After the era of national, top-down strategies, the government is moving into an age of diverse, local solutions. Joshua Chambers investigates the first substantive example of this approach in action: the broadband roll-out.
Silent Valley in County Down, Northern Ireland, derives its name from its absence of birdsong. The sound of the dynamite used to build a reservoir here scared its wildlife away years ago, and the birds never returned. Yet the area remains thoroughly rural, its small conurbations separated by farmland. Isolated by geography and poor communications, small businesses here struggled to compete against city-based firms – until the arrival of superfast broadband, a technology which has levelled the playing field.
Take one small business in the little town of Newcastle. Energy Assessments Northern Ireland was set up by a trio of graduates in 2008 to exploit a new piece of EU legislation requiring energy assessments on buildings. Initially, demand was slow, explains one of the founders, Paul Sherry. “We work with architects’ drawings, and used to have to drive over and pick them up,” he says. This limited the size of their potential market and reduced productivity.
Now, Sherry says that new broadband connections have enabled the business to expand, competing not only with companies based in Belfast but in the rest of the UK as well. The firm has even won contracts on mainland Britain, with architects’ drawings emailed over. “It made us able to work in Scotland and Swindon without having to be there,” Sherry says.
The coalition government sees broadband infrastructure as central to ensuring balanced economic growth across the UK. Its broadband strategy document, published in December, claims broadband will “provide the foundations from which the UK economy will grow and recover from the recession”. Culture secretary Jeremy Hunt was similarly enthusiastic at the launch of the policy, stating that “a superfast network will be the foundation for a new economic dynamism, creating hundreds of thousands of jobs and adding billions to our GDP”.
Indeed, a 2008 report cited by the Department for Culture, Media and Sport says that 280,000 jobs could be created by extending superfast broadband to everyone in the UK. Further, the infrastructure will help people access online public services – enabling central government to shift channels and significantly cut costs.
In keeping with its localist ideology, rather than controlling broadband roll-out from the centre the government is seeking local solutions and devolving power. The coalition’s broadband strategy can be seen as the Rosetta stone for the localism agenda, offering a template for how these ideas can be acted upon.
The plan
The overall target is to have the best superfast broadband network in Europe by 2015. This means that everyone in the country will be able to access the internet with a sufficiently fast connection to work online. In big cities, progress is already fast: private sector companies can quickly make a return on their investment there and BT, for example, is spending £2.5bn rolling out broadband to two-thirds of all UK homes and business. However, BT Group director of strategy and portfolio Olivia Garfield tells CSW that “without public funding, there just isn’t going to be a business case for [superfast broadband] to reach 100 per cent of the UK.”
The government has accepted that public funding will be necessary to ensure that everyone in the UK has broadband access. It set aside £530m in October’s spending review to ensure full coverage; £300m of it top-sliced from the TV licence. In order to find out how best to use this money to improve broadband infrastructure, the government has approved four pilots in Cumbria; the Highlands and Islands; North Yorkshire; and the Golden Valley in Herefordshire. Each pilot is now putting together a delivery strategy, considering partnerships not just with big firms such as BT and Virgin, but also with smaller firms which might offer a different approach. Each scheme is being given £5-10m by Broadband Delivery UK (BDUK), the delivery vehicle dedicated to ensuring that Britain meets its broadband target.
The current strategy is markedly different from the previous government’s – not only because it wants the private sector to lead the way, but also in its structure: like the pilots, local areas will have to bid for funding from BDUK to run their own processes for installing broadband. Labour had a big state solution: a £6 annual levy on all UK landlines would raise £1.2bn, to be spent on national implementation. The plan would have achieved universal access three years earlier than the coalition’s, but some commentators argue the pot of public money was so big that prices were being inflated. Philip Wells, project director of Herefordshire’s superfast broadband pilot, says that “whereas a year ago, some of the big supply community were sitting on their laurels thinking taxpayers’ money would pay for it, that has clearly changed.”
