Rural Digital Exclusion: The link between Internet Access and Economic Output

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1 Rural Digital Exclusion: The link between Internet Access and Economic Output

2 FOREWORD FOREWORD The findings of this research provide worrying reading for anyone concerned with the economic regeneration of some of the UK s most deprived rural areas. Clearly there are many different factors that impact the social-economic status of a region but in urban areas around the UK, highspeed Internet access has quickly become a fundamental service in the same way as other utilities like electricity and water. It is relied upon to assist commercial enterprises to do business and residents to gain access to important information and services. So, in many ways, it makes sense that those in rural areas, unable to access the high-speed Internet in the same way as their urban counterparts, would be at some kind of disadvantage. This research, for the first time, highlights that link by demonstrating a strong correlation between internet access and economic output. It is clear that some of the areas most in need of fast Internet access are currently the ones least likely to get it. It is important that we quickly find ways to remove this digital barrier. There is no reason why rural communities should not have access to the same technological advantages as their urban counterparts. In fact, with 50% of all business in the UK s rural areas being home-based businesses (compared to 26% in urban areas), it could be argued that rural areas should be a higher priority to help drive economic regeneration is these regions. Technological advances, such as our high-speed, satellite broadband service Tooway, have now made it possible to provide these rural communities with high-speed Internet access, wherever they may be in the UK. The key is now making these rural communities a priority for support to help remove any digital barriers to economic regeneration. Steve Petrie, UK General Manager for Skylogic. The UK s Growing Digital Divide Executive Summary Background Digital Exclusion and Rural Communities Poor Broadband Coverage Benefits of Broadband to Rural Communities Overall Economic Benefits of Digital Inclusion Benefits to Businesses Areas in greatest need Location and economic output Link between Internet Access and GVA What does the Correlation mean Rural Notspots and Deprived Communities Overview of Regions with Low Broadband Availability/speed Methodology for pinpointing Rural Notstpots Analysis of Rural Notspots The North East County Durham - Northumberland - Tyne & Wear and Tees Valley - The South West Cornwall - Devon and Dorset - Eastern England East Midlands - Yorkshire and The Humber - Wales Scotland About Skylogic

3 SUMMARY EXECUTIVE SUMMARY STRONG LINK BETWEEN HIGH-SPEED INTERNET ACCESS AND RURAL ECONOMIC OUTPUT The lack of high-speed internet access for some communities could be a major barrier to UK rural regeneration, according to this latest research which reveals a strong link between internet access and economic output. This report examines the links between regional economic output (GVA) and access to the internet across more than 800 wards and towns in some of the most rural regions of the UK. The rural areas of the five biggest UK broadband Not Spot regions of the North, South West and Eastern England, Wales, and Scotland, also delivered some of the countries lowest economic productivity results. This report highlights the rural areas of the North East, including County Durham, Northumberland, Tees Valley and Tyne & Wear as the region with the lowest internet access per household at just 59% and also the lowest GVA at 40,369m. This compares to the South East (excluding London) with an internet access per household at 79% and a GVA of 176,500m. It is clear from our research that some of the areas most in need of fast broadband Internet access are currently the ones least likely to get it, said Alex Wright, Head of Research at Winmark. There is a strong correlation between the most deprived rural regions of the UK and their lack of high-speed broadband internet access. Nationally, the digital divide is growing and lack of high-speed Internet access in rural communities could be a major barrier to economic regeneration. Currently, 42% of those living in rural areas are unlikely to receive broadband speeds greater than 2 Mbps; the Government s minimum target for all homes. As a result, rural communities face a number of challenges as a result of being digitally excluded, including¹: Impediments to business innovation and potential cost savings, often resulting in business flight to more urbanised areas. Home-based businesses (HBBs) account for 50% of rural businesses compared to 26% in urban areas. Limited or no access to the full range of social benefits, such as cheaper bills, job opportunities and healthcare diagnostics, since 90% of public services are migrating online and conventional ways of providing services are being withdrawn. Limited or no access to online training and distance learning programs. Inability to engage with the internet for social, news and recreational purposes. Increasing isolation from broader technological trends, especially felt by elderly people. Studies have shown that if these rural communities could be connected there would be major economic benefits²: If the 3.6 million low income, digitally excluded households became digitally included, they could have annual savings of over 1 billion a year from shopping and paying bills online. If the 1.6 million children living in digitally excluded families got online at home, it could boost their total lifetime earnings by over 10 billion. Developing ICT skills result in better paid employment, with an average ICT wage premium of 3-10% and up to 20%. Total estimated economic benefit of getting everyone in the UK online is in excess of 22bn. Steve Petrie, Skylogic UK General Manager, said: We commissioned this research to help highlight the plight of the Digitally Excluded in the rural communities of the UK today. Clearly there are many different factors that impact the social-economic status of a region but in the urban areas around the UK high-speed Internet access has quickly become a fundamental service in the same way as other utilities like electricity and water. There is no reason why rural communities should not have access to the same advantages. Technological advances, such as our high-speed, satellite broadband service Tooway, have now made it possible to provide these rural communities with high-speed Internet access, wherever they may be in the UK. The key is now making these rural communities a priority for support to help remove any digital barriers to economic regeneration.

