[Title will be auto-generated] by Northwest Regional Development Agency

Report for the Northwest Development Agency

Making NGA a reality in the North West Evidence Paper 30 September 2009 Ref: 15557-384

Contents 1

Executive summary

Introduction

3 3.1 3.2 3.3 3.4

Regional objectives and the role that NGA plays in delivering them Strategic objectives of the North West region Introduction to the next generation of broadband NGA can help deliver the objectives of Regional Economic Strategy A long-term ambition for NGA in the North West

9 9 12 15 17

NGA policy context in the UK and Europe

5 5.1 5.2 5.3 5.4 5.5

NGA in the North West under a ‘do-nothing’ scenario Existing telecoms operators New NGA networks from the private sector New NGA networks not led by the private sector Other networks that could be used to support NGA in the North West Summary of likely outcome in a ‘do-nothing’ scenario

22 22 27 28 33 34

6 How will the gap between a ‘do-nothing’ scenario and the long-term ambition affect the NWDA’s goals? 36 6.1 Non universal coverage of NGA 36 6.2 Limited availability of FTTP 37 6.3 Slow deployment of NGA 40 6.4 Inward investment and regional competitiveness 40 6.5 Below average take-up 41 7 7.1 7.2 7.3 7.4

What can the NWDA do to help achieve its goals? Introduce policies and standards to make the most of private sector activity Stimulating demand for NGA to increase usage and promote investment Invest directly in the development of NGA in the region Other actions to promote and support NGA investment

44 45 49 52 57

Conclusions

Recommendations

Annex A: State aid rules and how these affect the NWDA Annex B: Stimulating competition through open access Annex C: Case studies on Citynet and Stokab Annex D: Broadband price benchmarking

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Making NGA a reality in the North West

Annex E: The role of the mobile industry Annex F: Glossary of terms used

Confidentiality Notice: This document and the information contained herein are strictly private and confidential, and are solely for the use of Northwest Development Agency Copyright © 2009. The information contained herein is the property of Analysys Mason Limited and is provided on condition that it will not be reproduced, copied, lent or disclosed, directly or indirectly, nor used for any purpose other than that for which it was specifically furnished. Analysys Mason Limited Exchange Quay Manchester M5 3EF UK Tel: +44 (0)161 877 7808 Fax: +44 (0)161 877 7810 enquiries@analysysmason.com www.analysysmason.com

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1 Executive summary The Northwest Development Agency (NWDA) has a number of strategic objectives that could benefit from improved access to faster broadband connectivity in the region. Improved connectivity would benefit a number of industries, especially those that are information intensive, by improving links between North West businesses, and from the North West to companies across the globe. These links could serve to increase productivity, stimulate activity in rural areas, and attract inward investment from UK-based and international companies. Beyond the business benefits, improved Internet access would provide the region’s citizens with a host of new services and applications that would raise the average quality of life. A potential vision for next-generation access (NGA) in the region is summarised below. The North West should have ubiquitous access to NGA as soon as possible, with 90% coverage being exceeded in the medium term, and 100% coverage achieved in the long term. NGA will be provided by a range of retail providers in a competitive market to ensure that low prices and service innovation continue. The technology used to deliver NGA must be capable of delivering the connectivity required to support world-class applications to which businesses and consumers need access. The region will lead the rest of the UK in the widespread use of NGA by all sectors of society. This vision is an initial iteration and should be debated and evolved so that it is as ambitious as possible, while also being achievable. The term ‘next-generation access’ refers to super-fast broadband that is enabled by replacing copper phone lines with fibre-optic cable (fibre). There are three distinct types of NGA: • •

•

fibre to the premises (FTTP) where fibre is laid all the way from the telephone exchange to the customer premises, enabling symmetrical broadband services, typically of 100Mbit/s fibre to the cabinet (FTTC) where fibre is laid from the telephone exchange to street cabinets, enabling faster speeds over the short distance of copper wire that remains (this option is less expensive than FTTP, but performance is slower, particularly for upload speeds). In addition there is cable broadband using DOCSIS3.0, which has the potential to provide download speeds of up to 200Mbit/s. This technology is used by Virgin Media to provide its 50Mbit/s service. However it is worth noting that this network is not open access (i.e. no competitors have access to it) and it would be difficult to implement open access on a cable network.

Each of the technologies (as well as the current ADSL broadband technology) are illustrated below:

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Figure 1.1: Overview of different broadband

ADSL 24 / 1.4 Mbit/s

technologies [Source:

FTTC 100 / 10 Mbit/s

DOCSIS3.0 200 / 100 Mbit/s FTTH over 1000 / 1000 Mbit/s

NGA technologies

Telephone exchange

Analysys Mason]

Key Fibre Copper Active electronics Note: speeds are maximum download / upload

The NWDA’s long-term ambition should be to provide ubiquitous FTTP coverage in the region, but this would require a total investment of around GBP3 billion1, so FTTC will need to provide part of an interim solution. In order to define an NGA strategy for the region and move towards the NWDA’s long-term ambition, it is essential to understand what would be delivered (and when) if the NWDA employed a ‘do-nothing’ NGA strategy. There are three main sources for the deployment of NGA in the North West: existing telecoms operators upgrading their networks; new NGA networks; and Government-led intervention. There is already a large amount of NGA infrastructure in the North West, as Virgin Media uses DOCSIS3.0 to cover 54% of the region’s premises with NGA, and FTTP is available to many large businesses (albeit at prices which are relatively high for most SMEs). A comparison of pricing for such services is given in Annex D, which shows that the prices of such services in the UK are lower than similar products in France, but are higher than in cities such as Stockholm and parts of Amsterdam which have both ahd public sector investment in fibre infrastructure.

Calculated by Analysys Mason using information derived from our report for the Broadband Stakeholder Group, http://www.broadbanduk.org/fibrecosts

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There are also other fibre networks within the North West which do not provide access to end users, but could play a role in supporting NGA. Examples of this include the fibre backbones of Cable & Wireless, Geo, EasyNet and public sector networks such as CLEO and JANET.2 As well as the upgrades of existing networks, there are a number of new NGA networks being planned. These include local independent networks such as the Manchester Oxford Road FTTP project, and in other parts of the UK there are networks associated with new properties, as well as networks from alternative telecoms operators such as H2O. Without any intervention from the NWDA, NGA availability is set to improve as market forces are expected to increase FTTC coverage to around 75% of the North West via private investment from companies such as Virgin Media and BT. However, it will be beyond 2012 when this is achieved. In addition, proposed plans from the Digital Britain report could extend FTTC coverage to over 90% of the region’s premises (by 2017).3 The deployment of NGA is likely to be focussed upon the more densely populated urban areas first. The majority of NGA will also be FTTC rather than FTTP which will not meet the requirements of some businesses and will limit the development of consumer applications. There is also a risk that the NGA infrastructure that does exist will be under-utilised if demand in the region does not increase. This would result in the benefits of NGA not being fully realised, and could slow down the development of further infrastructure in the region by discouraging investors. There are a number of activities the NWDA should consider that would improve NGA availability and increase the positive impact it has on the region’s strategic objectives. These activities are summarised in Figure 1.2 below.

Note that both CLEO and JANET utilise fibre connections from the private sector as well as their own dedicated fibre Digital Britain, Lord Carter, 17 June 2009

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Activity

What will it

Stakeholders

Cost

Issues and challenges

deliver? Introduce policies and standards to make the most of private sector activity Promote common standards for ducting

Promote common standards for ducting

Work with councils to include NGA considerations in planning permission processes

Make NGA considerations a condition for NWDA investment

Stimulating demand for NGA to increase usage and promote investment Encourage NGA usage and take-up

Encourage NGA usage and take-up

Encourage NGA usage and takeup

Encourage NGA usage and take-up

Stimulate and aggregate demand to promote investment

Invest directly in the development of NGA in the region Invest in conjunction with Digital Britain initiatives

Invest in conjunction with Digital Britain initiatives

Invest independently of Digital Britain initiatives

Other actions to promote and support NGA investment Lobby other public sector bodies to reduce barriers to NGA investment

Lobby other public sector bodies to reduce barriers to NGA investment

Address information asymmetries

Use the Regional Advisory Group on

Use the Regional Advisory Group

Use the Regional

Use the Regional Advisory Group on

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NGA to share project plane

Figure 1.2:

NGA to share project plane

on NGA to share project plane

Advisory Group on NGA to share project plane

NGA to share project plane

Summary of potential policy options [Source: Analysys Mason]

If the Digital Britain Final Third Project (to tackle the fact that NGA deployment will not be commercially viable in a third of the UK) were not to be implemented, the market is only likely to deliver NGA (using a mixture of technologies) to around 75% of the North West, versus in excess of 90% if the Final Third Project is implemented. The future of the Final Third Project will become clearer in the next 12 months, and the NWDA should remain close to this process: if it does not get implemented the NWDA could take a leading role to shape the options regarding the most appropriate actions in relation to NGA in the absence of the Final Third Project. Some of the activities above would require the NWDA to take a leading role while others would involve supporting and lobbying other stakeholders, and the activities vary in the level of cost and the challenge they would represent to the NWDA. The report outlines the importance of NGA to the North West and how gaps in the delivery of NGA by others in the private and public sectors may impact the region’s goals. We have identified seven recommendations for the NWDA that will help to address the gaps in NGA and fulfil it’s ambitions. Each of these is discussed in turn below:

1) Continue to engage with stakeholders The NWDA should continue its dialogue process with regional stakeholders in NGA development, both internal and external to the development agency. This process should aim to communicate a common understanding of the current state of connectivity in the region and achieve buy-in regarding the gaps that need to be addressed. By receiving input to the process from a wide range of stakeholders, it will be possible to formulate the most appropriate strategy for promoting NGA in the region

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be capable of delivering the connectivity required to support world-class applications to which businesses and consumers need access. The region will lead the rest of the UK in the widespread use of NGA by all sectors of society. This vision is a initial iteration and should be debated and evolved so that it can agreed upon by the full range of stakeholders.

3) Agree the outcome of a do-nothing scenario One of the important outputs from this report is a vision of NGA in the North West under a scenario where the NWDA takes no action. This vision as outlined in section 5 should be circulated amongst stakeholders with the aim of agreeing upon the outcome of a do-nothing scenario for the North West. This process will also help to de-bunk any myths that exist within regional stakeholders.

4) Identify the gaps in NGA that will have the biggest impact upon the NWDA’s goals In section 6 we identify five areas where there is a potential gap between a do-nothing scenario and the goal of ubiquitous FTTP: • •

• •

•

non-universal coverage of NGA – some areas (up to 25%) will not have any NGA provision limited availability of FTTP – coverage of FTTP is likely to be limited, and NGA will be mostly FTTC and DOCSIS3.0 from Virgin Media, both of which do not provide the highest speeds and are not symmetrical slow deployment of NGA – it may be 2017 before 90% coverage of NGA is delivered regional competitiveness and inward investment – not having world-class infrastructure will affect the levels of inward investment and the implementation of sector and theme specific regional strategies and policies. below-average take-up – if NGA is not adopted, the full the benefits will be diluted; the region currently has below-average broadband adoption and it will be important to reverse this for NGA to deliver its full potential.

The NWDA should agree with its stakeholders the relative importance of each of these gaps. This should focus on how the gaps will impact the NWDA’s overall strategy and not be driven by the agendas of individual stakeholders. By agreeing upon the gaps that will have the biggest impact the NWDA can then seek to prioritise its effort to areas where it can have most impact.

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The investment framework may be used to support a wide range of projects that cover some or all of the gaps at a regional, sub-regional or local scale.

6)Identify actions that the NWDA could lead within the investment framework Based upon the outcome of the recommendations outlined above the NWDA should agree upon the actions that could be covered under the investment framework that it would like to take the lead with. We have set out ten potential actions in section 7, all of which could be used to tackle the gaps which have been identified, though it may be appropriate for the NWDA to take a lead on a subset of the ten actions that have been outlined.

7) Detailed definition of actions that the NWDA will take a lead with The NWDA should seek to add detail to the actions that are identified in the previous recommendation which it would take the lead on. Many of these are likely to be captured at a high level in section 7. Work should be undertaken to arrive at a detailed definition of the actions that could be taken, this could include: • • • • •

Clear definition of the aims for each action Detailed analysis of the likely impact against each of the gaps identified Work on how the action will be delivered. This could including the associated costs A project plan (including stakeholder engagement) for each action Engagement of other stakeholders

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2 Introduction Analysys Mason Limited (‘Analysys Mason’) has been working with the Northwest Development Agency (NWDA) and its stakeholders to produce this strategy paper for next-generation access (NGA) to broadband for the region. This paper has a number of objectives: • • • • • •

to outline an ambition for NGA in the region to provide a common understanding of the facts and issues surrounding NGA – ‘de-bunking myths’ to set NGA into the wider context of the region’s objectives and highlight the role it has in supporting other regional strategies to establish a likely scenario for NGA in the North West if the NWDA were to ‘do nothing’ to identify areas where this ‘do-nothing’ scenario would affect the region’s wider objectives to discuss potential policy options (at a high level) that could be pursued at a local, regional or national level by the NWDA.

The remainder of this document is laid out as follows: • • • • • • •

Section 3 outlines the regional objectives and the role that NGA plays in them, along with the suggested ambition for NGA in the region Section 4 provides a discussion of the policy context in the UK and Europe; this emerging policy context has led to NGA becoming a key issue at this point in time for the NWDA Section 5 presents our analysis of a ‘do-nothing’ scenario Section 6 identifies the key gaps between the ‘do-nothing’ scenario and the suggested ambition for NGA in the region Section 7 outlines some potential policy options to overcome these gaps; it also includes a discussion of some of the key stakeholders and challenges to overcome for each option Section 8 presents our conclusions Section 9 contains our recommendations for the next steps that the NWDA should take.

The report includes a number of annexes containing supplementary material: • • • • • •

Annex A provides a discussion of EC state aid rules relating to NGA Annex B provides an overview of different competition models and open access Annex C provides case studies of two public sector NGA interventions in Stockholm and Amsterdam Annex D provides price benchmarking for business services Annex E provides a commentary on the role of mobile networks Annex F provides a glossary of terms used.

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3 Regional objectives and the role that NGA plays in delivering them

3.1 Strategic objectives of the North West region Before considering the role that NGA has to play in meeting the regions objectives it is important to understand the overall objectives. The NWDA is working towards its vision of a dynamic, sustainable, international economy for the region, which competes on the basis of knowledge, advanced technology and an excellent quality of life for all. The Regional Economic Strategy highlights a full range of actions that will help to achieve this vision. One of the key challenges for the region in the Regional Economic Strategy is that the gross value added (GVA or output) per head in the region is 15% lower than the average for England, resulting in an output gap of GBP19.8 billion. GBP4.5 billion of this is due to fewer people working per head of population and GBP15.3 billion is due to lower productivity (GVA per employee)4. It is therefore an objective of the region to increase employment levels and improve the productivity of the industries present in the North West. As part of the drive to increase the North West’s GVA, the region aims to encourage enterprise activity by facilitating new business start ups, supporting entrepreneurs and maximising the competitiveness of the region’s existing businesses. Another means to improve the region’s productivity and competitiveness is through the development of relevant skills and innovation within the population. Due to the nature of the global economy, there is a particular drive to foster ICT skills and increase the use of such technologies as they are widely seen as being a future driver of increase din both productivity and innovation.. The region has the ambition to be a world-leading entity within the digital and creative industries, and as such places specific emphasis on the development of this sector. NGA is a key infrastructure which will support the development of the digital and creative sectors. The influence of digital and creative industries in the North West will be increased by the launch of MediaCityUK in Salford Quays, to which the BBC is moving five departments as the anchor tenant. The region will capitalise on this development through NorthernNET, a very high-speed (100Mbit/s, upgradeable to 1Gbit/s) fibre telecoms network linking MediaCityUK to a further 20 Media Access Bureaux across the North of England. The improved connectivity between companies in the digital and creative industries will strengthen the role of innovation and knowledge transfer in the development of new products and services.

