BROADBAND, COMMUNICATIONS AND DIGITAL CONNECTIVITY SUMMARY This paper provides background on digital connectivity in Scotland; with specific focus on broadband connectivity, and the Highlands and Islands region. Section 2 describes in detail the measures the Scottish Government and the enterprise agencies have put in place to significantly improve broadband connectivity in Scotland. Section 3 provides details on current UK Government broadband policy. Section 4 describes specific connectivity issues faced in the Highlands and Islands. Section 5 describes five key strands identified by stakeholders throughout the Highlands and Islands as priorities for improved connectivity in the region. 1. INTRODUCTION Information and Communication Technologies (ICTs) are playing a transformational role in our economy and society. ICT provides access to a broad range of services, irrespective of location, that influence all aspects of life such as healthcare, education, leisure, travel, business and banking. They are woven into the fabric of the economy and embedded in products we use every day, whether computers, cars, household appliances or mobile phones. ICT is also widely recognised as an enabler of business productivity, a driver of innovation and international trade, a means to minimising exclusion of geographically remote communities and a significant contributor to a low carbon economy. Research suggests that successful adoption and exploitation of ICT can have a significant effect on GVA and the competitiveness of regions. ICT will play a major role in the future and countries and regions that seek economic growth will be characterised by embracing the digital economy. Good broadband connectivity plays an important role. 2. BROADBAND IN SCOTLAND: PUBLIC SECTOR INTERVENTION & ACTIVITY 2.1 Broadband policy in Scotland Broadband availability has long been recognised by the Scottish Government as an enabler of sustainable economic growth - the central purpose of the government in Scotland. It is under this remit, that the Scottish Government has had a broadband policy in place since 2001, even though telecommunications policy (including broadband and mobile communication) remains a reserved matter. 2.2 Broadband availability in Scotland Availability of basic broadband, defined as 512 kbps (kilobits per second), is now at over 99% across Scotland, via a number of technologies. This is a significant improvement from only 43% availability in 2001. The current coverage level can be directly attributed to the 1
work of the Scottish Government and its Enterprise Agencies Scottish Enterprise (SE) and Highlands & Islands Enterprise (HIE). 2.3 Broadband for Scotland Project Early activity focused on demand-side intervention including encouraging business adoption of broadband and demand stimulation. In 2005, the Broadband for Scotland project was delivered. In this project, 378 rural and remote exchanges were upgraded for broadband by BT under a contract with the Scottish Executive worth 16.5 million. 81 of these exchanges are presently part of an upgrade programme to further enhance broadband access in these areas. The upgrade programme is expected to complete in November 2010. 2.4 Broadband Reach Project A further project the Broadband Reach Project was delivered from 2008-2010. This project brought a basic broadband service using satellite and wireless technology to those Not Spots located too far from their serving exchange to receive a broadband service. The project was delivered by Avanti Communications, under a contract with the Scottish Government worth up to 3.3 million. Approximately 2,400 premises throughout Scotland have been connected in this project. 2.5 Pathfinder The two Pathfinder projects in the Highlands and Islands and South of Scotland are providing broadband connectivity to over 1,200 public sector sites including schools, council offices and libraries. Deployment of the Pathfinder South and North projects completed in 2008 and 2009 respectively and the current contracts will run until 2014. They are receiving 27 million and 63 million funding respectively from the Scottish Government. 2.6 Connected Communities The Connected Communities project provides a wireless broadband service to those parts of the Western Isles where BT does not provide a broadband service. The network also provides the connectivity to deliver Pathfinder requirements in the Western Isles. The project is owned and managed by HIE and has received 6.5 million public funding (with 3.07 million attributed to the private sector part of the network which delivers to businesses and residential customers). 2.7 LEADER Funding One additional route to helping improve basic connectivity is through community-led initiatives. There are currently only a handful of community networks operating in the region, however, there is an opportunity to test alternative technologies and business models for improving local connectivity in rural areas via funding from the European Economic Recovery Package. 1 million is currently available through the Challenge Fund under the LEADER scheme. Applications are invited from communities through their LEADER Local 2
