Electronic Communications (Universal Service) (Broadband) Order 2018 - Motion to Regret

– in the House of Lords at 6:02 pm on 5th June 2018.

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Moved by Lord Stevenson of Balmacara

That this House regrets that the Electronic Communications (Universal Service) (Broadband) Order 2018 proposes a universal service obligation for broadband with a download speed of 10 megabits per second (Mbps) and an upload speed of 1Mbps; notes that in its December 2016 advice to Her Majesty’s Government, Ofcom modelled a scenario of superfast broadband with download speeds of 30Mbps, an upload speed of 6Mbps and a guaranteed minimum speed of 10Mbps; and calls on Her Majesty’s Government to adopt a more ambitious universal service obligation which promotes investment in broadband infrastructure and facilitates increased consumer access to ultrafast “full fibre” services (SI 2018/445).

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords)

My Lords, I shall start with a brief quote from the Guardian in August 2017:

“Britain is a broadband laggard with an average speed ranking it 31st in the world trailing most of Europe, Thailand and New Zealand. A new report has found that across the UK … it takes about an hour to download a … Hollywood film … The average speed in the UK is less than a third that of Singapore, which tops the global league table measuring broadband in 189 countries, where it takes an average of 18 minutes to download a [similar] film … The UK falls well short of the average speeds enjoyed by European countries … The report found that overall the UK lags behind 19 European countries, 17 of them in the European Union”.

Our conversations in this House about broadband usually take the form of a question or short debate on why reception and coverage received by individual Members of your Lordship’s House in such and such a place are so bad; others join in. Notspots are mentioned. Rural areas where 3G and 4G mobile coverage are to be found get discussed in little groups gathering around this Chamber as if they were places with Michelin-starred restaurants and secrets to be shared only discreetly and with close friends. Occasionally we might hear people drop in scary words like “latency” and “contention ratios”. This is followed by a reassuring statement from the Minister that things are going well, investment is pouring in, and that coverage is in excess of the target and is fast approaching 100%. However, if one listens carefully, the Minister never explains 100% of what, and that is a question I want to come back to. I confidently expect that this debate will be no different.

I have no substantive issues to raise on the order before us, and indeed I want to compliment the team at DDCMS for the high quality of the paperwork that has been provided, in particular the Explanatory Memorandum. What I want to do is try to set out why the Government approach to this issue was wrong in the Digital Economy Act 2017 and is wrong now, and to beg them to use the powers they have in that Act to try to push forward urgently towards what we have referred to in earlier debates as the “two-gig economy”.

Therefore, my starting point is an amendment to the Digital Economy Bill that we won on Report in February 2017. The early election that year meant that we did not get to ping-pong on the Bill and the amendment fell in the Commons. I like to think that our substantial win in the Division Lobby would have got us further down this track, had it been a normal year. As my noble friend Lord Mendelsohn, who moved the amendment, pointed out at the time, our amendments were about making sure that the universal service obligation being introduced met the Government’s published objectives, as set out strongly in the Ofcom technical advice to the Government at the time. It still seems incredible that the Government have come forward with the slowest of the available options. The only option that meets all the requirements was Ofcom’s scenario 3, with download speeds of 30 Mbps and upload speeds of 6 Mbps, compared to what is being proposed in the USO: 10 Mbps download speeds and 1 Mbps upload speeds, which is what we proposed.

At this stage, it is worth commenting that, in my view, responses to the government consultation showed support for higher speeds than what made it into the USO. Possibly reflecting that, I think it fair to point out that the Minister’s introduction to the report on the consultation said:

“I want to be clear that setting the minimum speed at at least 10 mbps is not the limit of our ambition. To support our vision of full fibre connectivity, in the 2016 Autumn Statement, the Government announced a £1.1bn package of measures to support investment in digital infrastructure, aimed at ensuring the UK has the digital connectivity it needs for the future, including full fibre networks and 5G”.

That is pretty good. I think we can all go along with that. Of course, it fits very nicely with the thrust of our amendment, which was to set a very high aspirational target for the USO— but a tough, unachievable floor for the ordinary day-to-day work—require the rollout of the USO to start in rural areas and prioritise small and medium-sized enterprises. We found all those ideas in Germany, where the Government had recently legislated successfully for precisely that approach.

In framing our amendment, we asked ourselves who could possibly argue against setting an aspirational target for broadband connection speeds of 2 Gbps or more, or object to the cost-effective minimum standard of 30 Mbps download speeds. We thought that the Government would welcome us specifying that rollout must be rural and SME-focused. Indeed, we spiced up the amendment even further by adding a requirement on the Secretary of State to ensure fair competition—“This is the Labour Party talking. We want fair competition and we want it now”—and calling for universal service obligations for mobile coverage. We thought that we were playing bingo and had won the full house, but we were wrong.

Looking back at the debate on the amendment, the key points that come out are as follows. The Ofcom report to which I referred is clear that the Government’s preferred USO speed of 10 Mbps will not be sufficient. It argues that even if it is possible and data usage might not require any more—a point that it says is unlikely, even when the technology gains in compression and transmission techniques are taken into account—other issues such as contention rates and latency would render 10 Mbps unfit for usage in a very short time. The best that the Ofcom report can muster in defence of a 10 Mbps download speed is that if it were adopted, it would have to be reviewed almost immediately.