Office of National Statistics, March 2009

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Science is also a strategically important area which the NWDA wishes to develop. The vision of the Northwest Science Strategy 2007–2010 is to enable the North West to be viewed as an area of world-class scientific achievement, creating a magnet for talent and scientific investment, a powerful driver for innovation and enterprise, and an effective force for delivering benefits to health, the environment and society. Included within the strategy is the notion of world-class infrastructure to enable scientific collaboration and exploitation. In an increasingly global economy, internationalisation will be a major contributor to GVA in the North West. Companies within the region who are able to export have consistently shown improvements in productivity, while overseas investors are more likely to offer better remuneration and are more productive than indigenous firms. Economies and regions that are able to offer access to the world’s most advanced broadband services to indigenous firms and potential investors alike, will experience greatly enhanced international competitiveness. One aspect of the strategy to increase international competitiveness of the region is attracting more foreign direct investment as many foreign companies have higher levels of productivity. This is achieved by improved access to other markets and strengthened supply chains. World-class telecoms is important to many global organisations and are increasingly part of the core infrastructure that must be present in a region in which they are seeking to invest. If the North West falls behind other countries and regions in the provision of world-class telecoms connectivity it may affect the ability to attract foreign direct investment. The annual survey of European cities and their attractiveness for business by Cushman & Wakefield found that telecoms was the third most important factor in choosing a city from which to operate, behind availability of staff, and easy access to staff. The quality of telecoms ranked slightly ahead of transport links. The importance of NGA to the region has also led to a number of other sub-regional bodies developing NGA ambitions and strategies. Of particular note are strategies from the New Economy for Manchester and Alston Cybermoor. Within Manchester there are plans to install FTTP connections to 1500 homes and businesses as part of a living lab trial, and within Cumbria there are plans to install a community fibre-to-the-premises (FTTP) network within Alston. The issue of NGA is also being discussed in detail across and within the localities of Lancashire, Cheshire and Merseyside with a view to determining specific projects. On a more localised level, another important objective is the development of economic activity in rural areas of the North West, which currently accounts for 20.5% of the region’s GVA. The rural North West has a higher share of micro-enterprises than the regional average, particularly in more remote rural areas which have over 30% of the region’s micro enterprises5. It is therefore important to identify and assist those enterprises with real potential for sustainable growth and employment creation and to address market failures in the provision of telecoms connectivity. Many of the region’s strategic objectives can be delivered by improving the level of telecoms connectivity in the region. Of particular importance is broadband connectivity. The move from 5

Source: BERR, 2007

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dial-up Internet connections to broadband technology has had a significant impact on business productivity, innovation and consumer services. The next generation of broadband technologies is now emerging and this will be of equal if not greater importance to the region.

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3.2 Introduction to the next generation of broadband The next generation of broadband is commonly referred to as next generation access (NGA). NGA provides homes and businesses with faster telecoms connectivity by replacing some or all of the legacy network of copper wiring with fibre-optic cable (fibre), which can carry greater bandwidths over longer distances. There are three main options for NGA deployment categorised by the depth to which fibre is extended. Fibre to the premises (FTTP)

FTTP involves laying fibre-optic cables directly to the customer premises, replacing all external copper wiring. FTTP can be deployed using so-called ‘point-to-point’ connections whereby each customer has a dedicated fibre. With current technology this connection is capable of supporting symmetrical speeds of up to 1Gbit/s (i.e. 1000Mbit/s). Alternatively, FTTP can be deployed using a so-called gigabit passive optical network (GPON) where fibre along the street is shared among a number of users (each still has their own fibre from the street to the home). In this configuration, customers can typically expect speeds on average to be around 100Mbit/s.

Fibre to the cabinet (FTTC)

Due to the high cost of laying fibre directly to each premises, an alternative is to lay fibre to street cabinets (FTTC). Electronic equipment is deployed in the street cabinet that connects to the customer premises using the existing copper cables. The proximity of these cabinets to premises (typically within a few hundred metres) means that download speeds of 30–100Mbit/s can be expected, depending on the length of the final copper line. Upload speeds are likely to be significantly less than download speeds, at up to 10Mbit/s.

DOCSIS3.0

Cable networks can be upgraded to use DOCSIS3.0 which is abke to offer NGA services. The resulting network is similar to a FTTC network in that fibre is deployed directly to a street cabinet within a few hundred metres of the customer premises. The final connection to the customer si then provided over a shared co-axial cable. DOCSIS3.0 is abel to provide end user connection of 200Mbit/s download and 100Mbit/s upload. However, commercially available services from Virgin Media toady are limited to 50Mbit/s download and 1.5Mbit/s upload (though they are trialling 10Mbit/s upload speeds). Virgin Media already use DOCSSI3.0 across all of their network.

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Figure 3.1: Overview of different broadband

ADSL 24 / 1.4 Mbit/s

technologies [Source:

FTTC 100 / 10 Mbit/s

DOCSIS3.0 200 / 100 Mbit/s FTTH over 1000 / 1000 Mbit/s

NGA technologies

Telephone exchange

Analysy Mason]

Key Fibre Copper Active electronics Note: speeds are maximum download / upload

One important difference between FTTP and other technologies (i.e. FTTC and ADSL) is that it offers symmetrical connections. This allows users to both send and receive data at a high speed. Increased upload speeds are particularly important for applications such as: sharing videos, streaming video from home (e.g. high quality video conferencing), remote backup and file transfer. FTTP is able to offer the highest bandwidth services, for both downloads and uploads and is the only mainstream technology that is capable of offering symmetrical 100Mbit/s services6. The potential uses for the highest speed NGA connectiosn are discussed in more detail in section 6.2. One such application could be cloud computing, where end users access computing resources and applications over the Internet instead of applications on their own PC. Cloud computing has particular potential in fields where large amounts of data processing can be carried out in the cloud, rather than on the desktop. However, to use such services it is necessary to have significantly faster upload speeds so that data can be sent to (and received from) the cloud in near real time. Cloud computing may allow small businesses to have access to more advanced business applications that are currently only viable for larger organisations such to the costs of developing and hosting specialised applications. It will therefore increase productivity and help to reduce ICT costs.

We note that some point to point wireless technologies can offer symmetrical 100Mbit/s services but these are unlikely to scale beiny niche applications due to limited amount of spectrum

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North West businesses requiring very high-speed symmetrical broadband connections can currently purchase Ethernet services from BT and alternative operators such as Virgin Media and Cable & Wireless. BT claim that they currently provide FTTP to 120 000 business in the UK7. The prices of such services vary significantly based on functionality and location of business premises. However, business orientated fibre services with dedicated capacity would typically cost in excess of GBP1000 per month. In comparison, in areas with widespread FTTP such as Amsterdam, these services can be purchased for between EUR75 and EUR750 per month depending on the level of priority assigned to the traffic8. More information on pricing comparisons is given in Annex D. Within the UK the availability of such high speed business services is generally concentrated in urban areas. The North West is not at a relative disadvantage to the rest of the UK as it has a large urban population and many of the national backbone networks pass through the region. FTTP is the best NGA solution currently available, as it does not share copper wire’s physical limitations in terms of the bandwidth it can carry. There have already been a number of FTTP deployments across the world and it is becoming available in the UK in some large property developments such as Ebbsfleet and Wembley City. However, laying fibre is expensive, costing in the region of GBP100 per metre, and this will limit the extent of commercial roll-out of FTTP. Though if fibre is deployed at the same time as other civil works this cost is significantly reduced and can be under GBP10 per metre. This is particularly marked in rural areas where cost per premises increases due to the longer distances over which fibre must be laid, and the lower customer density over which costs can be shared. FTTC is a far less expensive option, with the investment needed to connect all UK premises estimated to be around GBP5.1 billion compared to GBP28.8 billion for full point-to-point FTTP.9 FTTC can be seen as an interim step towards achieving full FTTP as the investment in laying fibre to the street cabinets would be needed for both solutions, provided the FTTC network is designed with future FTTP in mind. Upgrading a network to FTTP however would make the active equipment installed in street cabinets redundant, meaning that installing FTTP at first instance would require less investment overall. At present there are many providers of fibre based connectivity that could be used to support NGA. This existing fibre is owned and operated by companies such as BT, Virgin Media, Cable & Wireless, EasyNet, and Geo. The main users of this fibre are either other telecoms operators or large businesses. The exact routes of this fibre are commercially confidential. However based upon our experience fibre is currently in places that connect large centres of employment such as business parks with town and city centres. Within the centres of cities such as Manchester and Liverpool we would expect there to be significant amounts of fibre from multiple providers. We

http://www.btplc.com/news/articles/showarticle.cfm?articleid={efd7b1fa-52ed-45bb-b530-734fac577e94} Note that the products from BT are most comparable to the most expensive products in Amsterdam The costs of deploying fibre-based next-generation broadband infrastructure, by Analysys Mason for the Broadband Stakeholder Group in September 2008, http://www.broadbanduk.org/fibrecosts

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believe that the vast majority of BT telephone exchanges in the region have fibre laid directly to them. However, this fibre is only a very small proportion of the total fibre required to deliver FTTP. Using information from our report on the costs of deploying fibre for the BSG10 we can calculate the proportion of all fibre that is required for different parts of the network. To deliver a FTTP network to all of the UK would require 727 000km of fibre between the exchange and the premises. Over 85% of this fibre would be located between the street cabinet and the home. On average the street cabinet is within 500m of the premises, and the telephone exchange is within 2.3km of the premises. As a comparison Geo operate a fibre backbone network that provides connectivity for service providers such as Carphone Warehouse and the mobile network 3. Geo describe their network as “connecting all the major commercial centres” via its deployment in the sewers in London and on the national gas pipeline. This network comprises 2 500km of fibre – less than 0.5% of the total distance of fibre required for a nationwide FTTP network. This illustrates that the vast majority of fibre that is required in a FTTP deployment is very close to the end premises and that reusing the existing fibre assets that primarily provide links to population centres and major business sites will not make a significant impact upon the costs of deploying FTTP. It should be noted that fibre-based NGA is not the only solution for the provision of high-speed data services. Wireless mobile services play an important part in society and the way we communicate, and future developments will see 3G coverage increase and data speeds increase significantly. However, despite the advances in mobile technology ther are no current technologies available, or planned, that would be able to offer a widely available service that has similar characteristics to either FTTC or FTTP. This report does not focus on mobile communications, but a brief analysis of the salient issues in the industry and their impact on the North West is provided in Annex E.

3.3 NGA can help deliver the objectives of Regional Economic Strategy The improved bandwidth delivered by NGA technologies will improve the connectivity between the North West’s businesses, as well as improving their ability to interact with other national and international organisations. The benefits of NGA will be felt particularly strongly in informationintensive sectors such as digital and creative industries, which regularly transfer large media files. The NWDA’s Digital & Creative Industries Sector Strategy states that “access to advanced telecoms infrastructures is central both to the competitiveness of digital and creative firms and to their capacity to promote innovation in other priority sectors”. NorthernNET provides a starting

http://www.broadbanduk.org/fibrecosts

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foundation for this11, but further investment will be needed to provide all of the region’s companies with high-speed connectivity. The science sector is another area where the impact of NGA is expected to be pronounced, as improved connectivity will enable more efficient collaboration between organisations and will stimulate innovation. The demand for higher-speed broadband is being felt by a growing number of sectors in the North West, including advanced manufacturing and elements of business & professional services. Although not all industries will have this immediate demand for very high-speed connectivity, the introduction of NGA is expected to increase productivity for all companies that use the Internet in their day-to-day operations. Surveys also confirm that businesses view access to high-speed telecoms as a critical factor in determining the location for new investment. This regional competitiveness is relevant not just on a national level, but also internationally as global companies seek to expand operations in the UK. The improved connectivity provided by NGA will also serve to accelerate the wider adoption of other information and communications technologies as well as applications such as video conferencing and cloud computing. NGA will enable companies to explore new business models and to adopt new ways of working by enabling flexibility in aspects such as home working and entering horizontal supply chains on a global scale. The benefits of NGA are not confined to businesses as it will improve the ability of citizens to connect to online networks to access a range of entertainment, social and educational content. NGA will give consumers the ability to use new ‘tools’ at work and home, and to access a range of high-bandwidth services such as high-definition video streaming. These developments, along with increased functionality of online services such as healthcare and education, will improve quality of life and promote social inclusion. The Digital Britain report also highlighted the potential for broadband (and NGA) in this area.

We note that NorthernNet only provides NGA services to specific Media Access Bureau sites. However, this does allow some businesses at clusters for the digital and creative sector to access NGA services

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3.4 A long-term ambition for NGA in the North West Recognising that FTTP has the greatest potential when compared to other NGA technologies and the benefiots that retail competition can bring suggest that the greatest benefits to the North West would come from ubiquitous access to FTTP, with a highly competitive retail market for services and high levels of take-up of NGA, along with usage of the latest applications. However, it is unlikely to be viable to achieve ubiquitous FTTP in the short term for the region. FTTC will provide a marked improvement on currently available broadband services for the majority of North West homes and businesses, and particularly so in rural areas which are unable to receive reliable ADSL services. It may therefore be more appropriate to set an objective that all of the region has access to NGA that will enable both businesses and consumers to utilise the latest applications that they require to ensure continued economic development. This vision would ensure that end users that require FTTP for their continued economic development would have access to FTTP, but the region would not seek to actively promote FTTP over and above FTTC where there is no clear need for the additional capabilities of FTTP. However, this brings the challenge of identifying those businesses that may require the additional benefits of FTTP over and above that provided by FTTC, for which there may not be a simple answer. A potential vision for NGA in the region is summarised below. The North West should have ubiquitous access to NGA as soon as possible, with 90% coverage being exceeded in the medium term, and 100% coverage achieved in the long term. NGA will be provided by a range of retail providers in a competitive market to ensure that low prices and service innovation continue. The technology used to deliver NGA must be capable of delivering the connectivity required to support world-class applications to which businesses and consumers need access. The region will lead the rest of the UK in the widespread use of NGA by all sectors of society. This vision is a initial iteration and should be debated and evolved so that it is as ambitious as possible, while also being achievable.

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4 NGA policy context in the UK and Europe UK policy makers began to take an interest in provision of telecoms services to support Internet usage soon after BT started deploying broadband in 1999, when the debate was framed in terms of the percentage of domestic and business users with access to broadband (i.e. ADSL) connections. This led to a number of demand and supply-side interventions, including Project ACCESS within the North West. In addition there has been regulatory action to ensure that there is a competitive broadband market. The most significant actions here include the introduction of ‘local loop unbundling’ (LLU), which Ofcom has helped to enable; the resulting creation of Openreach. These actions have ensured that there is a competitive retail market for broadband services today. During 2007 and 2008, the focus of public policy debate about telecoms services began to move from measuring the extent of the initial roll-out of ADSL to understanding demand for and cost of delivering next-generation broadband. This has been accompanied by a concern that any proposed interventions should ensure competition between private sector wholesale and retail providers, see as a critical success factor in delivering ADSL to a very high percentage of UK users at prices comparable with or below those of UK’s main competitors. In April 2007, the Broadband Stakeholder Group (BSG) published its Pipe Dreams report. This assessed the prospects for NGA in the UK, and can be seen as having kick-started the NGA debate The debate evolved further during 2008, driven by: • • • •

the Caio independent review for the UK Government into NGA BSG reports on the benefits of NGA, models for intervention (by Analysys Mason), and costs of NGA (by Analysys Mason) European Commission and Ofcom guidance on regulatory policy for NGA UK’s legacy private sector network owners’ NGA announcements – BT’s detailed plans for a series of pilots as a precursor to deploying FTTC to 40% of the UK and Virgin Media rolling out a retail offer of 50Mbit/s download and 10Mbits/sec upload to its domestic customers .

