Written Evidence submitted by Paolo Gerli and Professor Jason Whalley, Department of Entrepreneurship, Innovation & Strategy, Newcastle Business School, Northumbria University (RBD0034)

We welcome this opportunity to contribute to the Committee’s enquiry into rural broadband and digital only services. We believe that the barriers to delivering superfast broadband and improved mobile coverage in rural areas relate to the diseconomies of scale associated with the provision of network industries in sparsely populated areas. This said, it is possible to overcome these through adopting innovative and non-traditional ways to funding and building broadband infrastructures. Not enough is being done to narrow the divide that occurs between rural and urban areas, with the consequence that as ever more services become digital those areas without adequate connectivity will suffer. Within this context, the universal service obligation has a key role to play but its current specification is inadequate to narrow the gap in any meaningful sense. Furthermore, the sums pledged in recent government initiatives are small compared to the scale of the problem that needs to be tackled. Without adequate connectivity, those living and working in rural areas will be disadvantaged – the unemployed will find it difficult to apply for benefit, those at school will not be able to do their homework and famers will not be able to complete the necessary administrative processes. Our views on the five questions mentioned in the terms of reference are laid out below.

What are the barriers to delivering superfast broadband and improved mobile phone coverage in rural areas at an affordable cost to consumers?

1. The provision and access to network infrastructures in rural areas has historically been shaped by the diseconomies of scale associated with sparsely populated areas. Nevertheless, community-led initiatives have demonstrated that such diseconomies can be overturned by adopting alternative models for the deployment of broadband infrastructure (such as bottom-up design, demand-led rollout and cooperative funding). One of the most successful of these community-led initiatives is Broadband for the Rural North (B4RN).[1] Through actively engaging with those local communities that they intend to serve, B4RN has been able to deploy fibre-to-the-home (FTTH) in very remote areas and raise the bulk of the necessary funding themselves.[2]

2. Notwithstanding the development of these initiatives, the delivery of broadband remains problematic in rural areas – of particular importance is the lack of backhaul access.[3] The availability of backhaul remains limited, with only BT having the necessary geographical scale of a network to connect all the remote and rural communities that need improved broadband connectivity. Alternative providers that own and operate backhaul networks do exist,[4] and they have partnered with local operators. The challenge is how such collaborations can be fostered on a larger (geographical) scale that reduces the barriers to deploying broadband in rural areas.[5]

Is enough being done to address the disparity in coverage and digital service provision between rural and urban areas? What is the impact of the urban-rural digital divide on rural communities?

3. Although a number of initiatives to tackle the urban–rural digital divide have been undertaken, it remains a significant issue that risks to further amplify social and economic divides within the UK. Limited access to broadband has significant implications for the liveability of rural areas. Our research on the rural divide in England emphasised that access to broadband is increasingly crucial to perform key activities for the personal and professional lives of rural communities, from accessing public services to running a business.[6] The absence of broadband, combined with the reduction of public transport services, increases the sense of isolation of those living and working in rural communities and contributes to their depopulation.

4. But when fibre-based broadband is made available, there is (anecdotal) evidence that shows rural communities are able to attract residents on the one hand and support the development of businesses on the other. This observation echoes research from Germany that found as superfast broadband was expanded people moved to those rural areas where coverage was introduced.[7]

Is the current Universal Service Obligation (USO) adequate for the needs of rural communities and businesses and will it be effectively delivered? Given technological developments, including provision of 5G, will the USO provide the necessary level of connectivity for rural areas in the next decade?

5. The government has proposed a USO of 10 Mbit/s download. This is considerably slower than average speeds within the UK – according a recent Ofcom publication, average fixed residential broadband speeds have risen from 12 Mbit/s in 2012 to 46.2 Mbit/s in 2017.[8] Although there is a possibility to increase the USO speed from 10 to 30 Mbit/s,[9] this is not automatic and even if it did increase a gap will still remain between the average speeds available across the UK and those areas covered by USO. In other words, the USO will not close the digital divide that exists. This should come as no surprise given the description of USO as a ‘safety net’.[10]

6. Through specifying different download speeds in different policies – 10 Mbit/s for USO, 24 Mbit/s for BDUK – inconsistent messages are being provided regarding what speed is appropriate. The development of products and services based on 24 Mbit/s are likely to be difficult to access by those located in areas covered by USO. Conversely, developing products and services on the basis of 10 Mbit/s is likely to limit functionality and thus the socio-economic benefits associated with faster broadband access speeds.
7. Although a range of technologies may be used to deliver the USO,[11] prominence is given to two fibre based approaches: FTTC and FTTP. Moreover, BT has informed Ofcom that it intends to deliver the USO using fibre.[12] The greater the use of fibre and the closer it is to the end user, the faster broadband speeds should be – this begs the question as to why the USO is not (considerably) higher.

