Broadband in Wales — [Steve McCabe in the Chair]

Part of the debate – in Westminster Hall at 3:40 pm on 6th July 2016.

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Photo of Ed Vaizey Ed Vaizey Minister of State for Culture and the Digital Economy (Jointly with Department for Business, Innovation and Skills), Minister of State for Culture and the Digital Economy (Jointly with Department for Culture Media and Sport) 3:40 pm, 6th July 2016

I know that the hon. Member would not want to mislead the House, and the quotation I hope he would take from what I said was “have access to superfast broadband”. There is a lot of terminology in this debate, but basically, yes, it is called fibre to the cabinet—it goes to the big green box—and sometimes people in homes who think they will have access to superfast broadband do not get it, but it is important to stress that the numbers we use are audited and tested by Broadband Delivery UK. We do not simply say, “Here’s a cabinet and therefore any home in the vicinity is going to get broadband.” We audit the figures and we are well aware that homes may be near a cabinet but do not get access to superfast broadband, because sometimes the circuit from the cabinet is confusing. [Interruption.] I am doing this for the benefit of Hansard, to see how they record it in the Official Report—perhaps it will say, “Minister waves his finger around in an odd way.”

The other good thing is that there is more money to be spent. The hon. Member for Ceredigion asked whether areas are being needlessly subsidised, so not only do I have to contend with colleagues; I have to contend with BT’s competitors, who are always keen to get in the door and tell everyone how useless BT is because they are promoting themselves. They say BT is being needlessly subsidised. We saw that one coming and constructed the contract so that if areas effectively become quasi-commercial because more people than we expected took up broadband, we get money back.

As I am sure hon. Members are aware, we have already gained £130 million and it is important to point out that BT have made that money available now. Under the strict terms of the contract, it could have held back for another seven years. We are expecting around £250 million back when the contracts are completed.

We have had additional money committed from BT and from underspend. We believe that with the existing money we can get to 97% rather than 95% of homes, albeit not by the end of 2017, but probably a little later. The underspend is around £150 million, to add to the gain share, so we are looking at about £400 million coming through. That will make a real difference and should help us to reach 97% of homes by the end of 2020.

Another of the points made—I think by the hon. Member for Ceredigion, although the Opposition spokesperson also talked about competition—was about the monopoly aspect. As we move to phase 2 and the contracts become smaller and a smaller number of premises are in play, we are able to bring in smaller providers—for example, we have got companies such as Gigaclear—who would simply not have had the capacity for the big phase 1 roll-out. As part of our market test pilots, to work out how to get to rural areas as cheaply as possible, companies such as AB Internet in Monmouthshire, for example, have already connected 1,500 premises as part of its pilot. The smaller players are now coming into play, and we are actively engaging with a wider supplier base. In total, five different suppliers from BT now have contracts under phase 2, and we have had approval for our new state aid national broadband scheme, which means we can power forward on phase 2.

Some other points were made. I want to reassure hon. Members that the ERDF funding is secure until the end of 2020. We want to put to bed the idea that somehow the European money will disappear. The hon. Member for Ceredigion said that Wales was left behind or left out. I really want to nail that one down. It is important to stress that no part of the United Kingdom was left behind. As I think was mentioned, the total amount of funding available to Wales was in the region of £220 million, and I talked about 750,000 premises being connected—some in very hard-to-reach areas. I think there was also mention of Wales being ahead of the game, in terms of broadband roll-out, compared with the rest of the country.

I want to turn to the future. We talked about the universal service obligation and we learned an important new fact, which is that that is not Government policy; it is the policy of Albert Owen. And it is not the universal service obligation; USO actually stands for “You’ve got service from Owen.” That is how it will be known from now on. In fact, he is such a genial-looking character that I think we might use him in the adverts when the universal service obligation comes to bear. I hope he will take part in the Second Reading debate on the Digital Economy Bill because I think my second roll-out of that terrible joke might get a better reception if he is better prepared for it. The universal service obligation is there as a safety net. As I said, I think we are going to get very far with the roll-out, but just to give the hon. Gentleman and, indeed, the Opposition an open goal, we have not yet worked out the detail of how the universal service obligation will work. We are working with Ofcom on a range of options, which we will consult on. There is a range of ways in which the USO can be put together.