Regional and devolved administrations have also announced plans for three next-generation interventions of a significant scale in the UK, as outlined below. South Yorkshire: the Digital Region project aims to deliver broadband speeds in excess of 25Mbit/s to 1.3 million citizens in South Yorkshire. The project will draw upon European Regional Development Fund (ERDF) support. The April 2009 Budget and Digital Britain have confirmed approval for the project. This project is discussed in more detail in Section 5.3. • •

Cornwall: embarking on region-wide NGA intervention that will use ERDF funds. Discussions are currently underway with a short list of preferred bidders. North Wales: FibreSpeed is a project by the Welsh Assembly Government to deliver fibre optic connections to 14 strategic business parks in North Wales. The network was launched in late 2008.

It is worth noting that the timing for these interventions has, to some extent, been driven by the availability of EU funding. As less generous transitional arrangements for the next round of European

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Structural Funds for areas like those in South Yorkshire and Cornwall come into effect and the nature of European regulation of this area of the market changes (see section on State Aid, later), the ability of other regions and devolved administrations to replicate interventions of this type is doubtful.

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On 03 March 2009, Ofcom released a statement on, “Delivering super-fast broadband in the UK, Promoting investment and competition”. This statement followed a series of consultations that have helped to shape the regulatory background for BT’s roll-out of next-generation broadband. Ofcom used the statement to announce that it will: • • •

allow BT a ‘reasonable rate of return’ for wholesale operations that reflects the underlying risks, without placing any definition or parameters of what might constitute a reasonable return; modify regulation so that Openreach can operate active electronics at the street cabinet (which will remove potential operational inefficiencies)12 safeguard the opportunity for future infrastructure competition (see Annex B for more detail on different models of infrastructure competition).

In addition, Ofcom is currently considering the implications of BT announcing that they may increase the amount of FTTP that is being deployed as part of their NGA deployment13. On 12 June 2009, the European Commission published its second set of proposals for NGA regulation. The new proposals are considered to be more balanced than the first in terms of passive and active remedies14. There is also some commentary on co-investment models, for which some operators such as Vodafone have been lobbying for in their responses to the consultation by the EC.15 The Digital Britain review, led by Lord Carter, published its final report on 17 June 2009. The report addressed many issues in the digital economy, including: next-generation broadband, universal broadband, mobile spectrum, digital TV, digital content, digital radio and media literacy. The report covers many issues, and redefines the policy context within with the NWDA and others operate. In respect of digital telecommunications infrastructure, the most prominent are: •

•

a Universal Service Commitment (USC) for broadband, at a proposed speed of 2Mbit/s by 2012. This would be in addition to the existing Universal Service Obligations (USO) placed upon BT. Though the 2Mbit/s USC may not be solely implemented by BT funding and a contestable procurement mechanism to provide NGA to the ‘final third’ of the UK’s domestic and business premises not expected to be reached by market investment in fibre networks.

Without changes to the regulation different division of BT would need to operate electronics that reside within tens of thousands of street cabinets. This would have caused significant additional costs for BT so Ofcom allowed a single division of BT to operate the passive infrastructure and active electronics at the street cabinet.

In particular BT have announced that they will investigate extending FTTP beyond areas of new build to areas of existing housing where the additional costs of deploying FTTP compared to FTTC are limited

Passive remedies refer to infrastructure competition at the physical infrastructure level, whereas active remedies would include access to regulated wholesale products that do not require investment in network infrastructure by alternative operators as most of the active equipment would be provided by the owner of the passive network

The public consultation will be open until 24 July 2009, and the EC plans to adopt the Recommendation, taking account of comments received, before the end of 2009

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Each of these issues is discussed in more detail in Section 5.3. It is clear that over the last two years the policy context for NGA in the UK has evolved significantly. There are now examples of commercial deployments, a regulatory regime has emerged, and central government has laid out some high-level policies for NGA. It now appears appropriate that other parts of the public sector, such as the NWDA, should be exploring their strategies for NGA so they can build on the existing work from other bodies to deliver the maximum benefits from NGA.

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5 NGA in the North West under a ‘do-nothing’ scenario In order to define an NGA strategy for the region – and move towards its long-term ambition as outlined in the previous section – it is essential to understand the current market developments in three areas: the type of NGA being delivered, the planned geographical coverage, and the timeframe for its availability. In this section we use the existing evidence base to determine what a ‘do-nothing’ NGA strategy would deliver for the North West. There are four main sources for the deployment of NGA in the North West are: • • • •

existing telecoms operators upgrading their networks new networks from the private sector new NGA networks that are not led by the private sector Government-led intervention.

There are also other fibre networks within the North West that do not provide access to end users, but could play a role in supporting NGA, for example networks owned by Universities. An analysis of each of these sources of NGA deployment is carried out in the following sections.

5.1 Existing telecoms operators Virgin Media and BT are the main existing telecoms operators in the North West that are planning to deliver widespread NGA, the existing announcements between them will cover in excess 50% of residential and business connections. There are also other operators focused on serving businesses such as Cable & Wireless, Geo, Easynet and Metronet. Each of these operators is discussed below.

Virgin Media Virgin Media completed the deployment of 50Mbit/s download services to all of its network which covers over 12 million UK homes in July 2009, of which we estimate around 1.7 million are in the North West.16 According to information from Ofcom, Virgin Media covers 54% of premises in the North West. 17 The 50Mbit/s service is delivered using a so-called ‘hybrid fibre co-axial network’, where the fibre-optic cable runs to street cabinets, and co-axial cable connected the customers. The ability to deliver 50Mbit/s services is supported by the DOCSIS3.0 standard which has been deployed to the Virgin Media network over the previous 18 months. DOCSIS3.0 is similar in architecture to FTTC, though DOCSIS3.0 uses shared bandwidth in the co-axial part of the 16

http://pressoffice.virginmedia.com/phoenix.zhtml?c=205406&p=irol-newsArticle&ID=1307695&highlight= http://www.ofcom.org.uk/research/cm/cmrnr09/england/nrcmreng.pdf

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network which may lead to less dedicated bandwidth per customer in the long term without additional network investment. Virgin Media currently offers upload speeds of up to 1.5Mbit/s, but it is conducting trials where this is increased to 10Mbit/s. It is also trialling the deployment of 200Mbit/s downstream services.

Virgin Media coverage Urban area Motorway route

Figure 5.1:

Virgin Media’s DOCSIS3.0 coverage [Source: Analysys Mason]

BT On 15 July 2008, BT announced plans to invest GBP1.5 billion in deploying NGA to 10 million homes in the UK by 2012. BT’s NGA plans include both FTTC and FTTP, but FTTP deployment is planned to be largely limited to areas of new build where the costs of deploying FTTP are similar to those of new copper connections. The vast majority of the NGA plans from BT are therefore likely to be FTTC to existing homes and businesses. BT has already announced the location for the first 1.5 million homes and businesses that will have FTTC deployed to them by early summer 2010. The North West has 20% of total planned premises by BT to date, compared to its 12% share of national premises. Manchester is to benefit particularly from the plans, as 62% of the city’s premises are covered by the exchanges which are planned for upgrade.

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Planned FTTC exchange Urban area Motorway route Glasgow

Edinburgh

Newcastle Leeds/Bradford

Note: This is a significant step forward from the coverage shown in the April 2009 Strategic Framework Paper

Manchester Birmingham London Cardiff Bristol

Figure 5.2:

Basingstoke

BT’s current plans for the first 100 exchanges to have FTTC [Source: BT/Analysys Mason]

BT’s original plans included very limited deployment of FTTP. However, it has more recently indicated that it is examining additional FTTP deployment to existing sites via a pilot roll-out18. The impact of this is uncertain, but it may lead to a greater proportion of the NGA delivered by BT being FTTP. BT has not stated the final coverage of NGA that it intends to deliver commercially, only that it will cover 10 million homes and businesses by 2012. Our study into the costs of deploying NGA for the BSG (a government advisory body on broadband) offers some insights into the likely commercial extent of NGA roll-out. Figure 5.3 below shows how the cost of FTTC varies with population coverage.

http://www.openreach.co.uk/orpg/news/generalbriefings/gen05109.do

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Cost per premises connected for FTTC (GBP)

Figure 5.3: Increase in 2,000

cost per premises

1,800

connected for FTTC in

1,600

the UK [Source:

1,400

Analysys Mason, derived from our study for the

1,200

BSG]

1,000 800 600 400 200 0 0%

20%

40%

60%

80%

100%

Cumulative coverage (% of premises)

It can be seen that the costs of deploying FTTC increase significantly at around two-thirds population coverage of the UK. Furthermore it can also be seen that the costs within the first twothirds of the country are relatively constant. This was the basis for Lord Carter’s decision to introduce an NGA fund for the ‘final third’ (last 33%) of the country (see Section 5.3). This suggests that with adequate funding, a commercial roll-out would be viable to two-thirds of the UK. As BT has already announced plans to cover 10 million homes (40% of the UK) it would seem reasonable to assume that it will extend its roll-out plans to around two-thirds of the UK if the existing plans to deploy to 10 million premises are successful. However, this is likely to occur after 2012. In addition to the new deployments of FTTP and FTTC by BT, it is also worth noting that it already offers very high-speed fibre to the premises services using point to point technology19. However, these services are designed for businesses that require very reliable high-speed dedicated connections. Due to the very high service levels and the dedicated infrastructure required, the prices of these services are too high for most businesses and are mainly used by large businesses with many users. More information on prices for business services is given in Annex D.

Other operators targeting businesses A number of alternative operators use their own fibre infrastructure to offer high-speed services directly to large businesses20. These operators typically have fibre to sites with high concentrations of large businesses in larger towns and cities. National operators with a presence in the North West

BT’s use of GPON technology is limited to residential and small business connections It also sometimes uses products from Openreach or BT Wholesale to complement its own networks and gain access to customer premises

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include Cable & Wireless, Geo and Easynet. In addition Metronet also offers coverage in Greater Manchester and Liverpool. Metronet uses a mixture of fibre-optic connections and high-speed point-to-point wireless connections to offer symmetrical services from 1Mbit/s to of 200Mbit/s. Metronet’s coverage within the North West is shown below, and the pricing is discussed in Annex D. Figure 5.4: Metronet coverage in Greater Manchester [Source: www.manchestermetron et.com]

Figure 5.5: Metronet coverage in Liverpool [Source: www.manchestermetron et.com]

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5.2 New NGA networks from the private sector

Networks to existing homes There are also plans from a relatively new alternative operator to deploy FTTP in the UK. H2O Networks deploys fibre-optic cables in sewers which can significantly reduce the deployment costs. It has already deployed limited metropolitan networks to connect major university sites in Aberdeen. Recently it has begun to focus on the residential market via its Fibrecity projects which currently aim to cover Bournemouth and Dundee. H2O Networks has plans to expand Fibrecity to connect over one million homes in the UK to FTTP over the next 10 years. The Fibrecity business model only involves providing wholesale services, with retail services to end users being provided by independent service providers. Based on information in the press, we do not believe H2O Networks has identified a retail partner yet, which will be a key challenge with the business case. Smallworld Media provide cable broadband services to parts of Carlisle, Lancaster and Morecombe in the North West. At present they only offer services of up to 25Mbit/s. However, they may choose to deploy NGA via DOCSIS3.0 (as Virgin media have) which would allow faster speeds to be deployed in these areas. Another important feature of its business model is that end users need to give permission for the FTTP network to be connected to their premises. When rolling out the network, potential end users are asked to give permission for their property to be connected to the network, without charge to the end user. If this permission is not given the property is not connected during the initial build. During the first phase of roll-out, Fibrecity has reported a 40% take-up rate for connections. Note that this does not mean that 40% of premises are using the service, but 40% have agreed to be connected to the network at no charge.

Networks associated with new properties The costs of deploying FTTP at new property developments are broadly similar to traditional copper networks because much of the cost relates to civil engineering. The most prominent FTTP deployment of this kind is by BT in Ebbsfleet which is being used by BT as a trial site. However, there are also examples outside of the North West from new telecoms operators. Two examples of such deployments are: • •

Wembley City, where the property developer installed FTTP and offers broadband services of up to 32Mbit/s, but has the ability to burst up to 100Mbit/s for a charge of GBP1 per hour West Whitlawburn Housing Cooperative has installed FTTP in a new development; a community service provider has been set up to offer broadband services of up to 100Mbit/s over the network.

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We expect the deployment of FTTP to new property developments to gain momentum and within the medium term most newly built properties will have FTTP deployed to them. However, the Regional Spatial Strategy set out a target of 416 000 new home in the region between 2003 and 2021. This equates to less than 1% of the total housing stck in the region per annum. At this rate it the deployment of FTTP to new build properties would nto have a significant impact in the medium term.

5.3 New NGA networks not led by the private sector In addition to the plans from the private sector to deploy NGA, there are a number of other organisations seeking to deploy new NGA networks in the UK that are not driven by the private sector. There are a number of these being deployed in the North West, and the rest of the UK. Within the North West there are two new NGA networks planned. Both of the networks are local initiatives, and have a limited geographic scope. •

•

Alston, where the community is looking to extend the existing Cybermoor project to include significant FTTP coverage within Alston. The Alston project is utilising a range of funding sources, including grants from the NHS to support telehealth pilots. Manchester Oxford Road, where there are plans for a living lab FTTP network to 1500 homes and businesses (see www.openlivinglabs.eu for more information21).

The scale of such local networks is not expected to exceed 1–2% of all homes in the UK in the medium term22. The likely distribution of such projects within the UK is not known. The Digital Britain report acknowledges the role that local networks may have to play in delivering NGA. However it also noted that “so long as they are constructed in an inter-operable fashion to allow services at scale across the country, play an important part in the development of our next generation broadband networks.” Mechanisms to achieve this interoperability and scale include the Independent Networks Co-operative Association (INCA)23; and the work by the BSG on Commercial, Operational and Technical Standards (COTS).

The European network of living labs provides a definition of a living lab as “A Living Lab is about experimentation and co-creation with real users in real life environments, where users together with researchers, firms and public institutions look together for new solutions, new products, new services or new business models. But also Living Labs are about societal involvement, about promoting innovation in a societal basis, involving academia, SMEs, public institutions and large companies in an Open Innovation process that because happens in real environments has an immediate impact.”

This was confirmed by stakeholders active in this area at a workshop on 19 August Digital Britain announced that INCA is to receive GBP150 000 of funding from central government to support its activities

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Other NGA-related projects planned for Manchester In addition to the planned living lab FTTP pilot in the Oxford Road area, Manchester also has plans for other NGA-related projects as outlined below. •

The connection of a further 500+ businesses within the Oxford Road area.

•

Extending the capacity of the existing Internet exchange in Manchester (which the the main Internet exchange outside of London within the UK)

•

The development of a 100Gbit/s ‘super-ring’ to connect key employment sites across New East Manchester, including the Northern Quarter, Sport City, Manchester College, Central Park and a new Internet exchange at the Sharp Project. This could also be extended to connect Media City, Oxford Road and other employment sites and towns within Greater Manchester. It has been proposed that this extension could be carried out using Greater Manchester Passenger Transport Executive (GMPTE) infrastructure and that the physical works could be incorporated within the ongoing extension of tram lines to minimise cost and disruption.

•

Investment to support data centres (potentially at the Sharp Factory).

•

Promotional and marketing activities to drive NGA adoption.

The Commission for the New Economy in Manchester and the NWDA are working together to develop a strategy for Manchester and review the develop details of individual proposal such as those outlined above.

Government-led interventions The Government’s policy for the digital economy was set out in the Digital Britain review, the final report of which was published in June 2009. The Digital Britain report contains two key policies relating to broadband infrastructure: • •

USC to deliver 2Mbit/s by 2012 Final Third Project to deliver NGA to over 90% of the UK by 2017.

