CBI Let's Get Digital report by The CBI

Letâ&#x20AC;&#x2122;s get digital!

Harnessing the commercial potential of digital infrastructure in the UK

CBI on Infrastructure

Letâ&#x20AC;&#x2122;s get digital â&#x20AC;&#x201C; harnessing the commercial potential of digital infrastructure in the UK

Contents

Foreword by Katja Hall, CBI

Executive summary

1 The roll-out of digital infrastructure is opening up new growth opportunities across the country 2 Private investment in infrastructure supports a vibrant digital economy in the UK and we must encourage businesses to do more with online services 3 For continued improvements to our digital infrastructure in the future, we need coherent and co-ordinated policy

4 We need a strategy from Whitehall to cement our long-term position as a world-beating digital economy

16 20

Glossary 37 References 38

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Digitalisation is the electrification of the 21st century – time to build on our strengths to enable world-class networks to thrive Government ministers are often keen to evoke the Victorian age of ambition and discovery when talking about infrastructure, channelling the romantic image of the railway and steam to demonstrate that anything is possible if our ideas are big enough. The development of wide-scale electrification programmes in the late 19th and early 20th centuries took our rail networks to a new level, opening up new possibilities in terms of speed, connections and technology. Electrification transformed the way we did business, bringing people and markets closer together, connecting cities, building supply chains and ferrying goods around the country. Today, the boom in digital networks is having a similar, if not a greater transformational impact. The effect of even modest investment in digital technologies can revolutionise a business, communicating with customers in new and exciting ways, and opening the door to markets across the world in an instant. Yet it is rare to see government figures talking with the same passion and verve about the ‘digital age’ or capturing the ‘21st century spirit’. To me, this seems a missed opportunity. We know that our digital networks are vital to fuelling business investment and exports – the twin engines for the UK’s future growth.1 Up and down the country, businesses talk to me about their plans for growing their operations, the technology they want to utilise and the digital infrastructure they need to bring these ideas to fruition. These businesses are not confined to a particular sector or region: the CBI’s 2012 infrastructure survey showed that three in four businesses saw the quality and cost of the UK’s digital networks as important to future investment decisions, on a par with transport

and energy.2 Combine this with recent Policy Exchange polling demonstrating that businesses see digital infrastructure in the government’s top two priorities for spending – behind only major roads – and the message from industry could not be clearer.3 With this report, I want to reinvigorate the debate about how we can continue to strengthen the UK’s digital economy in the global market. It is time that we saw political vision to match the ambition of business, and put in place long-term strategies to achieve goals over the course of the next decade. From a standing start at the beginning of this Parliament, we find ourselves in a positive position with private providers driving improvements to our digital networks at a canter and, indeed, our digital infrastructure fares well internationally against many indicators. The quality and connectivity of our digital infrastructure is of national importance and we need to treat it as such in our policy making. If we are serious about seizing the opportunities that investment in our digital networks presents, let’s get excited about today’s possibilities and start thinking about just what we can achieve in the future. In short, let’s get digital.

Katja Hall CBI chief policy director

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Executive summary

In the global race for capital and customers, connectivity is key. Building the right connections with the right investors and at the right time can transform a business, enabling that firm to expand and compete in the global marketplace. For government, this means working to ensure that these connections can take place, creating an environment in which the right infrastructure can be built, in the right place, to the right specification. Much emphasis has been placed – by the CBI and the government – on the importance of direct transport links to boosting trade, especially in the context of the current impasse on the future of the UK’s aviation capacity. But there is a more direct, instant connection that is revolutionising the way we do business and access markets, which must be fully recognised in the debate around infrastructure: the UK’s expanding digital footprint. This report sets out the benefits driven by private investment in our digital infrastructure, assesses current government policy and puts forward a plan to harness the power of our networks for the benefit of business today and growth tomorrow.

The roll-out of digital infrastructure is opening up new growth opportunities across the country Broader, faster digital networks yield countrywide economic benefits, injecting potential into every region of the UK. New connections support inward investment and job creation, while helping to nurture local businesses through access to new markets and new technology to improve commercial operations. On the ground, businesses are feeling a tangible difference to the services they are able to provide and the way they are able to interact with customers and clients. As the 2013 UK Attractiveness Survey indicates, retailers are continually employing digital platforms to reach consumers in new ways.4 From flexible working to faster payments, smart-phones to smart-grids, investment in digital infrastructure is transforming our business environment, making us more connected than ever before. Furthermore, this investment can help deliver other types of crucial national infrastructure. Whether building a new road, school or housing development, high-quality digital connections can help contractors speed up the delivery of major projects. This digital infrastructure helps get sites up and running quickly and allows contractors to undertake modelling on the ground to amend designs and facilitate clear communication and information sharing with other sites across the world. As the government continues to deliberate the UK’s future infrastructure needs and which projects should be prioritised, the UK’s digital networks must sit as an equal partner in the infrastructure debate.

Private investment in infrastructure supports a vibrant digital economy in the UK and we must encourage businesses to do more with online services In the last decade, private investment has driven the roll-out of our digital infrastructure – and we will continue to look to the private sector to build on this progress over the next decade. The on-going expansion of the UK’s digital footprint can only serve to further support our world-beating digital economy. Our consumers are prolific online shoppers, making the UK the largest e-commerce market in the world and offering huge potential for companies savvy enough to flex their business model to meet this demand. Moreover, UK businesses should be well-positioned to harness the commercial potential that stems from better connectivity. With prospects for future economic growth pinned to an investment and export-led recovery, it is vital that we encourage businesses to spread their wings online, accessing new markets through cross-border e-commerce and building new supply chains. Due to the on-going progress with network roll-out, the UK compares broadly well with our international counterparts on a number of indicators. First, the UK has the second highest percentage of households penetrated by fixed broadband among major economies. Second, the UK scores highly according to World Bank figures on the number of mobile subscriptions per 100 people. Third, with on-going efforts from the private sector to roll-out superfast broadband to well over two-thirds of the population, the percentage of broadband subscriptions which count as superfast in the UK is now above both the EU average and Germany, France and Italy.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

But to further cement the UK as a world-beater in the global digital economy, efforts must continue to bridge the gap between the coverage of urban and rural locations. Moreover, government and industry need to work together to boost connectivity among the business community, particularly for SMEs, with one study estimating that there is a commercial opportunity for UK plc here worth £18.8 billion if more SMEs were to market and operate online.5 Further progress in these areas will help to make the UK an even more attractive place to set up shop.

For continued improvements to our digital infrastructure in the future, we need coherent and co-ordinated policy The private sector can only go so far with the roll-out of digital infrastructure – where it is uneconomic to invest, the government has had to step in to complete the job. As we move towards the end of this Parliament, we are in a position to assess current schemes to suggest how better coherence and co-ordination can help to deploy government assisted projects swiftly. Moreover, there is a question over how government and industry can co-ordinate effectively on demand-side measures, working together to stimulate business uptake. Different business users in different sectors will require different levels of connectivity, but we need to ensure that more businesses are in a position to exploit the opportunities made possible by the digital networks available. There is no ‘silver bullet’ to boost business connectivity, but setting out the respective roles and responsibilities of government and industry to boost demand is an essential start.

We need a strategy from Whitehall to cement our long-term position as a world-beating digital economy The pace of change in the digital economy is incredibly dynamic, with no time to stand still. Relative to other areas of critical national infrastructure, such as transport or energy, our digital networks consistently out-perform in terms of quality and cost in the eyes of business. The UK has more than a fighting chance of catching countries such as Finland and Sweden who have embedded investment in digital networks as a central plank of their respective infrastructure strategies. To do this, we need to build on our existing momentum through a step-change in the way that the UK government views digital infrastructure – towards a recognition that investment in this area is helping to deliver the exports, the jobs, the regional prosperity and the shovel-ready projects that this country needs. This report sets out a four point plan with accompanying recommendations, developed with network providers and business users, to harness the commercial potential of digital infrastructure.

“There is no ‘silver bullet’ to boost business connectivity, but setting out the respective roles and responsibilities of government and industry to boost demand is an essential start.”

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Summary of recommendations

Government must articulate a vision and ambition for UK digital infrastructure that permeates Whitehall departments and boosts industry innovation • Embed digital at the heart of infrastructure decision-making in Whitehall by creating two new seats on the Infrastructure UK Advisory Council: one for the DCMS Permanent Secretary and one for an industry representative on a rolling basis • Revise the National Infrastructure Plan in its next upgrade to reflect the priority role that digital projects play in underpinning and supporting the delivery of other major projects • Ensure that digital infrastructure is considered as part of the government’s industrial strategy work, ensuring we have the quality networks needed to help deliver the BIS ‘Information Economy’ strategy

To translate this vision into reality, government must work with industry to develop a clear delivery strategy that provides investment certainty beyond this Parliament and which has cross-party support • Commission Infrastructure UK to work with infrastructure delivery departments across Whitehall and industry representatives to formulate a new post-2015 strategy for the delivery and uptake of digital infrastructure in the next decade • Bring forward the £300million already allocated to BDUK for 2015-17 into this Parliament to provide an immediate investment to roll out broadband connections to the ‘final 10%’ • Work with OFCOM and industry to develop a shared blueprint on future policy for spectrum, balancing competing commercial interests, which should be used as a basis for the UK’s involvement in EU and global negotiations on spectrum bands

The regulatory framework for digital should be updated to encourage investment and cross-industry collaboration • Expand the remit of OFCOM to help promote growth through private sector investment and innovation in the market • Commission OFCOM to help promote industry collaboration by providing best practice examples on the collaboration between content providers and infrastructure operators in delivering legal commercial services

Government and industry must set out a coherent plan to boost business uptake of digital technology – and the CBI will use its networks across sector and region to raise awareness of the commercial opportunities of doing more online • Commit to finding new opportunities for government services to be delivered and administered online to help drive demand for broadband infrastructure • Explore a formal partnership with industry geared towards boosting business uptake of digital services, and work with the CBI through Go ON UK to boost business awareness of digital commercial opportunities in all regions across the UK.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

The roll-out of digital infrastructure is opening up new growth opportunities across the country

Broader, faster digital networks yield countrywide economic benefits, injecting potential into every region of the UK. New connections support inward investment and job creation, while helping to nurture local businesses through access to new markets and new technology to improve commercial operations. On the ground, businesses are feeling a tangible difference to the services they are able to provide and the way they are able to interact with customers and clients. As the 2013 UK Attractiveness Survey indicates, retailers are continually employing digital platforms to reach consumers in new ways.6 From flexible working to faster payments, smart-phones to smartgrids, investment in digital infrastructure is transforming our business environment, making us more connected than ever before.