Of course, the hon. Member for Berwickshire, Roxburgh and Selkirk, who knows his onions when it comes to this subject, made a point that really only the aficionados would have picked up on, which is about how flexible it is possible to be with a USO. As he rightly notes, to have simply a demand-led USO for one individual premise, with a cost cap if it reached over a certain amount, would be potentially a very inefficient way of delivering broadband. We have to be more thoughtful and flexible about how we can deliver broadband to the lowest area.

The hon. Gentleman also talked about whether leaving the European Union might change our potential to increase the speed, but although we have left the European Union, we cannot change the laws of physics. The reason we have gone for 10 megabits is that it is the most realistic speed that we can get in a cost-effective way to the most hard-to-reach areas, but of course satellite connections, for example, could exceed that. Obviously we do not want to write the speed into the Bill, because we want to be flexible to ensure that the USO keeps pace in the future as average broadband speeds increase.

We are also bringing in the electronic communications code. I heard what Nia Griffith said about whether it should cover wholesale providers. We have rejected that because the wholesale providers are really on a par with the communication providers, with the mobile network operators, and we think it would be quite wrong to give the mobile network operators a commercial advantage over the wholesale providers that have built a business based on supplying the marketplace. We want the electronic communications code to be—a bit like the USO—a fall-back position whereby, in relation to an individual landlord who is not in the telecoms business but is providing land either for a wayleave or a mobile mast, there is a forum and a tribunal where any dispute can be worked out and worked out quickly. We want to bring the roll-out of broadband infrastructure into line with the roll-out of all other kinds of infrastructure, such as electricity, to try to bring down the costs.

I will make a serious point here. This may well prove to be controversial with some landowners, but we have dealt with a lot of the stakeholder groups in the landowning community, who are realistic and know that you can’t have your cake and eat it. People cannot charge relatively high rents and at the same time complain about rural coverage. I hope that hon. Members will see the bigger picture and support these important changes, because, as the hon. Member for Llanelli said, we have taken a pretty tortuous route to get here.

Those are the two main changes that will come forward in the Digital Economy Bill. Going back to where we are on broadband roll-out, I have been looking at some interesting international comparisons. For example, if someone says that France has 25% coverage for fibre to the premises, people think, “Well, that’s terrible; we’ve been left behind because we only have 2% coverage for fibre to the premises,” but what we should be looking at is the outcome. Then we discover that cable, fibre to the cabinet and fibre to the premises are all in effect in the same geographic areas in France, so actually about 75% of the country does not have access to superfast broadband, whereas 90% of the UK does have access to it.

In fact, we have been very British about this. We have been incremental in how we have rolled out technology; and now, as we come to the end of phase 1 and phase 2, we are about to introduce, for example. Virgin Media, as hon. Members know, is investing £3 billion or £4 billion for 4 million more homes. We are starting to bring forward what one could call the ultrafast speeds just at the point when the public are ready, as consumers and businesses, to invest in them.

Again, we need to look at the outcomes. I was struck by another figure: how much data do people use in different countries? The average amount of data used in the UK is twice as much as the French use. In fact, the amount of data used by UK consumers has doubled in the last year while prices have remained the same, so arguably data for the consumer—the stuff we watch on the telly or the documents that we download—have halved in price. The UK consumer is actually getting a very good deal.

Obviously I do not want to underestimate the concerns of hon. Members, who have spoken very knowledgeably in the debate. As they rightly point out, broadband is a very big issue. It is a major issue in the rural MP’s postbag, and every MP who has spoken has shown their extensive knowledge not just of the situation in their own constituency but of the situation with national broadband roll-out. We are coming through to the end of this phase and people are now beginning to see the tangible benefits of the programme, but of course there is more to do.