Government Detail Final 10Mbps For All UK Broadband USO Design UPDATE

As promised the Government has today set out their chosen design for the new Universal Service Obligation (USO), which pledges to give everybody in the United Kingdom the “legal right” to request a 10Mbps+ capable “high speed broadband” connection from 2020, but challenges remain.

The new measure was part of the wider Digital Economy Act 2017 and goes beyond the current USO, which is offered exclusively via fixed lines and only requires KCOM (Hull only) or BT (Openreach) to 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). In practice even a slow dial-up line would qualify under the existing USO.

At present around 95%+ of the UK can already order a fixed “superfast broadband” (24Mbps+) connection and by 2020 this is expected to reach around 98%, which means that the new USO will be primarily focused upon helping to cater for those in the final 2%; estimated to be somewhere around 300,000 to 500,000 premises in 2020 (or c.1 million if you were to deploy it last year).

Margot James, UK Digital Minister, said:

“In the 21st century, accessing the internet is a necessity not a luxury. We are building a Britain that is fit for the future, and we’re now putting high speed broadband on a similar footing as other essential services like water and phone lines.”

The Government believes that only a regulatory USO offers sufficient certainty and the legal enforceability that is required to ensure high speed broadband access for the whole of the UK by 2020. 95% of the UK already has access to superfast broadband, and the USO will provide a “digital safety net” for those in the most remote and hardest to reach places.”

Initially BT (Openreach) had made a voluntary proposal to invest up to £600m on delivering a softer commitment (here), although various legal threats from rival ISPs and competition concerns contributed to this option being rejected (here). However, the decision to proceed with a legally binding USO does leave the Government with some difficult questions to answer, not least with respect to funding.

Estimates from Ofcom and the BSG have noted that the 10Mbps USO could cost anything from around £200m and all the way up to £1bn (here), depending upon its design and coverage. Until now the government has only suggested that the costs could be met by industry through a cost-sharing mechanism (e.g. a small levy on subscribers), which would need to be established by Ofcom.

The 10Mbps USO Design

* A minimum download speed of at least 10Mbps (Megabits per second).

* A minimum upload speed of at least 1Mbps.

* Quality requirements for responsiveness of connections: A medium response time with end to end latency of no more than 200ms for speech applications, a maximum sharing between customers (contention ratio of 50:1) and a 100GB minimum data allowance. NOTE: Ofcom’s data revealed (here) that the average ‘mean’ broadband connection already uses 190GB of data a month (this will be even higher by 2020), but the figure drops to 84GB as a ‘median’ average and slower connections also tend to gobble less data.

* The USO can be delivered by a range of fixed line and / or wireless technologies (FTTC, FTTP, Mobile Broadband etc.).

* The USO must be funded by industry rather than public funding.

* Uniform pricing for upfront and ongoing charges. You should pay the same for the service no matter where you live in the country (e.g. rural or urban).

* A cost threshold of £3,400 per eligible property (same level as the current USO), enabling coverage to around 99.8% of premises. If a deployment costs more than this then the customer will be expected to either pay any excess costs (plus a standard connection charge), choose a Satellite service (final 0.2% of premises), try to aggregate demand (see below) or reject the offer. This is necessary to stop costs getting wildly out of control (e.g. spending £200k to connect one house up a mountain).

* A requirement for demand aggregation, so that people within an area can combine their per premise cost thresholds, to ensure that as many people who want to get connected do get connected.

* Service on request. The 10Mbps USO will adopt the same “on request” approach as the original one, which means that users who want it will need to upgrade to a relevant USO supporting service in order to benefit (note: faster services tend to cost a little more but then there’s no such thing as a free lunch). The competitive market also means that an “on request” approach is largely unavoidable.

* The Digital Economy Act included a power for the Government to direct Ofcom to review the USO at any time, after consulting the regulator, and for a specific requirement that once 75% of all premises take-up 30Mbps broadband the minimum speed would be reviewed. In practice it will be a fair few years before the USO speed is raised again.

* To help minimise the risk of overbuild and market distortion, and the imposition of costs on industry that might divert market investment and reduce competition, only premises who do not have a connection which meets the USO specification, or are unlikely to be connected under publicly funded procurements which meet the minimum specification, will be eligible to be connected.