Furthermore, this investment can help deliver other types of crucial national infrastructure. Whether building a new road, school or housing development, high-quality digital connections can help contractors speed up the delivery of major projects. This digital infrastructure helps get sites up and running quickly and allows contractors to undertake modelling on the ground to amend designs and facilitate clear communication and information sharing with other sites across the world. As the government continues to deliberate the UK’s future infrastructure needs and which projects should be prioritised, the UK’s digital networks must sit as an equal partner in the infrastructure debate.

Investment in broader and faster digital networks provides a demonstrable boost to UK GDP… The macro case for investing in our digital infrastructure is well proven. A variety of studies in the last decade have successfully demonstrated the direct contribution of digital networks to economic growth. The McKinsey Global Institute cites a study from the University of Munich that assesses data from twenty OECD countries for the period from 1996 to 2007, showing that every 10-percentage-point increase in broadband penetration adds 0.9 to 1.5 percentage points to per capita GDP.7 On a similar note, AT Kearney consultants have calculated that every £1 invested in connectivity – whether in fixed or mobile broadband – generates £5 worth of activity in the wider economy.8

If we focus on the impact of fast broadband services, Regeneris Consulting have estimated that in any one location in the UK – depending on the nature of the settlement9 – investment in superfast broadband could create between £143million (in the smallest) and £19.8billion (in the largest) in Gross Value Added (GVA), resulting in an annual aggregated percentage increase of between 0.3% and 0.5%.10 For faster mobile access, there are equally impressive results. Capital Economics have calculated the possible benefits that 4G (Fourth Generation) mobile technology will bring, both in terms of investment and employment. Their report suggests that the roll-out of 4G technology could generate £5.5billion in private sector investment in the domestic economy and could create and/or safeguard 125,000 jobs over a ten year period.11 Exhibit 1 demonstrates how these employment gains could break down across the different UK regions. It is hard to ascertain the extent to which some of these studies have taken an overly optimistic or conservative view – due to the difficulty in calculating uptake projections and indirect benefits – but what is clear is the growing body of evidence and unequivocal message to policymakers: investment in digital infrastructure supports economic growth.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Scotland

9,166

Jobs created or safeguarded by 4G

North East

Northern Ireland

2,785

3,960 North West

10,178

Yorkshire and the Humber

6,542 East Midlands West Midlands Wales

10,071

4,612 South West

9,166

7,946 London

18,831

East

13,914 South East

27,669

Exhibit 1: Capital Economics’ breakdown of jobs created and safeguarded in the regions by use of 4G LTE (long-term evolution) technology Source: Capital Economics, mobile broadband and the UK economy, 2012

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

…maximising growth potential across UK regions Good connectivity can be a vital catalyst for regional regeneration, in both urban and rural areas. The transformative impact is well illustrated in the example of ‘Superfast Cornwall’. In this case, a £132million joint investment partnership in superfast broadband, part-funded by Cornwall Council and regional funds from the EU, together with private sector capital from BT, looks on track to create 4,000 jobs and safeguard a further 2,000. Moreover, in Cumbria, EE are working to deliver the benefits of 4G superfast connectivity to around 2,000 residents.12 On the ground, broader and faster digital networks support the creation of new businesses, particularly in ‘tech’ clusters or concentrated groups of start-ups in industries such as software and computer programming. The CBI has long called for the further strengthening of ‘digital growth hubs’ in the UK – such as London’s Tech City (which stands as the seventh best digital start-up centre in the world13), ‘Silicon Fen’ near Cambridge, and Salford Media City – to bolster the strength of the surrounding local economies.14 Boosts to regional productivity can occur over a swift timescale once the infrastructure investment has been made. In Northern Ireland, a programme to roll out superfast broadband – funded by the Northern Irish executive and UK government, together with European regional funding and significant commercial investment from BT Ireland – received swift state aid approval from the EU in 2009 and was completed in 2011. A recent CBI report on regional regeneration, ‘Locally Grown’, has highlighted how Belfast’s Titanic Quarter, in particular, has benefited from commercial investment in superfast broadband (through an investment separate to the BT

assisted scheme), attracting a range of innovative businesses in next-generation media and film production.15 With investment in digital infrastructure unlocking such potential in local economies, it is easy to see why network providers and infrastructure users have been frustrated with the frequent hold-ups to delivery in recent years due to the planning system. Openreach’s deployment of superfast broadband across London boroughs is a case in point, where Kensington and Chelsea council rejected plans for 96 of the proposed 108 superfast broadband cabinets in the borough. The passing of the Growth and Infrastructure Act and its provision to ease up the requirements when installing cabinets should help to speed up broadband roll-out, but there is more to do to change the mind-set of local authorities and make the local economic case for this investment. Case studies such as Cornwall and Belfast demonstrate the art of the possible.

On the ground, greater connectivity is already changing the way we do business... At a micro level, connectivity is changing not just our everyday lives but also the way we do business, opening up new commercial and strategic opportunities for all kinds of companies. UK-based companies are making better use of digital platforms, whether through online interaction with customers or in-house digital processes, to boost sales and productivity. As the 2013 UK Attractiveness Survey indicates, retailers are continually employing digital platforms to reach consumers in new ways.16 Exhibit 2 shows how Asda has used multiple channels to deliver products and services to their customers.

Exhibit 2 Asda’s digital services Asda launched grocery home shopping 15 years ago, and now have around 1m regular customers who choose to order their groceries online, from a desktop, laptop, mobile phone or tablet device. Increasingly these customers are opting for the convenience of collecting their orders from their nearest store (already around 1 in 20 grocery orders are now collected by customers). For George.com, more than half of all online purchases are collected in a store. This extra visit by customers also results in incremental sales for Asda, as customers tend to shop for top-up items while in store. By having stores as collection points for parcels, Asda can also easily receive returned items making online shopping even more convenient. No need for their customers to collect parcels from the Post Office, or queue in line to return them if unwanted. In addition, more and more customers are choosing to interact with Asda every day via social media to share deals, make decisions about new product ranges, and to raise concerns. Finally, having mobilised their websites, Asda are now bringing the benefits of the internet into their stores. Asda have installed free wi-fi in all of their stores nationwide to enable customers to access the web as and when they need it. As a result of this connectivity, they have been able to introduce shopping list functionality on the Asda mobile app, which allows customers to plan and budget their weekly shop, taking some of the benefits of shopping online into their stores.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

In other sectors beyond retail, Pearson reported in 2012 that 50% of their £6.1billion sales had been generated through digital and service businesses.17 Moreover, many businesses in the financial services industry assert that better mobile connectivity could help improve productivity by stripping away much of the existing bureaucracy involved in exchanging information with customers. Steps to improve the UK’s digital footprint can only help to extend these benefits, enabling more businesses to set up flexible working arrangements with their employees due to better broadband in the home, while also allowing firms to streamline their delivery of consumer-facing services.

Exhibit 3 The future of mobile data • Global mobile data traffic will increase 26-fold up to 2015, at a compound annual growth rate (CAGR) of 92 per cent. • There will be nearly one mobile device per person by 2015. • There will be over 7.1 billion mobile-connected devices, including machine-to-machine (M2M) modules, in 2015, approximately equal to the world’s population in 2015 (7.2 billion).

…opening up new commercial opportunities by responding to patterns in consumer behaviour... Businesses can be both trailblazers and canny observers of technological trends. Catching such trends and making the right investments to stay ahead of the curve can open up new commercial opportunities for a wide range of industries. The global growth in smart-phone usage and the sheer volume of data generated by consumer activity are trends upon which companies can innovate and change their practices to exploit market opportunities in a responsible way. Exhibit 3 shows a projection from Cisco of the growth of global data traffic, together with an estimated rise in the number of mobile devices across the world. When combined with Exhibit 4, which shows that the majority of the UK population now own a smart-phone, we can see the scale of opportunity for British business to reach new customers and change the way they interact with their markets.

Source: Cisco VNI Global Mobile Data Forecast, 2010-2015

Exhibit 4 The share of the UK population owning a smart-phone has increased dramatically since 2010 38 2010 49 2011 51 2012 60 2013 0

UK smartphone owners as a percentage of the total population Source: eDigitalResearch and the Interactive Media in Retail Group

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

The volume of data available to businesses – generated by consumers using mobile devices – is set to increase exponentially, creating a significant opportunity. Given that much of this data will arise from exchanges between business and their customers, firms will look to aggregate this data in order to deliver more effective products and services. Research by Accenture has found an increasing number of firms taking this approach, leveraging this massive expansion in the volume of consumer data to make strategic changes to their business model and operations to meet customer needs.18 Moreover, such data can help firms generate smart solutions to common problems, simply by providing an evidence base from which to track patterns. Exhibit 5 shows how better use of data can help private companies improve essential functions, such as public transport.