4 BACKGROUND THE UK S GROWING DIGITAL DIVIDE In 2009, the UK government laid out plans to transform broadband infrastructure by 2017, including the rolling out of fast internet access to rural areas in order to redress the growing rural-urban digital divide. The proposal guarantees every household has access to a minimum broadband speed of 2 Mbps. The consequences of the digital divide in the UK are significant 1 : 21% of the UK population has never accessed the internet. 30% Approximately of rural households have a speed of less than 1 Mbps and 80% have a speed less than 5 Mbps. People earning over 40,000 per annum are more than twice as likely to be digitally included as those earning less than 12,500 per annum. 1 (1) PriceWaterhouseCooper (2009), The Economic Case for Digital Inclusion; (2) Office of National Statistics (2010), Internet Access 2010: Households and Individuals.

5 DIGITAL EXCLUSION AND RURAL COMMUNITIES In the UK, over 7 million households are not connected to the internet. Approximately 30% of households in rural areas only have access to slow internet connections of less than 1Mbps. Rural communities face a number of challenges as a result of being digitally excluded, including 2 : Impediments to business innovation and potential cost savings, often resulting in business flight to more urbanised areas. Limited or no access to the full range of social benefits, such as cheaper bills, job opportunities and healthcare diagnostics, since 90% of public services are migrating online and conventional ways of providing services are being withdrawn. Limited or no access to online training and distance learning programs. On a really good day I can get a 1Mbps connection but you can t do anything with it. I can t use Skype for example. Resident, Cumbria Inability to engage with the internet for social, news and recreational purposes. Increasing isolation from broader technological trends, especially felt by elderly people. Just because you re not in a city doesn t mean you don t want a decent connection. And, with more families moving in, and many of those with more than one person wanting to be online, we realised there was a real demand for better broadband. Resident, Kent 2 Commission for Rural Communities (2010), Mind Gap: Digital England A Rural Perspective

6 NOTSPOTS POOR BROADBAND COVERAGE Rural areas suffer from either a complete lack of internet service provisions or service that is too slow (< 2 Mbps) for much benefit to accrue these areas are called notspots. The notspots correlate with areas that are not in close proximity to urban centres. In particular, slower speeds and lower availability are found in the North of England, the South West, Eastern England, Wales and Scotland. Source:

7 OVERALL ECONOMIC BENEFITS OF DIGITAL INCLUSION TABLE 1: ESTIMATED AGGREGATE POTENTIAL ECONOMIC BENEFITS OF DIGITAL INCLUSION Annual Benefits ( billion) Lifetime Benefits ( billion) Home access for children Some key indicators clearly demonstrate the economic benefits of digital inclusion 3 : Improved ICT skills for the employed 0.56 Improved access to employment for the unemployed 0.56 Government efficiencies Online shopping If the 3.6 million low income, digitally excluded households became digitally included, they could have annual savings of over 1 billion a year from shopping and paying bills online. source: PWC analysis If the 1.6 million children living in digitally excluded families got online at home, it could boost their total lifetime earnings by over 10 billion. Developing ICT skills result in better paid employment, with an average ICT wage premium of 3-10% and up to 20%. Total estimated economic benefit of getting everyone in the UK online is in excess of 22bn 3 These figures are reported the following publications: (1) PriceWaterhouseCooper (2009), The Economic Case for Digital Inclusion; (2) Commission for Rural Communities (2010), Mind Gap: Digital England A Rural Perspective

