The ill-fated South Yorkshire Digital Region scheme set up to deliver broadband to the area has finally lost the support of the government. The Yorkshire Post reports today that Business Minister Michael Fallon announced that the government will stop supporting the scheme. This means that the four local councils involved in the scheme will have to decide whether or not they wish to continue with further taxpayer investment and a private sector partner. This is disastrous news for the taxpayer who will have to foot the bill of nearly £50 million just for the government to extricate itself from the project.
We have blogged about this scheme twice over the last several years. The project was haemorrhaging money since its launch in 2009 and has had nothing but heavy losses. Back in March Doncaster Council, one of the four participating councils, took the decision to re-procure the project because it was cheaper than scraping the project all together, at another cost to the taxpayer.
What has been so extraordinary about the entire project is the lack of oversight in determining who would sign up to the broadband offered. The project is in trouble because only 2.7% of the 108,000 customers required have chosen the take up the broadband offered. Lack of a marketing budget and the launch of BT’s Infiniti broadband did not help the situation, but the reality is that limited market competition and consumer choice played a big part in its failure.
As we are seeing with the government’s national broadband rollout scheme (BDUK) the lack of market competition in the place of government funding means that broadband schemes are rolled out because they are for the good of the country and not because they have signed up customers or made decisions based on business needs. It seems that the South Yorkshire Digital Scheme lacked the oversight or understanding of the customer market that was needed to keep the costs in check.
Since 2010 I have been saying that the market – and not the government – will provide Internet access across fixed line, mobile and satellite connections, among other options. The private sector as well as community led programs continue to be successful in building their networks based on demand. This is the most important point – demand for broadband of any kind by customers should drive infrastructure development. The government does not need to be involved and in the case of the South Yorkshire Digital scheme it will no longer be, but at great expense to the taxpayer.
As reported in the Telegraph and the South Yorkshire Times today the failed South Yorkshire Digital Regional scheme is to be offloaded to the private sector at a cost of £1.3 million to the taxpayer. Doncaster Council took the decision yesterday to transfer ownership of the failed network from four local governments – Doncaster, Rotherham, Sheffield and Barnsley – to the private sector company Bouygue Energy and Services based in France because it is cheaper than shutting down the network completely.
The South Yorkshire Digital Regional scheme was launched in 2009 with the aim of serving 97% of the geographical area with superfast broadband. At a cost of over £100 million made up of taxpayer funded money primarily coming from the European Regional Development Fund along with local and national money, the project has failed to achieve the projected 97% target and has failed to gain significant customer sign-ups.
In a report from Doncaster Council made available ahead of the meeting yesterday the council saw no other way to proceed than to go ahead with re-procurement. It said that scrapping the project would result in having to pay back the EU the money that it already spent on the scheme. Additionally, it would have to renegotiate the terms of the original scheme to account for rolling out superfast broadband to only 80% of the region. The report highlights the following goals for the re-procurement:
· Maintain the original vision for the Digital Region project
· Find new capabilities and expertise from a new operator
· Transfer the risk of operating the network to the private sector
· Cap shareholder liabilities
· Have a new contract in a form that avoid clawback of the European grant used to build the network
· Remain State Aid compliant
· Be cheaper than the alternative – which is closure
What would have been a better alternative? Eighty miles south company called Rutland Telecom provides non-BT (or non-UK telecommunications incumbent) fibre to the home and fibre to the cabinet broadband. And here is the catch – they need to signup at least 30% of a community in order to build out a network. This means that new networks are built out only if there is a demand for it. Any other business would do the same in the private sector.
In a recent OFCOM report one statistic stood out among all the others with respect to superfast broadband. Of the 67% of the UK that has access to superfast broadband only 7% chooses to take it up. The South Yorkshire Digital Regional scheme would have save a lot of taxpayers’ money if they had obtained pre-enrollment prior to building out the network. Other taxpayer funded superfast network projects should take note and use the South Yorkshire Digital Regional scheme failure as a warning.
