Broadband in Wales

Written evidence submitted by Arqiva

 

Summary of Key Points and Recommendations:

· Arqiva welcomes the opportunity to respond to the Welsh Affairs Committee’s new Inquiry into Broadband in Wales.

· There is an ever-greater social and economic cost to each person who falls, or is left behind on the wrong side of this ‘digital divide’. Research suggests that consumers and SMEs left without broadband would be disproportionately rural… and disproportionately Welsh. The overriding public policy objective must be to deliver universal access to broadband.

· It is therefore crucial that the political commitment to achieving universal access to broadband by 2015 is not lost in the heated arguments about who should receive ‘superfast’ broadband first… and how. The real gain for UK plc is to achieve universal access to broadband - not to push fibre to 90% penetration and then stop.

· We believe there would be a considerable opportunity cost (both economically and socially) if, come 2015, consumers who already have access to broadband were "super-served" with fibre… while millions who currently have little, or no broadband provision remain under-served, forgotten or left behind.

· We note that the current debate, in both Wales and across the UK, is focussed on how much penetration of superfast could be achieved, and how quickly, if all of the public subsidy were made available for that purpose. Arqiva warns that this would leave no public subsidy remaining for potentially millions of consumers, and nearby farms and other SMEs.

· Fixed solutions alone won’t deliver universality: Where fibre is not cost effective (ie: more than 1 million households), we believe Wireless broadband is the only practical solution. Arqiva believes all the evidence indicates that the optimal means of securing universal access to broadband requires a procurement of a mix of technology solutions.

· It is imperative that Wireless broadband be an essential part of the solution about to be procured by the Welsh Assembly Government.

· To help achieve this, we believe that Ofcom should be obliged:

§ to increase the scope of the coverage obligation to, say, 99% population;

§ to measure that obligation by Nation, so Wales benefits equally;

§ to double the size of the spectrum the obligation attaches to, to a third of the 800 MHz spectrum.

About Arqiva Arqiva is a media infrastructure and technology company operating at the heart of the broadcast and mobile communications industry and at the forefront of network solutions and services in an increasingly digital world.  Arqiva provides much of the infrastructure behind television, radio and wireless communications in the UK and has a growing presence in Ireland, mainland Europe and the USA. Arqiva is implementing UK Digital ‘Switch-Over’ from analogue television to Freeview – a huge logistical exercise which touches every Parliamentary constituency, requiring an investment by Arqiva of some £700m and which is successfully being delivered to time and budget. Arqiva is also founder member and Shareholder of Freeview (Arqiva broadcasts all six Freeview multiplexes and is the licensed operator of two of them) and was a key launch technology partner for Freesat. Arqiva is also the licensed operator of the Digital One national commercial DAB digital radio multiplex. Arqiva operates nine international satellite teleports, over 70 other staffed locations, and around 9000 shared radio sites throughout the UK and Ireland including masts, towers and rooftops from under 30 to over 300 metres tall. In addition for broadcasters, media companies and corporate enterprises Arqiva provides end-to-end capability ranging from – · outside broadcasts (10 trucks including HD, used for such popular programmes as Question Time and Antiques Roadshow); · satellite newsgathering (30 international broadcast SNG trucks); · 10 TV studios; · spectrum for Programme-Making & Special Events (PMSE) [1] ; · playout (capacity to play out over 70 channels including HD); to · satellite distribution (over 1200 services delivered). Elsewhere in the communications sector, the company supports cellular, wireless broadband, video, voice and data solutions for the mobile phone, public safety, public sector, public space and transport markets. Arqiva’s major customers include the BBC, ITV, Channel 4, Five, BSkyB, Classic FM, the four UK mobile operators, Metropolitan Police and the RNLI. Arqiva is a British success story, owned by a consortium of long-term investors and has its headquarters in Hampshire, with other major UK offices in Warwick, London, Buckinghamshire and Yorkshire.  Arqiva welcomes the opportunity to respond to the Welsh Affairs Committee’s new Inquiry into Broadband in Wales.

Why access to broadband matters

1. We note that the Coalition Government in Westminster has endorsed the previous Government’s ambitious plans to move to digitised public services, which should:

· Deliver better public services for lower cost; and

· Create a new dialogue between citizens and public service providers.

2. We recognise there is also a broad consensus that a programme to address digital inclusion is essential, not just to ensure that the expected efficiency savings from digitising public services are achieved, but as an instrument of real social change:

· Improving the life chances for the unemployed

· Widening access to online educational materials and resources and ultimately raising children’s grades and life chances

· Enabling the financially-disadvantaged and less knowledgeable, or media literate, to pay the same discounted prices for commercial products and services as the technology-savvy (who, ironically, are usually better able to pay more).

3. Digital inclusion has a passionate and experienced advocate in Martha Lane Fox, who has not shirked from addressing the key issues of literacy and affordability. However, unless access to broadband is universal, her Race Online 2012 initiative will never reach its full potential. There is an ever-greater social and economic cost to each person who falls, or is left behind on the wrong side of this ‘digital divide’. In addition, there is a risk that the much-heralded huge cost savings from slimming down "offline" Whitehall will not be realised - until access to digitised public services becomes universal.