The Government and Ofcom are now “working to put in place a number of processes to implement the USO as quickly as possible” (we believe secondary legislation will be needed), which they say includes the “running of a process to designate the universal service provider(s) who will be required to offer the service, giving both small and large providers a chance to put their names forward for consideration“.

Remaining Challenges

On the selection of a supplier(s), it’s worth nothing that only BT and KCOM have shown serious interest in supporting the USO, while other ISPs have largely rejected any notion of taking on the not insignificant legal and financial burden (example). We wouldn’t be too surprised if there aren’t many takers when Ofcom asks again but apparently there have recently been “expressions of interest from some smaller market players” in being designated as Universal Service Providers (USPs).

At this point some readers may understandably complain that the speed of 10Mbps, which Ofcom views as being enough to meet the requirements of an “average family“, is too slow. As such any forthcoming debate over new secondary legislation may reignite the battle for a 30Mbps USO. At this stage it’s worth remembering that the 10Mbps USO is only a “minimum” and most should get something far faster.

The problem with setting the USO at 30Mbps is that it would be considerably more expensive (up to £1.4bn according to the BSG) and could also risk damaging competition in the alternative network market, which would make it difficult to deliver in the current environment without causing further upset (particularly if BT were selected as the primary / only UK supplier).

In the end it’s likely that the primary responsibility will still fall on BT (UK) to deliver the USO, which in practice means that the national operator might still need to conduct much of the same deployment as it planned under the voluntary proposal. Either that or the whole roll-out could become very tedious, especially if masses of people request the USO service during early 2020.

On this point it’s worth noting that even BT’s voluntary proposal suggested that they wouldn’t have been able to fully implement the USO via fixed lines until December 2022 (this left 0.3% of premises to suffer Satellite, with an unspecified fixed wireless solution being used to meet the earlier 2020 deadline). None of this is going to magically change while the Government debates legislation.

Meanwhile ISPs will be keen to know details of precisely how the industry will be expected to help pay for all this, which tends to be an unpopular topic since no provider likes to raise their prices and forcing all customers to help pay for better connectivity in remote communities can be contentious.

It’s also worth pointing out again that other EU countries which have adopted a similar USO do not go as high as 10Mbps (e.g. Spain, Belgium and Croatia use 1Mbps, while Finland opted for 2Mbps and Malta is on 4Mbps) and many don’t even have one for broadband, although that could change (here).

Finally, the various regional governments will need to take care so as to align their respective non-binding broadband policies with the new legally binding USO. Both Wales and Scotland are aiming to achieve near universal coverage of 30Mbps+ broadband speeds by around the end of 2020 or 2021 and this could create some complicated problems if not correctly managed (duplicating investment etc.).

UPDATE 10:09am

Made a small tweak to clarify that Ofcom’s 190GB average is a ‘mean’, which falls to 84GB when using a ‘median’ average. Slower connections also tend to gobble less data, while Ofcom’s figure also factors all connections (including superfast and ultrafast etc.).

UPDATE 11:31am

Full details of the Government’s response to the USO design consultation are now online (here). Interestingly this states that “there have been expressions of interest from some smaller market players in being designated as Universal Service Providers (USP),” which would be a first and we’ll keep an eye out to see which are serious.

UPDATE 12:28pm

A comment has come in from the landowners association for England and Wales.

Tim Breitmeyer, CLA President, said:

“This commitment to universal broadband has been government policy for some time but it is still satisfying to see the enacting legislation laid. It means that the principle is now enshrined in law that no home or business should be left behind in the modern economy.

However, our campaign continues because although this commitment is right for now, technology advances at such a speed that is is essential for this law to evolve with the times. Whilst a minimum 10 Mbps download speed is adequate for now, that will change in the relatively near future.

Fixed broadband connections are only one part of the connectivity challenge. We have a long way to go to establish universal access to mobile data coverage that is equally important for people living and working in our countryside.

There are still technical issues to be resolved between now and the end of 2020 but the fundamentals are clear. As our right to the delivery of a letter was enshrined in law many decades ago, our access to digital connectivity will follow suit.

The CLA will work with Ofcom, the Department for Digital, Culture, Media & Sport and the wider industry to make sure the USO delivers the step change in consumer accountability that is promised.”