Other countries have shown what happens to innovation and productivity if due care and attention is not placed on the needs of SMEs or on ensuring the widest geographical reach possible. The issue here is linked to the vacuous reliance on coverage in a geographical sense, rather than in terms of the ability of the infrastructure to provide it, now and in the future, if it is to grow and develop. Coverage of 95%—even 98%—may be where we are at geographically or in terms of the number of properties reached, but it does not feel like that to anyone trying to use the internet to start up a business in rural parts of the UK. We need a measure for this in terms of whether one can use one’s equipment wherever they are in the United Kingdom.

Last week, I was climbing in the Scottish Highlands. We could not get coverage in the glens, not unexpectedly, but once I was at the top of Sgurr Fhuaran—I will just mention that it is 1,057 metres high—I found that I was on 4G. I sent messages and photographs. I emailed my friends, as well as the many fans and admirers of my brilliant climbing skills. In fact, I have them here in my pocket if noble Lords wish to see them. It was so good that I could have tweeted about it. But these are activities which I cannot do at my home only 25 miles away from this place. I cannot even have a smart meter, of which I have heard so much, because the connectivity in Little Missenden, where I live, is so bad. Do not get me started on the connectivity in this place.

What on earth is the point of ignoring, in a USO, mobile telephony? The Government wanted to resist that from the start, even though it has been dealt with in a different way. It may be in the various directives, but it makes no sense. That is a point I want to develop.

We are at the cusp of another revolution in technology. If you have lived through and enjoyed 2G, 2.5G, 3G, and even if you are experiencing 4G, you may understand better than I do what is going to happen when we get to 5G. I gather it is not just an upgrade. This is a new, real-time communications technology which will fit seamlessly with wi-fi, providing the infrastructure is upgraded. It is the technology that will make the internet of things viable and allow us to use many other newer technologies not yet thought of. With the capacity and response times achievable with 5G, it can only happen if we install fibre now and that must mean fibre to the premises.

Driving back from Scotland on Saturday, with aching limbs and a slow puncture, I was listening to digital Radio 4. That prompts another thought for the Minister: when are we going to have digital switchover on radio? While I was waiting for my car to be repaired, I had a chance to catch up with a programme called “The Bottom Line” with Evan Davis. He and his guests were discussing what 5G will do to our current use of the internet and, in turn, to our economy. I will not repeat all the points that were made, but it was a very rich and good discussion about what we should be doing to prepare for 5G. It is available on iPlayer and well worth listening to. The point repeated by the panel time and again is that we are well behind the rest of Europe in terms of delivering fibre to the premises. FTTP must be of a new standard, because without that, we will fall even further behind the rest of the world.

FTTP has been recommended by the infrastructure commission to be part of the universal service obligation. Fibre reflects the current and likely future patterns of consumer and citizen behaviour and the increasing use of mobiles as the growing means, particularly in the younger demographics, of accessing all sorts of digital and other services, often in parallel in real time.

My main regret is that we were not successful in getting our amendment to the Digital Economy Bill into the Act. The Act gives the Minister the power to review the USO, so my plea is that he does not regret the situation that we are in and begins to review the USO immediately. Surely the architecture of the USO has to be consistent with the Government’s productivity plan, industrial strategy and the national infrastructure plan. The argument is that without some ambition, the USO itself may become a constraint on all these important challenges.

The Government seem to be caught by the failure of the market structure which they are working with. The USO’s construction has necessarily been shaped with the imperfections of the market structure that has succeeded in getting us on the journey, but is inadequate to address current or future technology. The department needs to use the powers in the Bill to up its game. I beg to move.

Photo of Lord Foster of Bath Lord Foster of Bath Chair, Rural Economy Committee

My Lords, may I begin by congratulating the noble Lord, Lord Stevenson, on securing an opportunity for us to discuss the Government’s universal service obligation proposals? I very much enjoyed his characterisation of the many debates that we have had on this issue and related issues in this House. I suspect that the noble Lord has, as I do, a good idea of what is in the Minister’s folder and what we are likely to hear at the end of this debate.

I certainly agree with the noble Lord that we should be supporting the principle of a broadband universal service obligation, and I agree with him entirely that the USO lacks ambition. Indeed, by the Government’s own admission, the USO is simply a safety net and frankly, not a very good one at that. I have looked at many Ofcom documents and I cannot find a single one in which they express real enthusiasm for a USO of just 10 Mbps. The lack of ambition shown in the USO is common to much of the Government’s whole approach to broadband rollout.

I want to begin by declaring two interests. First, I live in the wilds of rural Suffolk in a home as yet untouched by superfast broadband, and not even by fast broadband. At the weekend, I used the excellent Ofcom app to check my broadband speed and discovered that I have a download speed of just about 3 Mbps and my upload speed is precisely one-third of 1 Mbps. I hope your Lordships will forgive the pun, but I will be champing at the megabit to take advantage of the USO when it comes along.

My second interest to declare is that I am the chairman of your Lordships’ ad hoc committee on the rural economy. Although we began our work just this morning, we have already learned that the last 5% of premises waiting for—indeed, desperate for—superfast broadband represent 75% of the UK’s geographical area. That means that the rural areas have been losing out. Yet in those rural areas, perhaps surprisingly, there are more SMEs per head of the population than in urban areas, but those businesses cannot begin to thrive and grow without good connectivity.