The Daily Telegraph and other news outlets are reporting that Simon Burns, the conservative MP for Chelmsford and Minister for Transport, said that HS2 will bring faster broadband to rural areas. He is quoted as saying,
“HS2 is far more than a new railway line — it is a national infrastructure project that will bring places and people closer together while creating jobs and driving growth. Construction of HS2 gives us the perfect opportunity to explore how we can make it easier for even more people to benefit from ultra-fast broadband — and potentially deliver improvements to the provision of other utility services, including water and electricity.”
As many of my colleagues have discussed, there are serious issues with the £32 billion cost of HS2 and tacking on additional taxpayer money to lay fibre alongside the rail seems outlandish. But the most ridiculous part of Minister Burns’ statement is the assumption that fixed line, superfast broadband will still deliver Internet access by the time the project is complete in 2026, or whatever the date is now.
In the UK access to the Internet takes many forms from mobile 3G and 4G to WiFi to fixed line broadband. The rise of WiMax as well as more affordable satellite broadband are set to provide even more, competitive options to access from our homes and as we travel around. By 2026, who knows what technologies may be developed. Cars are set to be used as WiFi hotspots and even the iconic black cab here in London will be a part of a scheme. The development of personal drones presents another WiFi connection option. The sky is the limit!
In all seriousness, WiFi and WiMax require fibre optic backhaul to masts and base stations in order to operate. The laying of fibre could be more efficiently and competitively achieved if the fibre and premise tax were scrapped and planning laws were relaxed. That said, fibre continues to be laid today so it looks like Minister Burns has a lot to learn about superfast broadband connections. Besides, apparently 70-90% of homes along the HS2 route already have access to a superfast broadband connection.
I’ve just returned from two weeks at the World Conference on International Telecommunications (WCIT) in Dubai. This conference sought to renegotiate the International Telecommunications Regulations (ITRs) for the first time since 1988. In the run up to the conference, many were concerned that the International Telelcommunications Union (ITU) would seek to gain control over the Internet in spite of protests from the ITU’s Secretary General. He said it was not supposed to be about the Internet, but in the end it was. Just over half of the 194 members of the ITU have yet to sign the new treaty and many, including the UK, will never sign it. In light of all of this, I’d like to offer some thoughts on the process and the work over the last few weeks as I experienced it.
For two weeks the text of the old treaty was discussed with the addition of new proposals from all countries. We worked quite tirelessly in working groups, ad hoc groups and over lunch to discuss different sections relating to telecommunications management and services. As part of the UK delegation I was assigned the remit of looking at accounting and charging (Article 6) in the ITRs. This was a very controversial area not helped by proposals from ETNO who hoped to introduce a sender pays model for all content over the Internet, meaning that if a user clicks on a blog, search engine, or news website, the owner of that website would have to pay to deliver the content to the end user. Of course this fundamentally upsets the Internet ecosystem and, in the end, the provisions were not in the treaty in their original form. Many long nights were spent trying to agree on wording and text for this and other parts of Article 6 in the ITRs, but in the end only a general agreement could be met.
I’ll be writing a longer piece on the WCIT in the near future, but for the time being it is safe to say that everyone who attended the WCIT worked very hard in spite of proposals on spam, security and the Internet that were constantly being put forth – and being rejected by the UK. There have been reports that the US and allies may have never intended to sign the treaty in the first place, but from my experience this was not the case. The work that we all did meant long nights, multiple proposals to texts, many compromises and many more emails, discussions in passing and phone calls. The days lasted from 8am to around midnight especially in the last week. Suffice it to say I met a number of people who work in countries all around the world and discussed all of the issues with them.
