Audit Office Casts Doubt on UK 2025 Gigabit Broadband Target UPDATE

A new report from the National Audit Office, which examines the original £1.9bn Superfast Broadband Programme (SFBB), has warned that the Government may struggle to achieve its ambition of bringing gigabit-capable broadband to all by the end of 2025 and thus risks “leaving the hardest to reach areas even further behind.”

The report starts off by summarising Building Digital UK’s (BDUK) original SFBB programme, which it states has so far help to extend “superfast broadband” (30Mbps+) coverage to 95% of UK premises (nearly 97% if you use the older 24Mbps+ definition). Public investment for this via 147 contracts is split between the Government (£719m) and local authorities (£1.2bn), although sadly the NAO doesn’t mention all of the private match-funding from ISPs.

Most of the original programme (Phase 1 + 2 = 95% coverage target) focused on delivering cheaper to deploy Fibre-to-the-Cabinet (FTTC / VDSL2) services, which are incapable of achieving ultrafast or gigabit broadband speeds in the UK. However, plenty of newer Phase 3 contracts have been signed to help further extending coverage (partly by harnessing clawback) and those tend to focus on gigabit-capable Fibre-to-the-Premises (FTTP) technology.

The Government (DCMS) now expects its SFBB contracts to run until 2024, “four years longer than originally planned … this is partly due to delays to existing contracts but also because the programme has been extended, with local bodies awarding new contracts to increase coverage.” Various operators, such as BT, Gigaclear, Airband and others, are taking part in Phase 3.

Despite all this progress, the NAO’s report warns that the SFBB’s focus on prioritising coverage over broadband speeds (i.e. lots of FTTC instead of FTTP) has “left the UK with infrastructure that will not meet future demand.” The catch is that if the SFBB project had focused on FTTP then the coverage achieved for £1.9bn would have been considerably less than 95% and it would have taken years longer, thus leaving more people trapped on slow copper ADSL lines.

At present around 27% of premises can already access a gigabit service (14% via full fibre FTTP) and it’s not unreasonable to assume that commercial deployments alone (e.g. Virgin Media’s DOCSIS 3.1 upgrade by the end of 2021) will take this to around 70%+ of premises by the end of 2025, although uncertainty over aspects like overbuild between rival networks and long-term rollout plans make it difficult to be exact.

In response the Government now plans to invest £5 billion – focused on helping those in the final 20% of hardest to reach premises – to ensure that “gigabit-capable broadband” (via FTTP, HFC DOCSIS 3.1, 5G or fixed wireless etc.) reaches every UK home by the end of 2025 (here). The final strategy for this is expected to surface alongside the Autumn 2020 Spending Review, but the NAO has concerns.

Gareth Davies, Head of the NAO, said:

“The Superfast Programme extended the nation’s broadband connectivity and helped people to work and study from home and stay connected during the COVID-19 pandemic. However, the UK has a broadband network that does not reach everyone and is not fully future proof. Less than a decade after launching the Superfast Programme the government has identified the need to upgrade the broadband network again.

To deliver the government’s vision of achieving nationwide gigabit connectivity, the Department must manage the tension between meeting a challenging timeline and serving those in greatest need. Failure to do so risks leaving the hardest to reach areas even further behind and widening the urban-rural divide.”

The Department is still in the early stages of establishing its programme to support the final 20% of premises (the Future Programme or F20) although it has already made some key decisions about the delivery model. While some funding will support a voucher scheme, approximately £4.5bn will be gap funding to subsidise infrastructure roll-out. We already have some idea how this will all work (here).

In England, the Department plans a more centralised procurement approach (avoiding the delay and complexity of having to manage lots of different approaches via local / council run contracts), although it’s not yet known if this will also apply to Wales, Scotland and Northern Ireland.

Crucially, all of this takes time to setup and the first contracts aren’t expected to be let until the autumn of 2021, which leaves precious little time for actual deployment (likely to start in 2022) and that’s assuming everything goes according to plan. Disputes, difficulties finalising state aid agreements, complex procurements and other administrative issues can all potentially create further delays.

On top of that the NAO notes how the Government is already warning that it considers the final 1% of premises (e.g. the same sort of area that their 10Mbps USO was supposed to help – this has suffered problems) “could be prohibitively expensive to reach” via even their gigabit programme. Furthermore, in order to achieve that 2025 timeline, it would need to increase build rates immediately from 1.5 million premises per year currently, to around 6 million (sadly they don’t show the modelling for this). A heck of a tall order.

