Broadband: Communications Committee Report

Lord Stevenson of Balmacara Excerpts

Monday 18th March 2013 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, I was briefly a member of the Communications Committee and participated in about one and a half reports. It was good to hear so many of my former colleagues speak today on this very important topic. I thank the noble Lord, Lord Inglewood, for his very helpful introduction to the debate which helped those of us who are not so expert in some of these issues to get a handle on what the committee had been up to and how it was expressing its concerns. I particularly enjoyed his jest—if it was one—about the expenditure on HS2. I secretly think that the Minister who is about to respond may also have some sympathetic thoughts in that regard, although, of course, he is far too well bred to reveal them to us today.

The committee report, which is a very good read, and the government response to it, which is not quite as good, raises some very good points on the way in which broadband will influence society in its broadest context, how coverage is perhaps more important than speed as a basic understanding of what the aims and objectives should be, on the problems of the rural divide and the very real difficulties of exclusion that may follow from that and on the sustainability of the initiatives that have been put forward, particularly whether or not there will sufficient commercial competition to maintain the drives that are required. The report also covered a question which was raised by several noble Lords, including my noble friend Lord Haskel, about whether uptake will be one of the biggest stumbling blocks. However, there is general agreement that broadband infrastructure will drive significant economic value for the United Kingdom and its economy and is obviously central to our future prospects of growth.

The projected explosion of data consumption over the next five years presents a huge challenge requiring large-scale investment to upgrade the capacity of existing networks and deliver new connectivity. As we have heard, consumers demand high definition video and audio content both inside the home and on the move and are using all sorts of devices. Those of us with teenage children will know how complicated it looks when you are able to get inside the bedroom of a 19 year-old or 20 year-old and discover what exactly they are doing on all the machines that they have. These are all consuming huge amounts of data. It is that sort of response and connectivity that this report is trying to arrive at. Clearly, consumers will be the driving force of that, and indeed have been driving about a 30% increase year on year in terms of usage, but how do we realise the demand for that and the economic value of it if we fail to allow private network operators to commit large-scale investment to increase the capacity that is required? These providers are operating in a market where the dynamics of investment are extremely finely balanced. Indeed, it is interesting that one of the larger suppliers dropped out recently.

Surely the Government’s central objective for broadband interventions in both rural and urban UK markets should be to create the conditions in which private-led investment and innovation can flourish. Yet the policy to date has suffered from what seemed to be fundamental weaknesses. The rural broadband programme, to which the committee drew attention, has failed to stimulate private, competing investment and will be awarding £1 billion of public subsidy to a single incumbent. The urban broadband fund risks critically undermining continued investment in broadband capacity by overbuilding existing networks, and not enough has been done, as we have heard, to promote usage.

It must be a real concern that the Government have failed through their rural broadband intervention to replicate the conditions of infrastructure-based competition that have served the urban market so well. Markets that benefit from infrastructure-based competition are better served in terms of innovation and penetration than those in which the incumbent is placed under no pressure to supply better, cheaper products. Across Europe broadband penetration in markets with infrastructure competition is nearly 20% higher than in countries that rely on service level competition alone. This is something that the Government must take into account.

Driving growth among SMEs is critical to the future success of the UK economy and increasing uptake of digital technologies among those businesses is central to that goal. Yet the potential benefits offered by digital technologies are not currently being realised by UK businesses. Only two-thirds have a website and only one-third sell goods and services online. The Government’s advisers suggest that the central barrier to small businesses realising these benefits is a lack of practical, digital skills and a shortage of resources to undertake digital training. This is hardly referred to in the Government’s response. Given the current economic climate, and a context in which recent EU budget negotiations have cut broadband funding by 90%, it is absolutely vital that the Government adopt a smart approach to broadband intervention that targets public finance where it can deliver the greatest economic gains.

I want to conclude by asking the Minister a few questions. The Government say that their key ambition is to have the best superfast broadband network in Europe by 2015. However, as we have heard, the latest figures suggest that we are only 16th in Europe and perhaps 24th overall. What is happening about this? Can we have some detail about the plans that will deliver the best superfast broadband in Europe within a couple of years?

The lack of broadband provision in rural areas is holding back the countryside, both economically and socially. The NFU ran a poll in 2010 regarding broadband access in rural areas. Around 40% of respondents said that they could not get broadband at all, while 90% who could access broadband did not get a reliable connection. What are the Government doing about this?

The Countryside Alliance believes it is important that there is competitive rollout of broadband services if the current problems of high prices and poor service in rural areas are to be overcome. There should not be one single technology to deliver broadband. Competition should be promoted between technologies, as we heard from a number of noble Lords. Can the Minister explain what the Government are doing to promote competition here?

Industry studies agree with the Government that the cost of putting together a superfast broadband network is probably going to be close to £15 billion. According to a recent freedom of information request, of the four pilot superfast broadband areas, which were named by the Chancellor in the Pre-Budget Report in 2010—the Highlands and Islands, north Yorkshire, Cumbria and Herefordshire—a couple of them have not spent a penny and two of the others were just moving towards finding local suppliers. Can the Minister update us on what is going on here?

Finally, as my noble friend Lady Bakewell mentioned, in the Heseltine report, No Stone Unturned, the suggestion is made that broadband for all is a critical step towards what the Government are doing. We have heard in recent press reports that the Budget will contain some details of that. Obviously no Budget secrets can be released but it would be interesting to know whether the Minister believes that the recommendations in the Heseltine report would be effective in bringing forward the proposals that have been made.