And this is a key point: in talking to other delegations it became clear what they wanted out of the treaty. They wanted to insure that they had a place to address their issues that couldn’t be dealt with through national laws or regulations. For example, a smaller African country wanted to put specific text in the treaty about dispute resolution with international telecommunications companies working in their countries. When I asked them if contracts that they signed with countries contained dispute resolutions, they said yes, but that ‘it takes too long to resolve’. This issues has to do with national law and legislation and not something that should be addressed at in an international treaty. I now have a clearer idea about why of some of the most restrictive proposals came forth over the last year and it is this understanding that I will take away and discuss with companies and civil society groups who might be able to facilitate work in these areas going forward.
But at the end of the two weeks the UK along with 55 others decided not to sign. Our head of delegation, Simon Towler, said,
“My delegation came to work for revised ITRs. But not at any cost. We’re not able to sign a bad agreement that does nobody any favours and makes nobody happy. We all agreed that content was not intended to be part of the ITRs, but content issues keep coming up. We preferred no text on security but in the interest of compromise we worked towards language we could accept. Unfortunately, the language that we proposed and the various alternatives we proposed were constantly rejected and the compromise that we have before us we could only possibly accept in the context of a treaty that was acceptable in all other respects. On the Internet itself, our position is clear. We do not see the ITRs as the place to address Internet issues. The proper place is multistakeholder fora, the IGF, the ICANN GAC”
This was the treaty that wasn’t about the Internet, but it was, really, all about the Internet in the end. The non-vote, ‘vote’ on the inclusion of an Internet resolution in the middle of the last week that was forced through by the chair sent a clear signal that the Internet was very much on the cards. Even the Secretary General said on Friday that we can’t ignore the new dynamic of telecommunications, contradicting his opening speech statement that the ITRs were not about the Internet. In the end, UK decided that it could not come home having signed a treaty that placed even more regulation on the growing digital economy in Great Britain.
In the next few weeks as we all reflect on what it means not to be a part of a global treaty that regulates communications and the digital technology, we should not predict a two tier digital economy or a bifurcation of the Internet. We should, instead, note that the UK and others have stood up for what they believe in – that increased regulation limits the freedom of individuals and organizations that innovate and create. We need to be proud of this and continue to ensure we promote the benefits that a smaller state and freedom brings to others. I only hope that this approach can now be taken at home in the UK with other, potentially damaging schemes like the Comms Data Bill and Digital Economy Act.
At the TaxPayers’ Alliance we believe in smaller government, lower taxes and less burdensome regulation. We believe in these fundamental principles for all people in the UK and abroad. Which is why we are closely watching the outcome of this week’s World Conference on Information Technology (WCIT) in Dubai.
The Digital Economy will bring yet untold benefits to everyone. A recent McKinsey report shows that for every traditional job lost to the Internet 2.6 jobs are created, and in mature markets 21 per cent of GDP growth in the last five years can be attributed to the Internet activities. In the UK there are now over 1,000 start-ups in London’s Tech City and there are many more digital success stories like ARM, whose chips enable digital technologies.
The WCIT will see the revision of a treaty called the International Telecommunication Regulations (ITRs) for the first time since 1988. (A guide to the structure of the WCIT and the ITU can be found here) Originally created to deal with international telephone issues, the ITRs will now see the Internet come into its remit through proposals from countries like Russia and China who wish to have more strict control of the Internet at home and abroad.
Last week, a concise guide to the WCIT came out it provides a brief overview to some of the most perplexing and concerning proposals that would impact economic growth home and abroad. There are summarised below.
As is evident, the WCIT will be a place where issues of Internet governance by different states will, no doubt, clash. Some states seek to regulate the Internet through heavy-handed intervention because access to information and the ability for freedom of expression undermines a national regime. This regulation will only cause harm to the much-needed economic growth worldwide. The UK cannot afford any other impacts to economic growth by way of a binding, international treaty at this time. So we will keep a watchful eye on the events over the next two weeks.
On Wednesday, the Open Data User Group has launched a data request form over on data.gov. The Open Data User Group are looking for suggestions and requests from anyone who is seeking to use data that is not currently available or open to the public.
