Is BDUK on the Right Track?

Is BDUK on the Right Track?

INCA Statement on Geo’s withdrawal from the BDUK Process

Whilst not unexpected Geo UK Ltd’s announcement on 16 November that it is withdrawing from the BDUK Framework and future NGA procurements marks a sad day. Even more so since Cable & Wireless Worldwide has apparently pulled out of the Cumbria procurement and there are rumours that BDUK’s shortlist may be getting shorter by the day.

Geo is a well-organised and effectively-led company that is actually delivering fibre networks in both urban and rural settings. In fact they are just the sort of company that government should be encouraging in the context of next generation networks. However Geo can’t make its model work under BDUK’s current approach.

First, having gone down the route of providing funding through the counties, rather than encouraging a range of approaches all local authorities are being steered towards a gap-funding model based on BT’s business case for rolling out fibre to the cabinet. Geo and other operators both large and small - Fujitsu Telecom, Gigaclear, Cybermoor, Fibre Options, IFNL, B4RN - are all working on plans that deliver much more FTTH – but they all require more investment than is currently on the table. If a proportion of that investment is to come from the private sector there has to be a level playing field; the concern is that gap funding automatically favours the incumbent. Other approaches are possible and indeed are being actively deployed in other countries, but they require different partnership-based approaches recognising the risks and returns between the parties.

Another major concern expressed by Geo and others in the process is access to BT’s existing passive infrastructure (PIA). Negotiations are taking place on how much alternative operators will be charged, but aside from costs they are concerned about the restrictions BT is placing on their use of the infrastructure. Making the business case in rural areas is tough. It’s made tougher if BT prevents alternative operators from using PIA to provide backhaul to rural communities, to offer business grade connections (leased lines), or to connect mobile or wireless infrastructure. Ofcom is looking at these issues under its Business Connectivity Market Review, but that isn’t expected to reach conclusions until late 2012, well after the BDUK procurements should be moving ahead.

In the end the big issue for all the alternative operators is to decide whether the BDUK game is worth the candle. As Keith Vinning from Fujitsu pointed out at the Next Gen Conference in Bristol, the costs of engagement are very high ‘many hundreds of thousands of pounds’ and the uncertainties are great. The knotty challenges to the business case are manifold: uncertain demand; no guaranteed anchor tenancy from the public sector; PIA restrictions; lack of expertise amongst the primary contractors – county councils – understandable since they aren’t used to engaging in exercises like this; and a funding model that likely favours the incumbent. Add these factors together and BDUK could end up with a very short list indeed.

It’s not just the private sector feeling unhappy. Some local authorities are looking at the bigger picture: next generation broadband as a key underlying infrastructure for their future economic well-being and prosperity. Investments and technology choices made now will have ramifications for years to come so it’s important to get it right. A one-size-fits-all approach isn’t necessarily going to achieve the best outcomes.

Even BT isn’t happy. Despite the likelihood that they will be the largest winners, the balkanisation of the process means that there are scale issues and they too are having spend large amounts of cash engaging with councils up and down the country. BT has a big team but it costs money.

Before we simply plunge on, surely the big question we should be asking is: ‘Are we getting this right?’

The Government’s ambition is for Britain to have the best superfast broadband network in Europe by 2015. Most in the industry strongly support this ambition. But at the Internet Service Providers Association conference on 9^th November delegates were asked if they thought it would actually be achieved. Only one hand went up, and that was the rep from BT. ISPA members are supposed to deliver services over these new networks, so clearly there is a large credibility gap.

At the same time members of EURIM, the Information Society Alliance, have been arguing for a linkage to be made between the broadband and ‘smart’ energy agendas. It seems crazy to be investing around £1.5bn to connect smart meters in homes and businesses without linking this to the next generation broadband plan. As a rep from one of the main industry equipment suppliers said recently, ‘We’re happy to take the money off the government twice, but we can’t really see the point.’

Government needs to do more joining up of agendas at the national level whilst allowing more freedom to innovate at the local. Ministers have successfully argued for £530m for broadband and brought in another £150m to support rural mobile coverage. Bringing together the broadband and energy agendas could pay extra dividends.

BDUK itself has been presented with a tough challenge. The 2015 target is hard to meet if your longer-term objective is to support the development of a competitive market with sustained investment and innovation. It would be much easier, quicker and cheaper to simply allocate the money to BT. However, if the government wants a competitive landscape the input problems need fixing and that takes time. Meanwhile the pressure from MPs and communities wanting better broadband continues. They know money has been allocated and they want results. None of this is easy. We need to take a hard look at what the 2015 target means and get the key players round a table to thrash out the issues.

With local authorities, a positive step that BDUK could take is to encourage those with the capacity to innovate to develop creative approaches – and then let them get on with it, rather than insisting everyone follows the same model. The Community Broadband Fund is an opportunity to support innovation, but is woefully small at £18m. Taking a look at what could be achieved by pushing more funding in that direction could really help.

Government needs to move faster on the release of spectrum for wireless services and more pressure needs to be applied to Ofcom to fix the PIA problem so we can ensure a level playing field for all operators. It needs a bit of ministerial table thumping.

Meanwhile the private sector needs to look at different models that both encourage more investment and organise demand. This means working top down with capital markets and government, and bottom up with communities, bringing in more patient capital and better matching supply to identified demand. There are models available at both ends, it’s not rocket science, it just requires more linking between sectors that don’t normally talk to each other – e.g. connecting those who help villages raise community investment to save their shops and pubs, with those who build broadband networks; or city institutions raising capital through the markets working with companies seeking long-term capital for next gen broadband projects. It will work if we get the fundamentals right.

INCA is helping with these agendas. Following the Next Gen 11 conference in Bristol, an INCA seminar in York on 24^th November is bringing together people from local authorities, the private sector and communities, to learn more about the different approaches that are starting to show success. They will hear about projects in Manchester, North Yorkshire, York itself and more rural areas.

In addition in 2012

·      We will launch a Quality Marque for local broadband schemes giving confidence to investors, project developers, service providers and customers that they are standards-based and well organised.

·      We are setting up a roster of suppliers and consultants able to support the development of projects, build and operate them.

·      We will publish the second edition of the popular ‘Beyond Broadband Guide’ that has proved very effective at helping local authorities, communities and other get to grips with the issues. We will continue to enhance the online Knowledge Base that extends the guide.

·      We plan to work with partners on community engagement and demand stimulation, including a visit to the Netherlands to learn from some of the Dutch examples.

·      We will continue to lobby for changes that support more competition, better services and choice for all of us as citizens and consumers.

You can learn more, follow these developments and join us at www.inca.coop and on twitter @inca_nextgen

This statement has been prepared on behalf of INCA’s board

Malcolm Corbett

INCA

18^th November 2011

Tel: 07770 896534

INCA’s Mission

The members of the Independent Networks Cooperative Association (INCA) are supporting, planning, building and operating sustainable, independent and interconnected networks that advance the economic and social development of the communities they serve and permit the provision of applications and services through open competition, innovation and diversity. They are working together to create cohesive interconnected next generation networks.

INCA's role is to:

• Promote the development and adoption of common technical & business standards amongst local projects
• Underpin the development of next generation networks by developing joint purchasing and marketing approaches
• Act as a unified voice for local projects to government and industry
• Promote the sector and explain why next generation broadband is important
• Support the development of next generation broadband projects by sharing expertise and information
• Work with other agencies to promote and support local project opportunities
• Encourage partnerships with public, private and community sector organisations to facilitate investment and faster roll out of next generation broadband infrastructure, particularly in under-served areas – the ‘Final Third’ of the country.