8 BENEFITS TO BUSINESS Most rural businesses are small and medium sized enterprises (SMEs) robust sources of innovation and rural wealth creation. Providing rural-based SMEs access to fast internet connections can increase their customer base and sales volume. Home-based businesses (HBBs) account for 50% of rural businesses compared to 26% in urban areas 6. With access to fast internet, HBBs can increase productivity and add to regional economic growth. Broadband access can help to slow down the migration of business from rural to urban centres, creating jobs and economic growth in the region. With fast internet access, rural manufacturers and retailers can effectively tap into worldwide markets, generating new revenue streams. Source: Commission for Rural Communities (2010), Mind Gap: Digital England A Rural Perspective 6 Thompson, N and Atterton J. Rural Prospects: A Report on the Future of Rural Development in the UK

9 INTERNET ACCESS (PER CENT) London South East East of England East Midlands West Midlands North West South West Yorkshire & The Humber North East England Wales Scotland LOCATION AND ECONOMIC OUTPUT The North East, the South West, Yorkshire and the Humber, Scotland and Wales have the lowest percentage of households with internet access. In the North East, between 2009 and 2010, internet access per household decreased by 8%. UK Base: UK Households SHARES OF TOTAL GVA (1989, 1999, 2009) North East North West Yorks & The Humber East Midlands West Midlands East of England London South East South West Wales Scotland Northern Ireland GVA per head a key measure of the productivity/ economic output of a region was the lowest in Northern Ireland, Wales, the North East, East Midlands and Yorkshire and the Humber. What is GVA? Gross Value Added (GVA) measures the contribution to the economy made by each individual producer, industry or sector at the regional level in the United Kingdom. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

10 KEY FINDING LINK BETWEEN INTERNET ACCESS AND GVA (GVA) London CORRELATION: London South East East of England East Midlands Wales West Midlands North West South West Yorks & The Humber Scotland North East North East INTERNET ACCESS (% PER UK HOUSEHOLD)

11 WHAT DOES THE CORRELATION MEAN? A correlation is a number that describes the strength of the relationship between two variables percentage of internet access (x) and GVA (y), in this case. The table below explains how to interpret a correlation number. The correlation between the two variables percentage of internet access and GVA is 0.694, which means there is a strong likelihood that when internet access increases, GVA will also tend to increase (although not always). CORRELATION RELATIONSHIP BETWEEN THE VARIABLES 1 Strong - Positive: As x goes up, y always goes up 0.5 Weak - Positive: As x goes up, y tends to usually go up 0 No Correlation: No relationship between x and y -0.5 Weak - Negative: As x goes up, y tends to usually go down -1.0 Strong - Negative: As x goes up, y always go down

12 OVERVIEW OF REGIONS WITH LOW BROADBAND AVAILABILITY/SPEED Although notspots exist all across the UK, the following regions are of particular interest due to the prevalence of low broadband availability and speed: The North of England County Durham and Northumberland, Tees Valley and Tyne & Wear The South West of England Cornwall, Devon, Dorset, Gloucestershire, Somerset NOTSPOTS Eastern England East Midlands and Yorkshire and the Humber Wales (excluding the South) Scotland (excluding the Glasgow-Edinburgh belt)

13 METHODOLOGY FOR PINPOINTING RURAL NOTSPOTS 1. In the 5 UK regions (see above), districts are chosen based on their level of rurality, as ranked by the Office for National Statistics. Counties ranked R50, R80 and SR are included SR: 26-50% population living in rural settlements or large market towns R50: 50-80% population living in rural settlements or large market towns R80: 80% population living in rural settlements or large market towns 2. Wards and towns* are chosen based the level of risk faced by not receiving fast broadband i.e. those wards/ towns that still will not have access to fast internet even with 75% national roll-out of high-speed broadband (risk assessments are based on a 2010 report commissioned by the government entitled An assessment and practical guidance on next generation access (NGA) risk in the UK ) * A ward is an electorally-based administrative unit, which is larger than a town. The majority of districts only provide information at ward level; whenever there is town level information, it is included.

14 LOCATING RURAL NOTSPOTS : THE NORTH EAST The North East is the region with the lowest internet access per household at 59%. The North East is the region with the highest percentage of deprived rural output areas (OAs) in England at 30.7%. INTERNET ACCESS (PER CENT) London South East East of England East Midlands West Midlands North West South West Yorkshire & The Humber North East England Wales Scotland UK Since 1989, the Gross Value Add (GVA) of the North Base: UK Households East, which measures productivity of the region, has decreased. The North East is currently ranked the lowest in England in terms of productivity and economic output. The North East includes; County Durham Northumberland Tees Valley Tyne & Wear Region DEPRIVATION Number of rural OAs in most deproved 20% across England % of all deprived rural OAs in England East Midlands East of England London North East North West South East South West West Midlands Yorkshire & Humber Total 1,

