surely a long way off. If there is some subsidy element to the proposed USO then it might come into play again, but it’s difficult to see how the mechanics of that would ever work given USO demands will likely be fragmented and not conducive to complex tendering processes.

      The only passive infrastructure I see being used is OR’s, and that would surely be under the “enhanced” PIA model (whatever that will look like), so the new rules are surely irrelevant in that case.

  6. Avatar Mike

    After the 23rd it won’t matter much.

    • Avatar Steve Jones

      That’s a bold statement. In any event, it takes at least two years to leave the EU (it’s in the treaties).

  7. Avatar gerarda

    “The UK can fully fund the investment to roll-out NGA broadband in areas where no NGA infrastructure exists” Does that mean the money cannot be spend on premises connected to an FTTC cabinet but too far away to receive a superfast service?

    • Avatar Steve Jones

      As there’s no direct expenditure involved on a premises attached to a cabinet that’s wholly irrelevant. Money is spent on installing the cabinet, and what this condition means is that some of the premises must be able to receive superfast speeds. In general, cabinets are going to be prioritised on a cost per premises passed at superfast speed (at least under existing BDUK contracts), so that would tend to mean those cabinets with very few superfast capable lines won’t get enabled.

    • Avatar TheFacts

      Cabinets are being installed on lines serving an area too far from the cabinet for superfast speeds.

    • ‘TheFacts’ If you know of a cabinet installed using gap funding where none of the premises can get a superfast service (and its not a mistake in the checker, of which handle a few per week) then be interested to know exchange name and cabinet number.

      Am sure Mark is interested too, and so would a council be too especially if they had paid for a cabinet to get X properties with access to superfast.

    • Avatar NGA for all

      @Gerada That must be the case, the £1.7bn assumed a c15% in-fill would be needed, so fibre extensions on poles would occur. I think the discussion is how much of this will happen. There is plenty of good work in evidence but it is less clear the resource is willing to commit.

      I do not quite know why the state aid measure took so long. Much of the extension work could occur within the existing contracts.

      On the efficacy of the cabinet on a rural crossroads or roundabout, perhaps 35 customers served from a single card is justifiable and should not prevent those further away from ordering an extension from the chamber. It may have been cheaper to describe coverage as fibres at a chamber

      Andrew – how few customers served do you want? The act of getting fibre bundles so deep might be worth more in the long run if the fibre paths can be extended.

    • Avatar Steve Jones

      @NGA

      There is no regulatory barrier whatsoever in doing fibre infill using the reinvestment fund within the scope of the current contracts. I suspect what will slow it down is the availability of resources and the eventual exhaustion of funds.

      I’d also add that OR (and the local authority) might well have an eye to a future 10Mbps USO. If a new cabinet it built rather than FTTP fill-in, it might not give superfast speed to everybody, but it could mean a lot more would beat the 10mbps USO figure. That’s not really in the strict letter of the BDUK approval (justified by NGA speeds), but I can see it being taken into account.

    • @NGAForAll Important to note I was the one asking for the cabinet, so can actually look and see, plus there are variations in how different projects behave that may explain it.

      All too often people are extrapolating from samples of 1 cabinet or very old information, rather than looking at the wider picture.

    • Avatar NGA for all

      @Andrew I have a sample of about 60 crossroad cabs, and you wonder why they are there, but you do want to celebrate the fact they have got fibre bundles that far. I am sure they can fill the first card, so there will be some utility.
      Once the cheapness of the cab is understood, then the only waste you might question is the power cost.
      Off some of these routes, you can also see Fibre on poles and manifolds beginning to appear which is encouraging to see. I hope the state aid measure and fresh scrutiny on BT’s capital contribution will unearth the same scale of funding being revealed in BT’s accounts for ‘clawback’. There is still £1bn of public funding available for in-fill which will make a big difference for many.

    • Avatar NGA for all

      @Andrew, the ones on entrances to Business Parks would be good to review, Lancing Business park might be worth a look. Even 350m away Businesses quickly start bumping into the limitations of the upload. Given most Business Parks have ducts which could take fibre all the way, these are harder to justify. I know BT needs to protect its private circuit revenue but they could have counted premises passed by delivering fibre in some nearest chamber and not installed a cabinet. Out of c19,000 bduk cabinets so far there will be 1,500 to 2,000 outside such locations.

      On rural, 30 ports on the first card, provided you have not gone mad on the power costs, and it would hit BT’s threshold for a return in 12 years.

    • Business parks are more spread out by virtue of car parking, warehouse sizes etc and some areas are opting for FTTP on them, so question is thus why are some areas not doing that, when the operator in the contracts is the same?

      Really looking at ‘TheFacts’ for an example of a cabinet meeting
      “Cabinets are being installed on lines serving an area too far from the cabinet for superfast speeds.”

      On bumping into upload limits, perhaps bonding, or not the hold has gone from FTTP on Demand that, or push for Etherent which will also carry better SLA and throughput guarantees.

    • Avatar GNewton

      @Andrew Ferguson: bonding, or not the hold has gone from FTTP on Demand

      About line bonding: If a business was to do this in order to achieve a reasonable upload speed (e.g. a 100mbps), I doubt BT would even be able to provide enough spare copper loops for the required multiple VDSL lines in quite a few (especially rural) locations. I have seen cases where BT was struggling even to provide 4 lines for bonding purposes, let alone more.

      Fibre-on-Demand would be a more reasonable option, but I am not aware of any provider for this, despite recent headlines to the contrary.

      Leased lines from other non-BT providers are sometimes possible and the best option for larger businesses, not though for smaller High Street offices.