Universal Service Commitment The USC will deliver 2Mbit/s broadband services to all of the UK by 2012, using a mix of technologies. The USC is a policy to ensure that all of the UK is able to access current generation broadband, and it not specifically designed to increase NGA availability. However, in some areas the most cost effective solution may be to deploy NGA, so the USC may deliver some limited

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NGA in the UK. Digital Britain estimated that around 420 000 homes would benefit from NGA as part of the USC. The USC will be funded using a GBP200 million under-spend from the Digital Switchover Help Scheme and a Strategic Investment Fund.24 The proposed USC would be in addition to existing Universal Service Obligations placed upon BT. These existing obligation include measures such as provision of telephone lines to all25 premises, functional internet access (i.e. dial up), social tariffs, telephone boxes, text relay services, directory inquiries, and 999 services. The USC would not necessarily be implemented by BT and will be legally distinct from the existing USO.

Next generation Final Third Project The Government’s Digital Britain report recognises the importance of NGA to the digital economy and the economic benefits that it is likely to stimulate. The report also examines the economics of deploying NGA and concludes that the costs of deploying NGA are likely to be significantly higher for the final third of the UK (see Figure 5.3) and therefore there is a strong chance that the market will not deliver NGA to these areas. To address this likely lack of NGA deployment to the final third, The Digital Britain report contains a proposal for a ‘Final Third Project’. This would involve a 50p per month levy on all copper lines to part-subsidise the deployment of NGA to the final third of the UK. The aim of the scheme is that it will help to deliver NGA to over 90% of the UK by 2017. Details of the scheme are still unclear, but from the final report of Digital Britain and subsequent comments from Civil Servants at BIS it appears that the funding would be used first to subsidise NGA in rural areas so that the deployment costs per home are reduced to a level equal to that in urban areas, where commercial investment in NGA is already occurring. Our preliminary analysis of the funding of this is shown in Figure 5.6 below.

This Strategic Investment Fund is administered by BIS and was announced in the 2009 Budget Some premises are excluded due to very high installation costs

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Figure 5.6: Funding

3.0

analysis of FTTC in the 0.47

Cost (GBP billion)

2.5

UK [Source: Analysys Mason]

2.0 1.20 1.5

2.81 2.27

1.0 1.13

0.5

First two-thirds (private sector investment)

Final third (private sector investment)

50p tax (8 years)

Funding gap

Total cost for the final third

Digital Britain mentions a reverse auction split into a number of lots as a feature of how the funds will be allocated. However, this may change once the delivery body, the Network Design and Procurement Group, is formed. A CEO of the Network Design and Procurement Group is due to be appointed in October 2009. BT has publicly expressed an interest in using the fund from the 50p levy to help extend its current FTTC plans to over 90% of the UK. Other organisations, such as Virgin Media, H2O Networks and local projects as mentioned earlier, may also seek to use the 50p levy as a source of funding for additional NGA deployments. Preliminary UK analysis result: Our analysis of the size of the fund for the Final Third Project shows it is sufficient to deliver FTTC to over 90% of the UK. In fact, our analysis shows that the coverage which may be achieved by the fund, although sensitive to the funding assumptions, could conceivably provide FTTC to in excess of 95% of the UK.

North West analysis result: We have also carried out an analysis of the costs for FTTC in the North West. This shows that the total costs for the North West are around GBP526 million, which is around 10% less per home than the UK average. Assuming that the private sector has a business case for the first two-thirds of the UK, our analysis shows that around GBP100–120 million would be required in subsidy (alongside private investment) to provide 100% FTTC to the North West. Assuming the Final Third Project occurs, we would expect it to provide the majority of this funding leaving less than GBP50 million that would need to be sourced from other funds. Our analysis for FTTP shows that there will not be significant FTTP coverage in the North West without public sector subsidy. In order to achieve a 100% coverage level of FTTP a subsidy of over GBP2.5 billion may be required. The implementation of the Final Third Project will require primary legislation that may not be enacted until after the next general election in 2010. There is a significant risk to the

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implementation of the Final Third Project: if the Government were to change at the next election, NGA policy could also change. As the Final Third Project could have a major impact on the NGA landscape, it is appropriate to consider a ‘do-nothing’ scenario where the Final Third Project does not become a reality.

Public sector NGA initiatives in other regions of the UK Wales and South Yorkshire both have advanced plans for NGA interventions via the FibreSpeed and Digital Region projects. Each of these is discussed below. FibreSpeed

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The FibreSpeed project was launched to enhance the competitiveness of Wales relative to other regions and to stimulate broadband deployment. The project intended to develop and support competitively priced, nextgeneration network solutions in 14 business parks in North Wales, with plans to reach a potential 50 locations by 2010. The network was jointly funded by the ERDF, the Welsh Assembly Government and Geo, and provides a high-speed link between North Wales and the Manchester Gateway. Capacity on the network is provided on a wholesale basis to ISPs which provide symmetrical connectivity services of at least 10Mbit/s to strategic business parks. One aim of FibreSpeed was to reduce the prices of high speed connectivity in north Wales, which before FibreSpeed was deployed were up to seven times higher than in London. We do not know how much the prices have since fallen, but we expect that the intervention will have had a significant inpact upon pricing in the area.

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Digital Region

The Digital Region project is set up to bring high speed broadband services to the region of South Yorkshire and seeks to change the future prospects of the region, both from an economic and a social perspective. The project is driven by three main goals: next-generation broadband is intended to aid economic regeneration for the region, where the main industry, manufacturing, is in decline; in addition, the project seeks to put South Yorkshire on the forefront of next-generation broadband deployment, thereby avoiding a social divide; finally, the project wants to enable more efficient delivery of public services. The network will support an FTTC network and will offer open access to service providers. The project aims to achieve near ubiquitous coverage with about 80% of all premises and SMEs having access to the network within the first three years. It is intended that the network’s reach shall be extended to 97% soon thereafter, at a pace dependent on revenue development. Thales Communication Systems Ltd. has been selected as the preferred bidder, and detailed negotiations are continuing to finalise the procurement process. The Government has also shown its approval for the project in the 2009 Budget and the Digital Britain report.

In addition there are also ongoing NGA-related procurements in Cornwall and Northern Ireland26. These are expected to deliver high levels of NGA availability to their respective regions.

5.4 Other networks that could be used to support NGA in the North West Discussion of investment in NGA networks tends to focus on the last-mile connection to the end user. However, broadband networks also require backhaul connections from the access network to the peering points where traffic can be exchanged between different networks. This peering of networks is what creates the Internet. There are many backhaul networks in the North West that use fibre-optic technology. However, their reach is generally limited to the major towns and cities in the region. Due to commercial confidentiality, most network operators do not disclose the location of their fibre routes, but it is often possible to identify the main areas linked by the backhaul networks. The education sector is a major user of fibre-optic connections in the North West. Much of this connectivity is provided via the JANET network which links higher education facilities. This network uses the latest optical networking technologies to provide multi gigabit connections which

Analysys Mason are currently advising Cornwall Council and DETI in Northern Ireland on these two ongoing interventions.

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extend to many towns and cities within the North West. Much of this network is provided over fibre networks from alternative providers such as Cable & Wireless, Geo and EasyNet. The same underlying infrastructure could be used to support NGA. However, it should be noted that the connectivity is primarily between towns and cities, that use of JANET for commercial services would require agreement over terms of use with the body charged with responsibility to manage the network, and the use of infrastructure that supports JANET (or other fibre networks used by the public sector) would not be likely to make a significant reduction to the costs of deploying NGA to a large number of new premises. Figure 5.7: Public sector

NetNW

fibre routes in the North

C&NLMAN CLEO

West [Source: Analysys

Carlisle

Geo Networks (funded by Lancaster University and CLEO)

Mason, NWDA]

Penrith

Kendal

Lancaster

Preston Southport

Clitheroe Accrington

Liverpool

Bolton Manchester

Warrington Chester

Crewe Alsager

The North West has high quality Internet peering connections via IFL1/2 and Telecity in Manchester. These facilities allow service providers to interconnect and gain access to the Internet at very high speeds. Manchester is widely acknowledged to have the best Internet peering facilities in the UK outside of London. These high quality international peering facilities will play a supporting role in the development of NGA in the region. There are also ambitions to improve the peering facilities in Manchester, as discussed previously in section 5.3.

5.5 Summary of likely outcome in a ‘do-nothing’ scenario There are many organisations showing an ambition to deploy NGA, using an increasingly diverse range of funding sources. However, we have identified three key organisations that are driving the deployment of NGA in the North West.

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•

Virgin Media has already deployed NGA over its cable network to 54% of the North West. The network is not open to rival service providers and offers slower connectivity than FTTP (particularly lower upload speeds).

•

BT is in the process of deploying NGA to around 40% of the UK, which should achieve a greater coverage level of the North West due to the region being more urban than the UK average. BT is expected mainly to deploy FTTC, but around 10–20% of its deployment could be FTTP. However, based on an analysis of the deployment costs we believe that if the deployment to 40% of the UK is a success, the commercial business case should also extend to around two-thirds of the UK, equating to around 75% of the North West.27 The BT deployment, carried out by Openreach, will be an open deployment offering opportunities to multiple competing service providers.

•

If implemented by central government the Final Third Project will deliver NGA (probably using FTTC) to over 90% of the UK by 2017, with coverage in the North West likely to exceed 90%. However, there is a key risk that this project does not happen due to a change in government policy following the next general election in 2010. In summary, under a ‘do-nothing’ scenario, NGA, predominantly in the form of FTTC over BT’s network, is likely to be available to 75% of the North West in the medium term (beyond 2012), and this may extend to over 90% by 2017 if the Final Third Project is implemented. This infrastructure will be open to competition from a diverse range of service providers. There will also be a second NGA infrastructure from Virgin Media that will cover 54% of the North West, but this will not be open to competition.

Analysys Mason estimate, assuming BT deploys to the most attractive areas first

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6 How will the gap between a ‘do-nothing’ scenario and the long-term ambition affect the NWDA’s goals? Based on this scenario for the region we can identify five areas where there is a potential gap between a do-nothing scenario and the goal of ubiquitous FTTP: • •

• •

•

non-universal coverage of NGA – some areas (up to 25%) will not have any NGA provision limited availability of FTTP – coverage of FTTP is likely to be limited, and NGA will be mostly FTTC and DOCSIS3.0 from Virgin Media, both of which do not provide the highest speeds and are not symmetrical slow deployment of NGA – it may be 2017 before 90% coverage of NGA is delivered regional competitiveness and inward investment– not having world-class infrastructure will affect the levels of inward investment and the implementation of sector and theme specific regional strategies and policies. below-average take-up – if NGA is not adopted, the full the benefits will be diluted; the region currently has below-average broadband adoption and it will be important to reverse this for NGA to deliver its full potential.

All of these gaps are likely to be present for both consumers and businesses. However, larger business sites may obtain dedicated fibre connections (FTTP) as they have greater spending power. We have no reason to believe that the level of take-up of such services is less than in other parts of the UK or Europe within companies of a similar size and sector. The potential impact of each gap identified above is discussed in the following sections.

6.1 Non universal coverage of NGA A ‘do-nothing’ scenario is likely to lead to between 75% and 90% of the North West having access to NGA in the form of FTTC. Those areas most likely to be left unserved will be rural, but the location of the unserved areas will be dependent on the Final Third Project being implemented, and the details of its implementation. The lack of universal NGA coverage in the region should be addressed for two different reasons. Firstly, those businesses and people within the areas without NGA will not be able to exploit the benefits that NGA can bring via routes such as increased productivity and innovation. Secondly, there is a social welfare issue: if a minority of rural areas do not have NGA they may become digitally excluded and not be able to use the new applications and services that are unlocked by NGA. This is then likely to have impacts upon productivity for businesses and the skills of the population in these digitally excluded areas.

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Summary: purely commercial deployments are likely to reach up to 75% of the North West, but the planned Final Third Project (funded by the 50p levy announced in Digital Britain) should, if implemented, increase NGA coverage (mostly in the form of FTTC) to over 90% of the North West by 2017. Addressing the remaining population will help to reduce digital and social exclusion.

6.2 Limited availability of FTTP The vast majority of NGA deployed under the ‘do-nothing’ scenario will be FTTC and DOCSIS3.0. Despite being a step change from the previous generation of broadband services these technologies offer less capability than FTTP. The likely maximum connection speeds are shown below. Download speed

Upload speed (Mbit/s)

(Mbit/s) FTTC

50–100 30

DOCSIS3.0

200

FTTP

1000+

Figure 6.1: Maximum performance of different

NGA technologies

100

[Source: Analysys

1000+

Mason]

One other important consideration of FTTC is that, as with ADSL, its performance is dependent on the length of the copper line to the street cabinet. There will therefore be some variability in speeds due to ‘up to’ services being offered. DOCSIS3.0 also shares the capacity between a number of customers. The sharing of bandwidth is also a feature of some FTTP technologies. Both FTTC and DOCSIS3.0 should be able to offer download speeds that are able to support the next generation of services. For example, in areas where FTTP is deployed it is common for operators only to offer services of 100Mbit/s instead of 1000Mbit/s. This suggests that the additional demand for 1000Mbit/s is limited. One factor behind this is the limited processing capacity of personal computers which may not be able to process data at a speed much in excess of 100Mbit/s. Perhaps the biggest and most important difference between FTTP and other NGA technologies is that it allows for much higher upload speeds as it provides symmetrical bandwidth (i.e. the same capacity for uploads and downloads). At present, all widely used broadband services have nonsymmetrical bandwidth as users download more information that they upload to the Internet. However the increase in user-generated content is one residential application that is leading to increasing demand for upload capacity so that people can share content such as pictures and videos. 28

BT’s planned FTTC service is not likely to offer 100Mbit/s services at first, though they are technically possible The initial services from BT are likely to offer 3Mbit/s uploads, but in Germany 10Mbit/s services are available Virgin Media is currently trialling 200Mbit/s services, and the standard allows up to 100Mbit/s uploads

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The greatest demand for upload capacity has historically been from businesses, particularly those which need to share large amounts of data between sites or with other businesses. At present these applications need to be provided over services that are significantly more expensive than the ADSL products used by small businesses. However, the additional costs should be set in context as many businesses that require high-speed symmetrical services have a large number of employees, and the additional connectivity costs may not be significant for their business. There is specific demand for high-speed symmetrical services within specific clusters, particularly the digital and creative sector. This demand for high-speed symmetrical services has been partly addressed by NorthernNET, but there is still likely to be demand for more affordable high-speed services to small and medium-sized businesses within the sector.

