North Skye Broadband Project Scraps State Aid Application Over Delays

The North Skye Broadband (NSB) project, which had been planning to deploy a B4RN-like fibre optic broadband network to 2,000 rural premises on the Northern side of the Isle of Skye in Scotland, has given up its application for significant state aid support after facing repeated delays.

Exact details of the roll-out plan have always been a bit vague but the “not for profit” community organisation, which was setup in 2015, did make progress last year (here) after the Community Broadband Scotland (CBS) initiative offered to support it through the OJEU procurement process with a view to harnessing a capital grant of up to £1,460,000 (max 89% of capital costs). Additional funding would come from the community itself.

The project’s original timetable, which always seemed quite overly optimistic given how long such processes usually take, predicted that a supplier contract could have been awarded by the summer of 2016 and the roll-out phase would then have started before the end of autumn in that same year. None of this happened.

Instead those behind the project claim that the lengthy application process for state aid support has been “dogged by delays due to complex public procurement requirements“, including a nine-month delay waiting for a new State Aid funding scheme to be drawn up and approved by the EU after the Phase 2 scheme expired in June 2015 (this also affected lots of Broadband Delivery UK contracts).

North Skye Broadband (NSB) has also undertaken two separate State Aid Public Consultations – a mandatory requirement on their procurement process – and the decision not to proceed further comes as it was due to undertake a third such consultation, which itself has been delayed for nearly six months awaiting new and more accurate “Open Market Review” data (existing data has been found in many cases to have a 30% to 40% error rate).

Geoff Semler, Chair of NSB, told ISPreview.co.uk:

“NSB has, from the very start, planned for this to be a community-owned network, broadly following the approach taken by Broadband for the Rural North, a very successful community benefit society operating in the North of England. By minimising costs and utilising community resources wherever possible – including, for example, seeking free wayleaves from landowners to lay high-capacity optical fibre across their land to establish the long-distance “backbone” network – NSB is seeking to narrow the “digital divide” caused by operators only offering high-speed broadband in denser urban areas and ignoring the needs of fragile rural communities, where many residents and businesses only have the choice of inferior broadband via obsolete technologies, or (often) no Internet connection at all.

It has been clear to NSB throughout that a wireless-based trunk network is wholly inappropriate for our needs. Not only does the harsh environment on Skye present challenges to the erection of masts and aerials, but HIE’s own figures demonstrate that even if such a scheme can be profitable, the business case simply does not generate sufficient surplus revenue to finance the technology refresh that will inevitably be needed to meet the ever-increasing demand for bandwidth. The existing State Aid schemes are not fit for purpose because they are designed to support the provision of as many wireless networks as possible, as cheaply as possible, and as quickly as possible.

The State Aid rules also require that such networks should be “future-proof”, but in our opinion they are clearly anything but. Ironically, until the Chancellor’s 2016 Autumn Statement and the establishment of the Digital Infrastructure Fund, BDUK would not approve any State Aid application that specified optical fibre as the network medium. Now, they are crying out for commercial providers to build fibre networks, but continue to refuse to fund community-owned networks.

Despite recent urgent discussions with HIE, CBS, and Scottish Government, a joint statement approved by all three bodies was issued to NSB on 22 June 2017 confirming that, in accordance with EU rules, the only funding available to North Skye Broadband in excess of the €200,000 de minimis provision would be via one of the formal State Aid schemes, none of which permit any funding other than for a network that is owned and operated by a commercial provider. Thus the State Aid process actually precludes NSB from adding any value to the implementation or operation of the network, instead it simply uses NSB as a funding conduit to provide a commercial operator (and its benefactors) with a state subsidy. Accordingly, it was agreed that as none of these schemes meet NSB’s requirements, the formal application process should be discontinued.”

In fairness, public funding isn’t usually something that is given out willy-nilly and local authorities, as well as any related schemes run by the central UK and Scottish Governments, tend to be quite risk averse when it comes to investing in such projects (they can be very publicly hauled over the coals if things go wrong).

Generally a network tends to stand a much better chance of gaining approval if it can raise money and establish a working service or become self-sufficient before applying for fresh public investment. We’ve seen plenty of projects run into problems when they attempt to apply from a standing start, although admittedly such checks are no guarantee of financial security (e.g. the recent AB Internet problems and Fibre GarDen before it).

However NSB fear that without a good network many of those within their coverage will be left to suffer the meagre usage allowances, high monthly rentals, slow latency and flaky service speeds of Satellite based broadband connections. As such the team are now considering whether or not they can develop the business case for a small FTTP pilot/demonstrator network with at least 50 local premises, including five business users.

Apparently the planning for this pilot is being undertaken in partnership with a “private sector partner that is fully supportive of what NSB is trying to achieve, one that is cooperating with NSB in the development of a bid for de minimis funding from CBS to demonstrate a new paradigm for providing truly future-proof ultrafast broadband services for the benefit of, and in co-operation with, rural communities across Scotland.”

We wish them luck and hope to see some more positive news from the Northern side of Skye in the future.