4. It is therefore crucial that the political commitment to achieving universal access to broadband by 2015 is not lost in the heated arguments about who should receive superfast broadband first… and how.

5. However, whilst Westminster and Cardiff are right to highlight the superfast option - since there will undoubtedly be new services which will emerge to take advantage of this. Nevertheless, it is also prudent to ‘future-proof’, as far as practical, infrastructure subsidised with public funds. We believe there would be a considerable opportunity cost (both economically and socially) if, come 2015, consumers who already have access to broadband were "super-served" with fibre… while millions who currently have little, or no broadband provision remain under-served, forgotten or left behind.

6. Research suggests that consumers and SMEs left without broadband would be disproportionately rural… and disproportionately Welsh. Indeed, in a world economy demanding that citizens, consumers and businesses are all connected – such a ‘digital divide’ could even exacerbate the problems of ‘rural drift’ (of both consumers and small businesses to towns).

The key public policy objective

7. The overriding public policy objective must be to deliver universal access to broadband and, within the funds available, to maximise the number of consumers and businesses with access to superfast.

8. We note that the current debate, in both Wales and across the UK, is focussed on how much penetration of superfast could be achieved, and how quickly, if all of the public subsidy were made available for that purpose. Arqiva warns that this would leave no public subsidy remaining for potentially millions of consumers, and nearby farms and other SMEs.

9. The real gain for UK plc is to achieve universal access to broadband - not to push fibre to 90% penetration and then stop. We are concerned that, within the Digital Wales strategy, there is currently no interim target to ensure all citizens are able to receive 2 Mbps broadband, meaning that some may have to wait until 2020 to receive this basic level of service.

10. This is supported by studies undertaken by McKinsey, Allen, OECD and the World Bank which show that a 10% increase in broadband penetration increases GDP by 1%. Yet there are no studies which can be referenced as to the impact of superfast broadband.

Fixed solutions alone won’t deliver universality

11. Many broadband "not spots [1] " are in urban and suburban areas, and best addressed by fibre. However, a large number of "not spots" are in rural areas and the outer suburbs, where the need to upgrade individual connections to each home or business to provide broadband by fibre or other fixed line solution can be ruinously expensive – and this will all take considerable time.

12. If insufficient homes are clustered together, fixed line solutions are unviable. Fibre requires 50 households per cabinet to make it economic to deploy. So the risk is that many rural homes could not be offered fibre with the funds currently available for subsidy.

13. Where fibre is not cost effective (ie: more than 1 million households), we believe wireless broadband is the only practical solution. No roads need to be dug up, no ducts shared (not that there are many in rural areas anyway), wireless broadband could be deployed quickly and offered to all consumers within range of each transmitter as soon as it was switched on – just like television, in fact.

14. We point out that television provides the optimal spectrum to use because as Arqiva switches off analogue television across the UK as part of Digital Switch-Over (Wales has, of course, already been switched), a swathe of spectrum (usually referred to as "800 MHz") which is harmonised across Europe for "4G" wireless broadband is left behind unused. So unlike the few rural wireless broadband solutions offered to date, the spectrum is ideal for this use (having previously provided universal public service television); the infrastructure is already in place; and consumers could choose from a range of cheap, standardised equipment.

15. The effectiveness of using 800 MHz spectrum to deploy 4G wireless broadband in rural areas was modelled for Ofcom and Arqiva in 2009 and, at the end of 2010, Arqiva borrowed some of this spectrum from Ofcom and carried out an extensive 4G trial.

16. This trial was carried out in Pembrokeshire, which was selected precisely because it would be difficult and highly costly for fibre to address its rural ‘not spots’, and yielded very impressive results. We were able to demonstrate delivery of high speed broadband (in excess of 50 Mbps) in a challenging rural environment where citizens currently experience typical speeds which are less than 500 Kbps - see Appendix 1 for further details. The importance of this trial was not lost on the Welsh Assembly Government, and their representatives who attended demonstrations, not least as Broadband Delivery UK (BDUK) did not select Wales for one of its broadband pilots.

17. It is imperative that Wireless broadband be an essential part of the solution about to be procured by the Welsh Assembly Government. Indeed, Wireless could play a considerably larger role than just addressing the hardest to reach. Many consumers are denied fixed broadband due to poor internal wiring, and providing them with 4G wireless broadband would be more cost-effective than requiring a home visit from an engineer.

18. UK mobile-only households increased from 8% to 15% in the five years to 2010, and many consumers clearly place a higher value on mobility than on absolute speed. So, there may be many consumers currently without broadband who would choose a Wireless solution in preference to fixed - not least as wireless could be offered to them years before any fixed solution could be.