Action Group (LAG), who will assess applications before bidding to the Challenge Fund by 29 October 2010. 2.8 Scottish Government future broadband policy development The Scottish Government s policy approach to date on NGA has been to allow commercial developments to fully take place, thereby avoiding market distortion. This remains its view as there is currently a lack of available evidence to support an economic rationale for direct government subsidy for the widespread supply of next generation broadband. Scottish Government research, published in 2007 1, concluded that the estimated productivity benefits to businesses from broadband, over the period 2001-2015, come largely from current generation broadband. The benefits, for known business applications, of upgrading to higher bandwidth were identified in this report to be smaller and primarily focussed on consumer markets and in entertainment and gaming. The Scottish Government is now undertaking new research to gain a better evidence base around the opportunities and constraints of current and next generation broadband. The first phase of this work, which is expected to complete in November 2010, focuses on: business optimisation of current-generation broadband; identifying the constraints to business growth of current generation broadband; and assessing the case for future broadband needs. The Scottish Government anticipates this research will provide evidence to clarify the extent to which existing broadband infrastructure is acting as a constraint on business growth, and hence has a resultant impact on sustainable economic growth. The research, which largely comprises a substantial survey of SMEs throughout Scotland, has been designed to show any sectoral and geographic variations. In addition, the Scottish Government has asked Sir John McClelland to carry out a review of the strategic management of investment in Scottish Public Sector ICT infrastructure, reporting to the Public Procurement Reform Board on how best to deliver improved value for money and support multi agency working and shared services. 1 Next Generation Broadband In Scotland; Scottish Government 2007: http://www.scotland.gov.uk/publications/2007/01/09153006/0 3
3. UK GOVERNMENT POLICY (2010) 3.1 Broadband Delivery UK In June 2010, the UK Government outlined its key goals for broadband: To ensure delivery of the 2 Mbps (Megabits per second) Universal Service Commitment within the lifetime of this parliament (2015). To ensure this country has the best superfast broadband in Europe by the end of this parliament (2015). To ensure the efficient use of funding to deliver Universal Service Commitment and Superfast Broadband. To assist other Government initiatives which are dependent upon customers ability to access Broadband based services. Broadband Delivery UK (BDUK) has been established by UK Government as its in-house body with responsibility for delivery of its broadband policies. 3.2 Scottish Government engagement with UK Government As a reserved matter, the Scottish Government is clear that it falls upon the UK Government to ensure delivery of its broadband commitments to the whole of the UK, including Scotland. The Scottish Government is committed to maximising its influence of and working with the UK Government to ensure that the best possible outcomes are achieved for Scotland. The Scottish Government established a small stakeholder group (comprising representatives from SE and HIE, and the main Scottish business and consumer organisations) to ensure that a wide range of Scottish views can be drawn together and articulated at UK level and that it was well placed to produce a robust Scottish position statement for the UK Government. The group met on 10 May and this meeting was chaired by the Minister for Enterprise, Energy & Tourism. On 24 June, the Minister for Enterprise, Energy & Tourism wrote to Jeremy Hunt MP, the UK Minister with responsibility for broadband, clearly setting out the Scottish Government s expectations on the UK Government and presenting the Scottish position statement arising from the stakeholder meeting of 10 May 2010. (http://www.scotland.gov.uk/topics/people/broadbandforscotland/sebroadbandinitiatives/hi story/digital-britain). 3.3 Universal Service Commitment (USC) The UK Government continues the previous administration s commitment of providing universal broadband coverage at a speed of 2 Mbps. A procurement to achieve this will be commenced by the UK Government later this year, with delivery by 2015. 4
3.4 NGA Market Testing Projects The UK Government intends to implement three rural broadband market testing pilot projects. With a view to future replication elsewhere, the projects will be carefully selected by BDUK to improve its knowledge and understanding of sustainable next generation access (NGA) delivery in challenging locations. The UK Government is expected to commence a separate procurement for these projects later this year. BDUK formally requested each of the Devolved Administrations and English RDAs to submit a preferred potential location for these pilots. For the Scottish submission, SE and HIE each developed a project within their regions which jointly test all of the known criteria BDUK is seeking to learn from the exercise. The result is a Scottish submission containing two robust and complementary projects which, if both were successful, would work hand in hand, but if only one were successful, would be a valuable project in its own right and would significantly transform NGA availability in rural Scotland. As BDUK requested that the projects in the Scottish submission be ranked, the Scottish Government held an internal assessment panel to score the projects against BDUK s assessment criteria. HIE s project was found by the panel to score higher than SE s, and was thus submitted to