15 COUNTY DURHAM 75% of the population is living in rural settlements 60% of homes in County Durham are not able to access high speed internet DISTRICTS WITH THE MOST NOTSPOTS TOP 3 1.3% In the top 20 Total growth (in 2008). The county is ranked in the bottom 5 GVA per head the most deprived districts in England are consistantly ranked as Easington, 1. Wear Valley (22) 2. Sedgfield (17) 3. Durham (16) Sedgefield, Derwentside and Wear Valley districts NOTSPOTS RANKED BY LEVEL OF DEPRIVATION TOP 5 1. Wheatbottome and Helmington, Wear Valley 2. Willington Central, Wear Valley 3. Dene Valley, Wear Valley 4. Blackhalls, Easington 5. Pittington and West Rainton, Durham

16 NORTHUMBERLAND 79.6% 14% 1.9% of the population is living in rural settlements of broadband lines to the Uplands area are estimated as problem lines is the county s GVA which has remained stagnant since 1995 DISTRICTS WITH THE MOST NOTSPOTS 1. Castle Morpeth (11) 2. Tynedale (10) 3. Berwick-upon-Tweed (9) TOP 3 NOTSPOTS RANKED BY LEVEL OF DEPRIVATION TOP 5 1. Kitty Brewster, Blyth Valley 2. Morpeth Stobhill, Castle Morpeth 3. Prior, Berwick-upon-Tweed 4. Spittal, Berwick-upon-Tweed 5. Seaton Delaval, Blyth Valley

17 TEES VALLEY AND TYNE & WEAR Tees Valley: The only district in Tees Valley county with low broadband availability is Redcar and Cleveland. 22% of the areas in Redcar and Cleveland are ranked within the National Most Deprived 10% - the district has seen the least improvement in deprivation levels since Tyne & Wear: 38% of the population in Gateshead district lives in areas that fall within the 20% most deprived areas in England. Sunderland and South Tyneside, in Tyne & Wear county, are consistently ranked in the top 20 most deprived local authorities in England. Note: Since there are a small number of rural areas in these counties, no rankings have been included.

18 TOP 3 DISTRICTS WITH THE MOST NOTSPOTS 1. Castle Morpeth (11) 2. Tynedale (10) 3. Berwick-upon-Tweed (9) TOP 5 NOTSPOTS RANKED BY LEVEL OF DEPRIVATION LOCATING RURAL NOTSPOTS : THE SOUTH WEST Labour productivity (GVA/hour) in the South West was 6% below the UK average. Over 14% in employment were self-employed, the second highest proportion in the UK. Cornwall, Devon and Somerset counties have the most number of deprived rural areas 8. The South West includes: Cornwall Devon Dorset Gloucestershire Somerset 1. Kitty Brewster, Blyth Valley 2. Morpeth Stobhill, Castle Morpeth 3. Prior, Berwick-upon-Tweed 4. Spittal, Berwick-upon-Tweed 5. Seaton Delaval, Blyth Valley INTERNET ACCESS (PER CENT) London South East East of England East Midlands West Midlands North West South West Yorkshire & The Humber North East England Wales Scotland UK Base: UK Households 8 Oxford Consultants for Social Inclusion (2009). Rural deprivation in the South West.

19 CORNWALL Cornwall is ranked as being the second most deprived County after Durham. 33% of households in Cornwall live in areas ranked within the 25% most deprived nationally. Cornwall has the lowest GVA per capita at 62% of the UK average in comparison to 91% for the South West. This manifests itself in low wages and low household income associated with low skilled, part time jobs. 8 Oxford Consultants for Social Inclusion (2009). Rural deprivation in the South West.

20 DEVON AND DORSET Devon: North Devon, Torridge and West Devon are districts with the highest number of rural areas that fall within the most deprived 20% in England. Devon s most deprived areas include, Chudleigh and Ilfracombe, which are also broadband notspots and at high risk of not having access to fast internet. Dorset: 64% of businesses in Dorset require a broadband connection speed of over 10Mbps; currently 39% of businesses receive speeds between 1 and 4 Mbps.