8. It is interesting to note that BT has highlighted the potential role of its 4G service in providing the USO. BT has stated that this service meets the technical specification of USO, with the subsequent investigation by Ofcom reassuring them that such technology could be used.[13] The appropriateness of using EE would also seem to be supported by the most recent Open Signal survey of the mobile consumer experience in the UK, which highlights its better performance – coverage, speed (down- and up-load), latency – compared to its peers.[14] Although the average download speed for EE was 29.6 Mbit/s[15], this is considerably less than the average fixed broadband download speed in 2018 of 54.2 Mbit/s.[16] There is, therefore, a danger that the use of existing wireless technologies will perpetuate the digital divide that currently exists with all that this entails.

9. Mobile networks are underpinned by fixed connectivity. This is particularly important when it comes to 5G, which will see a significant increase in the number of cells needed to deliver the speeds, latency, services etc. that are being talked about. The lack of fibre availability in rural and remote areas will limit their ability to benefit, at least in the short term, from 5G. 

10. Concerns have been raised by the recent announcement of mobile network operators to switch off their existing 3G network.[17] Although this development is unavoidable and is likely to be beneficial from a spectrum allocation perspective, it is important to ensure that the switch-off of 3G networks does not penalise rural and remote communities where 4G networks lack capacity or are not yet available. While the extent of not-spots has declined considerably in recent years, they still remain.[18]

Are the Government’s recent policy and funding announcements for improving digital connectivity adequate for rural areas, and how robust are the plans for delivery?

11. A series of recent announcements have indicated the government’s desire to expand and improve the quality of the UK’s broadband infrastructure. It is not clear to what extent these initiatives address rural areas; with the exception of USO, there was arguably greater interest in rural issues when BDUK was first initiated than there is today. The recent decision to provide £200 million to fund fibre networks in rural areas is welcome,[19] but the sums involved are arguably too small given the location of many unserved areas. Our research on BDUK has found a lack of transparency regarding the management of the clawback – through over estimating costs and underestimating demand, funds have been freed that could be used elsewhere to expand coverage[20]. More broadly, the inconsistent management of the clawback across the local projects highlights the need for a nationwide integrated approach to providing broadband across the country and ensure an efficient usage of public subsidies. Integral to this is the need for initiatives to learn from one another, and develop alternatives approaches to the delivery of rural broadband.[21]

12. As previously mentioned, community networks have emerged as a viable model for the supply of connectivity in rural England. Public support for these initiatives varies significantly, with some of them being awarded public subsidies and others benefitting only from tax exemptions. The UK government has recently declared that community networks are not eligible for ‘enterprise investment scheme’ tax relief,[22] thereby endangering the sustainability of some of these initiatives. We feel that this is misguided.

13. Many community networks have benefitted from demand-side subsidies (such as vouchers for SMEs) to cover part of the rollout costs. Research from the United States has found that when community WiFi networks receive public funding, there is a tendency for this to change how they behave in a manner than raises doubts regarding their long-term viability.[23] In other words, the requirements attached to public subsidies may distort the design and management of these projects and undermine their sustainability.[24]

How well do digital public services work in rural areas where there are poor internet connections? What support or alternatives are available for those in rural areas with poor or no connection to use digital public services and how effective is it?

14. Our research has found that across northern England that rural communities struggle to use public services online due to the lack of reliable connectivity.[25] For example, farmers are unable to comply with DEFRA requirements because their existing connections did not allow them to use the relevant online services. Similarly, it was reported that students living in rural areas could only complete their homework by staying in school after classes had ended due to their poor connectivity at home.

15. The lack of reliable connectivity is worsened by the limited alternatives that are available in rural communities. Public libraries play a key role in providing connectivity for residents in urban areas without Internet access[26], but their availability within rural areas is naturally limited in comparison.[27] The challenges for those in rural areas are further compounded by the reduced provision of public transport as well as the closure of post offices. With the well documented push of ‘digital by default’ by the UK government, those living and working in rural areas run the risk of being excluded from such services.

June 2019