Uses of additional capacity Although the need for high-bandwidth services may not be immediately apparent to all businesses and consumers, there are a range of existing applications that will benefit from increased speed and convenience, as well as a number of new applications that will be made possible. To assess the impact that limited availability of FTTP would have, it is important to consider the types of application that the increased capacity would enable. The typical download and upload speeds required for a number of applications are shown below. 7 minutes on a 1Mbit/s connection

Consumer Applications

File Transfer

Video Streaming

Download 4MB music track in 30 seconds

SDTV streaming e.g. BBC iPlayer

1.1 Mbit/s

2 Mbit/s

14 minutes on a 1Mbit/s connection

File Transfer Upload 50MB video file in 1 minute e.g. sharing home movie

Video Streaming

File Transfer

HDTV streaming

Upload 100MB photo album in 1 minute

7 Mbit/s

4-10 Mbit/s

17 Mbit/s

Increasing bandwidth demand

Business Applications

Video Conferencing

File Transfer

Video Conferencing

File Transfer

SD Video Conferencing

Upload 20MB Excel file in 20 seconds

HD video conferencing e.g. Cisco TelePresence

Download 20MB Excel file in 5 seconds

Upload 5GB (DVD) in 5 minutes e.g. large media file, remote backup

2 Mbit/s

8.4 Mbit/s

6-10 Mbit/s

34 Mbit/s

140 Mbit/s

Note: using multiple applications at the same time will use more bandwidth in total 12 hours on a 1Mbit/s connection

Figure 6.2:

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Examples of high bandwidth applications [Source: Analysys Mason]

Making NGA a reality in the North West | 39

In terms of consumer-orientated applications the main uses of high bandwidths will be the streaming of HD video, which may use around 10Mbit/s of capacity. It is also possible that many households would require multiple HD streams of video for different members of the household. It can be seen that to use consumer applications with a reasonable speed, very high upload speeds are not required. For example uploading 100MB of photos in a minute would require 17Mbit/s. At present Virgin Media are trialling upload speeds of up to 10Mbit/s. Although this is less than the 17Mbit/s required for a one-minute upload, it would still take less than two minutes to share this large number of photos on a 10Mbit/s connection. Small home movies are also typically around 100MB. The ICT industry is moving towards cloud computing whereby content, applications and programmes are accessed over the Internet, rather than being stored on home computers. This growing interaction with the network will increase the need for high-speed uplinks. Uploading user-generated content such as photos is one application of cloud computing, but it will become more and more common for users to remotely backup the entire contents of their computer. A download of 20GB of data would be possible in under an hour on a 50Mbit/s FTTC connection, but uploading this volume of data would take around five times as long. For business-orientated applications it can be seen that activities such as sharing 5GB of data (i.e. a full DVD) are only practical with very high-speed connections. Exchanging such large files is common in the digital and creative sectors (and is sometimes carried out by courier). Other industries that could exchange large files include the financial services, which often use large databases of information that can be many Gbytes in size. Transferring 5GB of data in five minutes would require 140Mbit/s of capacity. It should eb noted that many of the applications discussed above can, and often are, use at the same time as each other (e.g. video conferencing, transferring files, web browsing, etc..). This is particularly true within businesses that have multiple users per site. Under these circumstances it is easy to see a situation where, even a SME, could see a requirement for symmetrical 100Mbit/s services. Summary: the solutions that are being deployed by commercial operators do not offer the highest connection speeds. Download speeds are likely to be adequate for most businesses and consumers, though FTTP would offer higher speeds. The technologies being deployed by commercial operators only offer relatively limited upload speeds. For most consumers, and a lot of businesses these will be adequate, but there will be some businesses, – particularly in the digital and creative, aerospace, automotive and scientific sectors – that will require the high-speed symmetrical services that are only offered by FTTP.

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6.3 Slow deployment of NGA Around 54% of the North West currently has access to NGA via Virgin Media’s network. However, take-up of NGA is currently low due to (i) it being a new service, and (ii) only being available from one service provider. NGA products are also currently more expensive that first generation broadband services, though this is not unexpected given the early stage in the deployment of NGA within the UK. Deployments from BT are also expected to reach at least 40% of the region by 2012. Beyond 2012 it is likely that coverage will extend to around 75% of the region via commercial deployments, and to over 90% of the region if the Final Third Project as part of Digital Britain is implemented. However, the Final Third Project is not expected to deliver 90% UK coverage until 2017. Widespread availability of NGA to the region is important, and once some areas begin to exploit the potential of NGA it is likely that consumers and businesses in areas without NGA may become frustrated at the lack of supply to the more rural areas of the region. It is therefore important that NGA is deployed as far as possible in a rapid fashion. Reaching a 90% coverage level of the UK by 2017 – more than eight years from now – does not constitute rapid deployment of NGA. Interventions in other areas of the country such as South Yorkshire and Cornwall are expected to deliver very high levels of NGA coverage significantly earlier than 2017. Summary: NGA is currently available to around 54% of the region via Virgin Media’s network. However this network is not open to retail competitors. It may be 2017 before over 90% of the region has access to NGA This is too far in the future and may affect economic development in (more rural) areas that will not have NGA deployed to them for many years.

6.4 Inward investment and regional competitiveness If the North West does not have NGA to the same standard as many of its national and international competitors then it may be placed at a disadvantage when seeking inward investment. For example, in European cities such as Paris and Amsterdam there are significant plans from the private sector to deploy FTTP. Though it is worth noting that at present the availability, and takeup, of these services is still relatively limited. A summary of NGA deployments in some key countries is shown below:

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Country

FTTP

FTTC

DOCSIS3.0

France

Four operators in major cities passing 18% premises, only 250,000 subscribers (<1%).

No current plans.

14% premises passed nation wide at March 2009.

Germany

Very little, limited to Hamburg and Cologne.

Partial coverage in 50 major cities, expanding to 13 more.

Planned 8.3% coverage by mid-2010.

Italy

Partial coverage in 15 cities, passing 8% premises.

Plans for 8% premises by 2010.

Spain

Planned to reach 40% of premises by 2010.

Netherlands

Residential in five cities, plans to cover all of the country.

FTTC networks available in five other cities.

More than 60% of homes

Sweden

33% premises by 2013 with mix of FTTP and FTTC.

Partial coverage in 65 cities, 18% population coverage.

Nation-wide roll out planned.

USA

10% premises at March 2009.

13% homes by Dec 08, but speeds as low as 1.5Mbit/s.

Available in metro areas only.

Japan

79% premises passed, Around 28% connected.

South Korea

Over 30% coverage, mainly “fiber to the highrise”

Figure 6.3:

Madrid only.

20% premises passed, speeds of up to 160Mbit/s. 674 thousand apartment blocks covered at June 2007

International NGA development status [Source: Analysys Mason]

It can be seen that current and planned availability in most of the countries above is not significantly more advanced than the UK, or the North West. For example the North West currently has 54% coverage from Virgin Media’s DOCSIS3.0 network. The only countries with a higher NGA availability (currently or planned) in the above table are Japan the Netherlands. However, if coverage is only measured based upon FTTP the UK would be behind other countries as most of the plans for NGA rely upon wither FTTC or DOCSIS3.0. To ensure that the region, and its major cities, remain competitive it may be appropriate to ensure that world-class NGA using FTTP is available within the main business areas.

6.5 Below average take-up One important aspect of the North West’s vision for NGA is that it is widely used to deliver economic benefits to the region. However, at present the North West lags behind the UK average in terms of residential broadband take-up at 63% compared to 68% across the UK.

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90% 80%

78% 78%

75% 74%

Broadband take-up

70%

70% 68%

60%

65% 64% 64% 63% 61% 60% 58% 57%

50% 40% 30% 20% 10%

Figure 6.4:

W M

W al es

la nd ot

Y& H

N W

N I

N E

U K

an d En

Lo nd on

Residential broadband take-up by region of the UK [Source: Ofcom]

Figure 6.4 shows that the highest levels of broadband take-up are in London and the South East at 78%, 15% higher than the North West figure. There are a combination of factors that influence broadband take-up including age, income, profession, level of education, and whether an individual has children. Differences in age distribution will have a small impact on the North West’s take-up, as take-up among the over-45s is 4% below the national average, but for under-45s it is 8% below. This may be a factor of lower average incomes in the region and higher than average unemployment levels. As a reflection of lower levels of disposable income, PC penetration is also lower in the North West than the UK average, at 69% compared to 74%. The lower broadband take-up in the North West cannot be fully explained by differences in income and profession. Even amongst the ABC1 socio-economic segment, the same research data from Ofcom shows that broadband take-up is lower than the UK average at 76% compared to 79%. There is however a more significant gap in the C2DE segment with broadband take-up being only 44% in the North West compared to a UK average of 55%. Ofcom’s Access and Inclusion paper from March 200931 examined factors affecting regional differences in take-up levels and based on normalisation of the data concluded that they cannot be explained by any single factor of age, gender, working status, socio economic group or urban/rural location. The paper concluded “it may be a combination of these factors and other softer aspects such as mix of employment types, education and attitudes that affect take-up levels.”

http://www.ofcom.org.uk/consult/condocs/access/access_inc.pdf

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Following from the research findings that PC ownership and broadband take-up are lower in the North West than national averages, it can be inferred that the population of the North West (particularly the C2DE segments) are likely to be less computer literate than the UK average. ICT skills are increasingly important in the economy and are a key factor in moving towards a regional economy with more high skilled, and well paid jobs. Previous research at a national level and for the NWDA has shown that take-up of ICT and broadband by businesses is higher than residential users, particularly amongst businesses with more than 10 employees.32 Increased ICT adoption by small businesses is likely to be the main area to address in businesses. The issues faced by these businesses may be similar to residential users which typically include a lack of skills and a lack of understanding of the benefits of ICT. As outlined earlier, Regional Economic Strategy aims to increase the productivity (GVA per employee) of the region to close the 15% gap between the region and the UK average. The e-skills UK report titled ‘IT & Telecoms Insights 2008: The Impact of ICT on UK Productivity’33 estimated that if ICT usage was optimised among businesses, this would result in a 3-4% productivity saving, which could increase UK GVA by GBP35 billion over a five to seven year period. This demonstrates the importance of improving ICT take-up and usage (of which broadband take-up is an indicator) as part of the Regional Economic Strategy. It is therefore important that the region addresses the lower-than-average levels of broadband take-up in the region alongside any efforts to increase the availability of NGA. Summary: broadband take-up and PC ownership are below the UK average. Addressing this gap will be an important part of the region’s strategy to increase productivity (i.e. GVA per employee).

Northwest Business ICT Survey 2007 http://www.e-skills.com/Research-and-policy/Insights-2008/2180

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7 What can the NWDA do to help achieve its goals? In the previous section we outlined the main gaps between the ‘do-nothing’ scenario and the NWDA’s vision for NGA in the region. • •

• •

•

non-universal coverage of NGA – some areas (up to 25%) will not have any NGA provision limited availability of FTTP – coverage of FTTP is likely to be limited, and NGA will be mostly FTTC and DOCSIS3.0 from Virgin Media, both of which do not provide the highest speeds and are not symmetrical slow deployment of NGA – it may be 2017 before 90% coverage of NGA is delivered regional competitiveness and inward investment– not having world-class infrastructure will affect the levels of inward investment and the implementation of sector and theme specific regional strategies and policies. below-average take-up – if NGA is not adopted, the full benefits will be diluted; the region currently has below-average broadband adoption and it will be important to reverse this for NGA to deliver its full potential.

There are a number of activities that the NWDA could take to address these gaps. The potential activities vary in the amount of investment that may be required and the challenges that need to be overcome. In this section we discuss a range of activities that could be taken which can be summarised as: •

•

Introduce policies and standards to make the most of private sector activity – promote common standards for ducting – work with councils to include NGA considerations in planning permission processes – make NGA considerations a condition for NWDA investment Stimulating demand for NGA to increase usage and promote investment – encourage NGA usage and take-up – stimulate and aggregate demand to promote investment Invest directly in the development of NGA in the region – invest in conjunction with Digital Britain initiatives – invest independently of Digital Britain initiatives Other actions to promote and support NGA investment – Lobby other public sector bodies to reduce barriers to NGA investment – Address information asymmetries – Use the Regional Advisory Group on NGA to share project plans.

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7.1 Introduce policies and standards to make the most of private sector activity

7.1.1 Promote common standards for ducting

What is it? Previous attempts have been made to co-ordinate civil works so that fibre can be deployed at the same time as other utilities have had limited success. This is mainly due to the complexities of co-ordinating the activities of multiple private companies on an ad-hoc basis. One way to overcome this coordination issue is to have common standards for fibre ducting so that any organisation can deploy ducting that is suitable to then be used for NGA.. This could help to reduce the costs of deploying NGA as the majority of the costs associated with NGA provision are from the civil works needed to lay fibre under the ground, which often involves digging up roads and other public spaces. Large cost savings could be made by laying the necessary fibre ducts when roads are dug up for other purposes such as the installation or maintenance of the pipes and cables used for utility distribution. Local councils that would wish to exploit these synergies are often unable to as there are no clear standards or specifications defining what type of ducting should be used or how it should be installed. Common standards need to be implemented so that when civil works and new developments are being planned, local councils can follow clear procedures to avoid missing the related opportunities.

What will it deliver? The development of ducting standards will help to reduce the overall cost of implementing NGA in the region by minimising the duplication of costs with other projects. It could also lead to an increase in coverage of NGA by improving the business case for reaching certain areas, or cause them to be reached in a more timely manner. However, the ad-hoc nature of most civil works means that the resulting ducting coverage would be sporadic.

Other stakeholders that need to be included The development of these standards will need to be co-ordinated (and possibly regulated) at a national level and should receive input from major stakeholders such as BT and Virgin Media. However, the NWDA could play an active role in the discourse and in lobbying the relevant parties to accelerate the process. Local councils would be a key stakeholder for this activity as they would be responsible for monitoring what civil works are to take place in their area and coordinating with telecoms companies to ensure the appropriate ducting is installed. In its position as a regional leader the NWDA could work with 4NW and with individual North West councils to

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Making NGA a reality in the North West | 46

ensure that NGA requirements are given greater emphasis and to encourage the necessary cooperation with private sector companies such as utilities. The utility companies would need to be consulted to ensure that the new standards and processes were as efficient as possible.

What will it cost? The costs of this activity would be minimal but NWDA resources would be needed to conduct the lobbying and co-ordination activities.

Key issues and challenges The NWDA would need to engage a large number of stakeholders to design processes at a level of detail that makes them easy to follow and also fulfil the requirements of telecoms operators and providers of other utility infrastructure. Models for ownership of any new ducts would need to be explored, as would the funding mechanisms for any shared civil works. The new ducts could be installed and owned by telecoms operators or the public sector could retain ownership and lease capacity on an open-access basis. Different models of infrastructure access are discussed in Annex B.

7.1.2 Work with councils to include NGA considerations in planning permission processes

What is it? It is significantly more efficient to deploy next-generation broadband as part of a new-build development, regeneration or redevelopment when compared to deploying next-generation broadband to existing sites. The NWDA should therefore endeavour to maximise the number of new-build premises that have NGA ducting installed. In cases where the NWDA is investing in the project, it could influence this directly (as discussed in Section 7.1.3), but in other cases it could exert its influence through local councils in the North West. Local planning authorities can mandate certain obligations on property developers before planning permission is approved. The model planning obligation (section 106) agreement34 details a number of these obligations but NGA access is not currently sufficiently catered for. There are guidelines in place such as the guidance from the Department of Communities and Local Government on Data Ducting Infrastructure for New Homes,35 and the recent Ofcom consultation on Next-Generation New Build. By making some

http://www.communities.gov.uk/planningandbuilding/planning/planningpolicyimplementation/planningobligations/modelplanningobliga tion/ 35

http://www.communities.gov.uk/publications/planningandbuilding/dataductinginfrastructure.

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areas of these guidelines into mandatory planning conditions, it would ensure all new-builds have provisions for NGA access.

What will it deliver? Mandating the inclusion of NGA considerations in the planning permission for new developments would ensure good connectivity to premises built in the future. The activity would not, however, address the connectivity shortcomings of the region’s existing sites. The Government has announced ambitious plans to build three million new homes by 2020, but even if this target is reached, the new-builds would account for less than 10% of total UK properties. Any impact on existing sites would be through transferring some NGA costs to other parties such as property developers, meaning that public and private sector money planned for NGA could go further.

Other stakeholders that need to be included This activity could be a regional initiative and the key stakeholders would be the local councils in the North West. It would also be important to consult telecoms operators and property developers to ensure the planning obligations introduced are as appropriate as possible.

What will it cost? The costs of this activity would be minimal but NWDA resources would be needed to co-ordinate the process with local councils.

Key issues and challenges Simple criteria will need to be developed for those assessing planning applications to quickly ascertain whether the plans have provided sufficiently for NGA requirements. Property developers will want to comply to NGA requirements at the minimum cost, but planning regulations must ensure the resulting solution is both future proof and provides an easy means for telecoms operators to connect to NGA networks. If the policy is not implemented on a UK basis, this may create a dis-incentive for property developers to invest in the North West if they perceive providing NGA capability as a burden. There is also no guarantee that a telecoms operator would provide services over the infrastructure as the universal service obligation currently requires BT to provide copper connections and they may not wish to provide both copper and fibre based services.

