Superfast Broadband Delivery: Somerset

Tuesday 13th November 2018 Westminster Hall

09:15

[James Heappey (Wells) (Con)]

I beg to move,

That this House has considered superfast broadband delivery in Somerset.

It is a pleasure to serve under your chairmanship, Ms Dorries. I know the Minister is swimming in unfamiliar waters this morning, but I am very grateful to him for coming to respond to this debate.

The Connecting Devon and Somerset intervention area, or CDS, is the biggest in England, and it is connecting some of the hardest-to-reach communities in the country. CDS did not have an easy task by any stretch of the imagination, and it is important to say right at the outset that the purpose of today’s debate is not to beat up CDS for the Gigaclear contract unravelling as it has. In fact, rather than starting with criticism of CDS, I would like to pick out Matt Barrow, an employee of Devon County Council who has been working on the Connecting Devon and Somerset project since its beginning, and who has spent hours by my side in public meetings in village halls across my constituency. I know he has done it with many colleagues elsewhere in their constituencies, helping residents to understand the differences between fibre to the cabinet and fibre to the premises, the way that CDS is working and when they will get their broadband.

There is absolutely no shortage of effort or expertise at Connecting Devon and Somerset, and the organisation has all the right intentions to deliver the best possible quality broadband to the residents of Devon and Somerset as quickly as it can. The reason we have this debate this morning is that the Gigaclear contract, which was signed for the delivery of phase 2 of the state aid intervention, has not run to time. Indeed, at the very first check after only six months of its anticipated delivery, Gigaclear is already well behind and has admitted that it needs to relook at the programme for delivery.

There are three key areas for our discussion this morning. The first is the soundness of Gigaclear’s position. Can it actually deliver what it has said it can? The second is the continued case for state aid in some parts of Devon and Somerset. The market has changed over the last year or so, and commercial providers are now delivering fibre to the premises, which raises a question about the legitimacy of state aid in those circumstances. Thirdly, how can we get on with the final 5% of premises that are now awaiting connection?

[Rebecca Pow (Taunton Deane) (Con)]

I commend Connecting Devon and Somerset on the biggest roll-out of rural broadband in the country. A great deal has been achieved, but it must not be forgotten that many of my constituents, and indeed those of my hon. Friend, have been ill-served. They have waited all this time, but nothing has been delivered. It has been a catalogue of incompetence and things that have arisen by the way, and many of my constituents are still not receiving broadband. The most important point in all this is that we resolve it as quickly as possible.

[James Heappey]

I think my hon. Friend means that nothing has come yet as a consequence of the phase 2 contract, and she is absolutely right. The phase 1 contract, which was a fibre to the cabinet deal, is now complete in its delivery. Tens of thousands of homes and businesses in my constituency have benefited from that, and I am sure that my hon. Friend has seen the same in hers. She is absolutely right that we are more than six months into the delivery window, and it has been over a year since the contract was signed. Not one constituent of mine is a Gigaclear customer yet, and I know from my hon. Friend’s intervention that it is the same in her constituency, too.

Gigaclear’s position is what it is because they were supported by the Carillion group, which met its demise. I think it is now clear that Gigaclear has quite inexplicably failed to understand that a lot of roads in Devon and Somerset are single-track lanes, which require somewhat more endeavour to dig up and somewhat more planning around road closures—it is not possible simply to go down one side of the road or even on the verge to the left or right.

I am inclined to agree with some of the comments from the county councils. There was overconfidence on the part of senior management at Gigaclear: they were telling the Connecting Devon and Somerset leadership and our county councils that all was fine, when it was obvious that things had not progressed as they should have. In the light of that, we need to ensure that what Gigaclear now says it is capable of doing is realistic. It has already overpromised once. As it seeks to put together a remedial plan to deliver the contract, we must ensure that it is at a realistic pace, so that, crucially, our constituents can have certainty about when their broadband will arrive. The Government, the Broadband Delivery UK programme and the county councils will want to be certain about the continued financial support that Gigaclear has secured.