“The volume of data available to businesses – generated by consumers using mobile devices – is set to increase exponentially, creating a significant opportunity. ”

Exhibit 5 Xerox – making use of transportation analytics to reduce congestion Xerox start from an understanding that the modern trend of digitalisation can help to streamline practices that have long been essential to the way societies communicate – transportation and movement. Technology developed in Xerox labs has used the availability of data sets such as fare purchases and season ticket information in relation to public transport, and simulated a model to track who is using what public transport at different times. This then provides public transportation network operators with an analysis of where bottlenecks in congestion are likely to occur and plan accordingly. Furthermore, this also helps operators plan what they need to do in order to alert commuters and, given the spread of smartphones and tablets, these can be used effectively to disseminate real-time information. This is an example of how collation and analysis of data can help infrastructure operators to better plan their services and help commuters to receive frequent and accurate travel updates. It represents a ‘smart’ solution to every-day problems on the ground.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 6 Sony Music and 4G – working to deliver creative content over digital platforms “Something we are a big believer in at Sony is creative innovation with a myriad of digital platforms. Certainly, telecoms companies look like they will be a huge partner with the advent of 4G. It’s really about finding strong commercial solutions. That’s the future.” “There’s a very high use of smartphones for streaming music, while music apps are still the second-most downloaded applications. We strongly believe that a lot of the music services set up by the carriers have not been well managed or marketed. There is an awful lot that we as an industry can bring to the telecoms business in terms of what consumers want. They understand their customers but we understand music consumers and I think there’s a real value to us working together to create compelling commercial offerings.” Nick Gatfield, Chairman, Sony Music Entertainment UK & Ireland, MusicWeek, August 2012 Organisations such as Sony Music have realised that the growth of smartphone usage presents a new opportunity to deliver on-demand and legally licensed products to consumers and are therefore exploring the opportunities for collaboration with network operators to deliver compelling music services over 4G. The power of music services integrated into a mobile offering has been demonstrated in other territories such as the partnership between Spotify and Telia in Sweden, with benefits accruing to Telia in the region of €60million.

…strengthening high performance in creative sectors where the UK is already strong… Investment in broader, faster digital infrastructure allows innovation to flourish in a range of sectors especially reliant on network capability. In many of these high-growth digital and creative content sectors – such as video games, radio, social media and software – the UK punches above its weight on a global stage and maintains a strong export performance. A recent government study estimated that these sectors accounted for £21.2billion of GVA or 1.7% of UK economic output in 2009.19 Content providers are constantly responding to the proliferation of digital technology, adapting traditional business models. As Exhibit 6 shows, working effectively with digital network operators can help established companies like Sony Music to channel traditional content in new and innovative ways.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

…and helping to build the physical infrastructure this country needs to remain competitive The commercial benefits of technology enabled by digital infrastructure are not restricted to the creative industries or the service sector – they can be felt just as strongly in other sectors, such as the construction industry. Here, contractors have long awaited the roll-out of 4G connectivity. Its speed and coverage is already helping firms like Kier get a site up and running swiftly, with the ability to model in real-time on the ground as a particular project evolves.20 Moreover, digital networks are of critical importance to the wider use of Building Information Modelling (BIM) technology by contractors like Skanska in delivering some of the UK’s biggest transport projects, such as the £6.2billion scheme to widen the M25 motorway. What this shows is that investment in faster digital networks and broader coverage can, in turn, help to deliver other types of critical national infrastructure. The cross-cutting nature of digital networks and their ability to support the government’s broad policy goals – specifically the renewal of more traditional national infrastructure and the need to boost our export performance – demonstrates why this particular type of infrastructure should not be kept in a silo, set apart from considerations about our future transport and energy needs. Digital networks are vital in getting big projects moving and the example of the roll-out of SMART meters further demonstrates this importance. To co-ordinate information on energy usage between a range of stakeholders, including energy companies and network providers,

the government is set to appoint a designated Data and Communications Company (DCC) later this year. But for the DCC to play this co-ordinating role, the availability of high-speed connectivity is essential. As the government continues to deliberate the UK’s future infrastructure needs and which projects should be prioritised, digital infrastructure must sit as an equal partner in the infrastructure debate. The examples above illustrate the pivotal role of digital technology in the delivery of physical infrastructure and – especially in the case of smart meters to better monitor energy usage – in driving savings for businesses and consumers alike. Facilitating constant improvements to the UK’s underlying digital networks is therefore vital if we are to speed up shovel-ready projects and deliver efficiencies in critical areas, such as energy provision. In looking to shape the National Infrastructure Plan into a future pipeline, businesses need government to think about the interaction between different priority projects, and how digital infrastructure is not self-contained but acts as pivotal crossinfrastructure enabler. When Transport for London and project planners consider how to build the ‘Crossrail’ of the future, for example, it must be an essential requirement to have teams in place which can assess large swathes of data to work out where particular risks to the project might be, and establish the best forms of digital technology to employ in order to speed up delivery. Digital capabilities have to be built into the UK’s broader infrastructure landscape – our international competitors are already well on their way.

Letâ&#x20AC;&#x2122;s get digital â&#x20AC;&#x201C; harnessing the commercial potential of digital infrastructure in the UK

As the government continues to deliberate the UKâ&#x20AC;&#x2122;s future infrastructure needs and which projects should be prioritised, digital infrastructure must sit as an equal partner in the infrastructure debate.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Private investment in infrastructure supports a vibrant digital economy in the UK and we must encourage businesses to do more with online services

In the last decade, private investment has driven the roll-out of our digital infrastructure – and we will continue to look to the private sector to build on this progress over the next decade. The on-going expansion of the UK’s digital footprint can only serve to further support our worldbeating digital economy. Our consumers are prolific online shoppers, making the UK the largest e-commerce market in the world and offering huge potential for companies savvy enough to flex their business model to meet this demand. Moreover, UK business should be wellpositioned to harness the commercial potential that stems from better connectivity. With prospects for future economic growth pinned to an investment and export-led recovery, it is vital that we encourage businesses to spread their wings online, accessing new markets through cross-border e-commerce and building new supply chains.

Due to the on-going progress with network roll-out, the UK compares broadly well with our international counterparts on a number of indicators. First, the UK has the second highest percentage of households penetrated by fixed broadband among major economies. Second, the UK scores highly according to World Bank figures on the number of mobile subscriptions per 100 people. Third, with on-going efforts from the private sector to roll-out superfast broadband to well over two-thirds of the population, the percentage of broadband subscriptions which count as superfast in the UK is now above both the EU average and Germany, France and Italy. But to further cement the UK as a world-beater in the global digital economy, we need to continue our efforts to bridge the gap between the coverage of urban and rural locations. Moreover, government and industry need to work together to boost connectivity among the business community, particularly for SMEs, with one study estimating that there is a commercial opportunity for UK plc here worth £18.8billion.21 Further progress in these areas will help to make the UK an even more attractive place to set up shop.

Private investment in networks has delivered demonstrable change in the UK’s digital footprint Private sector investment has been at the forefront of the existing network roll-out of both fixed and mobile connections. The importance of the private sector’s role was underlined by the

government only months into the 2010 parliament: “private investment has been the driving force behind advances in communications technology”.22 There are many commercial players driving forward different projects around the country. BT will have invested £2.5billion to bring superfast broadband to more than two-thirds of UK homes by the spring of 2014 and have passed over 15 million homes to date. Similarly, Virgin Media pledged to invest over £13.5billion over the next 20 years to extend their cable networks. On mobile networks, according to figures from the Mobile Operators Association (MOA), the capital costs invested in existing networks by all operators stands (at current prices) between £4.2billion and £5.7billion. In 2011, EE committed to invest £1.5billion over three years, while Vodafone have pledged £900 million in 2013-14 alone to merge their fixed and mobile offerings. These figures only reveal the investment levels in the current network; the roll-out of new 4G services will add half again to these levels. The MOA estimates that operators will spend a further £2.1billion to £3billion over the next four years. This private sector investment has delivered the tangible progress in our networks to date. Data compiled by OFCOM shows that the average broadband speed in the UK has increased by 69% from 2011 to 2012.23 Furthermore, OFCOM confirm that the number of UK premises which can receive a 3G mobile signal from all mobile operators increased from 72% in 2011 to 77% in 2012.24

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 7 Size of each country’s internet economy as a percentage of national GDP 8.3 United Kingdom

From a consumer perspective, the UK’s digital economy is in strong health. OFCOM data confirms that we are a “data-savvy” nation, with four in ten of us now using smartphones.25 UK consumers spend each year an average of £1083 per head online, which makes the UK the largest e-commerce market in the world.26 Research from the Boston Consulting Group (BCG) complements this assertion, calculating that the size of the internet economy in the United Kingdom across a range of industries was 8.3 per cent of GDP in 2010, ahead of the OECD average.27 Exhibit 7 demonstrates the UK’s lead against some of our biggest international competitors.