BDUK on 6 September as the Scottish Government s first ranked project. If successful, HIE s project will deliver NGA to around 40 settlements across the region. It will also potentially enable the realisation of wider benefits to the region, including the growth of key industries and businesses dependant on good connectivity. Additionally, it will provide a valuable contribution towards the sustainability and growth of fragile communities, not least by improved remote delivery of public services. By also meeting the demands of the wider population to access new digital services and entertainment, new forms of remote working, remote education and lifestyle choice could be facilitated. The Minister for Enterprise, Energy & Tourism presented HIE s project as the Scottish Government s first ranked project in a letter to Jeremy Hunt on 6 September 2010. The UK Government s decision (expected October 2010) as to which UK projects will be selected for the NGA pilots is now awaited. The Scottish Government remains fully supportive of both projects and is pressing BDUK for discussion as to what support may be available for any unsuccessful project as is its understanding of BDUK s intention. 5
4. CONNECTIVITY IN THE HIGHLANDS & ISLANDS Over the last 10 years, the Highlands and Islands has seen considerable advances in telecoms connectivity. Publicly funded projects, worth almost 14 million, have helped provide good coverage of both basic broadband and 2G (voice and text) mobile telephony services across the region. Availability of broadband in the region is good when compared with many other European countries but it is slightly lower than the UK average. Over 60% of premises have a broadband connection, which is similar to the Scottish figures but lower than UK take-up 2. However, broadband speeds achieved in the region significantly lag behind the UK average of 4.1 Mbps 3. Research conducted in 2009 showed that broadband speeds in Inverness averaged 2.5 Mbps, compared with over 6 Mbps in Edinburgh and Glasgow 4. Many parts of the region are only able to achieve 0.5 Mbps due to the distance from the local telephone exchange or the technology that is used in some of the region s smallest exchanges. Furthermore, only 20% 5 of phone lines in the region have access to local loop unbundling (LLU) broadband services, compared to over 80% of the UK. This is because many operators do not feel that it s commercially viable to offer unbundled services in the region 6. (LLU is where an alternative telecoms provider installs its own equipment in the local BT exchange allowing it to offer its broadband services typically speeds of up to 24 Mbps directly to customer). 2G coverage in the Highlands and Islands is comparable with other rural parts of the UK. However, there are still many parts of the region where 2G coverage is not satisfactory. Furthermore, around 80% of the UK now has access to 3G (mobile broadband) services, compared with only 16% of the Highlands and Islands 7. 2 Ofcom s Communications Market Report and BT data 2010. 3 UK Broadband Speeds 2009, Ofcom 4 Top-10 Broadband Research, 2009 5 ISP data listed on SamKnows website 6 LLU is where an alternative telecoms provider installs its own equipment in the local BT exchange allowing it to offer its broadband services typically speeds of up to 24 Mbps directly to customer. 7 3G Coverage Maps, Ofcom 6
5. FIVE KEY STRANDS OF ROADMAP FOR CONNECTIVITY IN THE HIGHLANDS AND ISLANDS The importance of enhancing connectivity is widely recognised as a key regional priority. Following research commissioned by HIE in 2009 to establish current connectivity in the region and a Connectivity Workshop in late January attended by a range of stakeholders and interested parties including public sector, private sector, academia, business organisations five strands were identified that collectively would improve connectivity and provide a number of recommendations for further consideration. The desire within the highlands and Islands region is to have a shared plan of action around which all parties can align efforts. These are outlined in this section. 5.1 Optimising current connectivity Key Issue: Need to ensure skills and knowledge exists to maximise the benefits of current connectivity While improvements in connectivity are vital, it is important that in the short term businesses and communities within the Highlands and Islands make best use of their current connectivity. Both availability and take-up of broadband services are good and it is therefore crucial to ensure that broadband is used to its full potential. Resources can be developed to assist with this and HIE s draft Digital Highlands & Islands action plan will propose a number of projects to help develop ICT skills and the ICT supply chain within the region which support this goal. It is also anticipated that the current Scottish Government research project on broadband and business will identify areas where optimisation of broadband may be deficient and will therefore identify opportunities to improve take-up 5.2 Incremental Improvements Key Issue: 28% of the Highlands & Islands does not receive 2 Mbps Lack of good connectivity at key locations across the region Currently, around 28% 8 of premises in the Highlands and Islands do not receive the level of broadband promised by the universal service commitment (USC) 2 Mbps and therefore, implementation of the USC will provide a welcome improvement for many. It is expected that the USC will be delivered using a range of technologies, such as improvements in home wiring, wireless networks, fibre to the cabinet and satellite broadband. It is important that delivery of the USC focuses on delivering solutions that provide future-proofed solutions for the region. A need also exists to push for connectivity improvements at key locations across the region. While low levels of 3G coverage exist, it is imperative that focus be given to ensuring coverage at all entry points, venues, main roads and rail routes as a priority. There is also an opportunity to work with Vodafone who have recently launched a new product, Sure Signal, which creates small 3G hot spots. This product utilises a broadband connection to give 3G 8 Connectivity Review 2009 HIE - http://www.hie.co.uk/connectivity-review-2009. 7
