State Aid, broadband and the art of the possible

December 19, 2014 in Public Policy by Adrian Wooster

The UK’s relationship with EU State Aid rules often feels a little difficult but its a complex area where few seem to really understand the art of the possible.

Recently a group of UK cities were reported as saying that state aid rule were blocking investment in broadband in their cities while enabling it in rural areas, and I was quoted in an article suggesting the UK Government is blocking funds for broadband.

Its not my view that funds are being blocked but I do feel that understanding of what the state aid rules can permit is not widespread, and UK public bodies often seem more risk averse than some of their European colleagues; a generalisation but certainly many of the smaller, more decentralized countries struggle less with state aid than the UK does. This can result in a narrower and more cautious approach to issues like broadband.

Three years ago I reported that the level of fibre-based broadband in a country was often inversely correlated to the number of state aid applications for broadband. At the time, the UK had by far the highest number of state aid applications for subsidising broadband investment yet remained unranked in the FttH Council’s European fibre league table, while the Scandinavian countries riding high in the league table also had very few state aid applications.

Let’s be clear: The reason isn’t because UK bodies are deliberately blocking funds for broadband or because the EU has sneakily added rules which target the UK in some way.

Often it’s simply because countries with lower levels aid applications have public bodies with a higher tolerance for risk so their interventions aren’t viewed in the same way by the European Commission.

The rules exist to ensure that when members states opt to intervene in a market, broadband operators in this case, they minimise the resulting market distortion. As covered here before, loan guarantees are considered less distorting than grants, for example.

However, less distorting interventions, like public loans or equity investments, also tend to result in the public body maintaining a longer-term direct involvement in the solution. On the downside this can mean accepting some additional delivery risk but it also means the public body can continue to directly influence the delivery of their social and economic goals.

While I don’t agree that UK public bodies are deliberately blocking funding for broadband, I do believe that a wider understanding of the art of the possible and a measured but enlarged appetite for risk would pay dividends for all.

 

Final 5% or Final 10% – what’s the difference?

December 12, 2014 in Adrian's tech blog by Adrian Wooster

Industry colleague John Popham highlighted an article in the Western Morning News covering comments from Devon MP Neil Parish to the BDUK Chief Executive, Chris Townsend. Much of the item wasn’t news – that people in hard to reach rural areas are severely impacted and irritated by the state their broadband.

What did catch my eye was this:

“Mr Townsend said the hardest-to-reach areas would be the focus of the third phase of the programme, with the aim to reach them by 2020 “at the very latest”. He added: “Some of these rural areas are very, very, very hard to reach.”

The first phase of the programme built on the commercial footprint to take coverage from around 70% to about 90% of the UK population. The second phase is seeking to raise this to around 95%, again starting where the previous phase left off. So the quoted third phase will be focussing on the the final 5%.

The challenge this approach has created is that the final 5% is highly fragmented and has become exponentially harder to solve with each passing phase.

A two-pronged approach seeking to solve final 5% as a standalone problem will be asking suppliers to find superfast broadband solutions for clusters of perhaps 1 or 2 premises. Given that much of the final 5% is covered in trees and located at the bottom of long, winding valleys, even wireless models begin to break down at this level of dispersion, especially when factoring in operational support costs for a network with only a handful of customers spanning many square miles of countryside.

In aggregate the final 5% is likely to include 1 – 1.5 million homes and businesses at a population density akin to a desert state like Libya but with that population evenly distributed across the totality of the land.

By way of contrast, a decision was taken in West Oxfordshire to treat the whole of the final 10% as one problem to solve. This was far from a simple decision but its not as hard as creating standalone business cases in a two-stage approach for increasingly fragmented pockets of digital exclusion. While the final 10% is fragmented, it has sufficient clustering to find sensible solutions which are viable for all stakeholders –  community, private and public sectors.

The final 10% is a complex space, and splitting the problem in two is likely to concentrate that complexity in such a way that for some there may simply be no solution.

The approach in West Oxfordshire was to find a model that manages this complexity in a scalable way and maximises digital inclusion.

What the Ofcom broadband data tells us about West Oxfordshire

December 10, 2014 in Adrian's tech blog, Mapping, Public Policy by Adrian Wooster

This week Ofcom released the data sitting behind their recent broadband study. The dataset contains over 1.5m postcodes from across Britain, summarizing the local broadband experience.