7.3 South Korea 5.5 China 4.7 Japan 4.7 United States 4.1 India 3.3 Australia 3 Canada 3

This positive picture is reflected in the UK’s international rankings on digital infrastructure, where we score broadly well on a number of indicators…

Germany 2.9 France 2.2 Brazil 2.1 Italy 0

2 Internet economy (as a % of GDP)

This infrastructure supports a thriving digital economy in the UK, with the largest e-commerce market in the world

Source: Boston Consulting Group

Given the prolific online activity of UK consumers, it is not surprising that we compare rather well with our international counterparts when we look at the overall uptake – businesses and households combined– of both fixed and mobile broadband subscriptions. Exhibit 8 shows that the UK has the second highest percentage of households penetrated by fixed broadband among major economies – a result that is complemented by the World Bank mobile subscription results in Exhibit 9, in which the UK scores highly.

Exhibit 8 Broadband penetration of households per 100 people during 2011 81 France 77 UK 75 USA 69 Germany 64 Spain 54 Italy 0

100 Source: OFCOM

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 9 Number of mobile subscriptions per 100 people by country 150

With the on-going spread of fast broadband networks, it is no surprise that the uptake of digital services by businesses and consumers has risen over the past few years. As Exhibit 10 confirms, as of January 2013, the percentage of broadband subscriptions which count as superfast in the UK is now above the EU average and Germany, France and Italy.

125

100

This improving picture is particularly important as we look to extend the coverage of broadband networks to rural areas throughout the United Kingdom. Locally led campaigns such as ‘Digital Business First’ indicate that there is real demand for faster connectivity from Local Enterprise Partnerships and industry in these areas.

…and to retain our competitiveness, we need to continually focus on extending coverage to rural areas...

2008

2009

United States

Germany

China

United Kingdom

Japan

2010

2011

Source: World Bank

The latest statistics from OFCOM in 2012 point to some disparities between different regions and between different types of settlement. For instance, while the overall availability of superfast broadband services stands at 65% in the UK, there is a marked difference between the figure for superfast availability in Northern Ireland (95%) and the comparative figure for Wales (37%), although here BT and BDUK look set to deliver superfast broadband to over 95% of premises by 2015. Similarly, in 2012, while 84% of urban premises had access to superfast broadband, only 19% of rural areas could say the same.28 The picture was similar for mobile coverage: while 80.5% of premises in England are covered by 3G signal coverage from all network operators, in Wales and Northern Ireland the figures stand at 55.9% and 52.4% respectively.29

Exhibit 10 Superfast Broadband/Next Generation Access uptake as a % of total broadband subscriptions 2 Italy 3 France 11 Austria 14 Germany 18 Denmark 20 EU 22 Spain 25 UK 27 Ireland 33 Finland 35 Sweden 52 Netherlands 0

Source: European Commission, Digital Agenda Scorecard, 2013

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

We know that picture this will improve as the UK’s digital footprint continues to expand; nonetheless, a primary policy objective has to be to ensure that all regions of the United Kingdom, whether north or south, rural or urban, England or devolved nation, can have access to the fast connectivity which, in turn, will deliver a range of benefits to the economy across the board.

…while ensuring that we do our utmost to boost online business activity, particularly in the context of SMEs The size of the UK digital consumer market might be substantial, but there is always more that can be done to help boost the uptake of digital services by businesses and to encourage them to do more online. This is because digital connectivity offers huge potential for export activity, new supply chain links and smarter, often cheaper, commercial operations. In practice, the substantial majority of businesses in the UK have either ethernet or broadband connections, according to BT Business research.30 Some evidence suggests that there is more to be done to ensure that smaller firms are able to fully exploit the benefits of the internet. A report by Booz & Co suggests that if more SMEs were to market and operate online, UK plc could benefit to the tune of £18.8billion.31 As an international comparison, the Booz & Co study also showed that while only 14% of SMEs currently sell online in the UK, in Norway that figure is doubled, with 30% of SMEs selling online.32 For the UK to maximise the potential of our investment in digital infrastructure, we have to get these companies making the most of our networks.

The benefits for SMEs will come not just from tapping into the UK’s domestic e-commerce market but also by gaining greater exposure to the global marketplace. As recent CBI work has emphasised, to consolidate the path towards growth, the UK has to tilt the balance of its economy towards investment and exports, pushing trade towards foreign markets with a higher growth potential.33 Digital infrastructure provides companies with a portal through which to access a global consumer base, but many UK firms are currently missing out on this opportunity. To lock UK consumers and businesses in a virtuous circle of improvement and innovation, we need to boost uptake to keep up with the pace of infrastructure roll-out.

Our international competitors are taking big steps to get the most out of their network investment – and the UK should set out a long term plan to stay ahead. Many of the UK’s international competitors are taking concrete steps to develop world-class digital infrastructure, recognising the need to approach the challenge with a long-term strategy and a clear objective. In France, President Hollande has recently committed to an investment of €20billion over the course of the next decade in order to deliver high-speed broadband to every household in the country by 2023 – in practice, this means €200million of investment per year with a mixed public/private sector investment model.34 In an earlier comparative study of different broadband plans across a range of nations, researchers

from Harvard University found that in the deployment of the fibre-optic cables needed to roll-out superfast ‘fixed’ broadband, the most successful countries – such as Sweden, South Korea and Japan – made large, long-term investments, structured by decade-long plans that delivered high quality networks.35 Against these examples, UK businesses need to know whether policymakers are currently equipped to do what needs to be done to ensure that the UK cements its current position. It is no longer sufficient to approach the challenge in a piecemeal fashion, to assume that digital infrastructure will sort itself out while ministers concentrate on fixing the road network or setting a new energy framework. To compete on a global stage, businesses need infrastructure that will create a true ‘digital ecosystem’ – where speed and coverage are maximised, uptake is incentivised and networks are fully integrated with other physical infrastructure to deliver the biggest and widest return on investment. With providers currently unsure about the exact policy and funding landscape beyond the end of this Parliament, clarity and longtermism are crucial.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

For continued improvements to our digital infrastructure in the future, we need coherent and co-ordinated policy

The private sector can only go so far with the roll-out of digital infrastructure – where it is uneconomic to invest, the government has had to step in to complete the job. As we move towards the end of this Parliament, we are in a position to assess current schemes to suggest how better coherence and co-ordination can help to deploy government assisted projects swiftly.

Moreover, there is a question over how government and industry can co-ordinate effectively on demand-side measures, working together to stimulate business uptake. Different business users in different sectors will require different levels of connectivity, but we need to ensure that more businesses are in a position to exploit the opportunities made possible by the digital networks available. There is no ‘silver bullet’ to boost business connectivity, but setting out the respective roles and responsibilities of government and industry to boost demand is an essential start.

Given the delayed Return-On-Investment for private infrastructure providers, in some areas the government has needed to step in where it is uneconomic to invest While more and more private investment is being ploughed into rolling out the networks we need to support business growth and consumer demand, Exhibit 11 shows that total industry revenue from telecoms operators has fallen slightly in the last few years. Couple this trend with both the rising number of fixed broadband connections and the demand for data outlined above and the picture becomes complicated. There needs to be a much greater acknowledgement of the levels of investment involved in maintaining and renewing our digital infrastructure: AT Kearney research shows that infrastructure investment accounts for 72% of the internet value chain.36 The critical point to highlight is that much of the immediate economic value provided by the roll-out of digital infrastructure does not flow direct to network builders/operators. Indeed, it will take a longer

period for operators to gain an adequate return-on-investment compared to the more significant short-term economic boost their investment brings for UK plc as a whole. There seems to be an expectation from government that the industry will deliver no matter what. This expectation manifests itself in the regulatory framework, with the regulator instructed by statute to minimise prices for the consumer above any consideration of the need to invest in and deliver network upgrades to meet consumer demand. With investment in new and existing digital networks so critically important, we need to assess whether the existing policy and regulatory frameworks are designed to support growth and whether they strike the right balance in order to facilitate the sustainable levels of private-led capital funding we need.

Exhibit 11 Total telecoms industry revenue (£bn) 43

2008

2009

2010

2011

Source: Policy Exchange and OFCOM data

Letâ&#x20AC;&#x2122;s get digital â&#x20AC;&#x201C; harnessing the commercial potential of digital infrastructure in the UK

Different business users in different sectors will require different levels of connectivity, but we need to ensure that more businesses are in a position to exploit the opportunities made possible by the digital networks available.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

The government has set up various initiatives to support this private sector investment Given the role of the network providers, wholesalers and substantial private sector investment in the roll-out of digital infrastructure, the logical issue to address next is the role of the government. In this market, government has two clear functions: firstly, to create the right regulatory and policy framework to incentivise and support continued private investment; and secondly, to fund broadband roll-out in areas of the country where it is not economic for the private sector to invest, usually due to the combination of a small customer base that requires disproportionate capital costs to reach. To meet this latter function, the government set out three specific targets in 2010: the delivery of superfast broadband to 90% of the population, minimum broadband access for the remaining 10% of the population, and the extension of mobile coverage to 99% of the population, with improved quality in areas of poor coverage. Exhibit 12 sets out these targets in detail.