I will raise some issues later that make the business case slightly less sound. It needs to be tested by BDUK and CDS to ensure that Gigaclear is still the answer, especially since the market has changed and commercial delivery is happening. When Gigaclear gets to communities as part of the state aid programme, it may well find that they already have fibre—it will have already been taken up. Gigaclear might not hit its uptake targets or realise the customers that it was expecting to. Now that Gigaclear is operating in a more competitive environment than the one that it negotiated when it took on the CDS contract, we need to look robustly at whether their numbers still stack up and whether we need to relook at the intervention area. In the briefing to MPs last week, which was the first indication that we had had of what the remedial plan would be, Gigaclear said that by the summer of 2020 it would deliver 40% to 50% of all that it had promised to have completed by 2020. That is a significant reduction in the pace of delivery, and Gigaclear now wants to deliver the remainder of the contract by 2022.

[Rebecca Pow]

On that point, is it not the case that the Government funding secured by Gigaclear needs to be spent by March 2020? One of the key issues is whether we could ask for an extension of the funding in order for Gigaclear to get its house back in order and to roll out the new, proposed programme that they are suggesting to us.

[James Heappey]

My hon. Friend is ensuring that the Minister gets the message loud and clear, because that is one of the key questions for today’s debate. The remedial plan presented by Gigaclear already runs beyond the date that the Government have said that all available money for the delivery of phase 2 will be spent. Clearly, if Gigaclear’s remedial plan is accepted, the Government will need to be willing to extend the period over which the money is spent from 2020 to 2022. I hope that the Minister will be able to give us some good news on that.

Given that only 40% to 60% of properties that were due to be connected by 2020 will now be connected by that time, we might also look at whether we should offer a voucher scheme to people who now find themselves in the 50% to 60% that will not be connected, so that they can take some sort of interim measure themselves. We did exactly that for those who were going to be in phase 2 or in the final 5% when the phase 1 delivery programme was rolled out; we offered voucher schemes of £500, so that people could take interim measures within their homes.

The second issue is the ongoing case for state aid, which we have spoken about a number of times. When the delay in the Gigaclear delivery was first announced, I was straight on local TV and radio, and speaking to my local newspapers, because I was very, very cross. My expectation was that my mailbag was about to explode and that I was going to be contacted by hundreds, if not thousands, of very angry people who were concerned that the broadband they had been waiting for for years and they thought was just weeks away was actually going to be years away again.

The reality is that I have had hardly anything, and that makes me wonder why. If I go back to my former employment, there is a very important part of the military planning process. When assessing the orders to be given in order to achieve a mission, we keep asking ourselves whether the situation has changed, in order to make sure that we are not problem-solving against a situation that no longer exists. I have come to realise in the last few weeks that the reason why so many of my constituents have not been in touch with me about the Gigaclear delay is that they have sorted themselves out.

They have gone to Openreach and put in place a community fibre partnership, or they have gone to companies such as TrueSpeed or Voneus that have cell-to-build business models. Those companies go out into communities and engage, they get 30% sign-up and then draw down the money from Aviva, which underwrites the delivery of the infrastructure, and they build the fibre into those communities. When the Gigaclear contract was delayed, there was complete silence from all those communities that were flashing red on the whiteboard in my office as those which most urgently needed broadband. The reason is that the market is already providing, and has already provided, for a number of them.

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

My hon. Friend is making a strong point and is representing his constituents extremely well. I am old enough to remember, because I was here before this started with CDS, that we were originally promised a level, as he quite rightly said, and it has not appeared. BT, slightly duplicitously, is getting in behind and setting up in villages that we were not expecting to come on. They were going to come on with Airband or Gigaclear, which is the point that my hon. Friend has made, and have actually come on behind. We should celebrate the fact that BT is still opening up in some areas—I hope the Minister takes that point—as it is a good fibre system. I accept that Gigaclear has problems and I understand that, but we must not just put BT to one side, because its infrastructure is what they all use.

