Monday, November 28, 2011

NextGen11 conference report day 2: securing the right investment

Day 2 of NextGen11 (my report of day 1 here) began with a presentation from Rob Hamlin of Arqiva on the potential of wireless technologies to deliver broadband to rural and remote areas. Arqiva's LTE trials in Preseli (more here) demonstrate "the economic and technical viability of a neutral-host wireless network as a route to extending broadband Internet services to areas with no broadband coverage (‘notspots’) and those with speeds lower than 2Mbps throughout the UK, estimated at 10% of UK households." The Preseli trial was the first live LTE trial in the UK to use the 800MHz spectrum freed up by digital TV switchover and can deliver speeds of over 50Mbps. Arqiva's solution would offer wholesale access to all service providers and new entrants to maintain competition; the company previously offered this submission to the Welsh Assembly on the opportunities wireless technologies offer in Wales.

Next, Trent T.Holmes gave an overview of Thales' experiences of building and operating the Digital Region network in South Yorkshire. The first phase of the network build is on track to be completed in December 2011. This will include 545km of new fibre optic duct, 36 exchanges, and 1,359 street cabinets. When completed, the network will cover a population of over 1.3 million citizens, 546,000 homes and 40,000 businesses. All four local authorities in South Yorkshire are already accessing Public Services Network (PSN) services across the network. News coverage earlier this year focused on the problems the project was experiencing in securing takeup, with some speculation that the project could be sold, but a more recently it was reported that a new ISP had signed up to deliver services via the network - hopefully a sign that things are looking up?

A further three parallel workshops followed, I attended the one on finance and procurement. James Saunby of GreySky Consulting offered advice on getting the best deal  for superfast broadband deployments, for councils, communities, and suppliers. In particular, James highlighted the importance of gaining public sector commitment, as a major user of communications services. Delivering the requirements of the public sector over commercial superfast broadband infrastructure (rather than over separate dedicated networks) can provide additional guaranteed revenues throughout a region, making more areas commercially viable by helping to close the investment gap (an approach taken by Sunderland City Council, working with BT). While connecting the last 10% is challenging, James is confident it can be done, noting that securing revenues  may not be as difficult as might first appear: if there is no other form of broadband available, take-up can be rapid, reaching 70% or even higher very quickly. "Self-dig" also has an important role to play in reducing costs, as being demonstrated in Cumbria, with scale being important too: combining community projects can make a collective exercise far more commercially viable than multiple disparate approaches, underlining the importance of planning and a strong business case.

Michael Armitage of Broadway Partners spoke next, offering some reflections on state aid issues and concerns, as well as investment opportunities. Michael suggested that the demand case is sufficiently strong to encourage investment, and that mechanisms are in place in the form of "long term, patient money" but these are not currently being utilised. He flagged the Enterprise Investment Scheme (EIS) as an example of such a vehicle, in that it is is designed to help smaller higher-risk companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. The right investors in this space are ones that are able and prepared to wait for a guaranteed return, as opposed to investors requiring a return in a much shorter period. Returns are sufficiently attractive if the interests of investors, beneficiaries, suppliers and intermediaries are properly aligned. A new perspective is required: one example of a "different take" on the current situation is to view business rates on fibre as an opportunity rather than a problem: they can provide a means for a local authority to service a municipal bond, issued to fund investment in NGA infrastructure, by providing a guaranteed income stream to service the debt? Lastly in this session, Clive Downing of NYnet covered alternative models for broadband delivery, including gap funding, design build operate (DBO), digital community hubs and public sector networks, covering the pros and cons of each.

We then reconvened for a session on policy and regulation, with presentations from David Clarkson of Ofcom and Kate McGavin of DCMS. David outlined Ofcom's regulatory strategy and approach in relation to NGA, focusing on sub-loop unbundling (SLU) and physical infrastructure access (PIA) as mechanisms to promote investment, particularly in rural areas, and local loop unbundling (LLU) and Virtual Unbundled Local Access (VULA) as mechanisms to promote competition. In Ofcom's view, current generation broadband will continue to have a significant role over the next few years, something echoed by the current takeup rates of superfast services, with the regulatory framework therefore having to continue to support current generation access during the transition to NGA. People's propensity to pay for NGA services (or the lack thereof) remains a key challenge, underlining the importance of demand stimulation in driving investment.

Kate focused on market activity and the "arms race for speed" (something I've also covered here), broadband’s place at the heart of government policy and policy developments to enable roll-out. Whilst I commend the way many Government departments have joined up in recognising the importance of broadband, the Department for Education currently seems absent from this discussion. While the Government-commissioned report of the James Review of Education Capital published in April 2011 contained a number of specific recommendations on the provision of broadband for schools, including the recognition of the need to "leverage the value of existing public sector broadband networks, aligned with the roll out of superfast broadband and working with commercial providers, local authorities, and regional broadband consortia to establish a minimum bandwidth standard of 10Mbps for primary schools and 100Mbps for secondary schools", the subsequent DFE consultation document on the implementation of the James Review's recommendations contained no reference to broadband at all. Given the extensive reach of existing schools' broadband networks into rural areas, and the continuing importance of meeting schools' increasing broadband requirements, this would seem an opportunity to join up with wider broadband policy missed. However, it is very encouraging to see this recent acknowledgement by DFE of technology's potential for education. More to come in the new year, according to the speech.

I missed the next set of parallel workshops; following these, Crister Mattson of Acreo presented findings from a study into the socio-economic impact of fibre to the home provision in Sweden. 44% of all households and businesses in Sweden now have access to at least 100 Mbps broadband. The study found benefits in terms of increased economic activity (with increased GDP due to increased employment), savings in municipal and regional public sector costs for data and telecommunications and added value for end users, for example in terms of the increased value of residential premises resulting from the provision of enhanced broadband connectivity. Following a panel session on NGA leadership challenges, Mark Kellet of Magnet Networks gave an overview of the lessons learned from previous fibre deployments, in terms of provisioning and adoption; a key risk here is overestimating demand in the short term while underestimating demand in the long term. However, consumers' speed requirements are only moving in one direction...upwards.

The conference closed with a panel discussion on lessons learned and the way forward. For me, the key messages from this year's conference were the importance of planning, the need for sound business models and securing the "right" kind of investment, with technical issues and concerns being almost a secondary consideration once these foundations are in place. While concerns and frustrations remain over the speed and nature of NGA deployments in the UK, the overall mood seemed (to me at least) generally positive, acknowledging that we have come a very long way over the last few years, particularly in the recognition of broadband in both national and regional/local policy, to support economic growth and deliver a range of benefits for society.

However, we still have a long way to go. I think developments over the next 12 months will be crucial, meaning that NextGen12 is highly unlikely to be any less engaging than previous NextGen events.

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