The file is far too big to play win in Excel but when loaded into a spatial database it becomes a fantastic resource that will take some time to properly exploit. Given last year’s data was in a similar format it means we may soon be able to build up a picture of the evolution of broadband over time as well, empirically showing the advances that the UK is making.

With the data loaded, I wanted to have a quick look to see what it might show. The map below is a snapshot of West Oxfordshire, the focus of the Cotswolds Broadband project I’m helping.

Ofcom mean broadband speed in West Oxfordshire

The goal of the project is to turn West Oxfordshire into the first district with universal superfast broadband by filling in the areas between BT’s, Virgin’s and Gigaclear’s networks, and what the map shows is the distribution of the mean download speeds.

Its important to understand what this map is saying.

What it doesn’t say that broadband in West Oxfordshire is exceptionally poor; just like any rural district there are pockets of very poor and non-existent broadband but most have access to something and some access to very good broadband.

Instead what its highlighting is that the gap between the best and worst is now very wide.

Those people in the brightest green areas typically average more than 30 Mbps with 10% of postcodes across the district containing premises receiving more than 100 Mbps, with 150 Mbps far from unique.

In contrast, a third of postcodes average less than 10 Mbps, the speed increasingly considered the minimum to be properly functional on the Internet today, while 90% of postcodes contain at least one premise with speeds of less than 10 Mbps.

About 10% of postcodes in West Oxfordshire have neighbours where the gap between the best and worst broadband is more than 100Mbps.

This is a problem fully recognised in West Oxfordshire; that some people may consider an upgrade to 5 or even 10Mbps to be sufficient for their needs, but such an increase wouldn’t amount to keeping pace with the majority in society.

When all the planned broadband investments are complete, the map above should be universally green with postcode averaging less than 24 Mbps.

Cotswolds Broadband passes a milestone

November 28, 2014 in Adrian's tech blog, Architecture & Technical, Public Policy by Adrian Wooster

Today Cotswolds Broadband passed something of a milestone in its long journey to ensure everyone in West Oxfordshire has access to superfast broadband – today it is launching the open procurement process to find an organisation to build and maintain their broadband infrastructure.

So what makes it different?

Firstly, the project is a community-led public-private partnership with investment from local people, external professional private investors, and public bodies. The project has so far secured £6.4m for the project with all the stakeholder groups represented – the community alongside the financial and public sectors as true investors.

In addition the state funding is only partially in the form of grants. While BDUK are making a significant grant available, West Oxfordshire District Council are lending their share with the expectation of receiving repayment with interest. The procurement will finalize the level of public subsidy but it is expected to be less than 30% of the total investment, much lower than might typically be expected for such a rural area.

With a trend in the industry towards more integrated delivery models, the resulting infrastructure will be owned by Cotswolds Broadband who will only wholesale services to other providers. An independent community service provider and a mix of other internet and media offerings will offer homes and businesses a rich choice of services.

Some years ago Brian Condon produced his thinking on the different models needed to deliver superfast broadband, encompassing what he called the “Big Me” monopoly, isolated “Islands of Connectivity” and the “Patchwork Quilt” with multiple providers tightly sewn together. Any market is likely to have elements of all of these but West Oxfordshire is rapidly becoming the archetype for the universal patchwork, leveraging a variety of different business models and technologies to ensure no-one is left behind.

West Oxfordshire will have the most diverse and competitive infrastructure in the UK with Cotswolds Broadband, BT, Virgin and Gigaclear all delivering innovative superfast services across the full extent of one of the South East’s most rural areas.

But the bottom line is that when it’s finished, West Oxfordshire will be the first district in the UK with universal superfast broadband, and that is ground-breaking.

NB: The Cotswolds procurement page is here: http://cotswoldsbroadband.co.uk/procurement/

 

A week in broadband – net neutrality, content and competition

November 15, 2014 in Adrian's tech blog, Architecture & Technical, Public Policy by Adrian Wooster

Its been and interesting week to contrast the discussions and shifts in the broadband markets in the UK and the US.

In the US, the Net Neutrality debate is coming to a head as President Obama sharing his thoughts and with the FCC now considering how they might inject some additional layers of competition in an attempt to use market forces to avoid operators fiddling with customers traffic.