As research by McKinsey shows, businesses that have proper online presence are growing twice as fast as those that do not. Poor internet connectivity means, for instance, that farmers have to pay extra to have agents fill in online forms for them, that freelancers struggle to make contact with potential clients, and that selling goods or services online or even joining in on a videoconference is almost an impossibility. Skills development loses out because students cannot easily access online learning resources, and people cannot use social media to counter isolation and loneliness. That is the reality in many parts of rural Britain, where, without decent broadband speeds, they are increasingly falling behind. That is why Ofcom rightly said in its recent report that there are still too many people who cannot get a decent broadband connection. Indeed, interestingly, the Secretary of State for Defra, Michael Gove, went even further in his recent NFU speech. He said:

“It is unjustifiable that … broadband provision is so patchy and poor in so many areas”.

I acknowledge that the USO will help and it is welcome, but it is unambitious. The Government are good at talking the language of ambition in this area, but it is worth studying that language. Take the definitions used. The Government define “superfast broadband” as broadband with download speeds of 24 Mbps and above, but across the rest of Europe superfast means 30 Mbps and above. Even our own regulator, Ofcom, uses that higher 30 Mbps definition, but not our unambitious Government. Or take the figures that will no doubt be used shortly by the Minister to seek to persuade us how well we are doing. The Minister and the Government provide figures relating to access to a particular broadband speed. They rarely quote the take-up rate of those particular speeds. Surely it should be a concern that significantly fewer than 50% of premises that have access to superfast broadband actually take up the offer. We need to be more ambitious about promoting take-up through skills training, marketing the benefits, addressing barriers such as cost and developing quality technology and content. Higher take-up means lower unit costs. Only when we have a high take-up rate can we achieve the huge benefits to individuals, businesses and the country at large that superfast broadband can bring.

To date, the Government’s strategy has been almost entirely to concentrate on building up the structures, while doing very little about stimulating demand. When I raised this point with the Minister 20 months ago he replied:

“We agree with driving take-up”.—[Official Report, 27/10/16; col. GC 16.]

I hope that when he responds, he will tell us what the Government—not other people—have done in the intervening time. I will remind him of something else he said then:

“When it comes to digital infrastructure connectivity, we want the UK to be not only the lead in Europe, we want to be a world leader”.—[Official Report, 27/10/16; col. GC 13.]

Ambitious language indeed, but the reality is that, for example, around 1 million premises in this country are connected with “fibre to the premises”—FTTP, or full fibre as it is now more frequently called. Spain already has 17.5 million premises connected with full fibre.

I was very taken by a recent Oral Question from the noble Countess, Lady Mar, who asked,

“My Lords, can the Minister explain why remote parts of mountainous Norway and even remote villages in China can have high-speed broadband but we in the United Kingdom cannot?”

The Minister’s reply included a statement of the obvious:

“It is a question of getting the infrastructure in place”.—[Official Report, 19/3/18; col. 8.]

Indeed it is, so no wonder Ofcom has said recently that greater investment is needed to build full fibre networks.

In the debate 20 months ago, in another outburst of ambition, the Minister said:

“I think we all agree with the ultimate objective, which is to not be satisfied with just superfast broadband; we want fibre to the premises for everyone and we want increasingly high speeds because that is what the future will require”.—[Official Report, 27/10/16; col. GC 16.]

So the Minister acknowledges that what is required is not just superfast but fibre to the premises, which as the Minister knows means speeds being offered that are 100 times faster than we are going to get through the USO. The nearly 1 million premises like mine that do not even currently have functional broadband speeds are to be offered something which is 100 times worse than the Government believe is needed. And, of course, the offer of that “digital safety net” of 10 Mbps is conditional on the costs not exceeding £3,400.

The Digital Minister in the other place, Margot James, recently claimed:

“In the 21st century, accessing the internet is a necessity not a luxury. We are building a Britain that is fit for the future, and we’re now putting high speed broadband on a similar footing as other essential services like water and phone lines”.

The nearly 1 million premises set to benefit from the USO will not be getting what they see as high-speed broadband. They are certainly not getting superfast broadband, and they are very definitely not getting full fibre with speeds up to 1 Gbps. They will not have broadband on the same footing as water or phone lines. Yet again, we have ambitious language far exceeding actual delivery. Sadly, with the unambitious USO we have before us, the digital divide will continue.

Photo of Lord Aberdare Lord Aberdare Crossbench 6:15 pm, 5th June 2018

My Lords, I add my support to the Motion of the noble Lord, Lord Stevenson, and I share his concern that the proposed broadband universal service obligation is disappointing. I have not studied the helpful documentation accompanying the order in great detail but my overall reaction, as someone with a home in west Wales—I am following the script set out by the noble Lord at the beginning—with no current mobile telephone coverage and rather limited broadband options, is that the situation of myself and others in the same boat is unlikely to be much improved by the USO as proposed. I welcome the principle of the USO and the fact that it includes a minimum upload speed as well as a minimum download speed, but 1 megabit is not enough.

One of the great potential benefits of universal broadband, as we have heard, is that it makes it possible to run a small or even medium-sized business from anywhere in the country, however remote. However, such businesses depend at least as much, if not more, on their ability to upload data to their customers and partners as on being able to download material from the internet. Unlike private users, they are less likely to spend time and bandwidth downloading films, videos and social media postings. I recognise that full fibre, much as I would welcome it—either right to the premises or, indeed, to anywhere reasonably nearby—is unlikely to reach all of the rural areas where many of the 5% of premises not currently receiving superfast broadband are located. What will the order do to promote the development of new approaches and technologies that can reach those locations? It seems to me that far too much reliance has been placed on Broadband Delivery UK, Openreach in particular, to achieve the 95% coverage, using largely old-fashioned technologies with limited expansion capability.