21 INTERNET ACCESS (PER CENT) LOCATING RURAL NOTSPOTS : EASTERN ENGLAND Eastern England includes the East Midlands and Yorkshire and the Humber. London South East East of England East Midlands West Midlands North West South West Yorkshire & The Humber North East England Wales Scotland UK Base: UK Households The East Midlands and Yorkshire and the Humber have a high number of deprived rural areas, totalling 34% of deprived rural areas in England. Region DEPRIVATION Number of rural OAs in most deproved 20% across England % of all deprived rural OAs in England Approximately 30% of households in Yorkshire and the Humber have no internet access. East Midlands East of England London North East North West South East South West West Midlands Yorkshire & Humber Total 1,

22 EAST MIDLANDS 25% of areas in the district of Bolsover, in Derbyshire county, fall within 10% of the most deprived districts in terms of employment-related deprivation. DISTRICTS WITH THE MOST NOTSPOTS 1. Lincolnshire (61) TOP 3 2. Derbyshire (39) 3. Nottinghamshire (12) NOTSPOTS RANKED BY LEVEL OF DEPRIVATION TOP 5 1. Elmton-with-Creswell, Bolsover 2. Scarcliffe, Bolsover 3. Croft, East Lindsey 4. Ingoldmells, East Lindsey 5. Skidbrooke with Saltfleet Haven, East Lindsey

23 YORKSHIRE AND THE HUMBER The region has the lowest productivity, in terms of GVA/ hour, of any English region DISTRICTS WITH THE MOST NOTSPOTS TOP 3 31% of households significantly below acceptable standard in terms of income; this is followed by 24% Ryedale 21% Craven The district of Scarborough has the highest level of rural deprivation, with 1. Ryedale (14) 2. Richmondshire (12) 3. Hambleton (10) & East Riding of Yorkshire (10) NOTSPOTS RANKED BY LEVEL OF DEPRIVATION TOP 5 1. Fylingdales, Scarborough 2. Scalby, Hackness and Staintondale, Scarborough 3. Amotherby, Ryedale 4. Sinnington, Ryedale 5. Ingleton, Craven

24 WALES Main barriers to information access in the rural areas are lack of public transport and low income, as opposed to unemployment. Denbighshire, Conwy and Carmarthenshire have the most number of rural areas that fall within 10% of most deprived areas in Wales 9. DISTRICTS WITH THE MOST NOTSPOTS 1. Powys (33) 2. Pembrokeshire (30) 3. Carmarthenshire (20) TOP 3 NOTSPOTS RANKED BY LEVEL OF DEPRIVATION TOP 5 1. Efenechtyd, Denbighshire 2. Llanrhaeadr-yng-Nghinmeirch, Denbighshire 3. Deganwy 1, Conwy 4. Eglwysbach, Conwy 5. Cilycwm, Carmarthenshire 9 Mid Wales Library and Information Partnership (2008). Rural information needs report.

25 TOP 3 DISTRICTS WITH THE MOST NOTSPOTS 1. Aberdeenshire (28) 2. Highlands (27) 3. Scottish Borders (14) LOCATING RURAL NOTSPOTS : SCOTLAND Over 35% of Scottish households have no access to the internet only the North East of England has less households connected. The Highlands, Perth & Kinross and Angus are counties with the highest number of deprived rural areas in terms of income and employment deprivation. TOP 5 NOTSPOTS RANKED BY LEVEL OF DEPRIVATION 1. Lochlash, Highlands 2. Inverness East Rural, Highlands 3. Ross and Cromarty South West, Highlands 4. Seaboard, Highlands 5. Powmill, Cleish and Scotlandwell, Perth & Kinross INTERNET ACCESS (PER CENT) London South East East of England East Midlands West Midlands North West South West Yorkshire & The Humber North East England Wales Scotland UK Base: UK Households

26 ABOUT SKYLOGIC Skylogic provides satellite broadband communications services for Internet access (via IP protocol) and for television transmissions to corporate enterprises and public bodies. The Turin-based company is a subsidiary of Eutelsat. SkyPark, Skylogic s teleport, houses one of the largest platforms in the world for two-way broadband IP transmissions. Skylogic s Skylogic s mission is to improve communications for the general public, business and public authorities. To do so, Skylogic delivers a complete portfolio of digital satellite solutions, including custom solutions, through a network of excellent distributors and commercial partners. Highly qualified personnel and advanced technology enable Skylogic to provide even turnkey global network services. Skylogic is helping to extend digital coverage and bridge the digital divide. Our main objective is to deliver satellite broadband connectivity to end users, businesses, service providers and public authorities who are unable to connect to a terrestrial network. satellite networks are interconnected by optic fibre to the largest operators in the sector, guaranteeing connectivity in Europe, the Mediterranean Basin, the Middle East, North Africa and America. For further information visit: and

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