At the same time there are UK reports that  BT may be considering the scrapping their Wholesale division in favour of Openreach, reducing the separation between their infrastructure and the services that flow over it.

The timing of the latter reports couldn’t be better timed for the FCC’s deliberations.

In principle the UK has a market which creates a distinction between services and infrastructure; it is true the Europe doesn’t have the scale of problems the US has with net neutrality but our markets are certainly not in rude health.

To contrast the very different attitudes to net neutrality in Europe, its worth remembering that Eircom, the Irish incumbent was proud to advertise traffic fiddling, sorry shaped traffic, as a customer benefit offered at no extra cost to their valued customers!

Casting your mind back to the early dial-up days in the UK, there were innumerable ISP’s; many small, some large, and all with an individual, independent air about them. Remember Nildram? Pipex?

As the broadband market emerged there was significant market consolidation. Its possible, sensible even, to argue that this is a natural phase for any new market as it matures but today we have a very small clutch of vast service providers with a group of tiny, tenacious ISPs hanging onto a low single-digit percentage market share.

The UK’s flavour of net neutrality is less about meddling with content but with the content itself as BT and Sky wrangle over rights to sports with rugby fans currently the big losers.

The question the FCC needs to ask is “Why is this happening in the UK?”

Healthy markets rely on the participants’ abilities to differentiate and innovate. The ADSL broadband market was created such that the only significant differentiators were price and brand, and the only innovation was in the business model – the smartest way to give it away. Unchecked, this can only lead to the “pile it high, sell it cheap” environment with a small number of vast, lean organisations we have in the UK today. This isn’t a criticism of these organisations, either – they have been the most successful in coping with the market pressures.

The move to FttC (BT’s Infinity) has further impacted the scope for competition because its simply not commercially viable to deploy VDSL in competition to the incumbent with any scale. With no physical infrastructure unbundling there are no differentiators left apart from a brand associated with the content you permit over your service. This is the source of the inevitable and harmful battles over sporting rights with fans the biggest losers.

If the FCC are serious about using market forces to regulate net neutrality, they need to consider what the competition will be based on. A non-descript and narrow commodity market will result in a temporary pain relief and a diversion while the new service providers storm, form and then battle for content rights, taking the market full-circle but for more complex and expensive reasons; customers will increasingly become secondary as the competition becomes ever more concentrated and the battles ever more critical to the providers’ survival.

A US market will need to be created based on a set of products which can be combined to create a rich and diverse market, with ample scope for market players to innovate, and with sensible returns possible for all players in the market.

The UK doesn’t currently have this but if the FCC is smart it could start to lead the way if it learns from the UK experiment.

The fall-out for the UK?

If left unchecked, the trend suggests we should expect Sky to get more engaged in fibre infrastructure (they’ve just applied for code powers to dig up the roads) as BT gets more involved in content, and with BT preparing to use its 4G licence expect Vodafone to spend some of their considerable cash pile to get more interested in UK fixed broadband (Talktalk a target, perhaps?).

In other words, the links between content and delivery will grow stronger and the shape of competition more concentrated in the hands of an even smaller group of even bigger players with business models converging on Virgin Media’s (read: Comcast’s) cable model. And as this happens, expect Netflix, Google and Amazon to get more concerned about how their traffic is treated.

The UK’s trajectory is back to earth with a model not unlike the one the US is trying to escape.

Its your business to know your Open Market Review from your Public Consultation!

November 13, 2014 in Adrian's tech blog, Public Policy by Adrian Wooster

I’m starting to hear, again, some very confused and sometimes very wrong advice from within the telecoms industry regarding the flow of the state aid process and how it relates to existing network operators.

From the beginning, when an organisation – any organisation – wants to use public money to roll-out broadband it needs to go through a state aid process.

Even small investments, so-called ‘de minimis aid‘, need to go through this process although they may not have to notify the European Commission as the final step – de minimis aid is still aid and needs to obey the same rules as any other aid, it’s just considered too small to have a significant distorting impact on the market so the Commission doesn’t need to specifically rule on it.

For large interventions it’s considered very good practice to carry out an Open Market Review (OMR) and BDUK will typically insist on it. This is not a mandatory or even binding stage, and is simply used by the aid recipient to better understand the landscape in which they plan to intervene. The advice to existent network operators is that it is very helpful to reply to any OMRs that affect your but it is not absolutely “live or die” essential.