We were rescued from a BT Broadband service that rarely, if ever, reached 0.2 Mbps by a local ISP, appropriately called ResQ, which offers a line-of-sight fixed-wireless service with speeds of around 10 Mbps for both download and upload. Surely it would be better to incentivise and promote competition in developing new approaches, whether based on fibre, fixed wireless, satellite or even the use of 4G mobile networks, with the capability of reaching premises everywhere in the UK with speeds more like 30 Mbps than the 10 Mbps in the order. Members of your Lordships’ EU Internal Market Sub-Committee who visited the Harwell space centre recently heard from a smallish satellite company with plans to offer global high-speed broadband coverage via satellite. There are opportunities to explore technologies other than fibre.

I note from the Government’s impact assessment that a USO specifying 30 Mbps download and 6 Mbps upload could reach 2.6 million premises in scope, as opposed to 1.05 million for the proposed approach. That is well over double the number of premises able to access superfast broadband for a relatively modest extra investment.

Finally, I ask the Minister to explain how the USO will actually be enforced. If I am not getting my 10 Mbps, what do I do? How soon must the service be provided and by whom? I also note with concern that if it costs more than £3,400 to provide it, the end user—that is, me—is going to have to pay the extra.

The UK is already a considerable way behind many other nations in its rollout of truly high-speed broadband. In my view, the introduction of the USO, which is indeed welcome in principle, should be grasped not as a way of trying to catch up a bit but as an opportunity to get ahead and to open the doors to all the potential internet-based applications of the future. We do not know yet what those will be but we can be pretty sure they will require more broadband capacity, rather than less.

Photo of Earl Cathcart Earl Cathcart Conservative

My Lords, I am sure that my noble friend Lord Ashton of Hyde will know what I am going to say before I say it so I will not disappoint him—or the noble Lord, Lord Stevenson. I live in Norfolk and as in many other areas of the country, as everybody has said so far, we receive appalling broadband speeds. It is so bad that when Defra sends me a long farming document, I cannot download it, so I have to ring up my agent in Norwich, get him to print it out and send it to me in the post. That is hardly 21st-century communications but at least the post is reliable.

We have been promised speeds of 2 Mbps and now the universal service obligation of 10 Mbps. As my noble friend found out for himself when he stayed with me last summer, our speeds are very slow. He measured our speed and found it was a mere 0.03 megabits per second—hardly the promised 2 Mbps, let alone 10 Mbps. He helpfully gave me a number of contacts to improve our speeds and I also contacted Better Broadband for Norfolk, an organisation set up by Norfolk County Council and BT to help all those areas in Norfolk that get bad speeds.

I can now report to my noble friend Lord Ashton of Hyde that our broadband speed is still 0.03 Mbps. Nothing gets done. I have given up being frustrated by all this but I feel sorry for others in the village—architects, photographers, designers, et cetera—who rely on good broadband speeds for their business, let alone schoolchildren trying to research their homework.

My question to my noble friend is: why are the Government spending hundreds of millions of pounds on superfast broadband speeds when they have not got the basics right? Surely they should ensure that everyone has adequate speeds before embarking on a product that not everybody wants or needs. For all the good it will do me, I look forward to my noble friend’s response.

Photo of The Earl of Lytton The Earl of Lytton Crossbench 6:30 pm, 5th June 2018

My Lords, I had not originally intended to intervene on this important matter but the noble Lord, Lord Stevenson, is to be commended on raising it. I speak as someone who lives and works in a rural part of West Sussex and has business tenants in the same location. It is not that it is that rural: I am two miles from the expanding village of Southwater, with its 10,000 residents. It rejoices in having a data centre for the Royal & Sun Alliance insurance company, which doubtless has its own dedicated connection with the outside world. We are five miles from the town of Horsham and about 18 miles from London’s second airport.

All this is in an acknowledged growth area and commercial hub known as the Gatwick Diamond, an area where successive Governments have expected growth to take place. Yet despite constant badgering of both BT and Openreach, my statistics for my sub 4-megabit service are, on a good day, probably comparable with the ones quoted by the noble Lord, Lord Foster. I relate to what he said. It often downloads at less than 2 megabits and is seemingly incapable of upgrade. This is about not the final mile but provider inertia, and the half mile downstream of the green cabinet before the line gets any juice. What is in between is understood to be a dated piece of twisted pair cable, which ought to have been dug up and replaced about 25 years ago. Sadly, the mobile signal is also poor in that area and, at the moment, I have not succeeded in establishing a line of sight to enable me to get a 4G signal.

This matters because I cannot at present allow my equipment access simultaneously to Microsoft 365 and Dropbox; the thing simply will not function. Sometimes I have to bring my Dropbox material up to London on a memory stick and upload it here. In fact my little 4G mobile dongle, which I travel around with, will when in signal enable me to do it far more effectively than that other paragon of communication efficiency, a Southern Rail train. The aspirations of the noble Lord, Lord Stevenson, would be heaven indeed because things such as internet banking would be revolutionised. Online returns to VAT, PAYE and income tax portals would be made viable because those things all rely on sufficiently fast communications for them to create a proper handshake and get a connection.

