The Advisory Committee for Scotland advises Ofcom about the interests and opinions, in relation to

398 Pages·2016·21.09 MB·English

DCMS – April 2016
A New Broadband Universal Service Obligation
Response from the OFCOM Advisory Committee for Scotland

‘The Advisory Committee for Scotland advises Ofcom about the interests and opinions, in relation
to communications matters, of persons living in Scotland.’1
This response to the Broadband Universal Service Obligation Consultation is from the Advisory
Committee for Scotland (ACS). In no sense does it represent the views of Ofcom. However, it
draws on the collective knowledge and expertise of the Advisory Committee for Scotland,
informed by discussion at our meetings, the agendas and minutes of which are available on the
Ofcom website.
The ACS is pleased that the USD/USO framework is being used and, indeed, championed and that,
alongside the telephony and mail framework, the UK government recognises the principal rights
of all citizens to communications in a modern society. The ACS limits its response to this
consultation to the following specified questions and focuses on key points it believes are
important in a Scottish context. We would also refer you to our response to the DCMS enquiry
into establishing world-class connectivity throughout the UK, dated September 20152.

Background

This consultation seeks views on the Government’s proposed approach to introducing a new
Broadband Universal Service Obligation.

The Government intends to introduce a new enabling power in primary legislation, which will
give the Secretary of State an explicit power to introduce a broadband USO to provide for the
functional internet access considered appropriate for today’s needs. Secondary legislation would
then be developed setting out the scope, including specific requirements and guidance for the
design of the USO, which Ofcom will be responsible for implementing.

Do you have any concerns about the approach that has been set out by the DCMS?

The ACS recognises that primary and secondary legislation is necessary to introduce a broadband
USO. The process must have a clear objective and timeline to implement. It would not be a
universal service if the delivery was subject to an open ended timescale; this would lead to the
most rural areas waiting at the end of the queue once again. We consider that more could be
done at the primary legislation level to provide for what will follow. The ACS would argue for a
wider duty to be applied to Ministers in considering the regulation and any matters it provides
for. For example placing Ministers under a duty, in making the order and in any provisions under
it, ‘to have regard to the economic and social well-being of customers or potential customers in
rural and remote areas or other areas of economic and social disadvantage and to seek to
minimise any disparity in service levels between those areas and service levels enjoyed generally.’

1 http://www.ofcom.org.uk/about/how-ofcom-is-run/committees/scotland/
2 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culture-media-and-sport-
committee/establishing-worldclass-connectivity-throughout-the-uk/written/21807.html
In addition the ACS would suggest the primary legislation should state:-

 that the draft regulation shall be subject to consultation
 that the regulation must provide for a review at least every two years of the level of the
USO; or alternatively, the minimum for the USO be tied to a calculation of the mean level
of service, to ensure that the USO is at no time less than X percent of the highest level of
commercial service offered to householders by the provider.

Further comments in a Scottish context

We recognise that this consultation is only concerned with defining the required primary
legislation, however, the ACS wishes to make some further points here which will probably be
more relevant at the secondary legislation stage, but which may affect the shaping of the primary
legislation.

 The ACS would argue that, if the commitment is serious, then a USO should be exactly that –
Universal, without a cost of provision threshold, because broadband is such a vital enabler of
other services and it is a different economic case from the provision of voice or mail services.
However, we note that the EU Universal Service Directive says that a USO provider cannot be
burdened with unfair costs – it is therefore almost inevitable that there will be a debate on
costs and what is fair to the owners of the Obligation.
 Any exceptions from the USO, (as already exist in mail regulation), must be based on some
agreed formulation of 'reasonableness' which is technology neutral, with the onus on the
provider to make the case for connection being unreasonable. The lack of a suitable definition
of reasonableness will invariably differentiate and discriminate against rural communities,
resulting in greater costs for rural areas, inevitably lower take up and the knock on
consequential impact to fragile economies as a result of being excluded from digital society.
The ACS would argue that access to broadband is essential to being able to participate as a
UK citizen and the cost of ensuring a USO for broadband needs to be set against the possible
savings which could be gained from being able to assume that every household has
broadband. These include online access to government services, to further and higher
education, and to tele-healthcare. In general, the savings would be highest in rural areas
where transport is most expensive. There are also the economic benefits of stabilising
populations in our most fragile communities by making remote working possible and allowing
small businesses to offer the same services as their competitors elsewhere.

 It will be important to obtain clarity on whom the USO rests and on the precise definition of
the obligation. A clear definition of the obligation is imperative, together with a clear route
of redress if the obligation is not being met. This should include compensation for consumers
if broadband levels drop significantly below the USO level.

 The ACS would caution against making comparisons with the way costs for telephone
installation under the telephony USO are passed on to the consumer above a certain
threshold. A voice line is either there, or it is not. Once the infrastructure is in place, only
basic maintenance is required and the ongoing cost is relatively predictable. Broadband is a
far more variable product, with increased speeds not linearly related to increased costs. Once
connected, the cost of supplying broadband is less predictable in more populous areas. We
are already seeing broadband speeds falling in urban areas due to contention, requiring
further infrastructure investment to maintain existing speeds. New builds in urban areas can
also require significant infrastructure investment to maintain broadband speeds for that
area, which will not be related to the installation cost of the physical broadband connection.
Unless the cost of such investment in a local urban area is directly passed on to the local
consumers, it is much harder to justify passing on the installation cost for rural consumers –
it could be argued rural consumers would be unfairly subsidising the maintenance of the USO
in urban areas.

 The ACS considers that, if it is not a factor in defining primary legislation, there needs to be
an early commitment in the USO to a delivery strategy where the most remote and rural
areas are those that should receive the first and greatest priority among the areas to be
brought up to the USO basic level - moving from the edge to the middle ground, rather than
extending from the middle ground out to the edge.

We do not propose to specify speed in primary legislation. Should speed be specified in
primary or secondary legislation?

The ACS believes that, consistent with the government’s initial pronouncement, a USO with an
absolute minimum download speed of 10Mbps, should be a fundamental objective in primary
legislation. The ACS believes that starting with this minimum objective in the primary legislation
will help to ensure that the debate has a clear end goal, and ensure any ongoing work
completed before the secondary legislation is in place is fit for purpose. Provision should be
made in the primary legislation for secondary legislation to be used to adjust this minimum
speed upward, as outlined in the consultation document, according to changes in technology
and user connectivity requirements. As discussed above, we suggest including in the primary
legislation a statement that the minimum for the USO be tied to a calculation of the mean level
of service, to ensure that the USO is at no time less than X percent of the highest level of
commercial service offered to householders by the provider, or alternatively, stating the
maximum period between reviews of the level of USO.

In terms of giving the Secretary of State a power to direct Ofcom to review the USO,
should Government have a continuing role or should this be a matter for Ofcom?

The ACS believes that, as the regulator, Ofcom should enforce the USO and keep it under review.
The ACS was pleased to note that, on a recent visit to Scotland, the CEO of Ofcom confirmed that
no consultation with HMT has taken place with respect to maximisation of income from spectrum
and that Ofcom does not have a spectrum revenue income maximisation obligation in its remit.
This is important in the context of a broadband USO being substantially delivered in rural areas
over wireless infrastructure.

ACS
April 2016

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