All of this may help to explain why the Government has recently watered-down their language to “go as far as we possibly can by 2025” (here); the 2025 target always did seem to be somewhat overly optimistic. “Maximising gigabit-capable build by 2025 means that the Department is likely to try to deliver to as many premises as possible in the timeframe, rather than starting with those in greatest need,” said the NAO before making a series of recommendations.

NAO Recommendations

The Department should, in respect of both the Superfast and Future Programmes:

a. Work with suppliers and Ofcom to address customer issues with broadband and encourage take-up, to help realise the benefits from widespread broadband envisaged in its Superfast Programme’s business case and to ensure the Future Programme also achieves the benefits of gigabit‑capable technology;

b. Set out how it will ensure better outcomes for consumers, including any relevant learning from similar programmes, so that they have both choice and the ability to switch providers; and

c. Set out how it intends to measure the benefits of its investment, including setting programme-specific objectives as clear measures of success for its Future Programme.

In respect of the Future Programme, it should:

d. Set out how it intends to improve its data, including how it will:

• Secure the required quality of data for identifying which areas and premises it intends to subsidise;
• Replicate local body knowledge and systems; and
• Encourage suppliers to set out their plans;

e. Set out how it will retain local body expertise in a centralised procurement model, including how it will mitigate the risk of financial pressures on local government leading to broadband teams being disbanded;

f. Present a detailed plan and schedule, reflecting on learning from the recent pandemic to pinpoint gaps in current broadband provision, identifying:

• How it will meet the proposed timeline together with additional costs and benefits of accelerating the programme;
• The key risks to delivery, costs and outcomes and its proposed mitigation approaches;
• The extent to which it intends to follow an “outside-in” approach;
• Those local areas which will still not be covered by the final 20% of the Future Programme and any mitigations to ensure that these areas are not left behind; and
• How and when it intends to review and update these plans to ensure transparency about what it considers to be deliverable and by when.

We should point out that the NAO’s report does not examine the Department’s progress on the Future (Gigabit) Programme in detail as it is still in the design stage and has yet to be given final approval for its business case. In closing the NAO said: “The Department still has much to do to mobilise and deliver a substantial programme. It has applied some learning from the Superfast Programme but it has moved away from some of its more successful aspects in a bid to meet its challenging timeline.”

In the end we’re fairly confident that quite a few premises will still be waiting for gigabit-capable broadband come the end of 2025, but at the same time a large chunk of the problem should have been solved by then, we just don’t know how much will be left to do.

UPDATE 3:54pm

We’ve added a couple of reaction comments below.

Paul Stobart, CEO of Zen Internet, said:

“The target of rolling out ultrafast fibre broadband by 2025 is bold and ambitious in equal measure. The Government and Openreach are committed to the task at hand. However the clock is ticking on the 2025 date, and now is the time to quicken the pace.

The roll-out is urgently needed to close the digital divide in rural and remote locations currently shackled by poor internet connectivity. This can underpin growth at a critical time for the economy, supporting the UK’s recovery.

It is important to remember that this is not simply a task for the Government and Openreach. The whole industry, including internet providers, has a duty to make faster, reliable connectivity a reality at a time when the nation needs it most.”

Michael Armitage, CEO of Broadway Partners, added:

“The digital divide between rural and urban connectivity has perhaps never been felt more keenly than during these last few months of lockdown, with a large majority of the population confined to working from home. In rural Wales, for example, we estimate that as much as 30% of the population has barely functional broadband. With rising demand for delivery of services and the intensifying pressure on councils for education, health, social services and transport, improved digital connectivity is essential. We therefore need to accelerate the reach of reliable broadband and ensure that every person and business, no matter their location, can stay connected.

There’s no doubt the government’s target of delivering gigabit-capable connectivity to 100% of the UK by 2025 is ambitious, but it is still achievable and does not need to exacerbate the digital divide we currently face. For this to happen, however, the UK must re-evaluate its method and approach. Success relies on a combination of activating the energy of smaller suppliers, building truly collaborative partnerships across the public and private sectors, and harnessing the power of fibre and 5G. Right now, it’s as much about being flexible as it is pragmatic.”