[James Heappey]

My hon. Friend and neighbour is absolutely right: the market is delivering. Whatever the business model, and whether that is cell first and build second, I now have hundreds, perhaps even thousands, of TrueSpeed, Voneus and Openreach fibre-to-the-premise customers in my constituency—a situation that has been delivered through an open-market solution, within the area that the open market review had identified as requiring state aid.

A key question for the Government today is whether state aid is even legal in areas where the market has already provided. I am not sure that we should be using taxpayers’ money to subsidise the delivery of a competitor into an area where a commercial company has already set up. TrueSpeed is underwritten by Prudential. How absurd that we would be spending taxpayers’ money to subsidise the delivery of an infrastructure underwritten by one pension scheme while another, Aviva, has underwritten the money on a commercial basis without the need for taxpayers’ intervention. As the market has changed, we need to be very clear about whether we need to go back and look at the open market review again to understand where the market is now providing.

It is certainly the case that my constituency and those of my hon. Friends the Member for Weston-super-Mare (John Penrose) and for North East Somerset (Mr Rees-Mogg), of my right hon. Friend the Member for North Somerset (Dr Fox) and my hon. Friends the Members for Somerton and Frome (David Warburton) and for Bridgwater and West Somerset (Mr Liddell-Grainger) will benefit more quickly because TrueSpeed is working away from the transatlantic fibre link that lands at Weston-super-Mare. TrueSpeed has accessed that link to fibre and is fanning out from there. The delay in the Gigaclear contract is an opportunity for us to look again at whether the market has changed, and whether Gigaclear’s priorities need to be tweaked.

[Rebecca Pow]

My hon. Friend is making a very expansive case. On the point about extra funding and the money going to the different companies, I believe that Connecting Devon and Somerset has just received £5 million from the Rural Development Programme. I wonder whether we might push to see where that money is going to be spent and whether the Minister has any revelations to make about that. I believe it is for phase 2, and some of it is destined to go to Airband, Gigaclear and the various companies providing the different methods of rolling out the service.

[James Heappey]

My hon. Friend is an excellent pacemaker—she runs slightly in front of me. I am coming to that point, but it is very helpful for the Minister to hear such things twice.

There is another part to the point about the change in the market and whether state aid is relevant. There is also the frustration that communities feel when they have got themselves motivated to bring in an alternative provider, such as TrueSpeed, Voneus or Openreach, and when they have fibre to the premise already, and yet their roads are now being closed and dug up with their tax money to deliver something that causes huge inconvenience to them while it is being put in, and which they have already got. A number of communities have written to me not to criticise the delay in the Gigaclear programme but to ask, “Why on earth are you still digging up our roads and blocking off our village when we have already got ourselves sorted and we have got it? Can we not have our tax money spent on improvements to our junction or a new road or something else?”

I know that is not how it works, but it certainly underlines the case for reassessing the priorities that Gigaclear has been set by Connecting Devon and Somerset, so that Gigaclear focuses on areas where we know the market will not be able to provide over the next 24 months, rather than focusing on areas, as is the case at the moment with its early areas, that are in direct competition, particularly with TrueSpeed. I am not sure that that is the most effective spending of Government money.

As my hon. Friend the Member for Taunton Deane (Rebecca Pow) pointed out, we have been given extra money by the Government to look at further broadband improvement in rural areas. There is a real opportunity to take the money that the Government have announced—I know that the Minister will be enthusiastic to remind us of the vast sums of money that the Government have made available to Devon and Somerset—and to add it to the £5 million-plus already available in gainshare from Openreach from phase 1 of the CDS roll-out, and the substantial additional money that is still to come as part of that gainshare, and look at where that combination of funds could be used as an intervention to deliver the final 5%.