access within the premises. This could also be used to provide 2G coverage in key locations where there is a broadband service. 5.3 Mobile coverage Key Issues: Limited 3G coverage in the Highlands & Islands 2G black-spots still prevalent throughout the region 3G coverage provides the ability to access broadband on the move through either a mobile phone or a laptop. 3G coverage is widely available across the UK and many people assume these services are universally available. Within the Highlands and Islands, however, 3G coverage only extends to Inverness, Fort William and Oban as it is not currently financially viable for mobile operators to roll out further 9. This equates to just 16% of the region s population. Ofcom s 2010 Communications Market Review indicates that 3G coverage in Scotland as a whole at 66% is behind the UK average of 87%. Further rollout should be assisted by a number of changes in spectrum regulation. Spectrum is used for a number of purposes such as television, radio and mobile telephony. The release of new spectrum as a result of digital television switchover has the potential to make rural implementation of 3G more cost effective. These changes are due to take place later in 2010, with spectrum auctions in 2011, which may allow mobile operators to increase 3G coverage across the UK. In addition to moving forward with 3G, there is a need to ensure that remaining 2G not-spots are identified and pressure is placed on mobile operators to improve connectivity. Ofcom are currently undertaking research to consider why 2G not-spots occur and what can be done to resolve them. Furthermore, there a number of 4G trials already taking place across Europe this leading edge technology will deliver even faster mobile broadband services. As the region is currently trailing the UK in 3G roll-out, there is a potential risk that it will lag even further as 4G becomes mainstream. It is important therefore to understand what can be done to limit the possibility of this happening and to explore potential avenues for a 4G trial in the region. 5.4 Next Generation Access Key Issues: Commercial roll-out only likely to reach 40% of the Highlands & Islands Fragile and island communities are potentially unlikely to receive NGA Next generation access (NGA) provides broadband speeds far in excess of current broadband availability by replacing part or all of the copper cables with fibre cables or wireless technology. As well as the UK Government stating its aim of having the best superfast broadband in Europe by the end of this parliament (2015), the European 9 Digital Britain, Chapter 3a Paragraph 87, UK Government. 8
Commission s Digital Agenda for Europe has also set the ambitious target of 100% of Europe receiving a minimum of 30Mbit/s by 2020 10. Current and planned services from BT and Virgin Media will see access to speeds of up to 40 Mbps delivered to over 50% of the UK population by 2012 11 and 65% by 2015 12. Neither operator has so far articulated any plans to deliver its NGA services to the region. Work conducted by HIE in 2009 suggests that commercial investment may only deliver coverage to 40% of the region by 2017 13. There is a growing desire to move quickly to secure NGA in the Highlands and Islands to ensure that the region does not become digitally disadvantaged as other parts of the UK and Europe roll out NGA. If the Highlands and Islands is successful in securing an NGA Delivery Trial through BDUK, this will provide a significant step towards wider aspirations of NGA availability in the region. 5.5 Influencing on behalf of the region Key Issues: Key UK-wide initiatives in connectivity which require co-ordinated input Regulatory issues that are negatively impacting the region Contribute to Scotland s broadband plans There are a number of areas where there is a need to ensure that there is a strong and coordinated voice to champion the connectivity needs of the region. As the direction of UK Government s broadband strategy becomes clearer, there is a need to work with BDUK to ensure the best impact for the region, and Scotland as a whole. Furthermore, there are regulatory issues which are currently having a detrimental impact on the region. Examples of these are the distance-related charging of leased lines that disadvantage remote areas and the coverage obligations for the roll-out of 3G coverage. 10 http://ec.europa.eu/information_society/digital-agenda/documents/digital-agenda-communicationen.pdf 11 Digital Britain Impact Assessment Report, P38, BIS 2009. 12 http://www.btplc.com/news/articles/showarticle.cfm?articleid=4c5affb0-eb60-4171-b43f- FFBA68646870 13 Connectivity Review 2009, HIE - http://www.hie.co.uk/connectivity-review-2009. 9