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7.1.3 Make NGA considerations a condition for NWDA investment

What is it? NWDA funding is used to facilitate many property and infrastructure development projects in the North West, particularly those involving larger enterprises. The NWDA could make use of its influence in the planning of such projects by mandating that NGA considerations are accounted for before a project can qualify for funding from the NWDA. These funding criteria could include the provision of sufficient infrastructure to new developments so that telecoms operators could then provide services without significant additional investment.

What will it deliver? Mandating the inclusion of NGA considerations in the planning of new developments would ensure good connectivity to key NWDA sites built in the future. The activity would not however address the connectivity shortcomings of the region’s existing sites. Any impact on existing sites would be through transferring some NGA costs to other parties such as property developers, meaning that public and private sector money planned for NGA could go further.

Other stakeholders that need to be included Implementing this activity would require limited input from other stakeholders, but the NWDA should consult operators and property developers to help determine what exact criteria should be implemented. The changes to the NWDA’s investment criteria would need to be clearly communicated to potential candidates as early in their planning process as possible. This would be a regional initiative meaning that very little stakeholder involvement would be needed outside of the North West.

What will it cost? This activity would be very low cost for the NWDA and would be relatively simple to implement.

Key issues and challenges This option shares the same key issues and challenges as the previous option.

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7.2 Stimulating demand for NGA to increase usage and promote investment

7.2.1 Encourage NGA usage and take-up

What is it? Regardless of the NWDA’s actions, it is likely that some form of NGA infrastructure will become available to a large proportion of the North West. The availability of NGA, however, will have no impact on the region’s strategic goals unless there are corresponding increases in take-up and usage of high-bandwidth services. The NWDA could employ marketing to promote the benefits of NGA services and encourage usage so as to capitalise on the new infrastructure in the region. Businesses in particular may have existing applications for NGA technology, but would need to be made aware that it is available and be educated on its uses. The effectiveness of marketing for this purpose was demonstrated by the marketing campaign for Project ACCESS which ran from February 2006 to August 2008. Project ACCESS aimed to provide affordable broadband coverage to 95% of Cumbria, and a marketing agency was engaged to stimulate demand among Cumbrian businesses. By informing businesses of the benefits of broadband and persuading them to adopt the relevant technologies, business broadband take-up was increased from 27% to over 75% – 12% higher than the UK average. The NWDA could carry out a similar campaign to stimulate demand for next-generation broadband services among the region’s consumers and businesses where NGA is available. This activity could potentially be delivered by Business Link. The campaign should educate people about what NGA is and the services it enables, inform them that it is available in their area, and explain how it could benefit them and their businesses.

What will it deliver? This activity would be targeted at making the most of existing NGA in the region and translating this into tangible benefits for businesses, consumers and the region’s competitiveness. Increased take-up in the region would also create an incentive for further NGA development where the technology is not available, and this is discussed in the next activity.

Other stakeholders that need to be included This would be a regional initiative and would not require UK-wide co-ordination. The NWDA may wish to either use Business Link (and the existing Solutions for Business products), or a marketing agency to manage the campaign, which would target businesses and consumers across the region.

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What will it cost? The cost of a marketing campaign would be highly dependent on a number of factors including the breadth of the target audience and the communication channels employed. Using Project ACCESS as a benchmark, the marketing related costs came to around GBP1.4 million which funded a twoyear campaign that involved contacting over 90% of the 26 000 businesses in Cumbria and visiting over 4000 of them. Although the entire North West has a far greater number of businesses and the campaign may also target consumers, lower cost communication methods could be used such as above-the-line advertising and direct mail. As the vast majority of early adopters of NGA services will be existing Internet users, geographically targeted Web advertising could be a cost effective tool for raising awareness as well as tracking interest through a Web survey. Costs could also be minimised by targeting particular segments of the population where the messages are expected to have the greatest impact. It may be possible to recoup some of the costs of this marketing campaign through contributions from service providers who would benefit from increased demand. There may be potential for a joint campaign to be run with telecoms companies, and such models should be investigated in more detail. There are not likely to be any State Aid implications in this area so long as any activity is not biased towards any single provider of NGA.

Key issues and challenges To make the most of any investment, the marketing campaign would need to efficiently target the right people in the region. The key challenge will be to design a compelling marketing campaign that reaches out not only to those people who are unsure of the benefits of NGA, but also to those communities which have currently resisted adoption of even first generation broadband.

7.2.2 Stimulate and aggregate demand to promote investment

What is it? The business case for a private investor to roll-out NGA infrastructure in any given area is greatly influenced by the level of take-up that they expect to achieve. The NWDA could increase the attractiveness of the region for investors by employing a marketing campaign to stimulate increased demand for high-bandwidth broadband services, where they are available. The NWDA could also aggregate any latent demand from consumers and businesses via registration schemes. The key difference between this action, and the previous one is that it would be aimed at bringing investment to areas that the private sector has not yet addressed. In the case of Project ACCESS, mentioned above, infrastructure roll-out was happening in parallel to the drive for greater service adoption. In the case of NGA, it may be necessary to demonstrate

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demand for services before the infrastructure exists to provide them. It would therefore be necessary to measure the level of demand in different parts of the North West and quantify this in a way that can inform and influence investment decisions. Investors will want to have a view of how many customers will adopt NGA services, over what time frame, and at what price. During the roll-out of ADSL broadband technology, BT ran a pre-registration programme whereby a telephone exchange was only upgraded once expressions of interest surpassed a certain trigger level. A similar process may be necessary to justify NGA investment and the NWDA could play an active role in the measurement and aggregation of demand levels, especially if done in conjunction with a marketing campaign. As the level of investment required for NGA is far higher than was needed for ADSL upgrades, firmer contractual commitments may be needed from those who want the service, rather than just expressions of interest. Additionally, the proportion of an area’s population that triggers NGA investment may vary between urban and rural areas, and this may also be affected by other initiatives such as the Digital Britain Final Third Project.

What will it deliver? The key impact of a demand stimulation marketing campaign and registration scheme would be to accelerate the deployment of NGA services. By quantifying demand in the region, the NWDA could demonstrate its value to potential investors and show it is well positioned to benefit from early stages of government initiatives. The scheme could also make NGA available to more of the region than would otherwise be the case, though it is likely that this impact will be limited as the market would eventually identify sufficient demand and address the attractive areas without any public sector involvement. Such a scheme should be addressed at delivering rapid NGA coverage to those areas within the most urban two-thirds of the region that will be attractive for NGA, but where no deployment plans from the private sector have been announced.

Other stakeholders that need to be included This would be a regional initiative and would not require UK-wide co-ordination. However, the model could be replicated in other regions or on a national scale so it may be appropriate to consult with other regional development agencies (RDAs). The NWDA may wish to procure assistance via OJEU to target businesses and consumers across the region. The target audience of the demand data would be potential NGA investors, such as operators (e.g. BT and Virgin Media) and the Digital Britain team. It would be important to engage with these stakeholders in the design of the registration and aggregation process to ensure that its outputs are compatible with their processes for identifying where to deploy new NGA coverage.

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What will it cost? As with the activity above, costs would be highly variable based on the size and communications methods of the campaign. The cost of the demand registration process would depend on a number of factors such as survey method, sample size, and the granularity of output data. Costs could be kept to a minimum by running a Web-based registration scheme and marketing activates. Though this method would obviously only help to target people and businesses upgrading from current broadband to NGA.

Key issues and challenges As with the activity above, the key challenge of the marketing campaign would be designing effective messages and a communications plan that targets those people where it can have the greatest impact. When planning the registration activities it is important that they are designed to provide all of the information needed by the different stakeholders. It will also be important to engage commercial operators seeking to invest in NGA to ensure that this action will help them to identify demand that they wish to serve.

7.3 Invest directly in the development of NGA in the region

7.3.1 Invest in conjunction with Digital Britain initiatives

What is it? As stated earlier, the Final Third Project is expected to deliver FTTC to over 90% of the UK by 2017, with the North West coverage percentage projected to be higher. The implementation plans for these projects are yet to become clear so it is difficult to predict how additional funding would affect them. The NWDA could, however, invest in conjunction with the Final Third Project (in addition to the proposed 50p levy) with the aim of (i) increasing the percentage of population reached, (ii) reaching the target population more quickly, or (iii) providing a greater proportion with FTTP access as opposed to FTTC, or some combination of these three that helps to deliver the objectives of this strategy in ways prioritised by agreement with stakeholders and industry. The main advantage of investing in conjunction with Digital Britain initiatives is that the NWDA could potentially create efficiencies by utilising the existing planning and procurement functions.

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What will it deliver? By investing alongside any Final Third project the NWDA should be able to maximise the impact of its own funding in terms of infrastructure development, and its investment could make a material impact on NGA availability. Investment from the NWDA could take coverage of the Final Third Project from its expected 90% up to 100% FTTC coverage.

Other stakeholders that need to be included The increased value for money this approach would bring may mean sacrificing some control over where and how the money is spent. Investing in conjunction with Digital Britain initiatives would therefore require close co-operation and negotiations over the terms of any agreement. The complex nature of the Final Third Project’s objectives means that many stakeholders would be affected by additional NWDA investment, however, Digital Britain’s delivery methods are still unclear.

What will it cost? The level of investment required from the NWDA depends entirely on its strategic goals. We estimate that less than GBP50 million would be required in addition to private investment and the Final Third fund in order to provide full FTTC coverage to the North West. The maximum funding required to achieve 100% FTTP coverage would be in the region of GBP3 billion.

Key issues and challenges The main difficulty of investing alongside Digital Britain would be agreeing how NWDA funds are incorporated into what may already be a highly complicated national scheme. The NWDA would not want to inject money into the scheme at the expense of having to sacrifice funding that would have come from existing funding for the Final Third Project. The Final Third Project may also have strategic goals that do not align with the NWDA’s vision for the region. At present there is still very limited detail on how the Final Third project will work. This is currently being advanced by BIS and once more details is available it will be possible to asses this option in more detail (including details of how it could work).

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7.3.2 Invest independently of Digital Britain initiatives

What is it? As the outcomes of the Digital Britain initiatives are so uncertain, the NWDA could decide to conduct its own procurement process for NGA infrastructure. This could potentially be necessary if the Final Third Project does not happen, in which case the NWDA would be responsible for all roll-out beyond private investment levels. This independent investment from NWDA funds and/or state aid could follow the models employed in Cornwall, Yorkshire, Northern Ireland or Wales. Alternatively, the NWDA may wish to increase penetration by providing funding in addition to the Final Third Project, but be unable to do this in conjunction with Digital Britain. This could be because RDAs are not permitted to top up the Digital Britain funds or because specific objectives of the NWDA (e.g. improving FTTP coverage) are not aligned with Digital Britain plans. In this instance the NWDA could instigate its own procurement process to meet the objectives. There are at least five major options the NWDA could take with regards to targeting its investment: a. b.

maximise blanket population coverage of NGA in the form of FTTC (or achieve it more quickly) target investment in strategically important geographies

target investment in strategically important sectors

target investment to underpin strategic investment in capacity by other stakeholders , including sub-regional partners

Increase speed and penetration of delivery of FTTP by some combination of (b), (c) and (d).

What will it deliver? The scale of the impact that such an activity could have is limited by the level of funding available and would also be affected by any parallel initiatives from the private and public sectors. What the two investment options outlined above will deliver is summarised below. a.

If blanket coverage is the NWDA’s objective, the funding could be used to improve overall NGA coverage, or to achieve targeted levels in a shorter time frame. If the investment is in parallel with Digital Britain, NWDA funding could extend coverage above the 90% levels expected from the Final Third Project. If the Final Third Project does not come to fruition, the NWDA could focus on extending coverage beyond the 66% of the UK that is likely to be targeted by private investment.

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In the case of strategically targeted investment, the NWDA would have a range of options in terms of what projects to deliver. This could be anything from providing FTTP to the region’s science and business parks, to delivering FTTC to the region’s most rural areas where private investment would be unlikely in the medium term.

Other stakeholders that need to be included Both of the investment options discussed above would focus on regional change and would not require much national co-ordination. It would be important to ensure investment plans took consideration of any developments from private investment or Digital Britain so as to avoid any overlap and to maximise the impact of the NWDA’s investment. The NWDA would need to instigate its own procurement process which should involve discussions with a number of potential vendors. The vendors would have different ideas as to what solution would best meet the NWDA’s objectives and therefore an OJEU Competitive Dialogue process would be recommended. This process would involve outlining a high-level specification of what the NWDA wishes to achieve and then inviting parties to tender with their opinion of the optimum solution and their reasoning behind it. Tenderers could then be short-listed based on their first response, before initiating a dialogue on what could be delivered for different costs and other commitments, such as changing timelines or particular rules of the procurement process. Having learned from this dialogue process, the NWDA would be in a position to define its final specification and re-tender to find the best value solution.

What will it cost? The NWDA has many options for its investment ranging from GBP500 000 for an area such as the Manchester Oxford Road project, up to GBP3 billion to provide the region with 100% FTTP coverage. The estimated subsidy for different levels of FTTP coverage is shown in Figure 7.1 below.

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Figure 7.1: Estimated

3.0

subsidy required for different levels of FTTP

Estimated public subsidy

2.5

in the North West [Source: Analysys

2.0

Mason]

1.5 1.0 0.5 0.0 0%

20%

40%

60%

80%

100%

Population coverage of North West

Key issues and challenges The main challenge related to investing in NGA development would be deciding where to target the investment so as to best satisfy the conflicting needs of different stakeholders and to maximise the impact on the region’s strategic objectives. This decision would be highly dependent on the plans for the Final Third Project, which are yet to become clear. The other area of difficulty would be the design and management of the large-scale procurement process that would be needed. As discussed above, the wide range of investment options available mean that an involved procurement process would be necessary to identify the most cost-effective and beneficial solution. Another key consideration for this activity would be securing additional funding from EU state aid. A number of conditions need to be met by any project for it to be eligible to receive state aid and more information on these conditions and the application process is available in Annex A.

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7.4 Other actions to promote and support NGA investment

7.4.1

Lobby other public sector bodies to reduce barriers to NGA investment

What is it? There are a number of ares where regulatory and public policy concerning NGA are uncertain. In some cases this is seen as potentially increasing the costs of NGA, or may add additional risk to any commercial investment. The NWDA could engage in the debate in these areas to ensure that any regulations or policy decisions will promote investment in NGA. Some examples of areas where the NWDA could work with other bodies to reduce the barriers to NGA investment include: • • • • •

The rules surrounding the valuation of fibre assets by the Valuation Office. The valuation Office are currently working with the BSg to provide clarity on the current regieme. Using additional overhead cabling via telegraph poles. There is currently an active consultation from BIS on this topic Access to existing ducts owned by BT and others. This area is currently being investigated by Ofcom Regulations relating to fibre within new buildings (as discussed previously) Common standards for the commercial, operational and technical aspects of independent networks. This is currently being progressed by the BSG and the Independent Network Cooperative Association (INCA). Ofcom’s work on Active Line Access (ALA) is also relevant in this area.

What will it deliver? Changes to some of the existing rules and regulations may make the business case for NGA more attractive. This could lead to additional private sector investment to greater coverage and/or additional FTTP. However, it is unlikely that any one areas will provide a ‘silver bullet’.

Other stakeholders that need to be included There are already a wide range of stakeholders (including some RDAs) in the debates about changes to rules and regulations. The stakeholders come from all aspects of the telecoms sector, and a large number fo public sector bodies. It is unlikely that the NWDA would be leading the debate in any of the areas outlined above.

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What will it cost? The costs of this activity would be minimal but NWDA resources would be needed to conduct the lobbying and co-ordination activities.

Key issues and challenges The NWDA is unlikely to be the main party in discussions to change rules and regulations and may find it difficult to have a significant influence.