We know now, by definition, what the final 5% is, because phase 2 delivers everything but the final 5%, so surely we can deliver that final 5% concurrently rather than waiting until we have connected the 95th percentile to get on with connecting the 96th through 100th percentiles. It seems to me that the money is already available. The gainshare is coming onstream very quickly. We have a real opportunity to get the whole thing cracked in a few years by taking advantage of what the market is now providing.

In some ways, we have an embarrassment of riches, because in some parts of Somerset we now have two entirely independent fibre-to-the-premise networks being dug in on very remote rural lanes, which is a slightly absurd situation. In small communities such as Badgworth, Biddisham and Lympsham, people will soon end up being able to choose which fibre-to-the-premise provider they want to use—not the internet service provider, but actually who is going to put the fibre to their front door. I am not sure that that is actually what taxpayers’ money should be being used for.

[Mr Liddell-Grainger]

I remind my hon. Friend that places such as Exmoor and the more remote parts of Somerset do not have that choice. Gigaclear’s cheapest package, for instance, is £35, with an activation fee of £120. Sometimes we have no choice. I know my hon. Friend is fully aware of that, because he covers the Mendips, but it is worth reiterating to the Minister that there is a cost differential here that people have to pay.

[James Heappey]

That intervention perfectly underlines the final line of my speech. There is absolutely no point in spending taxpayers’ money in areas where the market is providing. There are areas of my hon. Friend’s constituency and mine, and other parts of the Devon and Somerset, where the market will definitely not provide. Let us ensure that Gigclear’s priorities are those areas and that we do not use taxpayers’ money to compete in areas where the market is providing.

11:19

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Michael Ellis)]

It is a pleasure to be here. I thank my hon. Friend the Member for Wells (James Heappey) for securing the debate and my hon. Friends who have spoken. The debate allows me the opportunity to update hon. Members on the Government’s plans and progress towards ensuring universal high-speed broadband.

Broadband connectivity is just as, if not more, important in rural communities across the UK as in urban centres. That is why the Government and local partners are investing £1.7 billion in the superfast broadband programme, which has provided superfast coverage with speeds of more than 24 megabits per second to around 5 million premises in areas that would not otherwise have been covered by commercially funded roll-out. Coverage of homes and businesses in the UK continues to increase beyond the 95% policy objective that was achieved less than a year ago in December 2017—up from just 45% in 2010, when this Government entered office. That is a significant achievement.

At least £210 million of funding will be available to support further investment as a result of efficiency savings in the initial roll-out. High levels of take-up mean that gainshare funding from the additional profits from the network is projected to reach at least £712 million. That means a total of £922 million will be available to support further roll-out. Of that, £4.7 million will go on work that will cover areas including the constituency of my hon. Friend the Member for Wells, and that is being modelled by Openreach as we speak. He and other hon. Friends present will recognise that a substantial improvement has been achieved in their constituencies over the past few years, but that there is still more to do, which I accept.

Superfast coverage in my hon. Friend’s constituency has increased from 15.6% in 2013 to over 90%, while more than 96% of premises have speeds of 10 megabits per second or above. Connecting Devon and Somerset, or the CDS project, which is delivering across both Somerset and Devon, has to date provided superfast broadband access to over 300,000 premises that would have otherwise been left behind.

It was inevitable that reaching more rural homes and businesses would require building entirely new networks, which requires major civil engineering. Gigaclear seemed well placed to provide that following the open procurement exercise. The contracts were awarded on the basis of the supplier being financially robust enough to support the roll-out, providing the necessary broadband speeds under state aid rules, and representing good value for money for the required public investment. My hon. Friend asked a question about state aid; the short answer is that all projects begin by testing the market. We take the view that state aid is legal in an area where the market has delivered. I will write to him about that in more detail in due course.

There are a number of reasons why there has been a delay up until now. These include poor operational capacity and, frankly, poor decision making within Gigaclear linked to their supply chain management. Partly as a result of the adverse impact of the collapse of Carillion earlier this year, it has become apparent that the resources were not in place for the contracts to be managed successfully.

