Ofcom Invites UK ISPs to Supply the New 10Mbps Broadband USO
Ofcom has today formally invited UK ISPs to express their interest in becoming suppliers for the new Universal Service Obligation (USO), which from 2020 will make it possible for anybody in a slow speed area to request a minimum broadband download speed of 10Mbps+ (1Mbps upload).
By 2020 it’s predicted that fixed “superfast broadband” (24Mbps+) networks should be available to around 98% of premises across the United Kingdom. As a result the focus of the government’s new USO will be on helping to cater for those in the final 2% (estimated to be somewhere around 600,000 premises in 2020 or c.900,000 if measured today).
Specification for the 10Mbps USO
* A minimum download “sync” speed of at least 10Mbps (Megabits per second).
* A minimum upload “sync” speed of at least 1Mbps.
* 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.
* A minimum data allowance of 100GB.
* A technology neutrality design (can be delivered via a mix of fibre based and wireless solutions).
The USO is NOT an automatic service upgrade and as such it will only give people the “legal right” to “request” a 10Mbps+ capable broadband connection, albeit only in poorly served areas where no future upgrades are planned to deliver even faster speeds within the next year (necessary to limit any potential conflict from network overbuilds).
Furthermore the government also confirmed in March 2018 (here) that the obligation would be funded by industry (e.g. ISPs), must adopt uniform pricing (i.e. cost the same no matter where you live), will have a cost threshold of £3,400 (i.e. you may have to help pay for it if the costs go above this) and support demand aggregation (i.e. multiple properties in an area could help to bring the deployment cost down).
Today’s new ‘Call for Expressions of Interest‘ document thus focuses on which suppliers wish to be considered as potential Universal Service Providers (USP), either on a national or regional basis; and what their delivery plans would be. “We will consider whether different providers could be designated in different areas of the UK, or whether the designation of a single national provider would better meet our objectives,” said the regulator.
However picking suppliers won’t be easy. So far only BT and KCOM have shown any serious interest in supporting the USO, while other ISPs have largely rejected any notion of taking on such a significant legal and financial burden (example). But at the last update Ofcom noted that they had since received “expressions of interest from some smaller market players” in being designated as USPs.
Ofcom Statement
Existing UK network infrastructure means that the majority of USO eligible premises will be connected to BT’s copper network or will be in areas where BT’s network is present, except in Hull, where KCOM has an extensive presence. These two providers are therefore able to incrementally expand and upgrade existing network infrastructure more easily than alternative providers.
Designating BT and KCOM as Universal Service Providers for the broadband USO may therefore be the quickest and most efficient means of ensuring that consumers are able to request USO services at the earliest opportunity. In addition, designating BT and KCOM on a national basis may also simplify the process for consumers (as they will not need to check which Universal Service Provider serves their area) and enable more efficient delivery of the USO due to economies of scale.
However, we recognise that alternative providers which operate networks on a national or sub-national scale may be able to deliver the USO more quickly or more efficiently than BT or KCOM, and should not be excluded from consideration. Without assessing whether there is interest in delivering the USO from alternative providers, and how they would approach this, we cannot make a full assessment of which providers would be the most appropriate to designate.
We are therefore keen to understand whether there is interest in delivering the USO from any alternative providers (i.e. other than BT and KCOM) and whether this is on a national or sub-national basis.
The USO itself would then be funded by the industry via a Universal Service Fund (USF), although as it stands we still don’t know precisely how much funding will be available or precisely where Ofcom will extract it from. Sadly today’s document only clarifies the processes involved in securing funding for the USPs and not the detail of where that money is to be found.
Ofcom’s hunt for suppliers will remain open until 20th August 2018 and in the following month they will consult on the procedural regulations for setting out how they propose to designate USPs, which will be followed by a final decision on the chosen providers and further USO details before the end of 2018. “We expect to make our final decisions by Summer 2019, after which consumers will be able to make requests for connections,” said the regulator.
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 X (Twitter), Mastodon, Facebook and Linkedin.
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I’m sure ISP’s will be battering down the door!
I would of course be amusing if none applied. I imaged BT/K will (knowing they would probably be forced to even if they didn’t). I have complete faith that Ofcom will manage as well as they do everything else!!!
I suspect ISP’s will be weighing up the odds of ditching sub-10Mbps customers vs USO marketing benefits.
I wouldn’t be suprised if Sky sign up given how picky they are.
I suspect Sky wouldn’t count as they aren’t the physical network operator, they are piggybacking off Openreach. In that sense they might be able to take an order for a USO compliant service but they might not be the one designated to actually deliver it, as that would be the job of the infrastructure provider.
Has KCOM already basically reached the USO themselves anyway or will have by 2020?
Yes.
so if BT and KCOM are the only ones who step up, does it mean that your “request” for broadband will be limited to the connections they offer? if i ask for internet in the middle of nowhere and im told it costs like £5k for a line but I don’t want to pay, can I ask for the 3.4k to go to satellite internet from another isp instead?
wouldnt it be better to have a load of different isps using different tech to ensure everyone can get something?