As a member of the Open Data User Group representing civil society, I am particularly keen on encouraging those working in the third sector to use the form and request information that would impact campaigning, volunteering and charity work. Open data has the potential to provide more effective and efficient ways of delivering services. We do not know what the untapped potential of government data is until it is open and available so do submit any and all requests.
If you would like to get in touch with me regarding questions, comments, or suggestions please do so. I look forward to hearing from you.
On Tuesday, Ofcom’s consultation on the initial obligations for costs sharing relating to the Digital Economy Act closed. The consultation sought feedback on the fees that will be paid by copyright holders, ISPs and alleged infringers as part of the process outlined in the Digital Economy Act.
The Digital Economy Act was passed in the wash up prior to the 2010 election. A ‘graduated response’ was established as part of the Initial Obligations Code and Technical Obligations Code. Essentially, ISPs will impose technical measures on individuals or households accused of repeat copyright infringement that may include disconnection from the Internet among other proposals. The cost obligations were finally announced just over a year ago as part of the implementation process. Copyright holders would be all of Ofcom’s costs and 75 per cent of ISPs while ISPs would pay 25 per cent of the costs incurred. An appeals fee of £20 would be charged for all of those accused, rightly or wrongly, of illegal file sharing. And these are the payment terms that Ofcom was consulting on.
The Digital Economy Act is an ill-conceived and written piece of legislation which has had many critics over the last two and half years. While copyright infringement is illegal, those accused of it should not be subjected to an extra-judicial process at the expense of the taxpayer. It is estimated that the set up costs for the DEA scheme will be around £12.5 and the annual costs will be between £4.9 and £9.1 million.
But the most concerning thing is that there is no guarantee that members of the MPAA, BPI or indeed any other copyright holders will use the scheme laid out in the Digital Economy Act. In other words, if copyright holders choose not to use this process, the set-up and running costs will not be recouped. In France, a similar law required that an anti-piracy agency was set up called Hadopi. In the 2 years since its initiation, it has only sued 14 people at the cost of €12 million euros to French taxpayers.
Is this really the best way use of taxpayers’ money? And is this the best way forward? The court system and due process exists so that a person accused of an illegal activity can make their case in public and in front of a jury. A person accused of copyright infringement should not have to pay £20 to appear in front of an extra-judicial body. Furthermore, asking the taxpayer to foot the bill for something that may not even be used is a waste of money at any time, let alone when savings need to be made.
A publicly-owned internet project in South Yorkshire has reported heavy losses for the second year running, forcing councils in Sheffield, Doncaster, Rotherham and Barnsley to inject tens of millions of pounds of taxpayers’ money into the company and putting its financial future at risk. Digital Region, a Government-backed scheme unveiled with great fanfare in 2009, aims to make ‘superfast’ fibre-optic broadband available to homes and businesses across South Yorkshire.
However the project has not been able to attract a single major Internet Service Provider (ISP) to sell the service to residential customers because so few people have signed up for it. Its disastrous £22 million losses last year were more than double those in 2010- 11. The scheme was expected to run a profit to pay off its multi-million pound start-up loans, but instead local councils have been forced to write them off. Doncaster, Rotherham and Barnsley councils last year allocated over £8 million each for Digital Region, with Sheffield’s liability estimated to be around £16 million. If the scheme requires a full bail-out, this means that the councils would have spent £41 million on a project designed to break even.
To make matters worse, an EU grant of £27 million made to Digital Region may end up having to be repaid due to its strict conditions. European Union money is only granted under the assumption that a project is a success and eventually becomes self-funding, to avoid it being misused. The now-defunct regional development agency Yorkshire Forward reportedly set aside a contingency fund should the grant need to be repaid, with almost half the money – £11.5 million – coming from the four councils.
Spokesmen for the local authorities and Digital Region have insisted that the scheme will be a success and that a company will eventually come and market the network. Instead of wasting taxpayers’ money on a white elephant project, it would have been better if the councils had bothered to ask local people and businesses if they were interested, suggesting that councillors were chasing EU money instead of paying attention to the needs of their constituents. A registry of interest would have shown whether or not South Yorkshire residents were willing to pay for superfast broadband and would have allowed the market to lead the way, rather than relying upon a failing scheme that is costing taxpayers tens of millions of pounds.