As pragmatic advice, I’d recommend that wireless operators specifically do consider submitting to OMRs as it can take longer to agree the coverage, especially for superfast NGA wireless networks. Starting that discussion early maximises the opportunity to press your case.

However, all interventions must carry out a Public Consultation which provides the one and only opportunity for anyone affected by the plans to provide their feedback. The Consultation has to remain open for a month and will contain maps and data which expresses the organisations best understanding of where they feel they can intervene and where specifically they plan to intervene; this will often be informed by the OMR process but is not limited to it.

Continue reading “Its your business to know your Open Market Review from your Public Consultation!” »

Creating a first draft fibre network using Opensource tools

November 7, 2014 in Adrian's tech blog, Mapping by Adrian Wooster

There are some fantastic tools out there for detailed design of fibre networks from companies like Comsof and IT Simplicity but they are sometimes overkill when all you want to gauge is if fibre is even the right technology to consider or if a project is worth going to the extra level of detail.

There are some excellent Opensource GIS tools out there with more features than most of us will ever need to consider – but are there enough to get that first draft fibre model to suggest whether fibre is the right solution?

The quick answer is “yes” but not in one place.

Continue reading “Creating a first draft fibre network using Opensource tools” »

Clustering spatial data

November 7, 2014 in Adrian's tech blog, Mapping by Adrian Wooster

I’ve  recently needed to find a way to break a large dataset of points into manageable clusters, ideally within a Postgres database.

I’ve not found anything in PostGIS, although would love to be proved wrong, so I looked to the R statistical language and to using the PL/R extension in Postgres (sorry, this post assumes R and PL/R have been installed).

After muddling around in a bunch of things at the edge of my understanding, I’ve managed to create a PL/R function that takes a set of spatially distributed points, processes them using R’s k-means tools, and returns them with a cluster id appended. Continue reading “Clustering spatial data” »

Estimating FttC/VDSL with free GIS tools

August 11, 2014 in Adrian's tech blog, Mapping by Adrian Wooster

One of the more common mapping questions I get asked is about predicting VDSL speeds – who might benefit from an upgrade to Fibre to the Cabinet (FttC) and who might be caught in what might be called the “NGA but not superfast” trap where premises are connected to an upgraded cabinet but don’t really benefit from it.

VDSL, just like its sibling technology ADSL before it, delivers diminishing speed with distance; in this case the further from a cabinet a customer resides the slower the speed they might expect. This decay is fairly well documented by manufacturers so can be predicted where the cabinet location and the copper network routes are known – but often only the location of the cabinet is known, or at least only the location of the cabinet is relatively easily found out, so some method of estimating the speed is needed based on some assumptions about the network.

The traditional method often used is to simply draw a circle of a given radius around a cabinet; at 1.4 km of wire VDSL is likely to deliver around 24 Mbps to a 1 km radius is often used to make some provision for winding roads. This can be misleading, as there is no standard degree of complexity in our road networks – some cabinets may well be located at the cross roads of a clean radial network while others are at the heart of a labyrinth of twists and turns.

A better method would be to use the road network and a “drive time” or isochrone algorithm but this is more complex and is more resource hungry when a large number so cabinets are needed. However, it is possible to create a model using this approach which works very well for clusters of cabinets using  QGIS, PostGIS 2.x, and the OpenStreetMap road network data loaded into a PostgreSQL database – all free resources!

Continue reading “Estimating FttC/VDSL with free GIS tools” »

Will the EU’s changes to broadband State Aid matter to you?

May 28, 2014 in Adrian's tech blog, Public Policy by Adrian Wooster

The EU has made a rapid start after the recent European elections by cutting the first bit of red tape – in fairness this has been coming for some time so perhaps its not possible to read too much into the timing.

New “block exemptions” make it easier to provide support to smaller projects without bureaucracy and delay. In particular, broadband projects will not have to be “notified” to or approved by the Commission if they are under €70 million – whether it’s for fast, next-generation networks or just “basic” broadband. That significantly cuts red tape for this essential investment – making it easier to roll out more networks for more people.

These enter into force on 1 July.

Essentially broadband projects up to €70m are now considered de minimis, or at a level where the potential for market distortion is considered too small to be worth reporting to the EU.

Does this make a big difference to UK broadband projects?

Continue reading “Will the EU’s changes to broadband State Aid matter to you?” »

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