    • Avatar NGA for all

      @Andrew . if you wanted to test one, there is a Surrey funded one on the roundabout on the way out of Leatherhead, towards Box Hill. As long as we praise the effort to get to the top of Box Hill and Leith Hill then looking at odd looking ones like this one might be ok.
      There are much much odder one on cross roads elsewhere, but if it contains one card and the resources can be extended then it may not be as poor as it looks. This is why if the subsidy is ultimately less than £20k on average and the fibre can be extended, then it can hold up.

  8. Avatar Steve Jones

    @TheFacts

    Do you mean all (or even the considerable majority) of lines attached to one of these new cabinets can’t get superfast? I think that’s unlikely in the extreme as it will breach the EU state aid rules and won’t count for the purpose of gap funding targets.

    I think you need to provide examples. Or even one example. Of course if you just mean some of the lines on the new cabinet can’t get superfast, then clearly that’s bound to happen. If the rule was every line had to get superfast speeds then that might very well mean the great majority of cabinets couldn’t be upgraded under BDUK. That’s clearly not the case.

    • Avatar TheFacts

      I mean a FTTP cabinet area where a cable from it runs into a community. An all-in-one cabinet has been installed, not yet live. Possibly 100 properties.

    • Avatar Steve Jones

      What on earth do you mean by an FTTP cabinet? Do you mean a fibre agregation point? Or a GPON node? Or do you actually mean an FTTC cabinet.

      In any event, I really don’t understand your point. A cabinet which is not yet live is a cabinet which is not yet live. Presumably it will go live at some point, and until it does, it will not count in the “premises passed” figure.

    • Avatar TheFacts

      Correction, a FTTC cabinet, of course.

  9. Avatar fastman

    nga

    I know BT needs to protect its private circuit revenue but they could have counted premises passed by delivering fibre in some nearest chamber and not installed a cabinet. Out of c19,000 bduk cabinets so far there will be 1,500 to 2,000 outside such locations.

    to be clear only those premises connected to an enabled cabinet would be classified as premises passed – more disnfortmation and incorrect suppossitions

    those Business parks will not have been dom by commercial too few premises and majority will not have been dome by BDUK as poor Value for Money — if a cab is say 20k do you 200 premises in a village of 40 businesses in a business park

    • Avatar NGA for all

      @Fastman – passed is where the copper cables are diverted through the cabinet or can do so, connected is where they take a service.
      What are the other incorrect suppositions so I can deal with them?

  10. Avatar gerarda

    Counting all premises connected to an enabled cabinet as premises passed is itself disinformation.

    • Avatar TheFacts

      Disinformation? We understand what it means. Availability of product.

    • Avatar gerarda

      No it doesnt – our village is “passed” but the service is not available to half of it and only at 2mpbs speed at best to the other half

    • Avatar MikeW

      Yawn.

      There are times when pedantry correctly demands the speed qualification to “homes passed”. Where the lack of it causes confusion.

      And there are times, in generic conversation, when applying that pedantry merely makes communication long-winded and virtually impossible. Unlike ASA there is no requirement to *say* all of those small-print comments for properly-intentioned speech to continue.

      Demanding the small-print every time someone mentions the phrase “homes passed” is, to me, small-minded.

      And, of course, you know the small print applies very well. Your village, like others on your exchange, is “passed” but isn’t “passed*”, to the extent they are fitting extra cabinets to turn those merely “passed” into ones truly “passed*”.

      * – fill in the small-print here.

    • Avatar gerarda

      I do see its pedantry to expect that when someone makes a claim about the number of premises they can supply with superfast, that they should only count those that they can supply. Outside the Humpty Dumpty world of BT and broadband doing the opposite would be called lying.

    • Avatar MikeW

      Where was the superfast claim here?

    • Avatar gerarda

      exactly my point

    • Avatar TheFacts

      @gerarda – a 288 port cab has one 64 port card fitted. What should be said?

      Where does it say your whole village is passed?

    • Avatar MikeW

      Strange, it is exactly my point too.

      No claim of superfast speeds, means no need for the clarification of what “homes passed” means, means no need for the pedantry

  11. Avatar gerarda

    This is what fastman said” to be clear only those premises connected to an enabled cabinet would be classified as premises passed” I am merely suggesting that this implies a service is available to all the connected premises which is not the case.

    • Avatar TheFacts

      Why is it not the case? What number would you quote for an area?

    • Avatar gerarda

      I just realised why I promised myself never to reply to one of your posts.

    • Avatar MikeW

      The key question that arises from @fastman’s quote is … what service?

      My argument is that, because the service isn’t specified, then the speed qualification doesn’t need to be either.

      Once you specify that the service is a superfast one, then you ought to put the qualifications. If you want to specify a 30Mbps+ EU service, you need different qualifications. If you want to specify a 10Mbps USO service, you need different qualifications again.

      @fastman’s quote seems to me to be trying to counter @NGA’s previous comment (“they could have counted premises passed by delivering fibre in some nearest chamber and not installed a cabinet”) by saying “Nope”. No-one mentioned any particular service, beyond it being a “fibre” one. No-one needed to.

      It just seems pedantic beyond tears to start demanding that everyone uses more and more and more qualifications when they aren’t always necessary.

  12. We’ve been told that “there are two aspects to the NBS (National Broadband Scheme), one which allows councils to procure suppliers on an full access basis and one on a restricted access basis. The first of these has been approved, the second (which was designed for BT) hasn’t yet”

    Any info on the second part around anywhere?

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