Nascent schemes across the UK are now seeking different solutions to the issue at hand, and negotiating with all suppliers – great and small – to get the best deal. CSW looks at four British broadband projects to help understand the process and the benefits.
Herefordshire
The rural hills and dales of Herefordshire render broadband installation rather difficult. Add a dispersed population to problematic geography, and the area doesn’t look appealing to private sector broadband companies. Philip Wells explains that his area “was unlikely to get any market-led intervention for a very long time: 10 years or more”.
However, the BDUK money has stimulated interest, he says, and the tendering process is just about to begin: “We’re getting positive responses from the supply community. They are willing to invest as long as the government is willing to share the risk.” The public funding, he explains, brings investment return timescales down to the level where not just big firms, but also smaller operations, are ready to stump up their cash.
As one of the four pilot schemes announced in the spending review, the area has been allocated up to £10m to spend. However, Wells emphasises that they hope to get the job done for less. The group, he says, is “not going to the market and saying: ‘We have £10m, what can you do with it?’” Instead, it’s examining how to maximise commercial investment. “We’re looking at what the problem is and asking the market to invest in a solution – with BDUK bridging the gap,” he says.
Herefordshire is particularly keen to ensure that smaller companies get a chance to invest, not just big providers. “We’re energetically encouraging smaller companies who have ideas,” says Wells, adding that where small companies can’t afford the full investment, the scheme wants small businesses with innovative ideas or new technological solutions to group together. “I’m hoping to see, through the tendering process, some groupings of smaller companies who we’ve never seen before,” he comments.
BDUK chose Herefordshire as one of the pilots because of the range of complexities faced by the scheme. Wells explains that in North Yorkshire, the pilot is experimenting with technology; Cumbria is concentrating on the localism agenda by setting up a community-run company; and the Highlands scheme is working to overcome problems of sheer distance – while Herefordshire has a mixture of all of these issues. In return for being an early adopter, Herefordshire has to feed back lessons learned to BDUK.
One key lesson learned so far, Wells explains, has been how to present information to broadband supply companies and put together a good enough case to attract investment. “We thought we had – and were acknowledged as having – a huge amount of information on the area proposed. What we’ve learned is that we had nowhere near the amount of information required,” he says. The scheme had to spend “a huge number of hours” re-examining and reformatting the information so that companies could see the potential benefits. Through this process, Herefordshire discovered its “USP” or Unique Selling Point: the area is a favourite destination for people who want to work from home, and also has a large number of people living there who would like to work flexibly.
Northern Ireland
Northern Ireland set up its own scheme to install superfast broadband across the province in 2009. The money is not coming from central government coffers: of the £48m being invested, £30m is being spent by BT and £18m by the EU through two departments in Northern Ireland. The Department of Enterprise, Trade and Investment (DETI) has secured funds from the European Regional Development Fund (ERDF) and the European Sustainable Competitiveness Programme, while the Department of Agriculture and Rural Development has secured funding from the European Agricultural Fund for Rural Development.
Mike Thompson is director of DETI’s Strategic Policy Unit, and believes the key to winning funding from the latter two programmes was building relationships with people in the EU. “We took the time to go to Brussels, talk to the director-generals, and used the Office of the Northern Ireland Executive in Brussels to help develop relationships and get the message out about what we wanted to do,” he says.
Trade and investment minister Arlene Foster adds that the ERDF is administered by DETI, so to win this tranche of cash the broadband scheme had to compete with other projects. “EU structural funding for this region is administered through our department, so where we spent it was a decision for us,” she says.
The broadband scheme was seen as worthwhile for a three key reasons. First, Northern Ireland has a predominantly rural population. “For a rural community, there are great advantages [to broadband]. Not everybody lives in the Belfast conurbation,” Foster says. “We can safely say that no part of the British Isles will have put the same amount of fibre[optic cable] into rural areas as us.”
Second, the government of Northern Ireland is seeking to shift delivery channels and move services online – particularly through its interactive portal NI Direct, which has been operating for 18 months. Head of the Northern Ireland Civil Service, Bruce Robinson, told CSW last year (p8, 1 December 2010) that NI Direct “can be developed somewhat further” and the government’s “objectives are to have more transactions on [NI Direct] in the immediate future”.
