Government rejects House of Lords USO amendments
The Universal Service Obligation which has not made its passage onto the Law books yet has had another airing in the House of Commons today with the debate covering amendments requested by the House of Lords a few weeks ago.
The debate on the USO was part of the wider Digital Economy Bill and while ten days ago one would have being moaning about the length of time the bill is taking to make it onto the statute books with a General Election now just weeks away the Digital Economy Bill is one of those rushing their way through before Parliament ceases. If the Bill does make it onto the statute law books if there is a new Party in charge they may want to revisit the bill or if the Conservatives are returned with a new mandate there may be changes they wish to make to elements of the bill since if they have a larger majority getting controversial elements passed becomes easier.
"Lords amendment 1 challenges the Government to be more ambitious on universal digital connectivity. The universal service obligation forms part of our plan to deliver better connectivity, helping to ensure that everyone gets decent broadband and no one is left behind. However, we have serious concerns about whether the amendment is deliverable. As drafted, it is counterproductive to the implementation of a USO, because of the risk of legal challenge and the delay that that would cause. We are legislating for the USO under the EU telecoms legislative framework, under which a USO is intended to ensure a baseline of services where a substantial majority has taken up the service but the market has not delivered, and where users are at risk of social exclusion.
According to Ofcom’s latest data, in 2016, take-up of ultrafast broadband with a download speed of 300 megabits per second and higher was less than 0.1%, so we are nowhere near being able to demonstrate that the majority of the population have access to full fibre with a download speed of 2 gigabits per second. We therefore cannot accept Lords amendment 1, and we are not in a position of a substantial majority having taken up superfast broadband. I do, however, support the ambition of better, faster, more reliable broadband, so the Government propose an amendment in lieu that requires any broadband USO to set a download speed of at least 10 megabits per second, and requires the Government to direct Ofcom to review the minimum download speed in the broadband USO once superfast take-up is 75%. That gives the assurance that any USO speed will be reconsidered once a substantial majority of subscribers are on superfast."Matt Hancock Minister of State for Digital and Culture at the Department for Culture, Media and Sport as recorded by Hansard on 26th April 2017
The 2 Gbps USO requirement was always an amendment too far, and perhaps was more a case of those lobbying Lords and wanting the USO to mandate that the UK utilise full fibre (FTTP) and no other technology in delivering the USO. So to see Matt Hancock reject the 2 Gbps is no surprise. The debate about how the escalator will work and a 30 Mbps baseline for the initial USO has been rejected, with the original 10 Mbps holding. The amendments the Government is proposing to insert instead are:
Page 1, line 12, at end insert 2, but may not do so unless—
Page 2, line 23, at end insert— “72B Broadband download speeds: duty to give direction under section 72A
- (a) it specifies the minimum download speed that must be provided by those connections and services, and
- (b) the speed so specified is at least 10 megabits per second."
- The Secretary of State must give OFCOM a direction under section 72A if—
- (a) the universal service order specifies a minimum download speed for broadband connections and services and the speed so specified is less than 30 megabits per second, and
- (b) it appears to the Secretary of State, on the basis of information published by OFCOM, that broadband connections or services that provide a minimum download speed of at least 30 megabits per second are subscribed to for use in at least 75% of premises in the United Kingdom.
- The direction—
- (a) must require OFCOM to review and report to the Secretary of State on whether it would be appropriate for the universal service order to specify a higher minimum download speed, and
- (b) may also require OFCOM to review and report to the Secretary of State on any other matter falling within section 72A(1).”Amendments Digital Economy Bill on USO proposed by Government
So if the USO does turn out to be a 10 Mbps minimum with an escalation to 30 Mbps once superfast take-up reaches 75% or higher when will that be? Well superfast take-up at end of 2015 was reported at 50% by Ofcom and 54% at the end of 2016, which is inline with the relevant figures from providers financial reports, and that means an estimate of 59% based on observations from March 2017 speed test results is within the ballpark. If (and it is a big if) demand for superfast continues to grow at the same pace as indicated by the last full quarters financial results we are looking at a growth of 2.4 million premises or around 8 percent points a year. Therefore the trigger may fire in 2021, but 2022 looks more likely. Of course take-up may level off, or it might increase, forecasting demand is a difficult business, changes such as Ofcom slashing the price of the GEA-FTTC 40/10 service might boost demand, but that change is not certain and the full saving may not make it to the retail market.
Members of Parliament did respond to Matt Hancock questioning the level of ambition especially when there is a greater ambition to deliver full fibre, but as we mentioned back in 2016 there was always a risk with all the talk of full fibre that until one actually sees delivery it is all just political rhetoric. Our earlier paragraph on take-up hopefully does illustrate once MP who may have sourced some wrong figures in their response.
"Let us look at what will happen with the Government’s offer here and at the trigger mechanism of a 75% subscription rate. In 2016, only 31% of people were getting 30 megabits; in 2015, it was only 27%. How long is a constituent in England, Wales or Northern Ireland going to have to wait before the USO catches up and gets to 75%? The USO could be either a really ambitious measure to close the digital divide or simply a safety net, and it is quite clearly the latter, which is fine—as long as it is clearly articulated as such—because other things can be done."Extract of Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP) talking in Digital Economy Debate
Correction 10am 27th April Due to a human error and missing the section title in the Ofcom Connected Nation Report the author was reading take-up of over 10 Mbps broadband, rather than 30 Mbps and higher, we apologise for any confusion. Ofcom Connected Nation report does state 31% for 2016 and 27% for 2015. Which if correct and take-up remains linear at 4 percentage points per year would mean 75% reached in 2028! 31% take-up at the end of 2016 seems low, when there were 7.2 Openreach GEA live services and 4.8 million Virgin Media cable and another probably 300,000 with other superfast (mostly ultrafast too) services. Applying a 5% allowance on the GEA numbers to remove those not likely to be superfast you get a total of 11.9 million superfast premises, which is 42% of 28 million UK premises, or you could say 44% of the 92% of UK premises currently with access to a superfast broadband option. Another way of expressing the figure is that Ofcom reports broadband take-up is running at 78% of UK premises, which is around 22 million and thus superfast take-up is running at 54% (this last figure is the closest to what we observe in terms of take-up of superfast services in our speed test round-ups). Ofcom elsewhere in the Connected Nations 2016 report (page 5) does indicate that its figure for the number of superfast was 9 million, which is substantially different to the 12 million indicated by financial reports by the operators at the end of 2016, what we don't know exactly is what date the nine million applies to. Nine million take-up and the 31% figure gives a UK premises total of 29 million and thus if no changes to the way Ofcom reports take-up means effectively everyone who has broadband now would have to upgrade to superfast broadband, and given the performance issues around VDSL2 unless broadband take-up increases significantly 75% superfast take-up is almost impossible.
The bit that no-one wants to talk about is who and what technology will actually deliver the Universal Service Obligation, and at what price point for delivery will who ever is charged with the USO be able to opt out of using a gold standard service but deliver it using just satellite broadband. Long Reach VDSL is touted as a solution and if ADSL/ADSL2+ frequencies can be recovered with additional infill cabinets this is a possibility, but that seems to presume Openreach taking the USO mantle and they might be very busy concentrating on duct and pole access for millions of premises getting full fibre rolled out to them by numerous other operators once we are into 2019 and onwards.