£150m

Government capital expenditure pledged to the Mobile Infrastructure Project (MIP)

To deliver these targets, the government has intervened in the market through a series of focused initiatives, with varying degrees of success. • The Broadband Delivery Programme: An allocated £530million from BBC licence fee receipts given to Broadband Delivery UK (BDUK) within the Department for Culture, Media and Sport (DCMS). This pot was to fund the roll-out of superfast broadband in rural communities, along with funding from local authorities and private sector investment. Moreover, in some qualifying cases such as Northern Ireland and Cornwall, this funding has been combined with Regional and Structural funds from the European Union. • £150million Urban Broadband Fund: a pot to create so-called ‘super-connected’ cities through the roll-out of ‘ultrafast’ broadband. This money is government capital expenditure which has been allocated in two rounds, where successful cities and towns bid for a portion of the funding available. However, the programme has been held up due to difficulties in obtaining state aid approval from the European Commission. In efforts to revise the scheme, the government has recently opened a consultation on providing a voucher scheme for SMEs worth up to £90million.37 • £20million Rural Community Broadband Fund: a pot to serve the areas not covered by the first two schemes. This fund is jointly administered by BDUK and the Department for the Environment, Food and Rural Affairs (DEFRA). • A further £150million of government expenditure has been pledged to the Mobile Infrastructure Project (MIP): this is a scheme intended to support the infrastructure required to channel mobile services to rural ‘not spots’ – those with poor or non-existing coverage.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 12 The government’s broadband targets

The ‘Next Generation Access’ target

The ‘Universal Services Commitment’ target

This target sets out to ensure that 90% of the UK population will have access to superfast broadband by 2015. Looking at the pie chart below, two-thirds of this 90% (or 60% of the population) are covered by BT’s own commercial investment worth £2.5 billion. Therefore, government involvement here has been funding to reach the final-third of this 90%, helping to incentivise the private sector to invest in the roll-out of digital infrastructure for those rural communities which commercial investment cannot cover alone.

To complement the above approach, this target is set to ensure that the “final 10%” (the percentage of the population not covered by either the BT commercial roll-out or the BDUK scheme – although the actual percentage may be lower if the roll-out to the 90% is able to cover more households and businesses than originally thought) can join the rest of the population in accessing a minimum speed of 2Mbps.

The ‘Mobile Coverage target’ This target has two-parts – firstly, “to improve the coverage and quality of mobile network services for the 5-10% of consumers and businesses that live and work in areas of the UK where existing mobile network coverage is poor and non-existent”; and secondly, “to extend coverage to 99% of the population”.

10%

Percentage of UK population covered by different targets

30% BT £2.5 billion commercial investment BDUK rural scheme Final 10%

60%

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

A look at existing schemes suggests that swift progress depends on ensuring that policy reforms support intended outcomes The government has made a financial commitment to invest in digital infrastructure, and a look at some projects intended for delivery by 2015 suggests how the policy framework could be improved beyond the next Parliament. In the case of the Mobile Infrastructure Project, some delays have been caused both by a lack of clarity about the primary focus of the initiative (the MIP) and the need for providers to await further supply-side reform. Turning to the Broadband Delivery Programme, the government has recently extended both the target and the delivery timetable with the aim to bring superfast ‘fixed’ broadband to 95% of the population by 2017.38 Here, there are lessons for policymakers as well, including the need to secure both state aid approval from the European Commission and the necessary policy instruments on the supply side as quickly as possible. Exhibits 13 and 14 appraise existing schemes to show that what is needed in the future is a joined-up, co-ordinated approach across government, complementing the roll-out of digital infrastructure with required supporting reforms in areas such as planning and regulatory guidelines.

Exhibit 13 The Broadband Delivery Programme The government’s Broadband Delivery Programme is intended to help deliver ministers’ stated ambition of having “the best superfast broadband network in Europe” by 2015 and to complement the swift commercial roll-out being undertaken by private providers. According to the government’s own figures, submitted in late March 2013, 26 out of 43 local projects were in procurement with 17 in implementation.39 Updated figures released by the Department for Culture, Media & Sport in May 2013 sought to confirm that 22 out of 44 projects had now moved into the delivery phase.40 The project was given an amber/red rating by the government’s ‘Major Projects Authority’ in March, but the network operator chiefly involved with the Programme, BT, asserts that the government’s ambition for 2015 will be realised. Going forward, we can observe two chief ‘policy lessons’ from the Broadband Delivery Programme. First, for the avoidance of any doubt, negotiations with the Commissioner for Competition in the European Commission should take place as early as possible in order to secure their involvement and prior approval for ‘state aid’ at the drafting stage of the programme. Second, progress on supply-side reform was unnecessarily protracted as shown by the fierce debate on Clause 8 in the Growth and Infrastructure Act. This Clause relaxes restrictions on the roll-out of broadband infrastructure, consistent with the aims outlined by the coalition in the

National Planning Policy Framework (NPPF). The passage of the Act means that this particular measure to remove planning barriers is now in place to support future programmes. As a general approach to planning reform, the NPPF states that local authorities “should aim to keep the number of radio and telecommunications masts and the sites for such installations to a minimum consistent with the efficient operation of the network”.41 The CBI supports this principle but it should not be a hindrance to the further streamlining of planning arrangements on the supply side to ensure that projects designed to deploy and operate superfast fixed broadband in hard-to-reach areas get underway.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 14 The Mobile Infrastructure Project (MIP)

The MIP was initially announced in October 2011, with £150million of capital expenditure pledged by the government. Funds from the MIP were initially earmarked to facilitate the extension of mobile voice (2G) coverage to up to 60,000 premises and ten key roads where existing mobile coverage is poor or non-existent. However, in later literature, it was implied that funds would be used to address the government’s twin Mobile Coverage Targets (outlined in Exhibit 12). Meanwhile, with the recent successful completion of the 4G spectrum auction, attention has turned to the fundamental question of whether we have the necessary infrastructure in place to support 4G roll-out.

The need for coherence

Better co-ordination

Given that some areas still have poor access to existing mobile services, the MIP’s primary aim should be made clear: is it to improve coverage of existing services such as 2G or 3G (with the caveat that only 3G connections are able to channel data over the internet), or could it be used to help facilitate 4G roll out in rural areas? At the recent 4G auction, only some of the 4G spectrum sold and packaged by OFCOM carried a coverage obligation: a requirement to extend indoor coverage to at least 98% of the total population and at least 95% of the population of each of the UK nations by 2017. This obligation was assumed by only one mobile network operator (O2 TelefÓnica).

Furthermore, for the MIP to properly incentivise providers to make the necessary upgrade investment, swift movement in streamlining supply-side arrangements is of the utmost importance. Reforms to the mobile planning regime and mast heights were not included in the Growth and Infrastructure Act, but the government has recently published a consultation to move the situation forward.

For more providers to invest in extending coverage to rural areas, the role of the MIP’s assistance becomes essential. The ideal scenario would be to cover off both objectives with this £150 million: using public funds to incentivise infrastructure providers to roll out networks which can provide existing 3G coverage to remote rural areas, while also ensuring that any infrastructure deployed in these areas is 4G-ready and, as much as possible, fit to channel 5G services in the future.

Network providers need to see a statutory instrument produced as soon as possible that provides clarification on how mobile operators can upgrade existing infrastructure sites to make them 4G ready. In addition, regulatory instruments such as the Electronic Communications Code must be reformed to ensure it does not artificially push up the cost of network roll-out for some types of providers. Mobile network operators need to be able to upgrade infrastructure sites without disproportionate rent hikes. Full plans for how the MIP will be delivered must be released soon given that, at the time of the 2012 consultation, industry bodies such as the Mobile Operators Association (MOA) stated that the timetable to meet the government’s mobile infrastructure targets by 2015 was already optimistic.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Beyond the end of the Parliament, the government must demonstrate the same dynamism and results focus of the private sector to ensure that all necessary policy barriers are removed to support future goals. Given the growth potential of investment in digital infrastructure and the almost instant transformational impact it brings to local areas, the private sector needs action from the government to help get projects moving. One key means to achieve faster delivery when planning future schemes to deliver connectivity, would be for the government to draw up a full ‘policy audit’ in consultation with industry stakeholders. This audit should be published and must detail all the necessary policy reforms – for example, on planning – needed to advance a particular scheme across government and a clear timetable for delivering these changes. It should set out barriers policymakers need to address, where these are located in government, and work out at which stage particular barriers need to be eliminated within the timescale of a project. Such an approach would help infrastructure providers to plan for often complex investment decisions.

Going forward, there are questions to be settled on the ‘final x%’ and spectrum There are two difficult areas that need to be addressed if infrastructure providers are to have a clearer view of the post-2015 landscape: how to ensure that superfast connectivity can reach the ‘final 10%’ and how to approach the future allocation of spectrum. Without a clear answer – or at least a clear process to determine the answer – both infrastructure providers and business users will not be able to plan ahead on investment. In addressing the first questions, it is worth remembering that there will be plenty of business users located in areas within the ‘final 10%’ bracket. Even with the £20million funding from the Rural Community Broadband Fund to spread minimum coverage, and in spite of the range of technologies available, there will still

be a number of businesses that will be unable to access the superfast services that could catapult their operations onto a different trajectory. In practice, in some localities, such as Surrey, Cambridgeshire and East Sussex, it may be possible for providers to extend connectivity even further than initially set out by the government’s targets, to premises currently within the ‘final 10%’. Government should do everything it can to help stretch these boundaries so that the ‘10%’ becomes an unspecified ‘final x%’ in single digits. Indeed, its recent pledges to help fund the expansion of superfast broadband to 95% of the population by 2017 and to consult on using a range of technologies to ensure at least 99% coverage by 2018 should be a great help in this regard.42 It is of vital importance that businesses located in this ‘final x%’, and in danger of not being adequately covered by the developing private or governmentassisted footprint, have access to the connectivity they need to develop and expand. These businesses cannot be classed as homogeneous simply because they may be situated in a rural location: there will be different demand requirements for different firms in different industries.