Some of the final funding details and flexibility are a little unclear, which is why Ofcom are consulting. As above they are also still considering whether to assign USO responsibility nationally or regionally to different providers.
Generally the areas that would benefit from such a USO may only have a limited choice of infrastructure, while responsibility for the USO in any given area may only rest with one supplier.
In your example the cost of £5k would be reduced by the cost threshold of £3.4k, particularly if other premises in the area would also benefit.
I don’t think Satellite (except maybe LEOs in the future) will apply here due to the requirement for a 200ms latency time, which is something that traditional GEO satellites can’t deliver.
My reading is that the USO provider can provide USO by any means that meet Ofcoms requirements. Ie their own existing package, a new package or indeed subcontracting a package from another specialist provider.
That’s not how the Ofcom document reads on the cost threshold. They are saying the USP must consider the cost threshold based on the cost per premise based on a) the total premises benefiting from any new USO infrastructure & b) the assumed takeup % from those premises (this % they will consult on further)
There is no pot of £3400 for each property.
More importantly is the statements that any unfair burden will only be repaid retrospectively and potentially over a number of years – ie any USP has to have the capital available to build every requested connection within 12months, but only recover some of the direct costs once live and even then only a part of the costs MAY be compensated.
That requirement is going to rule out a large number of smaller providers, as they simply dont have the resources (financial and operational) to deliver what could be 1000’s of requests in 12months even if they only request designation in a small LA area.
The minimum size of a LA will all but rule out small to medium suppliers anyway.
The cost per property 3400 is that but that can be considered with other properties where applicable.
” any USP has to have the capital available to build every requested connection within 12months,”
Well thats not in stone yet still to be consulted on. i could well see regional variations here.
By Smaller suppliers I mean the likes of Gigaclear – who in LA areas like West Oxfordshire have a significant presence, but could they delivery USO requests in that area within a tighter timeframe?
Experience suggests if the consultation starts with 12 months then there would need to be a compelling argument to look at longer timeframes… even CFP’s work on 12month delivery timeframe.
Its not a cost per property of £3400, that is just a ceiling per premises before the end user(s) can be asked to contribute anything to the pot. The delivery cost is going to come down to the technology the USP chooses to deploy, its not going to work like the current vouchers where suppliers can claim the maximum against the voucher scheme, for example you have suppliers in wales claiming £800 for 4G connections!
Realistically, I predict the USO is going to become a Fixed Wireless LTE connection for most properties, and the Operator can then claim any unfair burden for upgrading the backhaul from a mast at best, and that is going to be unlikely as it will cross over into indirect benefit. I don’t see the USO pushing FTTP very far, if at all.
I image FTTP will all depends on what councils are willing to throw in. Some still seem willing to part fund beyond existing schemes. That may be enough to top up the costs in some circumstances for FTTP to work.
Councils can’t contribute anything – that would then become state-aid and require a tender process etc
Any local schemes like that are likely to fall under the clause of other planned infrastructure and so exclude the property from the USO, that is where timescales are going to get complicated, especially if you move outside a short term 12 month window.
Vouchers etc are state aid exempt
@Joe – Vouchers would be considered state aid if incorporated with the USP designation – ie the voucher funding would be restricted to only a USO provider not the whole market. Also the level of USO provision combined with Voucher funding would exceed the de minimis threshold.
It is slightly disappointing that Ofcom have not recorded or requested the commitments of English counties to complete their BDUK programmes. The promise was to use the money available to go as far as possible and there is plenty of money in the pots to go further.
It would be good to see Ofcom make it a matter of record that what is recorded as BDUK ‘underspends’ which is likely to include the BT capital owed and the huge Capital Deferral would be expected to reduce the problem below 2% where much of the work is being done with full fibre.
There is a risk some counties will use the badly timed B_USO to stop their projects.
Its not going to stop any projects – the USO isn’t designed to be a mass programme of infrastructure build – the BDUK projects will continue and the respective LA can decide in due course whether to go for further phases (using clawback and savings) or push those funds back into other local priorities.
If they go for further phases, then those properties would fall out of USO scope, and if they redirect funds to other priorities then the USO acts as a safety net to those who need it.
Why do you want Ofcom to use this as an accounting exercise for BDUK projects?
Techno, the projects and the budgets were set, where the LA did not have that discretion. That discretion crept in with the constant rounds, itself a product of the gaming of costs and capital.
Ultimately, Ofcom should check on the BT capital contribution so their investment is consistent with WLA pricing/investment assumptions for FTTP. For LA’s, if you read the PAC evidence the commitment was to go as far as possible. The further UK go’s, the more FTTP and that will trigger yet more FTTP.
B-USO of 10Mbps was dreamt up in November 2015 just before folk got confident enough to tackle BT Groups efforts to short change their network division. All funds needs re-cycling. To that end more transparency is still needed.
Average costs are lower, demand is higher, there is no reason for English LA’s to use B-USO to stop.
