Broadband - Business, Innovation and Skills Committee Contents


3 Universal Service Commitment

Background

17.  The roll-out of broadband has provided 99% of the population with access to some form of broadband service.[13] However, the speed an individual connection can be expected to achieve is dependent on a number of factors. These include:

  • the distance of the user from the telephone exchange or the telecoms cabinet;
  • the time of day; and
  • the equipment and wiring that the consumer is using at home.[14]

18.  The current average UK broadband speed is 4.1Mbps, but many areas experience speeds well below that average.[15] We deal with advertised connection speeds later in this report, but there are two particular geographic locations which tend to be more likely to suffer from below average connection speed. They are:

  • rural areas which are far from the telephone exchange building; and
  • suburban areas which are often on the periphery of neighbouring exchanges and far from the telecoms cabinets [Cabinets are the green structures which can be found on pavements].

The Government has proposed to address this problem with the introduction of a Universal Service Commitment for the delivery of a 2Mbps connection to virtually every household by 2012.[16] This has the potential to provide significant benefits to rural areas and, in particular, to rural businesses whose competitiveness often depends on effective communications. The Minister confirmed that £200 million had been allocated as the "central resource" needed to deliver the commitment, but that further funding may be sought from industry, Regional Development Agencies or local authorities.[17]

Finding a suitable speed for commitment

19.  The Government's 2Mbps target is an attempt to balance a reasonable connection speed with the cost of providing that service and the number of homes to which the service would be extended. The following table, provided by the Department, demonstrates the level of services which can be delivered according to connection speeds:
256 kb/s 512 kb/s 1Mb/s 2 Mb/s
Basic internet browsing As before plus As before plusAs before plus
Instant MessagingBasic video streaming iPlayerDownload music album in 5 minutes
EmailTele-health SecondLifeLong-form video (MPEG4)
VoIPFaster internet browsing P2P file-sharingVideo conferencing via TV
Online radio Fast internet browsing
Basic video call Download audio CD in 10 minutes
Network storage & backup 'Near-VHS' PC conference call

Capability of different internet connection speeds[18]

20.  We found a consensus among internet service providers that the level of 2Mbps was appropriate. TalkTalk, which provides about 25% of the United Kingdom's broadband connections, argued:

The proposal has had its critics who claim it is not ambitious enough. In fact what they are implying is that more money should be spent to achieve higher speeds. These critics have not presented any argument or evidence to suggest that additional spend will deliver additional net benefits.[19]

Dr Whitley, the Group Strategy Director of BT, believed that 2Mbps represented a "good notional aspiration for a minimum".[20] The 2Mbps level for the Universal Service Commitment was also welcomed by the CBI:

The average speed currently experienced by consumers in the UK is 4.1Mbps per second which makes the USC speed of at least 2Mbps below the average at which most of the UK households operate, but still among the most ambitious commitments in Europe.[21]

21.  However, others were less convinced. Mr Holoway, Managing Director, IT Support Line Ltd, believed that the Government could have been more ambitious rather than "just stumping for 2Mbps", and argued that the target could have been set between 5Mbps and 10Mbps.[22] Mr Jonathan Stearn, Head of the Disadvantage Programme, Consumer Focus, believed that the 2Mbps level was chosen on the basis of what was achievable rather than what was desirable.[23] In addition, we received written evidence from Digital Region, a provider of an NGA network in Yorkshire, which argued that 2Mbps left a lot to be desired "in the provision of the additional capabilities of Next Generation Access, such as Quality of Service, multiple service providers across a single connection, guaranteed bandwidth."[24]

22.  There is a balance to be struck between the desire for ever faster broadband connections and the costs attached to applying a Universal Service Commitment at a minimum level. Given the case made for 2Mbps by Government and Internet Service Providers, and the services which 2Mbps will deliver, we agree that the Government has set the Universal Service Commitment at an appropriate level. However, our support is contingent upon a clear definition of what 2Mbps represents.

Defining 2Mbps

23.   While we agree, in principle, that the Government has set the USC at an appropriate level, it became apparent that there was no clear definition of what 2Mbps represented. The Advertising Standards Authority offers the following description of the variable nature of connection speeds, and the problems in monitoring those speeds:

an individual's connection is not consistent - it can fluctuate according to the time of day - and [so] the difficulties of creating a meaningful message for consumers about the speed of a broadband service quickly become clear.[25]

24.  The Minister noted the importance of a clear definition,[26] and offered the following description of what he believed 2Mbps represented:

"It is the speed which gives access to most of the service that are currently in use and in our memorandum we provided a table setting out the applications to which that level of service will give access. You are right, of course, that because of the nature of DSL there is some variability in what is provided. It can sometimes vary at different times of the day. We think it is the right level of service to give access to the applications which are widely used."[27]

Pressed for a more precise definition, Mr Timms responded that "we will give virtually everybody access to a line capable of delivering 2Mbps".[28] However, he also gave the following qualification:

It is not a guarantee that under any circumstances 2Mbps functionality will be available because there is a degree of variability about that. But the service that is provided will be capable of delivering 2Mbps.[29]

In supplementary evidence, the Department said that it expected that a connection provided by the Universal Service Commitment would be "a 2Mbps downstream connection for all practical purposes, and deliver 2Mbps most of the time allowing for the occasional drop in headline speed".[30]

25.  The Department subsequently stated that the connection the USC would provide "should look and feel like a 2Mbps commitment as someone in areas served by the market would understand it."[31] This is not a helpful statement. What a 2Mbps connection "feels" like is subject to the time of day the user tends to use the internet. Someone whose use is restricted to the evenings (i.e. peak hours) would have a very different feel of 2Mbps to someone whose use was confined to the mornings.