The second critical area requiring a concrete plan is the allocation of future spectrum. Spectrum refers to the electromagnetic waves over which a variety of services are launched, including broadcasting and mobile signals. In an age where we are seeing demand from consumers and businesses for the transmission of data, spectrum supply is finite; therefore both the government and the regulator (OFCOM) have several balances to strike in making spectrum available to a range of service providers and in releasing packages of spectrum at different frequencies. At previous auctions – 3G in 2001 and 4G in 2013 – mixed lots of high frequency and low frequency spectrum were sold to providers to ensure that coverage over both extensive rural areas and dense cities would be possible. How much money spectrum receipts from auctions will raise for the Treasury should not be the primary debate concerning government policy on spectrum. Instead, there needs to be an effective dialogue with industry in order to get the balance right in allocating future spectrum to a range of operators. The aim for policymakers must be to ensure that spectrum is allocated in such a way that consumers are able to receive a range of in-demand services and that businesses are in a position to receive faster connectivity.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Moreover, government and industry need to work together on a coherent approach to boost demand The case studies above demonstrate the need for coherence and co-ordination in supply-side measures – but this focus should be mirrored in initiatives to stimulate demand. Earlier chapters have highlighted the commercial opportunities for businesses – particularly at the smaller end – in doing more online and, to help unlock this growth potential, we need to put as much effort into boosting uptake as we do into building the infrastructure in the first place. However, demand side policy is, by its very nature, hard to define. The capacity requirements of a sector such as Soho’s burgeoning Visual Effects (VFX) industry, for instance, will be different from the capacity requirements of a rural mid-sized business, but the quality of digital networks is of central importance to both. It therefore makes sense to distinguish between ‘high-level’ demand, where the need for high speed is acute, and ‘low-level’ demand, where a basic level of coverage is necessary to carry out commercial functions. It is often the latter which requires stimulation: either an awareness campaign or incentives to ensure that firms are mindful of the commercial opportunities presented by digital networks, and are prepared and confident to take advantage of the benefits. Go ON UK works to draw attention to the sizeable commercial opportunity cost here, with many existing businesses either not making use of digital tools, such as a website, or not having a digital presence at all. The difficulty in addressing this problem is establishing responsibility: is it industry or the government, or both, who should be investing in demand-side measures? There are a variety of schemes either currently in operation or which will come

into force soon. These include the UK’s Digital Skills Alliance, which is a cross-industry body looking to boost basic digital skills and a commitment to introduce a future scheme to educate SMEs on how they can trade online due to be announced later this year. On the commercial side, the government has proposed the provision of vouchers to SMEs in areas without connectivity to part-fund some of the costs needed to gain access to digital infrastructure. The private sector also plays its part, whether through acting as industry partners for Go ON UK (in the case of the BBC, Eon, EE, Lloyds Banking Group, Post Office and Talk Talk) or involvement in a variety of skills campaigns and incentivising web-based businesses. However, given the constant need to boost business uptake, it is clear that these ad hoc measures are not sufficient. We need an aggregation of initiatives – the private sector is willing to play its part but we need to coordinate our efforts. The current approach to demand-side policy desperately needs reviewing. Policymakers need to move towards setting out a clear framework for what the roles and responsibilities of government and business should be on the demand side to 2015 and beyond. For inspiration, the Scottish Government’s ‘Scotland’s Digital Future’ strategy provides an interesting case study of how to co-ordinate business and industry activity on boosting business uptake.43 Here, as part of the strategy, several private sector firms, including Hewlett-Packard, Cisco, and BT serve as signatories to a ‘Digital Participation Charter’, committing them to help improve access to the digital economy. Policymakers south of the border, in collaboration with industry, should examine whether a similar approach could inject some new impetus into boosting business uptake.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

We need a strategy from Whitehall to cement our long-term position as a world-beating digital economy The pace of change in the digital economy is incredibly dynamic, with no time to stand still. Relative to other areas of critical national infrastructure, such as transport or energy, our digital networks consistently out-perform in terms of quality and cost in the eyes of business. The UK has more than a fighting chance of catching countries such as Finland and Sweden who have embedded investment in digital networks as a central plank of their respective infrastructure strategies. To do this, we need to build on our existing momentum through a step-change in the way that the UK government views digital infrastructure – towards recognition that investment in this area is as important as other types of infrastructure in delivering the exports, the jobs, the regional prosperity and the shovel-ready projects that this country needs.

This report sets out a four point plan for government, developed with network providers and business users, to harness the commercial potential of digital infrastructure.

1. Government must articulate a vision and ambition for UK digital infrastructure that permeates Whitehall departments and boosts industry innovation The government must demonstrate greater leadership in order to seize the growth potential of digital infrastructure, particularly the capacity for digital networks to deliver a range of benefits across the economy and to support the realisation of key crossinfrastructure projects. This requires oversight of digital infrastructure at the highest level of infrastructure policymaking, ensuring that digital projects are embedded in government strategy. These deliberations need to start at the very top of Infrastructure UK, the body within the Treasury charged with providing a focus on the UK’s long-term infrastructure priorities.

Recommendation Embed digital at the heart of infrastructure decision-making in Whitehall by creating two new seats on the Infrastructure UK Advisory Council: one for DCMS Permanent Secretary and one for an industry representative on a rotational basis.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

The coalition’s first National Infrastructure Plan in 2010 did acknowledge the role of digital infrastructure as a vital crossinfrastructure enabler with the statement that ‘interdependencies between systems are growing, with increasing reliance on technology and digital networks’.44 However, there is little evidence that government departments have acted on this point. In infrastructure decisions such as rail franchise awards, for example, proper consideration needs to be given to how digital networks might be able to support project delivery. The swift realisation of government initiatives on digital infrastructure is essential because, as noted in Chapter 1, in the case of construction, faster and broader connectivity can help to get ‘shovel-ready’ projects off the ground and deliver efficiencies in broader areas of the economy. The UK’s international counterparts are fully aware of this link. Finland, for example, in its long-term plan for digital infrastructure, entitled ‘Productive and innovative Finland – digital agenda for the years 2011-2020’, has explicitly linked the importance of improving digital infrastructure to the contribution these upgrades can make in supporting research schemes to monitor energy efficiency.

Recommendation Revise the ‘National Infrastructure Plan’ in its next upgrade to better reflect the role that digital networks play in underpinning and supporting the delivery of other major projects.

Through a longer-term approach to planning, the government can demonstrate greater vision by identifying strategic opportunities for the UK over the next decade. Given the on-going proliferation of new forms of digital technology, the way we interact either as business-to-business or business-to-consumer will continue to change in exciting and unpredictable ways. Moreover, with cloud computing coming to the fore as a growing sector where the UK could have competitive advantage, the government has recognised the need to support firms involved in cloud computing through the work being undertaken by the Department for Business, Innovation and Skills on an ‘Information Economy’ sector plan. This plan sits as part of the government’s initiative for a UK industrial strategy and defines the information economy as “the part of the economy where digital technologies and information combine to drive productivity and create new growth opportunities across the whole economy”.45 The government’s guiding rationale – namely, to look at ways we can help ensure that a variety of sectors in the digital economy can make the most of future strategic growth opportunities – is the right focus for this work. However, when undertaking thought-leadership on the potential of the UK’s digital economy and technological possibilities in the future, it is essential to link in a discussion on how we can continue to develop the necessary supporting digital infrastructure and, moreover, what these networks currently have the capacity to support. How digital networks can help drive further

growth in existing high-performing markets in the UK, such as tech clusters and media content industries like Visual Effects for example, must be a central concern.

Recommendation Ensure that digital infrastructure is considered as part of the government’s industrial strategy work, ensuring we have the quality networks needed to help deliver the BIS ‘Information Economy’ strategy.

2. To translate this vision into reality, government must work with industry to develop a clear delivery strategy that provides investment certainty beyond this Parliament and must have cross-party support Policymakers need to be upfront about what can be delivered within this Parliament, but they also have to lay the foundations for the projects of the future. This message is applicable to government’s approach to infrastructure across the board, but in the digital domain, it means that decisions must be made now on how we can continue to develop world-class digital infrastructure in order to provide certainty for investors and businesses alike beyond the five-year parliamentary cycle.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

The industry needs a strategy that stretches over the next decade, can attract cross-party consensus and is sufficiently co-ordinated as to address both supply and demand-side issues, as well as matching the outcomes desired with the policy reform required to achieve them. With a variety of funding pots such as the full £300 million future spend for BDUK and the £150million for the ‘Urban Broadband Fund’ yet to be committed on the ground, stakeholders need certainty over how this money will be spent. In their reply to the Queen’s speech at the opening of Parliament in May, the Labour Party announced that a Labour government would halve the £150 million budget for the ‘Urban Broadband Fund’ and spend this on a new programme to fund digital skills. This shows that, currently, government and the opposition disagree on future spending priorities in this area. Furthermore, and as noted in the previous chapter, recent government announcements have implied that the ‘Urban Broadband Fund’ is now likely to take the form of a voucher scheme for SMEs worth up to £90million. Instead of tinkering with a variety of funding pots, investors need a long-term strategy in place with clarity over how funds will be spent. The CBI is of the view that Infrastructure UK is best placed to take this strategic look across Whitehall and the industry and set out a coherent policy and funding strategy for the next decade. The government should seek to gain cross-party support for this long-term plan and commitment to see it through beyond the next two parliaments. Exhibit 15 sets out the areas of consideration that Infrastructure UK might want to address in taking forward such a

task. This approach would complement the longer-term frameworks currently being considered in other areas of infrastructure, such as the future market framework for our energy supply being debated in the Energy Bill, or the long-term need for aviation capacity being considered by the Airports Commission.

