Tag Archive for 'central government'

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EU State Aid Approvals and fibre

Published on March 17, 2011 in Adrian's tech blog. 0 Comments Tags: , , , , .

Leading from some conversations over the last couple of weeks I thought I’d have a look to see if there exists any link between EU State Aid rulings for projects and that countries ranking in the league tables. At the moment, this is little more than a work in progress while I try to understand why some countries make a big deal out of EU State Aid rules (UK tends to top the list) and how some countries seem able to make progress more efficiently  - please drop me a line if you can help!

This is what the data so far seems to suggest:

The more fibre you have, the less your feels the need to refer decisions to the EU for approval

This table ranks according to the League table, along with the the proportion of EU state aid decisions since 2003. If you’re looking for the UK, you’ll need to keep looking to the bottom of the table where you’ll find that we’re unranked by the FttH Council whilst accounting for 25% of all EU decisions, the highest proportion of any country. The UK started early as well with the first decision (in fact, the first 4!).

RankingCountryEU Decisions
1Lithuania3%
2Sweden1%
3Slovenia1%
4Estonia1%
5Denmark0%
6Slovakia0%
7Finland3%
8Netherlands4%
9Italy15%
10Latvia1%
11France5%
12Czech1%
13Portugal0%
14Bulgaria0%
UnrankedAustria3%
UnrankedCyprus1%
UnrankedGermany20%
UnrankedGreece1%
UnrankedHungary1%
UnrankedIreland4%
UnrankedSpain8%
UnrankedUK25%

At this time, there is no obvious and complete reason for this – the countries which have fewer decisions and more fibre don’t seem to have been caught breaking the rules especially – although I’m happy to be corrected. There, however, are a few possible partial explanations:

  • Many EU broadband projects tend to use templates from previous  rulings, and in fact the UK has proved to be a rich source of such templates. I’ve written about this before.
  • Most EU countries are developing national frameworks so that when public funds are used to stimulate broadband investment, the approval is essentially already done under an umbrella agreement.

At the moment, guidelines to Local Authorities refer only to the general EU guidelines on rapid broadband delivery, leaving it to each Local Authority to ensure they are not in breach of the rules – it would seem from this that the intention is for the UK not to have a specific framework agreement, which unless we learn from the approach taken by countries ranking much higher than us may mean we continue to maintain our lead on State Aid decisions and our slow deployment of fibre.

Believing this is the last subsidy for broadband will secure better value

Published on January 26, 2011 in Adrian's tech blog. 12 Comments Tags: , , .

I’ve been getting a worrying number of messages from people close to their local authority who are concerned that they appear to preparing to give any funds to BT for a quick FttC fix rather than seeks a more permanent, albeit more challenging, solution. Hopefully these messages come to no more than the nervousness of concerned citizens but, true or not, this raises two key issues in my mind.

The first is that the alternative network builders in the UK are increasingly wary of being used as tender fodder; at least one recent high-profile tender dented their confidence. If their settled view becomes that they are simply being invited to bid in order to make up the numbers, they won’t bother. Tendering for public contracts is an expensive process, and companies need to feel they stand a reasonable chance of success before they commit the significant resources and cash. If they choose not to don’t bid then it becomes a self-fulfilling prophecy.

This wouldn’t be good for the economy, nor would it be a sensible way of ensuring the best value when public funds are at stake.

The second, wider point is that while developing a relationship with BT is certainly an easy solution, to cabinet is a short term technology; few analysts internationally would see BT’s current strategy as anything other than buying them time while they work out how to persuade the money markets to lend them the kind of cash needed to solve the problem.

In five years, around the time of the next general election, FttC will have run out of steam while those areas which founds ways of delivering fibre will be merrily upgrading to gigabit services and Virgin Media cable areas are likely to be enjoying 200 Mbps services; the gap between the haves and have not’s will have never been wider.

In the build up to the next general election, after five years of tough economic decisions and shared pain, will there really be a political case for central to support a further round of broadband funding, a third major public investment, simply because some areas failed to look hard enough now?

Would it really be credible for a local authority to go cap in hand when a neighbouring area was speeding ahead?

Of course BT should win contracts – they are the largest network operator with resources few others can match. But its better for everyone, BT included, if they have to work for their subsidies.

And wherever possible this should be the last significant subsidy given to the telecoms industry for at least a generation – this should be borne in mind as tenders are issued and forms are filled in.

On the right track with broadband – 2006-style

Published on January 24, 2011 in Adrian's tech blog. 2 Comments Tags: , , , , , , .