Techno, Ofcom should also check that the overbuilding of 1.1m VM premises is accounted for properly. Some £85m of BT capital contribution should be visible in the LA/BDUK books, with a plan to invest that to deliver deeper coverage.
@NGA – so you have no evidence that any of this is or is not happening?
Facts, Ofcom have made no effort to record to English commitments. The commitments where made should be acknowledged,recorded, and applauded and the impact shown on the total.
There is no discussion on the appropriateness of applying a B-USO in urban areas including Greater London. Urban issues should be picked up by defining properly the a ‘reasonable request’ for FTTC and FTTP.
@NGA
The commitment as you say is in the signed contracts and the procurement processes underway. I see nothing that suggests any LA is going to pull out of these? Can you point to this factually?
BT Capital is going to show in BT Groups books not the LA accounts – these are gap funded contracts, only the element funded by the LA will appear in their accounts, nothing more
LA have the ability to take the clawback payments over the life of the contract and use this for any LA expenditure they like (could be a new phase with an new tender or could be social care) The exception to this is the Gainshare payment which must be contracted with BT. No LA has made any commitment with regard to future clawback sums, nor could they as they would be subject to elections and changing priorities over the lifetime of the BT Contracts.
Ofcom have no oversight role with BDUK projects – why should they? That is nonsense
The reverse is more likely than your worry that the USO will somehow stop the BDUK projects dead in England – I would say it is the driver to ensure that each LA has their ducks in a row regarding Gainshare and any planned procurement exercises before the USO comes into effect. That is where Ofcom need to be on their game and ensure they are the conduit for effective information from LA / BDUK to USP.
Overbuilding VM is a side show – its a natural consequence just as VM overbuilding BDUK is . It is a consequence of VM not providing OMR data together with simple network design – ie you cant control which properties a FTTC cabinet serves. At the end of the day, BT only gets paid for the Intervention properties not those served by VM.
Finally why should Urban areas not be included in a USO – that seems odd argument. What is a “reasonable right to request FTTC / FTTP”? That isn’t a viable mechanism. Openreach have clearly shown the real cost of FTTPoD and it is not an efficient way to deliver infrastructure in response to a single request. CFP is vastly more efficient as a mechanism, but neither are the what a USO is concerned with. You want a USO to be a driver for FTTPoD – it isnt and it cant be, coverage will continue to grow from BDUK Phases, Commercial, AltNets, CFP, Voucher Schemes are the like, much of it will be FTTP, but the USO is just a backstop to all of that activity.
200ms latency. That’s not good.
It’s there to rule out geostationary satellite links. 2 * 36000km is 240ms each way…
They would be better off enforcing a pay for what you get policy. Like pay per mb or something. That way ISP’s would want you to have a faster connection so they can charge you more. Pretty much what virgin media does now.
This USO will be funded by a levy on other ISPs whose bills are subject to VAT. So customers will be paying VAT not only for the services they purchase, but on the price hike to fund the USO.
Yet the Royal Mail does not have to add VAT to the cost of postage because of the USO.
VAT on ISP bills ought to be reduced accordingly.
That argument is so confused: Other than EU law, why the gov should lose tax revenue
The point is that the extra money on bills to subsidise the USO will also have 20% VAT levied. However one of the reasons given for not levying VAT on Royal Mail’s charges is that the RM has to bear the cost of the USO, unlike other postal operators who have to levy VAT.
I am guessing that EE will wish to become a USP, either using pure 4G (100GB is an easy hurdle for them, they offer 200GB packages today) or their recently announced hybrid DSL/4G.
If Mobile operators were to adopt unlimited data, as Three used to, they would no doubt have the ability to widely cover those needing to empower the USO.
In reality 100GB is not fit for purpose if you live in a ‘modern’ household. I think a lot of consumers would be presently suprised how much data they use when streaming etc.
I appreciate backhaul could be a problem for Mobile operators but if they were to invest appropriately no doubt any issues could be overcome.
Is it possible that BT already have this in mind with the aqusition of EE, it would put them in an incredibly strong position very quickly without necessarily having to conduct a wider network build? No doubt we will find out within the coming months!
“A medium response time with end to end latency of no more than 200ms for speech applications”!
This is potentially a similar speech delay we used to experience to International phone calls (satellite up and downlinks) in the 70’s and 80’s before widespread intercontinental fibre optics. Does Ofcom think this is a good thing? From rural location to small village no doubt. Perhaps short wave radio needs to be re-invented! 🙂
But how do you get this speed? Speed depends on a range of factors like condition of your line, distance from the exchange etc. They won’t change your phone line to get a better speed unless there is a fault with voice calls. I don’t even think fibre optic cables are free. They cost a fortune. If its a legal right why aren’t they dishing out lines to everybody. My phone line doesn’t do speeds like that. I can’t afford fibres! I think its all a lot of hype. No such thing as a minimum speed. My phone line doesn’t do that.
There is no such thing as ‘fixed line Universal Broadband’! BT Broadband is only available on compatible telephone lines. We don’t get the internet through our phone line. We all have to use different methods to access the web, dongles etc. It isn’t universal! What are you talking about!