Recommendation Commission Infrastructure UK to work with infrastructure delivery departments across Whitehall and industry representatives to formulate a new post-2015 strategy for the delivery and uptake of digital infrastructure in the next decade

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Exhibit 15 Outline for a government strategy on the future of digital infrastructure Industry needs a strategy that articulates how to achieve the government’s vision for the future of digital infrastructure in the UK. It must look beyond the 2009 ‘Digital Britain’ report and the coalition’s 2010 ‘Britain’s Superfast Broadband Future’ document, bringing together and assessing the capacity of all relevant aspects of government policy across the supply and demand side to help deliver the strategy. In undertaking such a process, Infrastructure UK should consider the following concerns: • Realism: The strategy must undertake a realistic assessment of metrics we are likely to achieve in the next decade through consultation with both consumers and industry specialists. These metrics should include targets for digital skills proficiency and rates of uptake by businesses as well as consumers. Furthermore, to provide clarity for investors and businesses alike, the strategy must set out the necessary levels of capital spending required from the public sector, in line with current government consolidation plans, and the likely projections of capital investment this would unlock from the private sector.

• Technology: An honest assessment of technology available and required should be coupled with demand requirements. Future governments should be in a position to act as an “honest broker” among a range of technologies that can deliver connectivity. • Role of the state: Policymakers must clarify the rules of the game – the parameters and principles that will guide and justify future state involvement in broadband roll-out. These principles must be consistent with updated state aid rules for broadband to ensure that any future programmes can be approved by the European Commission’s Commissioner for Competition as swiftly as possible. • Local empowerment: The strategy should articulate the relationship between national targets and local plans, referencing the role of business leaders and Local Enterprise Partnerships in determining local broadband plans. With government committed to introducing Lord Heseltine’s ‘ single local growth fund’, as outlined in his No Stone Unturned report , Infrastructure UK should consider how existing funding for digital infrastructure might be routed in this direction to allow business leaders to prioritise digital investment.

• Policy framework: To deliver the government’s targets for the next decade, the policy framework in which providers and business users are operating must be conducive to investment and efficient infrastructure roll-out. Infrastructure UK should undertake a policy audit as part of developing the strategy to assess current gaps and blockers. • Role of government and industry in boosting business uptake: Infrastructure UK should consider the appropriate policy instruments to stimulate demand and how new and existing private sector initiatives might be scaled up and/or aggregated to build on what works. • Skills: The strategy would be strengthened by a consideration of the skills required in both the roll-out of future digital infrastructure, and the uptake of commercial opportunities made possible through improved networks.

“Policymakers must clarify the rules of the game”

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

In addition to setting out a long-term strategy, government should look for quick wins within this Parliament, maximising investment to bolster the fragile recovery. A starting point is the £300million from future BBC licence fee settlements for 2015-16 and 2016-17, which was set aside as possible funding for BDUK in the next parliament. The government recently confirmed that £250million of this will be earmarked for use in 2015-16 to help extend the coverage of superfast fixed broadband to 95% of premises by 2017.46 Where possible, the CBI believes that the full £300million funding should be brought forward to this side of the general election. It would be easier for providers to scale up existing operations than to wait until 2015, when the roll-out programmes will be wrapping up, to kick-start a new round. This funding could be used to reach businesses and consumers in the ‘final x%’, enabling as many companies as possible to access a broadband service with decent functionality and speed. Under the existing Rural Community Broadband Fund, local communities are already working hard on a range of solutions to develop appropriate digital infrastructure to connect their area. For example, Northumberland County Council has been seeking investment to develop fibre networks direct to premises in areas that fall outside both the private and government-assisted footprint.47 Similarly, North Dorset Council are seeking combined funding of £4.1 million to help deliver fibre-optic cables to more than 2,000 homes and nearly 200 businesses.48

Furthermore, this funding could bolster the investment case for a variety of schemes in the private sector and spark further innovation on how to reach these difficult areas. Again, the government has announced its intention to consult with industry to promote more innovative technological solutions to reach at least 99% of the population by 2018.49 Yet this innovation is already underway in the private sector and funding should be frontloaded now to support it. For example, Vodafone and Three have already made use of ‘open Femtocell’ technology in rural towns and villages – constituting small, low-power mobile phone base stations that can be placed on existing telephone poles and therefore largely avoid the need for the approval of new masts. Equally, BT and EE have recently been collaborating on trials to provide faster broadband speeds through the use of 4G LTE Technology.50 There is a lot of experimentation going on in the private sector that could help reach the ‘final 10%’ – or ‘final x%’, as explained in Chapter 3 – and government can help to support it through complementary investment and acting as “honest broker” between industry players.

Recommendation Bring forward the £300million already set aside for future BDUK funding to this parliament to provide immediate investment and private sector support to roll out broadband connections to the ‘final 10%’.

The final piece of the infrastructure puzzle requiring a long-term strategic approach is the future of spectrum. The work that the government has been undertaking to free up surplus public sector spectrum from a range of departments, including the Ministry of Defence, is to be welcomed. This practice will go some way to help realise the ambition set out by the Chancellor in the 2013 Budget: “to release 500 MHz of spectrum by 2020”.57 Nevertheless, with delays to a promised new draft communications bill, we still need a coherent strategy to ensure that the allocation of spectrum for particular purposes supports the UK’s international competitiveness over the long term and delivers in-demand services to businesses and consumers alike. To achieve this, we need a shared understanding of future spectrum policy.

Recommendation Government, industry and OFCOM need to develop a shared blueprint on future policy for spectrum, balancing competing commercial interests, which should be used as a basis for the UK’s involvement in EU and global negotiations on spectrum bands.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

3. The regulatory framework for digital should be updated to encourage investment and highlight cross-industry collaboration In order to develop a strategy to realise the government’s vision for digital infrastructure, it is imperative to consider whether the current regulatory environment is geared up to support this ambition. The CBI believes that there are two ways in particular in which the work of OFCOM, the communications regulator with oversight on digital infrastructure, could be updated to better reflect the growth potential of investment in digital infrastructure. The first is to support the critical investment needed to continually improve and maintain the UK’s digital infrastructure, striking the right balance with consumer concerns. The second idea for OFCOM to consider is to monitor and publicise how UK industries – such as creative content – are positively embracing the opportunities afforded by improved digital networks, and collaborating successfully with infrastructure providers. Given the importance of private sector investment in ensuring that digital networks in the UK are fit to support economic growth, the CBI recommends that the government considers how the remit and priorities of OFCOM could be updated to support future infrastructure investment. While the regulator should continue to champion the interests of citizens and consumers, the regulatory framework must support capital spending plans from industry that are central to rolling out new and improved networks. This would be consistent with the approach taken by regulators for other

industries such as OFWAT and OFGEM. According to OFCOM’s priorities as currently set out in the Communications Act 2003, the regulator does have the discretion to consider “the desirability of encouraging investment and innovation in relevant markets”. Government and industry should discuss whether there is more that OFCOM could do to support private sector investment without compromising its existing priorities.

Recommendation Expand the remit of OFCOM to help promote growth through private sector investment and innovation in the market.

This report has highlighted the central importance of digital infrastructure as an enabler, particularly for sectors where the UK has world-beating strengths, such as the creative and digital content industries. The music industry, in particular, is increasingly collaborating with network providers to deliver services over new technological platforms. The CBI believes that there could be a role for the regulator to help support this activity: using its mandated function to report on particular trends (such as the state of the communications market) to provide best practice examples of successful collaboration between content providers and infrastructure operators in the delivery of legal commercial services. These examples could be included in existing publications from OFCOM, such as the annual Communications Market reports.

Recommendation Commission OFCOM to help promote industry collaboration by providing best practice examples on the collaboration between content providers and infrastructure operators in delivering legal commercial services.

4. Government and industry must set out a coherent plan to boost business uptake of digital technology – and the CBI will use its networks across sector and region to raise awareness of the commercial opportunities of doing more online None of the supply-side measures to facilitate infrastructure roll-out will make any difference to the UK’s growth prospects in the long term if the new and improved networks are not used. We need to boost business uptake to ensure that future improvements in the UK’s digital networks do not go to waste and that we keep pace with international rivals who are doing what they can to make the most of their infrastructure. The performance of international competitors in boosting demand for digital services on the part of businesses or consumers varies. A report by A.D. Little explores the relationship between 4G mobile coverage and improvements in uptake: in South Korea, 100% coverage within 14 months of the start of a roll-out programme

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

resulted in an uptake rate of 17.9%; however, in Germany, 16 months after the start of a roll-out programme resulting in 95% 4G coverage, the uptake rate was only 0.2%.53 The reasons why South Korea saw quicker results are hard to pin down, though factors such as the density of the population in close urban areas and a better focus on digital skills, with the provision of tablets in schools, might help to explain it. There is no silver bullet to solve this issue; nonetheless, considering the broad business benefits of connectivity, it is clear that an on-going collaborative effort from government and industry is necessary to encourage firms to do more online. This effort must sit shoulder-to-shoulder with constant improvements to underlying networks if we are to ensure that digital infrastructure can support future UK competitiveness. Government can play its role in boosting the uptake of digital technology, mainly through delivering public services online or via other digital means and pursuing the ‘digital by default’ strategy. Departments have opened up a variety of public sector data sets to help improve quality of service. So far, the government has published around 13,000 datasets in machine-readable formats, more than any other country in the world.54 With the introduction of the Universal Credit and the shift towards the online completion of HMRC tax returns, it is more important than ever to have a complementary approach to boosting infrastructure investment and business uptake. Examples like the ‘Digital Deal’, launched by the Department of Work and Pensions to incentivise social landlords to help get their tenants online, must become the new normal.

