Superfast broadband – will Scotland reach 100?

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This blog looks at plans to deliver superfast broadband to every home and business in Scotland by 2021, under the R100 programme. The blog explores the changing timeline for roll-out of R100, eligible areas for R100, and other Scottish Government broadband initiatives.

What’s R100?

Currently, around 94% of premises across Scotland can access superfast broadband (defined as >30 Megabits per second (Mbps)). This access figure includes both residential and business premises and is based around postcode level data. The speed available is determined by a model that reconstructs the Openreach exchange/cabinet based network taking into account the distance limitations of different types of broadband delivery infrastructure services.

Tackling the final 6% isn’t an easy task, as many of the remaining premises are in remote rural areas. In such locations, normal economic broadband delivery models tend to become extremely stretched and deployment often slows to a crawl. A big factor is the further a property is from a telephone exchange, the weaker the broadband connection.

At the end of 2017, the Scottish Government (SG) announced its plans to deliver superfast broadband (>30 Mbps) to every home and business in Scotland by 2021, under its (Reaching 100%) R100 programme. The SG committed £600 million to the first phase of procurement, of which £21 million (3.5% of total) was from the UK Government.

In terms of SG broadband delivery obligations, it is important to note that under the Scotland Act 1998, the legal and regulatory responsibility for telecoms in the UK rests solely with the UK Parliament and UK Ministers. The Scottish Government will be using economic development powers to subsidise broadband delivery through R100. No other part of the UK has matched the SG’s commitment to deliver universal access to superfast broadband of >30 Mbps.  It should be highlighted that superfast broadband has two definitions, the EU define it as greater than 30 Mbps, the R100 target, whereas the UK Westminster definition is over 24 Mbps.

Changing timelines for delivery

At the time of the original R100 announcement the first contract(s) were due to be awarded by the end of 2018. This was later delayed and it was advised that the final bids for R100 would instead be submitted in early 2019, followed by a contract award in March 2019. However, a dispute between some of the potential bidders caused this to be delayed.

Following June and July 2019 statements from SG, it now expected that the R100 contracts will be awarded by the end of 2019, with delivery timescales confirmed once a supplier or suppliers are in place.

The Department for Digital, Culture, Media and Sport (DCMS) is the UK Government department responsible for broadband policy. A recent change by DCMS to move toward only approving Building Digital UK contracts if they are “full fibre” (FTTP) has also contributed to some of the delayed timeline for R100. The “gainshare” implications of this are discussed below. A ‘gainshare’ mechanism ensures that telecoms providers building superfast broadband networks return a share of future revenues to the public sector, if adoption of their services is greater than expected. This change would have needed re-jigging in the solutions proposed by potential bidders.

ISPreview, a consumer broadband information website, stated:

If contracts are signed at the end of 2019 then it’s hard to see how the SG could possibly achieve their 2021/22 target, unless they opt for a quick-fix by using inferior GSO satellite services for the most remote communities.

Cabinet Secretary for Rural Economy, Fergus Ewing, has pledged to resign as a Minister, if he can’t complete the R100 project roll-out by 2021/22.

It was always likely the R100 procurement process would take a long time – not unlike a similar scheme for Wales – largely down to the sheer complexity of figuring out how to bring superfast broadband to some of the most remote areas in Europe, which makes them expensive to reach.

It should be noted that the R100 strategy came under further pressure after a 2018 report from Audit Scotland, warned that it “will be difficult” to deliver the stated ambition of 100% “superfast broadband” (30Mbps+) coverage by 2021. However, since this report SG has confirmed it is developing plans in parallel with the main procurement to ensure the 100% commitment is met.

Other SG broadband initiatives

The existing £400+ million Digital Scotland (DSSB) project with BT (Openreach), has been rolling out a mix of Fibre-to-the-Cabinet (FTTC / VDSL2) and a little Fibre-to-the-Premises (FTTP) technology, and is confirmed to have achieved its primary targets. DSSB has extended broadband access to over 930,000 homes and businesses across Scotland. “Without public-sector investment, only around two-thirds of premises in Scotland would have access,” according to the Audit Scotland report. The DSSB contract is due to complete by September 2019.

The Community Broadband Scotland (CBS) initiative helped to support a number of successful community-run networks across Scotland. This scheme ended in 2018 with SG stating that the CBS model was no longer the most viable approach, especially due to constraints around state aid. Communities within the project pipeline were given the option of continuing with their own projects or being included in planning for R100 and the vast majority of communities indicated a preference to wait for the R100 roll-out.

BB2 Blog - Featured Image“Broadband green” by Infosec Images is licensed under CC BY 2.0 

Intervention areas – eligible premises for R100

It is a legal requirement under state aid legislation that government broadband funding can only be invested in areas of market failure. An Open Market Review (OMR) was initiated at the end of 2016 to identify those premises that did not have access to superfast broadband, and those for whom there were no commercial delivery plans over the next three years. This information formed the basis of the ‘intervention area’ for the R100 programme, ensuring that public investment will not impact on private investment in broadband infrastructure.

Based on the R100’s OMR the procurement was split across three regional lots (North, Central and South). The procurement did not focus on urban city centre premises but targeted investment where it is needed most – in rural Scotland. SG expect commercial suppliers to fill gaps in urban areas and are encouraged by the emerging plans from BT, Virgin Media, CityFibre and Vodafone, which suggests that this is beginning to happen.

SG stated in June 2019 that they had to provide a revised intervention area listing to R100 bidders. This update was necessary to allow the final stages of dialogue to be based on the most up-to-date picture, taking into consideration commercial coverage plans and changes to planned DSSB deployment. Additional premises were added back into the R100 intervention area, in part due to direction from UK Ministers that future Gainshare activity be focused on full fibre solutions. This resulted in greater than expected changes across the country; and bidders requested extensions to enable them to remain in the process and provide competitive bids.

ISPreview recently noted that:

At present around 180,000 premises across Scotland are deemed eligible for intervention under R100 (across three lots), which given the £600m equates to a significant subsidy of around £3,300+ per premises. You could certainly do an awful lot of FTTP across that patch for such investment, particularly if the chosen supplier(s) put some of their own funding into the pot.

As we fast approach the final few months of 2019, many are now eagerly awaiting an updated delivery timeline for the R100 programme.

Feature image “Internet Speed” by Infosec Images is licensed under CC BY 2.0 

Alison O’Connor, Senior Analyst, Financial Scrutiny Unit