To my wife’s frustration, I’ve tended towards the “empty desk, empty mind” end of the scale – in fact I’m a bit of a hoarder. So every once in a blue moon I decide to make amends and clear out the papers that clearly were never meant to be kept but might some day possibly, maybe, conceiveably be useful – the process itself often proves the point, offering a last chance reminder of events since the last re-stacking, and an opportunity to revisit old thoughts in a new light.

Every time there is something pertinent that surfaces, and this time it was a document I was given in 2006 when I attended a small workshop in The Netherlands held jointly by the OnsNet project and the Dutch ’s team.

The document entitled “On the right track with broadband” (download an English version here) is a guide for councils and housing associations offering advice on tendering and state aid when looking to develop a local next generation broadband scheme.

Its worth remembering the timing of this – 5 years ago. This was a time just after had stood up at the Labour Party conference and announced that it was job done for broadband. At the same time the Dutch Government was actively encouraging and supporting councils, housing associations, and people to become directly involved in securing their long term digital future.

The document’s introduction ends with “The Netherlands can largely thank its present lead in the field of broadband connections to competition on and between networks.”

While the UK has long claimed the most competitive broadband market in Europe, the reality has always been competition on and not between networks – we would not have been able to make the same claim in 2006, and we couldn’t make it today.

In fact the small town of Nuenen, the home of OnsNet, had more fibre connections than the whole of the UK combined – even today, half a decade later, only the network in can claim to have more homes passed than the small market town of Nuenen.

If we fast forward to today – five years later – the change of Government in Britain has meant Big Company has been replaced by ; encouraging councils and people to stake a claim on their long term digital future rather than hope a massive subsidy for a behemoth will fix it for us.

Taking lessons from the Dutch experience can only help this process and a British version of “On the right track with broadband” would help put to bed one of the biggest hang-ups we still have – state aid. While other countries have found ways of working with European legislation, we have long used it as a reason to justify our inaction – we are now a long way behind our European neighbours, and the excuse can no longer be seen as reasonable.

And you know what’s mind numbing about this?

The Dutch advice points to more British state aid decisions as test cases than from any other country – Project Atlas, Cumbria’s intervention and Scotland’s business broadband decision. An updated document would no doubt also point to FibreSpeed in North Wales and South Yorkshire’s Digital Region. We pioneered the test cases but we are alone in not learning from them, and as a result we lag just about every European country who was smart enough to follow our pioneers.

The UK still has some of the best independent thinkers on broadband – in our councils, in Whitehall, in communities, and in the industry. For Big Society broadband to prosper as it has in the Netherlands and elsewhere, we need the confidence to support those pioneers and learn from them as others have done.

Rating success or land-grabs?

Published on August 31, 2010 in Adrian's tech blog. 3 Comments Tags: , , , , , , , , .

I’ve one final piece to get off my chest about the VOA’s “clarification” on business rates applied to networks, and its about the upside-down nature of the rules and how the new framework exacerbates an already difficult situation.

The old rules taxed fibre owners for homes passed regardless of whether anyone bought a service. The new rules almost triple the tax but apply it only to homes connected.

So the old rules penalised investment but the tax could be mitigated against a successful drive to build take-up. The new rules still penalise take-up but now mitigate in favour of land-grabs to keep other providers out rather than in driving take-up – and the ones which are most heavily penalised are likely to be companies specialising in green field developments where they are unlikely to achieve much less than 100% of the homes as the default telecoms infrastructure. (remember BT has special treatment, so this only applies to alternative providers).

The new VOA rules would seem to imply an almost tripling of the tax bill for green field network builders.

The new made it clear it wanted to encourage, enforce if necessary, infrastructure sharing but these new rules encourage a more monopolistic mindset – build to stop others building, and make just enough revenue to cover the costs – oh, and make the architecture so esoteric it could never support infrastructure competition anyway.

The VOA has shown no signs that they are even beginning to understand anything the Government has said since coming to power. Had they chosen to develop rules which moulded the rates system around Government policy they might have recommended a system which:

  • Reduced or eliminated business rates on new fibre investments in Ofcom Market 1 areas where there is currently no investment rather than the opposite
  • Favoured led “” smaller-scale networks over national carriers rather than the opposite
  • Penalised idle assets and favoured shared and used assets rather then the opposite

I try to avoid clear attacks like this my blog but the VOA appears to have worked against the key policies of BIS, DCMS, DCLG and DEFRA, while creating a framework so arbitrary and complex that the Treasury can’t possibly have any confidence in any figures estimating the revenue it will generate.

The National Audit Office was scrapped for a less fulsome opposition – can we hope the VOA has a similar fate awating?

Rant over.

I’d really like to thank Pauline Rigby for joining me on our journey to understand the VOA rules. We both felt uncomfortable writing politically charged articles like this one of mine but it was clear this was a major issue for the industry we both care about.