Last week our submission to the Secondary Legislation Scrutiny Committee was published. We submitted our concerns regarding the Draft Online Infringement (Initial Obligations) (Sharing of Costs) Order 2012. This draft order lays out how the costs will be shared for the implementation of the Digital Economy Act (DEA). Though the Act was passed in 2010, it has yet to be implemented fully and there continues to be concerns over the quality and efficacy of the legislation itself.
The DEA contains measures to curb illegal online copyright infringement through mass notification of users who copyright holders identify as possible infringers. OFCOM is required to set out how the scheme will work and a cost sharing is one of the many ways this is accomplished. The costs will be divided between copyright holders and internet service providers 75:25 and an appeal will cost £20 for any user who has been notified.
Our concern was that small to medium enterprises will be impacted greatly if treated as vendors of WiFi who will be subject to constant infringement notifications. In short we argued,
“This potential punitive measure amounts to a stealth tax on SMEs. Most, if not all small businesses need to diversify their offering order to bring customers in to their shops. The use and availability of WiFi is one of the ways in which that can be accomplished. SMEs are in the business of doing business and not chasing after the wrongdoings of their customers who may act in such a way illegally.”
To read the full report and our response, please see Session 2012-2013, 7th report here:
Writing for The Commentator, Dominique Lazanski argues that the government continues to suffer from poor research, ‘fag packet’ proposals and a general lack of understanding of the web issues that face the UK today.
Today, a cross party group of MPs announced widespread filtering of the Internet in the UK. Under the proposals, the group has said that Internet Service Providers have the responsibility to filter ‘inappropriate content’ from children. This announcement is yet another example of the lack of understanding in new technologies by this Coalition Government. More importantly, it sends a clear signal internationally that the UK is willing to engage in these kinds of dictatorship-style policies and it sends a message to all parents across the UK that the government knows best.
OFCOM announced today that it will require BT to reduce the cost of wholesale broadband to areas of the UK in which it is the only provider of fixed Internet access. The price reduction is another important step in the process to provide more broadband access to rural areas in the UK. The government has set a target date of 2015 for the rollout of 90% of the next generation of superfast broadband in the UK.
BT offers wholesale broadband to Internet Service Providers who often bundle and reuse the broadband in their consumer offerings. OFCOM has set the pricing now to 12% below annual inflation for just under 12% of the country where BT is the sole provider – or monopoly – in certain areas of the country (see here for a map of broadband competition in the UK). OFCOM hopes that the price cuts will encourage more competition in regional broadband markets.
This is clearly good news. OFCOM’s remit as a regulator is to manage monopolistic issues in the telecoms and Internet sectors. By setting wholesale pricing lower, one would expect to see more competition or at least new entrants into markets in specific regional areas. But this proposal alone can’t spur on rural broadband coverage.
OFCOM needs to complete negotiations with BT on duct and pole pricing. Negotiations between BT and other ISPs have been going on for months now with no sign of agreement. Allowing for the use of ducts and poles owned and used completely by BT for the laying of fibre by other companies would only boost competition in rural broadband. This would also dispel any fears that BT might not make future investments in rural broadband infrastructure because the lower wholesale pricing would bring in less income and, thus, less money to invest. Fujitsu, for one, is prepared to lay even more fibre if these negotiations can come to a reasonable agreement in the near future.
And of course the spectrum auction is happening in early 2012. More spectrum purchases by mobile carriers will hopefully mean more options to use either fixed or mobile broadband in rural areas. With any luck, this time next year we will see a competitive race to roll out both fixed and mobile Internet to rural areas which, in turn, will drive down the costs to consumers. So over the next 12-18 months we should see better options for consumers in rural areas. The OFCOM announcement today is a good start.