Before we get bogged down in the technicalities of up or down speeds, I would like to mention a word which has been implied but not mentioned before by other noble Lords: capacity. I know about capacity because, at certain times of day, I cannot get any internet access at all. I may as well go away and make a cup of coffee and a sandwich while it tries to do an initial start-up. Some while ago one of my office tenants left, specifically because for their small graphic design company the broadband speed was so utterly woeful that a member of staff had to take the material home with them to Worthing and send it from there. There are real problems with this because in West Sussex there are a very large number of microbusinesses operating from home. There are tens of thousands of home-workers in West Sussex alone, according to the information that I have been given by the county council.

Since the separation of BT and Openreach, seemingly the two do not talk to each other—at least, not very effectively—and I wonder quite what gives there. I know this because my wife is very often the one who is at home, trying to get some answers out of BT. Is the tenant’s application for a faster service being processed? Might we get one as well, and why do the neighbours 200 yards down the road have one? When she asks, “Who do I go to?”, BT’s reply is, “We don’t really deal with that side of the thing—that’s Openreach, because we deal only with the cabling”. Can we cut through exactly who provides what and get end-to-end configuration supplier to user? Were this a rail franchise, I think it highly likely that it would long since have been stripped of its operating licence.

What is the problem? Where is the Government’s willingness to impose this USO that we have talked about for a very long time? I would like to think that we will get somewhere with this order, but I remain unconvinced because all the things that have been done in the past have simply been ignored. There are people like me and others up and down the country who are fed up with this whole system. As has been mentioned by other noble Lords, you seem to be able to get a much better signal elsewhere. In my case, it was in the middle of the Peloponnese, somewhere in Greece, where I could get a 4G signal and have a conversation with my daughter who had some problem. That is going back a few years now, yet in a reasonably affluent and well-heeled part of West Sussex, you cannot do it.

Can we have a complete outlawing of “up to” speeds? That term is a smokescreen of the first order. All it does is allow providers to conceal poor performance. Will the Minister turn his mind to these things and say what will happen about giving this measure proper teeth so that we can start seeing some real results, not at some time two or three years hence, but in the next two, three, four months? The Government issue permits and licences and are responsible for governance here, but even if they were not, there is reason to intervene where there is market failure and there has been market failure here. There seems to have been a concentration on people streaming videos—or whatever it is they want to do—from Netflix and other providers, yet businesses cannot get the sort of download speeds they need for their day-to-day, normal-working-hours operations. I hope the Minister will be able to give us some positive news on that.

Photo of Viscount Waverley Viscount Waverley Crossbench

My Lords, I have heard the despairing contributions this afternoon. How on earth is the UK going to become “global Britain”, which is the aspiration post Brexit?

Photo of Lord Mendelsohn Lord Mendelsohn Labour

My Lords, I thank my noble friend Lord Stevenson for moving this Regret Motion and giving us an opportunity to debate the order. I also thank him for an outstanding speech setting the right context for this, and I thank the noble Lord, Lord Foster, for an excellent speech that placed in context the consequences for small businesses. I share the frustrations of previous speakers—the noble Lord, Lord Aberdare and the noble Earls, Lord Cathcart and Lord Lytton—about these speeds. I share it although I do not suffer from any of the difficult consequences, as they do.

I live in north London. We have three suppliers into the house. We have all sorts of cabling across the house, with boosters and all sorts of signals, but I have never achieved the stated packages from any of the services. We have problems of latency, contention and all those matters. In fact, my business has a dedicated phone line, which has boosters and other cabling to try to make sure that the signal is not lost, and we are fairly close to BT Tower itself—but our service is barely better than the much cheaper super broadband. It is frequently a problem that the claimed capacities are never fully achieved. That is something that we have to be very wary of, even when we establish a universal service obligation.

I turn my attention to the universal service obligation in this particular order. I want to make the simple point that the order does not achieve its objectives, and I would like the Minister to address that problem. When the Act was passed and the level at which the USO would be introduced was set, it was based on a series of assumptions none of which I believe to be true. I do not believe any more that it achieves the purposes of equity by trying to sort out the digital divide and deal with the problems of rural communities, and nor do I believe that it achieves any of the stated benefits of economic growth.

Some rather good documents on economic growth were produced by DCMS, and I thank it for the work that it did on that. In parenthesis, I acknowledge that the digital team at DCMS has steadily improved, and I suspect that if the same team had been around during the passage of the Bill last time we would not have been stuck with this level of USO. The economic growth benefits are said to be £257 million a year, which relates to:

“Local enterprise growth … Enterprise productivity growth … Increased teleworker productivity … Increased participation of carers and the disabled”.

Photo of Lord Ashton of Hyde Lord Ashton of Hyde The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

I apologise for interrupting. Were the figures that the noble Lord quoted from the USO? Is that what he was referring to?

Photo of Lord Mendelsohn Lord Mendelsohn Labour

I will specify that the figures themselves are on page 3 of the impact assessment and are for the USO. The stated growth figures themselves came from figures previously reported by Ofcom and from other reports. I can cite the reports for the Minister, but they are all in the documents that I mentioned. The assumptions on which they were made were an extrapolation from higher numbers, so even now to suggest that these numbers are consistent with the service is suspect, largely because the key factor in what is happening in the market and in the use of these things is the software and other services that are laid on top of them, which are the applications that people use. There is an idea that this level of service can be delivered on figures a year later when software has increased in order to deal with a market of higher usage, but that does not mean we can achieve these growth figures.