7.4.2

Address information asymmetries

What is it? There is no common repository in information regarding the current infrastructure which could be used to support NGA either in the North West or the rest of the UK. As discussed earlier in this report many different organisations in both the public and private sector have fibre optic assets. Knowledge of the locations of the different assets may help organisations from the public and private sector to invest in NGA as they will not need to invest in duplicate assets due to a lack of knowledge about the location of existing assets. To address this issue the NWDA could take a leading role in developing a database with the detailed location of all NGA related assets in the region. This database would also need to register the end owners of the assets36 and whether other parties are able to utilise them (for a fee). If the NWDA were to pursue a policy of investing in networks as outlined in section 7.3.2 it would be important to have multiple bidders as part of any procurement process. To ensure that there as many bidders as possible, all bidding on equal terms, it may be necessary to address a number fo information asymmetries. For example, if a bidder independent of BT wished to deploy FTTC it would need to use BT’s assets at the street cabinet. However, the location of these street cabinets and the number of lines at each is nto in the public domain. Without this information it would be difficult for an independent bidder to construct a robust financial business case fro an investment in FTTC.

It is important to note that many organisations often rent fibre assets from other organisations. It is therefore important top identify the owners of the basic assets.

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What will it deliver? By developing a database of existing assets to help address information asymmetries the NWDA may be able to promote additional investment in NGA. It may also help communities that are close to existing infrastructure to develop local initiatives.

Other stakeholders that need to be included The NWDA would need to engage with owerns of fibre assets. These include local authorities, higher education institutions, and commercial operators such as BT, Virgin Media, Cable & Wireless, and Geo.

What will it cost? The costs of this activity would include resources would be needed to conduct the activity, ther may also be software costs for developing a suitable database, which may also require a geographic dimension.

Key issues and challenges Traditionally both public and private sector organisations have been reluctant to divulge exact fibre routes due to commercial confidentiality and fears about network security.

7.4.3

Use the Regional Advisory Group on NGA to share project plans

What is it? The Regional Advisory Group (RAG) for NGA in the North West contains a ragne of stakeholders who have an interst in developing NGA in the region. The NWDA can sue this body to help keep up to date with the planned initiatives for NGA in the region. The RAG will also be a forum to share thoughts on projects and develop new ideas for delivering NGA to the region.

What will it deliver? Improved awareness of all NGA projects in the region, and a forum to share knowledge on best practice.

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Other stakeholders that need to be included Members of the Regional Advisory Group.

What will it cost? The costs of this activity would be minimal but NWDA resources would be needed to coordination activities.

Key issues and challenges Ensuring that the RAG has wide enough membership to ensure that all projects in the region are represented.

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8 Conclusions NGA is an important tool for achieving the NWDA’s strategic objectives for the North West, including increasing the region’s productivity and competitiveness and improving the quality of life for its inhabitants. The ideal NGA solution would be ubiquitous FTTP coverage, providing consumers and businesses with high-speed uploads as well as downloads, but the high cost of laying fibre directly to all premises means this is unlikely to be achievable in the short term. A large proportion of the region’s premises are likely to be served by lower cost cable and FTTC infrastructure, at least as an interim step to achieving full FTTP. Access to NGA via cable FTTC and FTTH will represent a marked improvement on current DSL broadband services. Market forces will ensure that NGA is provided to much of the North West without public sector intervention. Virgin Media already provides extensive DOCSIS3.0 coverage and BT has announced large-scale investment plans to reach 10 million homes across the UK by 2012 with a mixture of FTTC and FTTP. Our analysis shows that the costs of deploying FTTC increase significantly once two-thirds of the UK population (which corresponds to around 75% of the North West) has been reached and private investment is only expected to result in roughly this coverage level. This has given rise to the Digital Britain Final Third Project which seeks to address this gap and extend coverage to around 90% of the UK population, although the outcomes of this project are far from certain. Besides BT and Virgin Media, other operators do have NGA infrastructure in the region and they mainly provide premium data services to large businesses. There are also a number of public sector networks with large amounts of fibre, but these serve a limited number of locations and would be unlikely to contribute significantly to a region-wide network where the last-mile access network would be the over-riding cost. Other NGA projects that either provide NGA to end user or support its development in the region are at various stages of planning or development. Examples of this include: local independent networks such as the Manchester Oxford Road living lab project; a 100Gbit/s ‘super-ring’ connecting key employment sites in Manchester; NorthernNET linking MediaCityUK to other digital & creative industries companies across the North. As demonstrated by all of this activity, a large amount of NGA infrastructure would be installed in the North West without any intervention from the NWDA. However, as discussed in section 6 it will leave a number of gaps: • •

•

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•

regional competitiveness and inward investment– not having world-class infrastructure will affect the levels of inward investment and the implementation of sector and theme specific regional strategies and policies. below-average take-up – if NGA is not adopted, the full the benefits will be diluted; the region currently has below-average broadband adoption and it will be important to reverse this for NGA to deliver its full potential.

These gaps can be addressed by using a combination of actions that the NWDA could take, which as discussed in detail in section 7 Some of the activities would require the NWDA to take a leading role while others would involve supporting and lobbying other stakeholders, and the activities vary in the level of cost and the challenge they would represent to the NWDA. A summary of these is given below.

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Activity

What will it deliver?

Stakeholders

Cost

Issues and challenges

Introduce policies and standards to make the most of private sector activity

Promote common standards for ducting

More NGA in roads and public spaces

BT, Virgin Media, utility companies, local councils and government

Low

Common standards, duct ownership models

Work with councils to include NGA considerations in planning permission processes

NGA to new builds

Local councils, telecoms operators, property developers

Low

Planning permission criteria, use of ducting by operators

Make NGA considerations a condition for NWDA investment

NGA to new builds

Telecoms operators, property developers

Very low

Defining investment criteria, use of ducting by operators

Stimulating demand for NGA to increase usage and promote investment

Encourage NGA usage and take-up

Realise benefits of NGA in the region

Marketing agency, Business Link, and regional cluster organisations

Medium

Persuasive messaging, efficient targeting

Stimulate and aggregate demand to promote investment

Faster NGA development

Marketing agency, telecoms operators

Medium

Persuasive messaging, efficient targeting, effective survey design

Invest directly in the development of NGA in the region

Invest in conjunction with Digital Britain initiatives

Further Digital Britain objectives

Digital Britain team, telecoms operators

Medium to very high

Lack of control over investment, unclear outcomes of Digital Britain

Invest independently of Digital Britain initiatives

More NGA, more FTTP, faster roll-out

Telecoms operators

Medium to very high

Targeting investment, procurement, securing funding, EC State Aid

Other actions to promote and support NGA investment

Lobby other public sector bodies to reduce barriers to NGA investment

Rules and regulation for lower costs of deployment

Ofcom, BIS, VOA, BSG, others

Low

Other parties have a stringer voice with decision makers

Address information asymmetries

Common source of information about all NGA related assets

Owners of telecoms assets in the region

Low

Reluctance of network owners to share or publish information

Use the Regional Advisory Group on NGA to share project plane

A common view of the planned projects in the region

Regional Advisory Group

Low

Ensuring RAG have knowledge of all projects

Figure 8.1:

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Summary of potential policy options [Source: Analysys Mason]

Making NGA a reality in the North West | 64

9 Recommendations The report has outlined the importance of NGA to the North West and how gaps in the delivery of NGA by others in the private and public sectors may impact the region’s goals. We have identified seven recommendations for the NWDA that will help to address the gaps in NGA and fulfil it’s ambitions. Each of these is discussed in turn below:

2) Define an agreed ambition for NGA in the region As part of Recommendation (1) above the NWDA should seek to agree upon a regional ambition for NGA that is both challenging, but achievable. In section 3.4 we set out a potential vision for NGA in the region. The North West should have ubiquitous access to NGA as soon as possible, with 90% coverage being exceeded in the medium term, and 100% coverage achieved in the long term. NGA will be provided by a range of retail providers in a competitive market to ensure that low prices and service innovation continue. The technology used to deliver NGA must be capable of delivering the connectivity required to support world-class applications to which businesses and consumers need access. The region will lead the rest of the UK in the widespread use of NGA by all sectors of society. This vision is a initial iteration and should be debated and evolved so that it can agreed upon by the full range of stakeholders. Once a vision is agreed within the North West the NWDA could consider working to achieve an agreed NGA ambition for the whoel of the UK. Such a UK wide ambition would need to be agreed by many more stakeholders, and may eb different the the ambition in the North West. By agreeing a UK wide ambition it may help to provide a focus for UK policy for NGA deliver.

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• •

•

5) Define an investment framework for NGA The NWDA should define an investment framework that will allow funding to be directed towards projects that address the identified gaps with the aim of reaching the region’s ambition for NGA. The investment framework may be used to support a wide range of projects that cover some or all of the gaps at a regional, sub-regional or local scale.

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6) Identify actions that the NWDA could lead within the investment framework Based upon the outcome of the recommendations outlined above the NWDA should agree upon the actions that could be covered under the investment framework that it would like to take the lead with. We have set out ten potential actions in section 7, all of which could be used to tackle the gaps which have been identified, though it may be appropriate for the NWDA to take a lead on a subset of the ten actions that have been outlined.

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Annex A: State aid rules and how these affect the NWDA In May 2009, the European Commission (EC) produced draft guidelines for state aid relating to broadband networks, which includes specific advice for next-generation access (NGA) networks. Following a consultation period the final guidelines are expected to be published during the final quarter of 2009. We do not expect any major changes to the draft guidelines. The primary aims of state aid policy are that any aid will not crowd out market initiative in the broadband sector. If state aid for broadband were to be used in areas where the market would normally choose to invest or has already invested, this could affect investments already made by broadband operators and might significantly undermine the incentives of market operators to invest in broadband in the future. If this were to happen, state aid for broadband might become counterproductive. The primary objective of state aid control in broadband is therefore to ensure that state aid measures will result in a higher level of broadband coverage and penetration, or in a more timely manner, than would occur without the aid, and to ensure that the positive effects of aid outweigh its negative effects in terms of distortion of competition. The draft guidelines on state aid for NGA identify a different approach to three different types of area: • • •

white areas are not expected to have any NGA availability black areas are expected to have two or more NGA networks grey areas are only expected to have a single NGA network.

The likely availability of broadband services in an area should be considered using a five-year view of likely market developments.

A.1 White areas Within white areas state aid for NGA is generally acceptable. However, within white areas that would be considered grey for current generation broadband (i.e. ADSL) the following should be demonstrated: (i) that the broadband services provided over the said networks are not sufficient to satisfy the needs of citizens and business users in the area in question (also taking into account their eventually planned upgrade), and that (ii) there are no less distortive means (including ex ante regulation) to reach the stated goals. As almost all of the white areas for NGA within the North West would be classified as grey for current generation broadband, these conditions need to be demonstrated. In practice, it is likely that this would require the NWDA to show that citizens and business users in the areas being targeted require faster broadband services than they can currently receive using ADSL, and that

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other options such as demand stimulation and regulatory changes would lead to the supply of NGA services to the area.

A.2 Black areas The EC has indicated that state aid would not generally be acceptable in black areas.

A.3 Grey areas The EC requires a more detailed analysis of grey areas before state aid can be approved. In the context of NGA. As with white areas that have existing current generation broadband, the following should be demonstrated: (i) the existing or planned NGA network is not or would not be sufficient to satisfy the needs of citizens and business users in the areas in question, and that (ii) there are no less distortive means (including ex ante regulation) to reach the stated goals. In assessing these, the EC will consider if the level of current NGA prices and the types of service are appropriate, or if they are likely to become available without state aid. The lack of effective competition over a single NGA network could also be a rationale for state aid. Within the UK, most NGA coverage is likely to be from BT and Virgin Media. As Virgin Media does not have regulated wholesale access it is likely that there would be a stronger case for any intervention in grey areas where Virgin Media provides the only NGA network. However, in areas where BT is the only provider, it is likely that services will be offered via Openreach. Due to its regulatory obligations it is likely that Openreach will fulfil any necessary competition obligations. As outlined earlier in this document, it is our view that within five years it is likely that BT will have a more extensive NGA coverage than Virgin Media, and it is likely that most grey areas will be served by BT.

A.4 All interventions subject to state aid should be designed following some common principles The EC has laid out a number of characteristics of interventions that it would look for to ensure that interventions are proportionate and minimise market distortion. These are summarised below. Market analysis

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Detailed mapping and coverage analysis should be used to identify white, black and grey areas. The analysis should include consultations with stakeholders.

Making NGA a reality in the North West | A–3

Open tender process

An open tender approach should be used to ensure transparency and fairness for all bidders. Equal and non-discriminatory treatment of all bidders is an indispensable condition for an open tender.

Best economic offer

The bidder with the lowest amount of aid requested should, in principle, be the winner.

Technological neutrality

The project should be technology neutral and be based on the ability to deliver specific services. However, it should be noted that the detailed definition of a service can indirectly limit the choice of technologies, and that the EC also states a preference for point-to-point FTTP architectures using multiple fibres due to the increased flexibility for competition.

Use of existing infrastructure

To avoid unnecessary duplication of resources projects should seek to reuse existing infrastructure, where possible. However, it is noted that this condition should not be used to favour existing incumbent operators. In case of grey areas, where it is shown that dependence on the incumbent operator is part of the problem, it may be necessary to allow for more facilities-based competition.

Wholesale access

Mandating third parties wholesale access to a subsidised broadband infrastructure is a necessary component of any project. Wholesale access to the subsidised infrastructure should be offered for at least seven years.

Price benchmarking

To ensure effective wholesale access the prices of wholesale access should be set to avoid any ‘margin squeeze’.37

Claw-back mechanism

To ensure that the selected bidder is not over-compensated, there should be a claw-back mechanism that can reduce the overall level of subsidy if the project is more successful that originally anticipated.

Margin squeeze can occur when the retail arm of the operator providing the subsidised network can offer lower retail prices than an independent operator using wholesale services from the subsidised network. One way to overcome this issue is to ensure that all retail operators (including that of the company operating the subsidised network) use the same wholesale products. This is commonly termed as ‘open access’. Openreach is an example of an open access operator as it offers access to all operators, including BT Wholesale and BT Retail, on an equivalent basis.

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Making NGA a reality in the North West | B–1

Annex B: Stimulating competition through open access The provision of NGA infrastructure will enable high-speed broadband services to be made available but will not in itself guarantee the provision of high quality, good value services. Competition at the retail level is important to ensure that service prices are as low as possible and to stimulate innovation. This in turn will increase service take-up and maximise the positive benefit that NGA has on the region. For truly effective competition, market conditions should enable small service providers to compete effectively with large service providers to prevent an oligopoly situation from occurring. The resulting range of large and small service providers will maximise levels of innovation in the industry. It is widely accepted that for effective competition, telecoms infrastructure should be managed on an ‘open access’ basis. There is not, however, one standard definition of what ‘open access’ means. In its broadest sense, it describes unbiased access enabling multiple competitors to provide the same products and services under the same terms and conditions. One model for competition in telecoms networks uses a ‘ladder of investment’ model where, over time, operators invest in more infrastructure at a deeper level in the network. In NGA this ladder of investment can be represented by five levels as shown in Figure B.1. Figure B.1: NGA ladder of investment [Source: Analysys Mason]

Flexible active wholesale

Dark fibre / Sub-loop unbundling

Shared ducts

Independent networks

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Greater investment and control

White label

Making NGA a reality in the North West | B–2

As an operator invests deeper in the network, it goes down the ladder of investment and can obtain a greater degree of flexibility and independence from other network provides. Each level is discussed in turn below. If a network were to provide equivalent and open access to any of these levels in the network for all service providers it could be described as open access.