19. We note that there are also some consumers for whom even wireless broadband would not be the most cost-effective solution. Where population density falls below 15 houses per km2, satellite is likely to be the cheapest broadband solution. As such consumers are easily identified, their needs could be addressed quickly and there are a range of satellite broadband providers who could offer their services almost immediately.

20. Arqiva believes all the evidence indicates that the optimal means of securing universal access to broadband requires a procurement of a mix of technology solutions.

Ensuring that Digital Wales is a realisable goal

21. Wireless cannot play its essential complementary role without access to suitable spectrum. For cost-effective coverage of rural areas, the optimal spectrum to deploy would be 800 MHz. This has been recognised across the EU where a recent Commission Proposal [2] to the European Parliament and the Council included:

"Member States…shall ensure that the provision of access to broadband content and services using the…800MHz band is encouraged in sparsely populated areas, in particular through coverage obligations."

22. Ofcom has responded by proposing a coverage obligation for 800 MHz, but for such a small slice of that spectrum [3] that any operator deploying just this spectrum would be unable to support even the minimum 2 Mbps. In addition, Ofcom only proposes that 95% of the UK population be covered. This target is so un-ambitious that, in theory an operator could comply without deploying in Wales at all !! In addition, the relevant operator would also have until 2017 to achieve this target, which almost certainly means that the most disadvantaged would not obtain access until the 2017 deadline.

23. It must be noted that Ofcom is proposing to retain back-stop powers to revoke licences in rural areas if the spectrum remains unused even where public subsidy is available. So Ofcom is aware of the strong likelihood of the relevant operator refusing to deploy its spectrum in rural areas even where public subsidy is available. However, given Ofcom’s aversion to intervening in the market, and the time it would take for Ofcom to fully investigate the rural coverage achieved and planned, it seems unlikely that these powers would ultimately achieve very much.

24. We believe that Ofcom should be obliged:

i. to increase the scope of the coverage obligation to, say, 99% population;

ii. to measure that obligation by Nation, so Wales benefits equally;

iii. to double the size of the spectrum the obligation attaches to, to a third [4] of the 800 MHz spectrum.

25. There will be those (in particular, the mobile operators and HM Treasury) who may argue that making these coverage obligations to the greater social benefit, and thus harnessing greater use of this precious spectrum, would depress the auction proceeds. Arqiva believes the auction proceeds will be principally influenced by the competitive tension which results from 4 mobile operators chasing a maximum of 3 licences. The number of masts which might be required by Ofcom to be deployed will be a secondary factor for the bidders.

26. We recall that, in passing the Communications Act 2003 (which established Ofcom), Parliament charged Ofcom with securing optimal use of spectrum (a Crown asset) - rather than simply selling it all to the highest bidders. Arguably any auction outcome which left the 800 MHz spectrum unused over vast swathes of the UK could not be considered its ‘optimal’ use…

27. But for all Welsh consumers to benefit, it will also be essential that the Welsh Assembly Government in its current procurement of broadband recognises that a mix of technology solutions will be required, with the funding then made available to each of the selected technology solutions so that it can contribute as necessary to achieving what has to be the overriding public policy objective: Ensuring that no one is excluded from the connected, digital society of the future.

May 2011

Appendix 1: Preseli 4G wireless broadband trial

Analysis of locations and their serving Telephone Exchanges

Current broadband (downlink) speeds achieved at not spot postcodes

Post Code	Premises	Sam Knows [1]	Speed Checker
SA66 7SB	8	<0.512 Mbps	0.25 – 1. 5 Mbps
SA66 7XN	10		0.25 – 1.5 Mbps
SA66 7SH	1		0.25 – 1.5 Mbps
SA66 7SG	2		0.25 – 1.5 Mbps
SA66 7XJ	23		0.25 – 1.25 Mbps
SA66 7RY	22		0.5 – 4 Mbps
SA66 7RU	17		0.25 – 1.25 Mbps
SA66 7RT	4		0.25 – 1.5 Mbps
SA66 7RX	4		0.25 – 1.25 Mbps
SA66 7SF	1		0.25 – 1.25 Mbps
SA66 7JP	6		0.25 – 1.5 Mbps
SA66 7SE	16		1.5 – 6.5 Mbps
SA66 7SN	8		0.25 – 1.5 Mbps

Speed Achieved with the 4G trial [1] :

The bandwidth would be shared between users, with speeds of up to 42 Mbps and a guarantee of 2 Mbps in the busy hour.

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[1] Such as the wireless cameras operated by the BBC and Sky News, and the radio mics used in virtually all television production and many West End shows.

[1] ‘not spot’ is generally accepted to mean the lack of access to fixed broadband (almost everyone could get satellite broadband).

[2] COM(2010) 471 final

[3] Only 2 x 5 MHz, a mere sixth of the available spectrum.

[4] 2 x 10 MHz.

[1] A widely-quoted firm of broadband analysts.

[1] Assuming the use of all of the 800 MHz spectrum, a fixed directional antenna installed on the users’ house at the same height as the TV aerial, and deploying only a Single Sector.

[1]