The other options that were rejected, 20 and 30 megabits, still fulfil both objectives, whereas this order fails on both objectives. That has had counterproductive effects. It is certainly true for those of us who spend a lot of time in industry that by setting the USO at 10 megabits we have ended up in a situation where there has been a chill on potential investment from other players. Other people have not been able to enter the market, and even the main providers that are looking to bid have found it hard to justify business cases when the USO is at 10 megabits. That is a huge problem. I agree with all the speakers who have raised the issue that there will be a dramatic impact on our relative position with this low, unambitious target.

The Government’s argument is that the reason why the level has been set is that it is all Europe’s fault, or it is in the directive. I beg to differ. The directive is all about how you interpret it and we have chosen to interpret it in a more restrictive way than others have done, as well as offering interpretations of some of the aspects in the most limited possible fashion. The most significant one is about what the minimum specification is. The documents that were provided state that the connection should be available to,

“permit functional Internet access, taking into account prevailing technologies used by the majority of subscribers and technological feasibility”.

That interpretation has been highly restrictive in how we have looked at the issue. We assume that the sorts of things that people are using in these different areas are based on easy-to-apply averages, but that is not the case. When you start talking about 10 megabits as being the sort of level that people can use, you come to the wrong conclusion. If you are in the rural community and using many of the technological features that are now used to enhance your business, you will tend to use them on a mobile. When you look for a broadband wi-fi connection, you will find that it does not meet the requirements that you can gain if you can get access to 4G.

The blogs, comments and news reports on all the IT and rural community pages are stuffed full with people who say all those sorts of things. I have one comment here: “For the isolated rural like us, USO will deliver nothing useful. We will be pointed to 4G, which is already available”. They make a further point: that the 4G contract is now double the USO offer in terms of monthly data volume. The USO offer of monthly data volume is 100 gigabits. Even in the documents prepared by the department, it admitted that usage had risen considerably from 2016 to 2017, from 132 to 190 gigabits, but that includes all those who cannot get more than 10 megabits. Those above 10 megabits are well over 200 already on those old figures, probably touching closer to 300 now. When you look at what the average user gets, it is not the same. There is no equity. That enhances the digital divide.

While the Government say that we have to consider wider policy considerations such as market distortions, this is the greatest market distortion of itself. They suggest that it may reduce competition. Actually, we all know that only two parties are seriously bidding to implement this: BT and KCOM. All the other suppliers will not even look at this at 10 megabits. They will look at it at a larger number. They have moved on to full fibre rollout because that is the only economically viable proposition.

I note, as have others, that some smaller market players are looking at this, but again one has only to read the technology papers and the trade press to know how scoffed at is the notion that anyone will be able to come forward with a credible plan. The Government’s argument is that it will reduce market investment—this has proved not to be true in either full fibre rollout, other consequences or even in who will enter the USO—and that it will increase consumer prices. We will come to that later, as someone else observed.

Perhaps the weakest point in the order is the notion of the review date. The Government indeed acknowledged that 10 megabits might not be sufficient in the fullness of time—as opposed to future-proofing so that we actually deal with the problem—but sets, “if applicable”, the review date of 2028. Under the Bill, the Secretary of State can do this at any time—I hope that he seeks to exercise that power as quickly as possible—or when 75% of the population has access to superfast at 30 megabits.

Is it really the Government’s ambition that we will hit 75% at 30 megabits in 2028? Europe’s target for 2020 is 300, and ours is in 2028? How is it possible to sustain an argument that we are dealing with a directive that restricts our position but allows Europe to march ahead? That does not make sense.

What does this mean for others? Where does the digital divide exist? It starts in England. In Scotland, the Scottish Economy Secretary describes the whole USO as grossly unfair. The Scottish Government are currently pursuing plans to deploy 30 megabits to all homes under a £600 million programme to be done and dusted by 2022 which will be paid for by the Scottish Administration. Their concern is that consumers will have to pay higher prices to deliver 10 megabits across the rest of country. That is the impact of increasing consumer prices.

To see the impact on rural communities, you have only to look at what has happened in York. In a fantastic initiative, York has established itself as the first gigabit city. The Sunday Times placed it as the best place to live. That has been a magnet for investment, a magnet for businesses starting up, but the worst possible magnet because the young and mobile are seeking to leave rural areas to establish their businesses there. Nothing will create a greater divide and less equity than such a consequence. I think that is a huge mistake and a huge problem for us.

I do not think that this order meets the objectives. I do not think that it is in date—it is out of date. I should be very grateful if the Minister would seriously consider when would be the appropriate time to set a proper review date and have data that do not come from 2015 or 2016 on customer usage and other things to try to calculate this, when we have something properly up to date and properly future-proofed to establish what should be the proper USO.

Photo of Lord Ashton of Hyde Lord Ashton of Hyde The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport 6:45 pm, 5th June 2018

My Lords, I am grateful to all noble Lords for their contributions. We are faced with a dilemma here. On the one hand, people such as my noble friend Lord Cathcart are begging for anything to be done to allow them to have some decent connection. By decent, I mean something that would enable him to receive his emails and documents. On the other hand, many noble Lords have said that we have lacked ambition. The last, very compelling speech from the noble Lord, Lord Mendelsohn, castigated the Government for their lack of ambition and for setting incoherent USOs, to sum up his speech very briefly.