Recommendation Commit to finding new opportunities for government services to be delivered and administered online to help drive demand for broadband infrastructure.

The business community clearly has a vital role to play in partnership with government to ensure that more firms are in a position to make the most of their digital networks. With less than two years left of this parliament, policymakers and industry should collaborate to see if a formal partnership akin to Scotland’s ‘Digital Participation Charter’ could be enacted ahead of the next election. This will help to ensure that boosting business uptake is a central part of any future digital strategy. Furthermore, the CBI will commit to working with government and Go ON UK to try to boost awareness and uptake of digital services in its broader membership across the UK.

Recommendation Explore a formal partnership with industry geared towards boosting business uptake of digital services, and work with the CBI through Go ON UK to boost business awareness of digital commercial opportunities in all regions across the UK.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Summary of recommendations

Government must articulate a vision and ambition for UK digital infrastructure that permeates Whitehall departments and boosts industry innovation • Embed digital at the heart of infrastructure decision-making in Whitehall by creating two new seats on the Infrastructure UK Advisory Council: one for the DCMS Permanent Secretary and one for an industry representative on a rotational basis • Revise the National Infrastructure Plan in its next upgrade to reflect the priority role that digital projects play in underpinning and supporting the delivery of other major projects • Ensure that digital infrastructure is considered as part of the government’s industrial strategy work, ensuring we have the quality networks needed to help deliver the BIS ‘Information Economy’ strategy

To translate this vision into reality, government must work with industry to develop a clear delivery strategy that provides investment certainty beyond this Parliament and which has cross-party support • Commission Infrastructure UK to work with infrastructure delivery departments across Whitehall and industry representatives to formulate a new post-2015 strategy for the delivery and uptake of digital infrastructure in the next decade • Bring forward the £300million already allocated to BDUK for 2015-17 into this parliament to provide an immediate investment to roll out broadband connections to the ‘final 10%’ • Work with OFCOM and industry to develop a shared blueprint on future policy for spectrum, balancing competing commercial interests, which should be used as a basis for the UK’s involvement in EU and global negotiations on spectrum bands

The regulatory framework for digital should be updated to encourage investment and crossindustry collaboration • Expand the remit of OFCOM to help promote growth through private sector investment and innovation in the market • Commission OFCOM to help promote industry collaboration by providing best practice examples on the collaboration between content providers and infrastructure operators in delivering legal commercial services

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Katja Hall, CBI chief policy director

If we are serious about seizing the opportunities that investment in our digital networks presents, let’s get excited about today’s possibilities and start thinking about just what we can achieve in the future. In short, let’s get digital.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

Glossary

Digital infrastructure is a catch-all phrase, which refers in part to the tangible physical hardware that makes access to the internet possible, such as copper lines, ducts, fibre-optic cables and masts; but it also captures the intangible, namely the spectrum through which mobile broadband services are channelled over radio waves or the wireless routers which provide the platform for the internet in many homes. Accordingly, we need to be careful and specific about what we mean when we refer to different forms of digital infrastructure or, more accurately, ‘telecommunications’ infrastructure, such as broadband, whether fixed or mobile. The glossary below builds on definitions set out by OFCOM in its Communications Infrastructure Report (2012). Telecommunications refers to ‘conveyance over distance of speech, music and other sounds, visual images or signals by electric, magnetic or electro-magnetic means’. Fixed broadband refers to technology, such as copper lines and fibre-optic cables, which delivers broadband services either to local exchanges (in the case of copper), or to a high street cabinet or, in some cases, directly to a given premise (in the case of fibre). Superfast fixed broadband definitions vary according to different conceptions of speed. For instance, the UK government classifies superfast as having a minimum speed of 24 Megabits per second (Mbps); in contrast, the European Commission classifies superfast as having a minimum speed of 30 Mbps.

Mobile broadband refers to ‘various types of wireless, high speed internet access through a mobile telephone’. 3G or third generation mobile systems allow the transmission of various types of applications such as music, video and the internet. They are transmitted via spectrum, different portions of which were allocated to mobile network providers at an auction run by the regulator, OFCOM, in 2001. 4G or fourth generation mobile systems are ‘designed to provide faster data download and upload speeds on mobile networks’. 4G goes hand-in-hand with LTE or Long Term Evolution technology and the spectrum to launch 4G services was allocated in the recent auction at the start of 2013. Wi-Fi refers to a short-range wireless access technology connecting the base station (essentially, the hardware which emits the signal) with the end consumer. In addition to the types of infrastructure outlined above, where other forms of technology are mentioned, these are properly referenced over the course of this report.

Let’s get digital – harnessing the commercial potential of digital infrastructure in the UK

References

1 CBI, A vision for rebalancing the economy, December 2011

21 Booz&Co, This is for Everyone: The case for Universal Digitisation, 2012

2 CBI and KPMG, Infrastructure Survey, 2012

22 UK Government, Britain’s Superfast Broadband Future, December 2010

3 Policy Exchange, The Superfast and the Furious, 2012 4 Ernst & Young, 2013 UK Attractiveness Survey

23 OFCOM, UK Communications Infrastructure Report, 2012, p. 2: the data shows the average speed of a fixed broadband connection to be 12.7 Mbit/s in 2012 – an increase of 69% from the 7.5 Mbit/s recorded in 2011

5 Booz&Co, This is for Everyone: The case for Universal Digitisation, 2012

24 OFCOM, UK Communications Infrastructure Report, 2012

6 Ernst & Young, 2013 UK Attractiveness Survey

25 OFCOM, Adults media use and attitudes report, 2012

7 McKinsey Global Institute, Internet Matters: The Net’s sweeping impact on growth, jobs and prosperity, 2011

26 OFCOM, The Communications Market Report, July 2012

45 HM Government, UK Government Information Economy Strategy: A Call for Views and Evidence, February 2013

27 BCG, The Internet Economy in the G-20, March 2012

46 HM Treasury, Investing in Britain’s Future, June 2013

28 OFCOM data, Communications Infrastructure Report, June 2012 update

47 http://www.inorthumberland.org.uk/about

29 OFCOM data, Communications Infrastructure Report, June 2012 update

48 www.northdoresetbroadband.co.uk

30 BT Business research March 2013

49 HM Treasury, Investing in Britain’s Future, June 2013

11 Capital Economics, 4G and UK Growth, April 2012

31 Booz&Co, This is for Everyone: The case for Universal Digitisation, 2012

50 http://www.btplc.com/Innovation/News/4GLTE.htm

12 EE bringing 4G to rural Cumbria, March 2013; https://explore.ee.co.uk/ our-company/newsroom/ee-bringing-4g-to-rural-cumbria

32 Booz&Co, This is for Everyone: The case for Universal Digitisation, 2012

51 HM Government, Budget 2013, 1.95, p. 38; https://www.gov.uk/ sharing-defence-spectrum

8 AT Kearney, The Internet Economy in the United Kingdom, January 2012 9 Whether a rural area, town or city 10 BT and Regeneris Consulting, Superfast Broadband: Boosting Business and the UK economy, March 2012

13 Start-up Compass 2012 14 CBI, Making the UK the best place to invest, April 2011 15 CBI, Locally Grown: Unlocking business potential through regeneration, 2013 16 Ernst & Young, 2013 UK Attractiveness Survey 17 Pearson 2012 preliminary results 18 Accenture, Analytics in Action: Breakthroughs and barriers on the Journey to ROI, 2013 19 DCMS, Contribution of the digital communications sector to economic growth and productivity in the UK, September 2011 20 Telegraph Online, Building a 4G future without the fixed line, 19 April 2013

33 CBI, The Only Way is Exports, 2013 34 http://www.zdnet.com/ france-to-invest-20bn-in-high-speed-broadband-for-the-entirecountry-7000011671/ 35 Harvard University, Next Generation Connectivity – A Review of broadband internet transitions and policy from around the world, 2010 36 AT Kearney, The Internet Economy in the United Kingdom, 2011 37 Telegraph Online, George Osborne broadband growth plan abandoned over state aid complaints, 26 June 2013 38 HM Treasury, Investing in Britain’s Future, June 2013 39 The Major Projects Authority Annual Report, Government Major Projects Portfolio date for DCMS, 2013

40 DCMS, Progress on Broadband Transformatio: Roll-out passes halfway mark, 15 May 2015 41 DCLG, National Planning Policy Framework, 27 March 2012 42 HM Treasury, investing in Britain’s Future, June 2013 43 Scottish Government, Scotland’s Digital Future, 2011 44 HM Treasury and Infrastructure UK, National Infrastructure Plan, 2010

52 Communications Act (2003), General Duties of OFCOM, 3.(4).(d). 53 A.D. Little, The Business Benefits of 4G LTE, 2012 54 Policy Exchange, A Right to Data: Fulfilling the promise of open public data in the UK, 2012

Letâ&#x20AC;&#x2122;s get digital â&#x20AC;&#x201C; harnessing the commercial potential of digital infrastructure in the UK

For further information, contact: James Nation Policy Adviser, CBI Centre Point, 103 New Oxford Street London WC1A 1DU T: +44 (0)20 7395 8121 E: james.nation@cbi.org.uk

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