Rating the big society

Published on August 17, 2010 in Adrian's tech blog. 1 Comment Tags: , , , , , .

I’ve already written about the impact the clarification by the VOA has on technical decisions and , but there is a wider impact and one which suggests the civil servants at the VOA haven’t really understood the new ’s agenda.

By way of an example I’ve attempted to work through a typical rural project and see what the impact the VOA rules will have.

In this hypothetical lives around 2,500 people in 1,000 homes with 20 shops and businesses along the main street, mostly cafés and family businesses.

Lets say that an project for the area has a single point of presence, and for simplicity that all the shops on the main street average 1km from the PoP and that each take a service over a single . This project is then connected to a neighbouring scheme 25km away using a direct connection the scheme owns. So in total they have 45km (20 x 1km businesses plus 25km backhaul) of rateable and 1,000 domestic customers.

All the tables of what rate what length and capacity are taxed at is here but this is a quick summary for this village:

  • The domestic access network element is rated at £20 per home connected, so we have an immediate £20,000 to consider.
  • Then we have 20km of business access with a single fibre lit, so this adds £6,600
  • And the 25km of backhaul adds a further £16,750 because they lit 4 fibres

A total rateable value of £43,350, which is rounded down to probably £43,250 and a multiplier is applied to calculate the payable rates. I understand the current multiplier is 0.417, so the rates payable by this community is £18,035.25 – or almost £18 per customer per year.

To add further complexity to this, I’ve assumed this project was an isolated community wanting to help themselves but if they had accepted an offer from a much bigger commercial company who had more than 1,000km of fibre, they might find the rates bill drop to a little over £13 per subscriber because scale, for the Valuations Office, matters.

There are any number of lessons to be learnt from this. Firstly that the additional rates for migrating a corner café shop from first generation broadband to a fibre-based connection costs as much as they may be currently paying for their broadband connection which seems to counter the ambition of the Government to unlock the potential of small businesses.

But equally curious is the disadvantage a self-help Big Society community is being asked to endure over a larger corporation through the business rates system. In my hypothetical village, a Big Society community would be asked to pay almost 40% more in business rates than Major Plc (setting aside the special treatment of BT which further exacerbates the problem).

It seems the VOA have created a very unique landscape for the UK to overcome. The UK has neither the appetite nor the money to fund a Da Wo top-down national fibre network, but the VOA rules means we also have a tax system which penalises grass-roots developments as well.

So who is encouraged to build if macro and micro approaches are being discouraged?

A model being championed by Rory Stewart MP for his Cumbrian constituency, part of which falls within the Big Society pilot area, is the idea of a village pump for broadband – a high-speed backhaul connection delivered to the heart of the community. If this is delivered by an large organisation then they may also benefit from lower business rates than the community itself would.

This then leaves the community to pick up the rates on the access network element for which there is less discrimination. As I coved in a previous article, if the community opt for a PON network rather than point-to-point then they can argue that the businesses can’t be isolated from the domestic customers, which limits their rates liability to “just” £20 per subscriber, business of domestic.

This seems such a complex, arbitrary model which serves to further contort the market rather than open and improve it. Somehow I don’t believe that Rory’s Village Pump concept was at the heart of the civil servant’s thinking when they “clarified” the rating system – its one of the many unforeseen outcomes.

VOA views on network architecture

Published on August 16, 2010 in Adrian's tech blog. 3 Comments Tags: , , , , , , , .

The Valuation Office’s clarification on rating networks seems to have aroused much debate – I decided not to publish my own piece on the general tone of the clarification as much has been said before, and none better than this: as clarification goes, this does seem to be a unique piece of work.

However, there was one aspect I didn’t think had been explored yet.  It’s worth understanding the VOA’s position on and the impact they may have.

On the access network piece they have two means of calculating :

  • For domestic users there is flat rate of £20 per home connected
  • For businesses there is a table which relates to the distance, amount of fibre in the scheme and the number of fibres lit

However, the VOA has this to say in their worked examples:

The following scenarios are intended to provide clarity to the approach the VOA would adopt when applying the approach set out above. The scenarios cover FTTC, FTTH- and FTTH-P2P, and have the following assumptions underlying them.

  • The end users in each case are a mix of residential and business customers; the identity of the end users as either residential or business users will not necessarily be available to the organisation liable for the rates on the asset (particularly if they are providing wholesale access to other service providers).

The implications of this are that if business customers can’t readily be singled out then they will be rated as domestic customers at £20 per connected premise. This really only applies to PON networks (not just GPON as the VOA asserts) where customers share a single splitter, while in an Ethernet overlaying a point-to-point network each customer will always be identifiable.