26.  Although the Minister believed that there was "clarity" on the Universal Service Commitment,[32] Rachel Clark, Deputy Director of Broadcasting and Content, Department for Business, Innovation and Skills, explained that a more detailed specification would be carried out by the Network Design and Procurement Group:

In [the department's] view the technical specification is something that needs to be done with [the Network Design and Procurement Group's] knowledge and expertise, so we would want the procurement team in place [before making the] technical specification.[33]

27.  We are concerned that the Government is committed to a Universal Service Commitment of 2Mbps, with a budget of £200 million, without a clear definition of what it means. The criteria upon which any significant spending is based must be made clear. Together with the Network Design and Procurement Group, the Government needs to address this issue as a matter of urgency.

28.  We believe that the Universal Service Commitment should deliver a minimum
2 Mbps under normal circumstances, to all users. This achievable objective would provide a greater range of services to all areas of the United Kingdom.

Delivery of the Universal Service Commitment

29.  Delivery of the Universal Service Commitment will be the responsibility of the Network Design and Procurement Group (NDPG). The Group has been created by the Department and is to be responsible for:

"structuring and running the procurement process, overseeing delivery, ensuring active stakeholder engagement, and accountability for the value for money use of the direct public contribution to the Universal Service Commitment."[34]

30.  The Government is waiting for the Network Design and Procurement Group to draw up the technical specifications on the commitment and has stated that it will "be their top priority when they are appointed early next year."[35] Currently, without a working definition from Government, it would seem the Network Design and Procurement Group will define its own objectives based upon the budget that the Government has allocated.

31.  Currently, the Network Design and Procurement Group will define its own targets, delivery mechanisms and terms of reference. This is not acceptable for the delivery of the Universal Service Commitment. The Government must publish a set of publicly available guidelines, defining what the targets are and the best practice for delivering them.

32.  The problems surrounding delivery are potentially compounded by the method of tendering contracts. The Government believes that in many low speed areas "a fibre to the street cabinet solution may well be the most economical."[36] However, Digital Britain states that the tendering of contracts will be based on a reverse auction[37] without setting out the details for that auction.[38] We are concerned that the reverse auction process would favour the cheapest rather than the most cost-effective solution. When asked if value for money or cost alone would be the main criterion for the reverse auction Ms Clark from the Department, stated:

The procurement process will need to explain absolutely clearly fundamentally what it is we expect bidders to deliver and within that we need to look at value for money[39]

33.  Mr Timms acknowledged that nature of the tendering process had not been clearly defined:

Precisely what mechanism they will use […] I agree there is space for debate, and quite an important debate, but I think that value for money is certainly an important consideration.[40]

34.  While we accept it is appropriate that the Network Design and Procurement Group be consulted in designing the procurement process, the Government needs to state expressly that value for money will be a cornerstone of its procurement model rather than proceed with a purely cost-based reverse auction.

35.  It is the Government's ambition that, where appropriate, Next Generation Access (NGA) should be used to deliver the USC, and that for 1.5 million homes this may be the most cost-effective solution.[41] We believe this is sensible as it limits the prospect of two sequential publicly subsidised upgrades—first, under the USC and second, under the Final Third programme, which we consider in the next section of this Report. That said, the level of demand for NGA remains uncertain and may not be at a uniform level across the country. For example, demand may be higher in rural areas as those communities often receive a poor service over the current network. There is an opportunity to address these uncertainties by using the communities who receive Next Generation Access under the Universal Service Commitment as market bell-weathers to indicate the strength of demand in areas that the market would not consider viable.

36.  In order to maximise the benefits of the Government's ambition to provide the Universal Service Commitment through Next Generation Access networks, we believe that where possible the economic data of the upgrade should be placed in the public domain. This offers the opportunity to use the USC as a testing ground for the roll-out of Next Generation Access.



13   "BT to speed up 24Mbps ADSL Max broadband penetration", www.broadbandanalyst.co.uk, 24 September 2009. Back

14   Ev 48 Back

15   Ofcom, UK Broadband Speeds Report 2009, July 2009 Back

16   Department for Business Innovation and Skills, Digital Britain, July 2009, p 53-54 Back

17   Q 167 Back

18   Ev 41 Back

19   Ev 150 Back

20   Q 21 Back

21   Ev 75 Back

22   Q 64 Back

23   Q 64 Back

24   Ev 98 Back

25   Ev 49 Back

26   Q 147 Back

27   Q 148  Back

28   Q 151 Back

29   Q 154 Back

30   Ev 44 Back

31   Ev 44 Back

32   Q 159 Back

33   Q 157 Back

34   Department for Business, Innovation and Skills, Digital Britain, July 2009. p 58 Back

35   Q 157 Back

36   Department for Business, Innovation and Skills, Digital Britain, July 2009, p 54 Back

37   A bidding system where the lowest bid wins. Back

38   Department for Business, Innovation and Skills, Digital Britain, July 2009, p 65 Back

39   Q 164 Back

40   Q 164  Back

41   Department of Business, Innovation and Skills, Digital Britain, June 2009, p 54 Back


 
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Prepared 23 February 2010