B.1 White label services In the case of white label services, one operator would design a range of pre-defined retail services and provide these to the market on a wholesale basis. An example of this is the early BT Wholesale model for DSL services whereby ISPs can resell BT services under their own brand but have minimal flexibility or control over the service specifications (e.g. a limited range of speeds and contention ratios). The advantage of this model is that it is simple for small ISPs to enter the market on the same terms as large ISPs, however there is limited scope for price competition or service innovation.

B.2 Flexible active services In the case of flexible active services, one operator installs active equipment and provides wholesale products to all other ISPs. To promote healthy competition, ISPs need flexibility in the services they offer to end users. By providing access to bitstream capacity (with an Ethernet interface), ISPs are free to design and offer their own voice, data and video services. Ofcom refers to this model as ‘active line access’ (ALA) and provides an analysis in its report, Next Generation Competitive Broadband: from LLU to ALA.38 Citynet in Amsterdam is managed in this way, with one wholesale operator providing active services to nine ISPs. For further details, see the case study in Annex C. The range of flexibility offered by active services varies, but the Ofcom proposal for ALA and the planned products from Openreach (termed Generic Ethernet Access) offer a high degree of flexibility. In some respects the ALA product definition from Ofcom could even offer greater retail flexibility for the consumer that the dark fibre model, as it would allow multiple service providers to use the same optical fibre.

http://www.ofcom.org.uk/telecoms/discussnga/eala/nga_llu_ala.pdf

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Making NGA a reality in the North West | B–3

B.3 Dark fibre and sub-loop unbundling In the case of dark fibre, open access is provided to the fibre cables themselves, enabling service providers to install their own active equipment. In a residential FTTP context this would probably occur at the telephone exchange. It is sometimes called fibre unbundling as it is similar to LLU as used for ADSL with copper lines. For fibre to the cabinet (FTTC), it is possible to unbundle the sub-loop (the copper line from the home to the street cabinet). Both of these methods give a service provider additional flexibility, but require additional investment and may only be economical for larger service providers. This is particularly true for sub-loop unbundling where previous studies by Analysys Mason for the regulators in the Netherlands and Ireland have shown that sub-loop unbundling would not be viable under most conditions for any alternative operators as they would have significantly higher costs than the incumbent. In the case of unbundling dark fibre at the exchange for fibre to the premises (FTTP) it is likely that there would only be a viable business case for a limited number of operators. This is illustrated by the recent consolidation in the LLU market which now sees four LLU operators dominate the market (alongside BT and Virgin Media).

B.4 Shared ducts The civil works required to lay ducting account for the majority of the costs of installing a fibre network. Providing open access to ducting therefore significantly reduces the cost for an operator to lay its own network. However, many incumbent operators prefer to re-use existing ducts themselves where possible to reduce deployment costs. In many cases, there are uncertainties over the amount of available space for alternative operators also to use incumbent ducts. The issue of limited space in ducts for multiple operators is under investigation by Ofcom, with assistance from Analysys Mason which has already completed one survey of BT ducts for Ofcom. By using shared ducts, an operator would own all of its own fibre and have increased control over its FTTP network e.g. it could chose between using gigabit passive optical network (GPON) or a point-to-point network for FTTP. Using shared ducts is an approach being actively pursued in France, and is also offered by incumbents in Italy and Portugal. It is also expected to be a key option for alternative operators in Spain.

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Making NGA a reality in the North West | B–4

B.5 Separate networks Separate networks would involve each operator having its own completely separate infrastructure (as is the case with Virgin Media and BT). There are no known plans for significant new investments in completely separate networks due to significant duplication of infrastructure which leads to higher total costs.

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Making NGA a reality in the North West | C–1

Annex C: Case studies on Citynet and Stokab

C.1 Citynet Amsterdam

Background In December 2005, the municipality of Amsterdam decided to invest in a next-generation network with the aim to ensure the competitiveness of Amsterdam on a European level. The first stage of the project is now complete and the network currently passes about 43 000 households. Total project costs for the first stage are estimated at around EUR30 million, EUR18 million of which were financed through equity investment and EUR12 million by raising debt. A holding called ‘Glasvezel Amsterdam’ (GNA) has been established which owns the passive network layer. Ownership of GNA is shared by the municipality (one-third), ING Real Estate and Reggefiber (one-sixth each) and various housing corporations (one-third). The projects underwent an EC state aid investigation. Due to the investment of third parties it was decided that Citynet adheres to the Market Economy Investor Principle (MEIP).

Services portfolio BBned has been selected as the exclusive wholesale operator for Citynet based on an open tender procedure. The company is leasing passive infrastructure from GNA to offer open access to active wholesale services. Currently, nine providers, all of which are niche players in the Dutch market, are active on the Citynet platform. Business customers have to pay between EUR75 and EUR750 per month for a symmetrical 100Mbit/s connection. The range in pricing is due to the level of prioritisation of their traffic on the network. Comparable residential services are more expensive as 50Mbit/s connections are available for about EUR70 per month. It appears that residential retail operators focus on packages that are in direct competition to current ADSL and cable offers.

Impact of Citynet Take-up of services has been moderate to date, with 3000 customers in February 2009. This is likely to be due to the fact that none of the major Dutch operators is currently active on Citynet. KPN’s announcement to provide services on Citynet from 2010 onward, as well as endeavours to connect an additional 100 000 households in co-operation with Reggefiber and KPN, are likely to change this situation significantly and provide bright prospects for the future of Citynet. Despite currently limited network coverage (10% of all Amsterdam households), the existence of Citynet poses a significant threat to operators, as they run the risk of progressively losing their

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Making NGA a reality in the North West | C–2

foothold in the biggest city in the Netherlands (~6% of all Dutch households). It appears that Citynet may have been one factor that has contributed to an acceleration of NGA deployments throughout the Netherlands.

C.2 Stokab Stockholm

Background Stokab was established by the City of Stockholm in 1994. Over the last 15 years, it has continuously rolled out a fibre-based network through the city of Stockholm. The network will connect 95 000 households by the end of 2009 and will target 400 000 by 2012 (translating into 90% coverage of Stockholm households). Stokab currently generates revenues of about GBP44 million per year.

Services portfolio Stokab offers its customers non-discriminatory access to dark fibre. It is important to note that, contrary to other public sector networks, there is not a single exclusive wholesale service provider operating on Stokab. As a result, a diversified group of about 90 operators and 460 enterprises are currently operating on the network. Most of these customers take up active services from intermediate wholesale operators rather than directly leasing dark fibre from Stokab. Stokab is also working in close cooperation with property developers. This co-operation offers synergies for both parties, as it provides new housing developments with the opportunity to connect their homes to a next-generation network in a cost-efficient manner. At the same time, it increases the appeal of the network for service operators and promotes competition. Price levels on Stokab appear to be higher than on Citynet. Symmetrical 100Mbit/s Internet access for business customers costs more than GBP150 per month. Residential stand-alone broadband services at 100Mbit/s are available from about GBP30 per month, though these are likely to be of a lower service quality than the business-focused services.

Impact of Stokab Stokab has been very successful in attracting operators and enterprises to the network. It has thereby made efficient use of its first mover advantage (starting operations in 1994) and the relative importance of Stockholm on a national context (10% of all households, 30% of GDP) to develop an attractive network proposition. As a result, even the incumbent operator Telia uses Stokab’s infrastructure, which is an unusual situation for a public sector NGA initiative. Stokab also focuses on aspects of social inclusion. As part of a three-year plan, 100% of public housing residents should be connected to the network by 2012. This target is significantly facilitated by the above mentioned close co-operation of Stokab with property developers. Currently, broadband penetration within Stockholm is at 98%.

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Making NGA a reality in the North West | D–1

Annex D: Broadband price benchmarking Broadband pricing is a complicated area, with prices dependent on many factors, such as technology, location, contention (i.e. sharing of bandwidth), reliability guarantees and other valueadded services that may be bundled with connectivity. We have identified two key types of offer to compare pricing: • •

high-speed symmetrical fibre service of around 100Mbit/s where all of the capacity is dedicated to a single customer39 typical non-fibre business service.

High-speed symmetrical fibre services It can be seen that the current levels of pricing for business services in Manchester are higher than cities such as Sweden and Amsterdam, which have had public sector interventions in fibre networks. For example in Amsterdam a symmetrical dedicated 100Mbit/s connection costs around GBP656 per month, compared to GBP1700 in Manchester. It should be noted that cheaper products at around GBP66 month can be purchased in Amsterdam, but these do not have dedicated capacity for the customer. However, the prices in Manchester are significantly lower than those from France Télécom. Network

ISP

Service

Connection (GBP)

Rental (GBP/month)

Stockab (Stockholm)

100Mbit/s

Stockab (Stockholm)

Fiber Direkt

100Mbit/s

344.75

Stockab (Stockholm)

Bahnhof

100Mbit/s

513.46

Citynet (Amsterdam)

DSD

100Mbit/s

656.04

FibreSpeed (Wales)

FibreWales

10Mbit/s

583.00

France Telecom

80Mbit/s

5334

6648.33

BT (UK)

BT Retail

100Mbit/s

6250

1733.33

Metronet (Manchester)

Metronet

100Mbit/s

3000

1700.00

Figure D.1:

163.53

Price benchmarking of high-speed symmetrical fibre services [Source: Analysys Mason]

Not all offers are clearly defined so we have had to select offers that have the highest level of traffic priority. These are very likely to have all of the capacity dedicated to a single customer.

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Making NGA a reality in the North West | D–2

Typical non-fibre business services If lower-speed business products using DSL are compared across countries it can be seen that the UK actually has the lowest pricing, which is likely to be a function of the highly competitive retail market in the UK. It should be noted that these products do not dedicate all of the capacity to a single user (and this is the case with all residential broadband packages in the UK and the rest of Europe, including areas with open access broadband interventions). Network

ISP

Service*40

Connection

Rental

(download/upload)

(GBP)

(GBP/month)

Stokab (Stockholm)

5Mbit/s / 5Mbit/s

37.54

France Télécom

8Mbit/s / 0.8 Mbit/s

46.70

KPN (Netherlands)

KPN

20Mbit/s / 1Mbit/s

43.74

DT (Germany)

16Mbit/s / 1Mbit/s

43.70

BT (UK)

BT Retail

20Mbit/s / 1Mbit/s

33.75

Figure D.2:

Price benchmarking of typical non-fibre business services [Source: Analysys Mason]

Note that ADSL speeds are ‘up to’ and are dependent upon the length of the copper access line

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Making NGA a reality in the North West | E–1

Annex E: The role of the mobile industry The important role of mobile communications in society and the economic development of the region should not be forgotten. The ability to communicate from any location, on the move has revolutionised society. The latest evolution in mobile communications is high-speed mobile broadband delivered over 3G networks using a technology called high-speed packet access (HSPA). At present mobile broadband is not available to all of the North West, with limited coverage outside of urban areas as shown below.

Figure E.1:

3G coverage of UK mobile operators at Q1 2009 [Source: Ofcom, GSM Association, 2009]

The coverage of mobile broadband within the North West is similar to other parts of he UK, and most of Europe, as 3G coverage only extends beyond urban areas in a small minority of countries, such as Sweden where spectrum licence conditions mandated very high coverage levels. 3G coverage increases in the UK have reached a plateau in recent years as operators reached their minimum coverage obligations and further network roll-out into more rural areas has been prevented by diminishing returns as population densities decrease. Coverage is set to increase in the near future however, as more radio spectrum becomes available following the switch-off of analogue television signals.

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Making NGA a reality in the North West | E–2

Mobile broadband (3G) services are currently provided using 2100MHz spectrum, but spectrum in the 800MHz and 900MHz bands is likely to become available in the short to medium term for mobile broadband. The lower frequency of this new spectrum means that signals can travel further and penetrate buildings better, reducing the number of mobile masts required to cover a given area. This in turn improves the business case for operators to extend 3G coverage into more rural areas. There is still debate over the exact use of the newly available spectrum as some may be used to increase capacity for 2G services which have near ubiquitous population coverage. However, an objective of the Digital Britain team is to maximise the use of spectrum for 3G services so as to make mobile broadband more widely available. Because of the likelihood of significant economic benefits from mobile broadband, the NWDA should endeavour to ensure that the North West has the highest possible 3G mobile coverage. There is less track record of public sector intervention in the mobile industry than with fixed broadband, so there are fewer established intervention models or experience on which to draw. If the release of new spectrum does not lead to significant coverage increases in the region, the NWDA could engage directly with mobile operators to discuss how they can co-operate towards the goal of increasing coverage. The other important development in the mobile industry is the progression to 4G technology, more commonly known as Long Term Evolution (LTE), which is expected to commence in 2011. The technology standards are still under development, but LTE is expected to deliver download and upload speeds that are comparable to FTTP. The Digital Britain report however, does not see LTE as a substitute for fibre-based NGA, as it will be subject to the same limitations as all mobile services, such as interference from natural obstacles and buildings. However, despite the important role that mobile broadband can play it is important to acknowledge that mobile technologies provide access speeds that are typically a generation behind fixed networks. This trend is expected to continue in the future. Mobile broadband will therefore not provide services directly comparable to NGA in the short to medium term.

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Making NGA a reality in the North West | F–1

Annex F: Glossary of terms used Term

Gloss

The second generation of mobile phone technology, using GSM standards and supporting voice, text and picture messaging services

The third generation of mobile phone technology, meeting technical requirements and standards defined by the International Telecommunications Union. The key development from second-generation (2G) technologies is support for higher data rates, enabling mobile access to demanding data applications, such as media streaming

ADSL

Asymmetric digital subscriber line – enables faster broadband over copper. ADSL2/2+ are the next generations of the technology offering

ALA

Active line access – one operator installs active equipment and provides wholesale products to all other ISPs, providing access to bitstream capacity (with an Ethernet interface), that allows ISPs to design and offer their own voice, data and video services

BSG

Broadband Stakeholders Group – government advisory body

DOCSIS

Data Over Cable Service Interface Specification – an international standard that permits high-speed broadband to be provided over a cable TV system

DSL

Digital subscriber line – technology providing data transmission over network

Competitive Dialogue

EC Directive 2004/18/EC for public sector procurement passed into law in the UK in January 2006, introducing the Competitive Dialogue process. It had the aim of giving the public sector more leeway in developing and procuring solutions to complex requirements, by entering into negotiations with suppliers, before requesting final tenders

ERDF

European Regional Development Fund

FTTP/C/B

Fibre to the premises/cabinet/building – different levels to which fibre infrastructure can be extended to improve end performance

Final Third

The 33% of the UK that the Digital Britain report suggests will not be viable for commercial roll-out of NGA

Gigabyte

GPON

Gigabit passive optical network – evolution of point-to-multipoint network architecture, using splitters to allow a single optical fibre to serve multiple premises

GVA

Gross value added or output

High definition – referring to video streaming that requires a high level of bandwidth

HSPA

High-speed Packet Access – Mobile phone protocols that improve the performance of 3G networks

Internet Protocol – a protocol to deliver data packets from the source host to the destination host solely based on its address

ISP

Internet service provider

LLU

Local loop unbundling – enables alternative operators to install their equipment in BT exchanges to connect customer lines to non-BT networks

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Making NGA a reality in the North West | F–2

Term

Gloss

LTE

Long Term Evolution – referring to enhancement of 3G (UMTS) to offer so-called ‘4G’ services

Mbit/s and kbit/s

Megabits per second/kilobits per second

Megabyte

MHz

MegaHertz

NGA

Next-generation access – refers to improved infrastructure in access networks (the last mile connecting the core network to customers) (usually copper) – often achieved by replacing legacy copper with fibre

Next-generation network

An all-IP, packet-based network with the capacity to manage multiple types of traffic e.g. voice, data, and multimedia

USC

Universal Service Commitment – suggested for broadband, at a proposed speed of 2Mbit/s by 2012 in the Digital Britain report

VDSL

Very high-speed digital subscriber line – providing faster transmission of data than standard DSL technologies

Figure F.1:

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Glossary [Source: Analysys Mason]