I have to remind noble Lords that the purpose of the universal service obligation, as outlined in the universal service directive, is to ensure the provision of services to all users. Noble Lords have mentioned Europe, which at the moment has coverage of about 76%. The universal service directive applies only to fixed broadband; it does not apply to mobile. Indeed, the European Commission itself has twice reviewed mobile and concluded that social exclusion does not exist.

The universal service obligation does not exist to promote investment; it exists to make sure universal services are indeed universal and a legal right. It is intended as a safety net. The noble Lord, Lord Foster, said that that safety net lacks ambition; we will deal with the Government’s ambition elsewhere in my speech. Interestingly, the noble Lord also admitted that he would benefit from the USO and cannot wait to have it.

Premises in the USO footprint will be the hardest and most costly to reach in the country. The Government’s position is that the current specification of the USO is sufficient at present and strikes the right balance between meeting consumers’ needs and ensuring that it is proportionate and deliverable. That was not a random decision. The Government carefully considered and consulted on a range of options and three different scenarios that Ofcom modelled: a basic 10 Mbps service; the preferred 10 Mbps service with additional specifications, such as upload speeds, latency and data caps; and the 30 Mbps or superfast service. The 10 Mbps was selected because data usage drops considerably below this, indicating broadband activity is more restricted with speeds under 10 Mbps. Further evidence from Ofcom shows that a speed of 10 Mbps meets the needs of typical households.

I would also point out that 10 Mbps is a higher speed than virtually every USO across Europe. Sweden may be higher. However, we fully recognise the USO will need to be revised over time as consumer needs evolve, so that it continues to meet people’s needs in the years to come. The Government will be closely monitoring this.

Ten Mbps will make a considerable difference. The noble Lord, Lord Foster, gave a list of things that he is currently unable to do, including combating loneliness—and the noble Lord, Lord Cathcart, mentioned downloading documents. Setting it at 10 Mbps will allow all those things that he mentioned to take place.

As has been mentioned, that is why the Digital Economy Act 2017 provides for the Government to direct Ofcom to undertake a review at any time, and it includes a specific requirement for a review to be undertaken when 75% of premises subscribe to broadband services of 30 Mbps or higher. By the way, despite what the noble Lord, Lord Foster, said, there is virtually no difference between the two definitions of “superfast” that Ofcom, Europe and the Government have been using. At the moment, it is 95% for the Government and 94.9% for 30 Mbps, so it really is not a significant difference.

As I said earlier, the 10 Mbps USO is a safety net, but the Government have much greater ambitions for connectivity across all parts of the UK, so on that I agree with most noble Lords. In his motion, the noble Lord, Lord Stevenson, referred to the third superfast scenario. Thanks to BDUK and £1.7 billion of public money, over 95% of UK premises already have access to superfast speeds, with savings and clawback due to deliver at least another 2% of coverage. The majority of this access has been delivered by providing fibre to the cabinet. However, we are not content with that, and I agree with the noble Lord, Lord Stevenson, and others. In his speech to the CBI last month, the Chancellor set a national target for full fibre—not just to the cabinet, but all the way to the premises. Our aim is for full fibre to 15 million premises by 2025, and all premises by 2033. So the Government are not short on ambition.

Likewise, at the Fibre Investment Conference, organised by the DDCMS and Ofcom in April this year, the Secretary of State spoke about creating a world-leading environment for investment in full fibre, and reaffirmed how vital full fibre is to building the capacity this country needs. That is why the Government are delivering a series of measures to realise these ambitions. The local full fibre networks programme and gigabit broadband voucher scheme are delivering fibre connections now and incentivising further commercial investment. The £400 million Digital Infrastructure Investment Fund is helping to finance alternative network providers, and the Treasury is further supporting investment through business rates relief for operators who install new fibre. The DDCMS future telecoms infrastructure review will soon publish a report looking at how we can create the best possible market structure to drive investment, and hit the Government’s targets to provide full fibre to all consumers.

The USO is part of these plans, but a higher speed USO would increase the direct costs of delivery as well as increasing the number of eligible premises. This may result in greater costs on consumers’ bills, and would increase competitive distortions. It would increase the risk of negatively affecting commercial incentives to invest. It is therefore crucial that, as a safety net, the USO works to support, and not unduly distort, the current and future market. The potential for market distortion limits what the USO can achieve.

I will try to respond to some of the points which noble Lords made. The noble Lord, Lord Aberdare, asked how the USO is going to be enforced. The order has been passed by both Houses and is now with Ofcom to implement. It will designate the provider and the industry cost-sharing fund. Ofcom expects this to take two years and it will consult on the provider this summer, so it is already working on that. That point was also made by the noble Earl, Lord Lytton. Once it is in place, the USO will enable the noble Earl to do exactly the things which he is complaining he cannot do now, so he should be glad about it.

The noble Lord, Lord Mendelsohn, talked about the needs of businesses, and of course he is right that in some cases a 10 Mbps speed is not sufficient. If you have a high-data business, that would not be ideal: for example, actuaries, whom I used to deal with, have huge data files. However, it will support many small businesses, and it provides access to every government service available.