I calculated that the additional rateable value for connecting a corner café in a small town network might be in the order of £330 per year depending on all sorts of variables but as an order of magnitude it will do. This would be unavoidable if the network used a P2P Ethernet but if the café happened to share a PON splitter with some domestic customers then the rateable value might be reduced to £20 per year.

If I were designing a network today this would certainly influence my choice of technology, and if I were a member of the Metro Ethernet Forum or a manufacturer of fibre I’d be rather concerned that I’d been singled out in this way.

** UPDATE ** But this has wider implications than just prejudicing the technology choices of network owners. For it to be reasonable to claim that its not possible to differentiate between business and domestic customers, the PON splitters would really need to be buried in the network and not in the point of presence; the deeper the splitters are embedded the more reasonable the claim.

However this reduces the openness of the networks and the degree of infrastructure competition that can be developed. So adding to the clamour of the MEF, fibre manufacturers and network owners should be Ofcom – the VOA’s guidance as it stands impacts competition and choice.

Perhaps rather than a little more clarity, a simpler, fairer mechanism is called for!

It would be so much nicer if the civil servants behind this work sat back and took a long, deep look at what they are actually trying to achieve and designed a framework which did that simply and directly, rather than adding more caveats and “clarification” to an already over-complicated morass.

Ambition is the new agenda

Published on July 18, 2010 in Adrian's tech blog. 1 Comment Tags: , , , , , , , , , , , , , , , , .

Last Thursday I attended the ’s Industry Day where they laid out their key policy framework and work programme for and the . If you hung around just long enough to hear Jeremy Hunt, and Caroline speak, and with only one ear on what was being said while you rushed to submit your copy you might be forgiven for thinking this was another platform where the new blames the old for a delay in delivering on a promise – BUT you’d be VERY wrong.

Before the election two phrases kept cropping up – “We’re in this together” and “”. For me, Thursday’s event was possibly the first time I’d seen a concrete example of what that meant in real terms. What was announced wasn’t a policy which handed large sums of money to a semi-state organisation to proscribe how better broadband would be delivered from on high. Instead we heard from Ministers explaining what their role was in defining and delivering the future, what we could reasonably expect from , and what needed to come from others.

We heard how the Government will remove barriers to investment and create the structures necessary to support local communities in defining their own broadband futures, and how industry would be encouraged to support that process, enabling a smart division of skills that could solve all but the most intractable of broadband problems.

And we heard from a Minister with a vision of 50 Mbps symmetrical services reaching most people by the end of this delivered by the combined efforts of Government, industry and communities. I suspect that sent a few shivers through Whitehall but knowing the people involved I’m sure they are universally excited by the challenge.

Starting immediately is a month long consultation seeking paper solutions to three paper broadband problems. These will be used to shape the Government’s support programmes, ensuring both commercial and organisations receive the right kind of support in the right manner. At the same time, the English regions and the devolved assemblies are each being asked to construct a long-list of areas they want to benefit from next generation broadband. From this, Broadband Delivery UK () will announce the location of three real market testing projects in September and begin a tendering process to find the right mix of commercial and players to make them a reality. From these projects they aim to learn about the impact of state aid, forms of broadband registration and demand stimulation, and infrastructure sharing open access models.

While this is going on, BD-UK will be negotiating with the EU towards a national state aid agreement which for the first time since dial-up modems were in short trousers will provide clear guidance to local authorities on what they can and can’t do.  State Aid legislation has been a bigger block to UK investment in broadband than almost any other, with state sponsored projects crippled by fear of challenge or paralysed by years of rulings before they can begin work. The first roadblock gone – and with it gone, a new process will be in place to unlock the public networks which already reach many of our most remote communities.

Secondly work will push ahead on infrastructure sharing including the opening up of BT’s ducts as well as other assets like the sewers and culverts. This is a knotty problem and not a panacea but an important element in making the UK an easier place to invest in. Second roadblock going.

With all this work hopefully complete – the lessons from the market testing projects learnt, infrastructure hopefully opened up, and state aid put to bed – the Government will announce the main programme of work next year to support local delivery of super-fast broadband, supported by what they termed “mid-level ” to make it easier for the service providers to link to homes and businesses. This time next year we will be well prepared for the main challenge ahead.

Did I hear all the answers on Thursday?No
Does that worry me?Quite the opposite – I’m relieved!
Am I excited?Absolutely!

For the first time in a long while, ambition is back on the agenda. Whether we actually achieve at least 50Mbps symmetrically to every corner of the UK doesn’t matter nearly so much as the way it will change the shape and aspirations of an industry, and the people and businesses that it serves. The journey matters as much as the arriving, and we are on our way.

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