I recognise that communities that have not yet got the expected coverage, such as those in the beautiful rural parts of the constituencies of my hon. Friends the Members for Wells, for Taunton Deane (Rebecca Pow) and for Bridgwater and West Somerset (Mr Liddell-Grainger), will feel left behind. We recognise that that is not good enough, especially when timescales extend, potentially, out to 2022.

Outline remedial plans that push delivery back to mid-2022 have been provided. Both CDS and BDUK will, however, require key reassurances regarding capacity and resources, a commitment to accelerate deployment and robust evidence that these new proposals can be delivered. We are expecting those reassurances in the coming days.

[James Heappey]

While I accept that the state aid is still legal, does the Minister agree that it should—at the very least—force a reassessment of the priorities that Gigaclear is given, so that the Gigaclear state aid programme complements what the market seems to be providing?

[Michael Ellis]

Yes, I do. The BDUK superfast programme is being delivered under a European Commission decision from 2016, which followed on from another in 2012. As my hon. Friend will know, the 2016 decision expires in 2020. Government policy is that the state aid regime will stay in place, and the Competition and Markets Authority will take on the Commission’s role in approving schemes. My Department is working closely with the CMA to ensure that BDUK can continue to deliver projects after the 2016 decision expires.

Even with this further delivery, some premises will remain without coverage. We are working hard on our commitment to ensure universal high-speed broadband of at least 10 megabits per second by 2020. We have set out the design for a legal right to high-speed broadband in secondary legislation. Ofcom’s implementation will meet the Government’s commitment to give everyone access to high-speed broadband by 2020. In the meantime, the better broadband scheme is available for any home or business with speeds below 2 megabits per second, and provides a subsidy of up to £350 for any eligible premises for satellite broadband or, where available, other solutions. The scheme has now supported almost 20,000 homes and businesses, particularly in acutely remote locations.

In the light of the findings and recommendations of the future telecoms infrastructure review, we need to move to ensure a transformation in the UK’s digital infrastructure based on fibre to the premises—or full fibre, as it is called. Despite their delay, the contracts awarded by the CDS project already adhere to this goal and overall objective. Currently only 5% of premises have a fibre-optic connection. That is not good enough. We have a target of at least 15 million premises having a full-fibre connection by 2025 and nationwide full-fibre coverage by 2033.

That is achievable according to recent industry announcements. BT Openreach, CityFibre, Virgin Media, KCOM, Hyperoptic, Gigaclear and others all have plans for significant new fibre coverage. Fibre would, of course, make a huge difference compared with copper technology. CityFibre recently announced a £2.5 billion investment in fibre, and Openreach has announced its plans to reach 3 million premises by 2020, and 10 million by 2025 if the conditions are right.

The digital infrastructure investment fund, involving Amber Fund Management and M&G Investments, is now in place. It provides £400 million of investment capital, alongside private capital, for new expanding providers of fibre broadband. Network operators such as WightFibre and Community Fibre have already leveraged that funding. Our barrier-busting taskforce is established and tackling the barriers to fibre roll-out across the UK, and includes the production of a framework for fibre delivery to provide best practice guidance. We also introduced a five-year relief from business rates in England for new fibre infrastructure.

There is no doubt that there are challenges ahead. My hon. Friends made sound points that represent the best interests of their constituents. There is also no doubt that we are making good progress in providing rural broadband coverage. I recognise that there are issues with the remaining harder-to-reach localities. We do however need to finish the job and it is our strong intention to do that. We will also continue to push hard on full-fibre coverage, including through the project in Somerset. I welcome the continued interest and support from hon. Members ably representing their constituents—they keenly require and have a right to broadband service—as we continue to ensure we deliver our goal of a full-fibre future for the United Kingdom.

Question put and agreed to.

11:29

Sitting suspended.