Many noble Lords have talked about the speeds and what we mean by them. It is important to note that the 10 Mbps speed is the minimum download sync speed. That means that this is the maximum speed available on the connection between the network and the premises. We therefore mean a minimum download sync speed on that; actual download speeds may therefore be greater.

The noble Lord, Lord Mendelsohn, also mentioned businesses in rural areas. Of course, we regard this as a safety net, but there are other things that rural businesses can apply for, such as the Gigabit Broadband Voucher Scheme, and Defra, for example, has allocated £30 million of grant from the Rural Development Programme for England for targeting to help connect businesses with broadband to reach rural areas. We agree that fibre is important. That is where the Government’s ambition is and, both in the mobile area and in broadband, that will be helped by the government initiatives on fibre.

I said that the universal service directive does not deal with mobile, but I take the noble Lord’s point. We agree that fibre is important because, to make sure that the benefits of 5G in particular are available—in which we have been helped by the Digital Economy Act—we will need to get fibre to all the extra masts that will have to be built, every one of which will be connected by fibre. Fibre is essential, not only for better broadband speeds but for mobile.

The noble Lord, Lord Foster, also talked about take-up, as I believe he has before. Take-up at the moment is at about 40% and rising. BDUK is working with local bodies to promote take-up further. The essential point is that there has been an increase in take-up, which has resulted in more than £600 million gain share to invest further in coverage. We agree that take-up is essential. I have to say to my noble friend Lord Cathcart that there is no point in providing the universal service obligation to those who do not want it, which is why it is a demand-based programme. The noble Lord, Lord Aberdare, also talked about how the upload in the USO is not good enough for SMEs. Again, I remind him that up to £3,000 is available for an SME to apply for gigabit vouchers.

The noble Lord, Lord Mendelsohn—this is a good place to end—mentioned Scotland’s R100 scheme. This illustrates the difference, and it is also similar to the European ambition for its scheme, which is 30 Mbps. I think the noble Lord, Lord Mendelsohn, makes it 300 Mbps. The difference between the European initiative and the R100 is that Scotland has gone for a higher level of 30 Mbps, but delivery will take longer. For example, Scotland does not know whether it is possible to deliver that with its current investment. The R100 procurement makes it clear that it is,

“aiming to find suppliers who will connect as many premises as possible for the available subsidy”.

The issue we want to cover with the universal service obligation at 10 Mbps is to allow people who get completely insufficient service from their broadband to have one that, while it is not future-proof or perfect, will make a significant difference to their lives, as I hope the noble Lord, Lord Foster, will realise.

I will try to end on a note of optimism. Where I agree with the noble Lord, Lord Stevenson, is in his ambition to promote better broadband speeds and more investment in full fibre connectivity. That is why we are taking the range of measures that I described. The USO has an important part to play in ensuring that no one is left behind, but a superfast or even ultrafast USO would not help achieve our ambitions and could even harm them. That is why we are proceeding with, and keeping under review, the present minimum 10 Mbps specification.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords) 7:00 pm, 5th June 2018

My Lords, I thank all those who have contributed and have got a lot of things off their chest, which is always a good thing to do. There are times when we want to get things moving but that does not happen. The noble Viscount, Lord Waverley, gets the prize for making the shortest and least geographically located point. Asking simply where global Britain was going to come out of all this was rather clever, and I wish that I had thought of that myself. At least we did not get to go down the byways and highways of yet another county, even though that is at the heart of what we have been trying to say.

I was left with five points from the many good speeches. First, I think that the Government are making a rod for their own back if they do not nail down very quickly what they mean by the various percentages and coverages and so on. The Minister’s speech was better in that sense, as it was restricted to a couple of examples. However, if people do not know what they are being offered, cannot measure it against their real experience and then do not see what they can do to redress the point—the question was asked: where do you go when you have a complaint?—we are going to end up in worse trouble than we are in at the moment, and I ask the Government to think again about that.

Secondly, what came through was the need to think about reach as much as about what broadband is doing in terms of broadly shaping of the economy—by that, I am referring to the two aspects of rural and small businesses. If we do not get that right, we will again build in trouble for ourselves, because there is a suppressed demand that we are not measuring and not seeing. Even though some people will say that they do not want particular advanced technologies, there seem to be an awful lot of other people out there who, if the technology is available, will be able to do a lot more than they can at present. We are missing a trick if we do not try to respond better to that.

Thirdly, it is good to hear about the commitment to fibre, which I have taken as a very positive output from this debate. The aim is for 15 million premises to have a pretty good fibre connection in a reasonable amount of time, but it seems a very long time to wait for the 100% figure to be reached. I assume that 100% is 100% of everybody everywhere. If it is not, obviously we will need to know about that, but 2033 seems an awfully long time to wait for that.

I have two final points to make. The thing that I had not thought about enough when preparing for this debate was the social exclusion argument, which was made by a number of people—particularly the noble Lord, Lord Foster. It is important not to lose that in the rush to find toys for people or, more seriously, to give people the tools they need to develop their careers and the work they want to do. The social exclusion element is really important.

Finally, a review of availability is promised in the order. There is a bit of a blockage at 75% of people getting 30 Mbps or more, but if it is possible to think about that more broadly in terms of serious issues regarding new technologies, I think we will all be happier. With that, I beg leave to withdraw the Motion.

Motion withdrawn.

House adjourned at 7.09 pm.