The third benefit of the infrastructure was the key advantage stressed to the EU by the bid team, Thompson says: the benefit to small and medium-sized enterprises in rural areas (see below). Foster says she “knew it would benefit the economy here because of the geographical spread of our businesses, which are all SMEs. The fact that everybody can now stay in their own area is very important to us.” Dr Trevor Forsythe from DETI’s telecommunications policy unit explains that the department believes it “could bring 1,000 jobs per annum and £25m per annum to the economy”.
This hasn’t been achieved yet, although Thompson is upbeat: “As night follows day, the economic downturn will inevitably have an impact – but it won’t be as bad because we’ve got this infrastructure.”
Shetland Islands
The northerly outcrops of the Shetland Islands have hosted a distinctive community for hundreds of years. In the 21st century, decent communications infrastructure is seen as one of the key ways to keep people there.
Marvin Smith is telecoms project manager for the Shetland Islands Council, and explains that “we have 20,000 people here and we need to keep our young people, keep our businesses. It’s not just about expanding the economy; it’s about retaining people as well.” He adds that “for a micro-economy like Shetland, keeping even £1 in the economy is worth so much for us.”
All telecommunications in the Shetland Islands have been reliant on microwave link from the mainland, which at one point made it the longest microwave connection in the world, Smith says. This left the connection susceptible to bad weather, and he recounts an experience a couple of years ago where all communications were lost. “Our coastguards stopped working, the hospitals struggled. Telecoms really is a lifeline.”
The islands needed to update their infrastructure but struggled to find a company willing to invest for such a small return. So instead, they developed a community solution to the problem. “We’ve had to be quite innovative: the council has set up its own arm’s-length telecoms operation,” Smith says. The council will retain ownership of the fibreoptic connections and has invested £1.1m in the project, with £400,000 of this coming from EU development funds.
The council is convinced of the long-term economic benefits of such an investment. Before, “no businesses in their right mind would relocate to Shetland,” Smith says; but now the islands will become better connected to the internet than most places in the UK. A survey commissioned by the council in 2007 showed that if the new infrastructure could attract 50-100 new people, it could bring economic benefits of up to £23.6m.
Cornwall
At the far end of the UK, Cornwall has also suffered from poor infrastructure which has harmed its economic competitiveness. Nigel Ashcroft is the head of the Business Services and Digital Programme at the Cornwall Development Company, and says: “We don’t have the best motorways or the best rail links in the world, but we’re going to have the best superfast broadband in Europe – and that helps.”
Last year, the Cornwall Development Company launched a £132m scheme with BT to connect all businesses and households in Cornwall and the Isles of Scilly by 2014. Of this, £53.5m is from European Regional Development Funds and £78.5m is from BT, in a project expected to create 4,000 new jobs and protect a further 2,000.
Ashcroft advises other schemes to be precise about what they want before they open plans out for commercial tender. “We were very specific in our requirements. We wanted extreme clarity on the amount of coverage – that’s geographical coverage, the number of end users, and the affordability. It’s no good building a network that nobody can afford to use,” he says.
The case for broadband
Overall, new broadband infrastructure is seen as a key way of ensuring balanced growth across the country. Given good internet access, companies in rural locations can compete on similar terms to those in big cities. Flexible working from rural locations also becomes more realistic, reducing the burden on transport networks and cutting CO2 emissions.
Unlike the plans of the previous government, this broadband scheme is very much the strategy of a government intent on local control of local projects. The formal bidding process for the next wave of schemes will be published in March, a DCMS spokesperson confirms.
Following this, local authorities will have to get their bids in during April, and the selection of schemes will be announced in May. No limit has been set on the number of projects. Co-ordinating the atomised pilot schemes may challenge to civil servants, but the direction of travel has been set.
Officials across government should take note. This scheme represents the future – not just because of the technology it delivers, but in the way it’s being implemented. The localism conundrum may have been cracked.