Broadband (Tech City)

Lord Vaizey of Didcot Excerpts

Wednesday 4th February 2015 Westminster Hall

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

It is a great pleasure to serve under your chairmanship, Mr Crausby. I thank the hon. Member for Islington South and Finsbury (Emily Thornberry) for securing this debate and for allowing me time to draw attention to the Government’s work in extending broadband.

During the last four and a half—almost five—years, we have very much moved forward in terms of broadband delivery. Superfast broadband is now available to 78% of UK premises; it was available to just 45% in 2010. In the UK, we have the highest superfast broadband coverage among EU5 countries. The average broadband speed in the UK has more than quadrupled. Superfast broadband take-up in the UK is the highest among the EU5 countries. So we have made a great deal of progress. However, I know that the issue of urban broadband continues to concern some of our colleagues, in particular issues around Tech City, because with Tech City’s prominence in the debate about how we continue to attract and grow technology companies, its connectivity sometimes gains national prominence.

When we started down this road, our focus was very much on rural areas, because we knew that the main providers and carriers of superfast broadband—Virgin and BT—were unlikely to go to many of them without some form of subsidy. I am pleased to say that that programme is well under way. We will shortly reach the halfway stage and we are well on the way to reaching our target of 90% superfast broadband by the end of this year.

Roll-out in urban areas is more problematic than in rural areas. To begin with, for example, it is not possible to get state aid to subsidise broadband roll-out in urban areas. The European Commission takes the view that the market is sufficiently competitive in urban areas not to need subsidy. However, that does not get away from the fact that there will be pockets in urban areas that some carriers do not believe are commercially viable to cover, and those areas could potentially get left behind.

[Emily Thornberry]

I would be very interested to hear the Minister’s thoughts on what might be the problem. I hear what he says about there being competition, but the situation can be quite difficult. For example, if one street has only copper lines and the rival companies do not know that, whereas BT does, would it not be right for BT to be forced to hand over such information so that its competitors can compete and can go up and down the street, asking how many businesses need superfast broadband but do not have individual lines going into them? Then Virgin, or whoever it is, can say, “Right. We will invest in putting in our own fibre optics in that street and connect it up, because if BT won’t do it we’ll do it instead.” However, without such information, it is very difficult. We know that BT has that information, and yet it is sitting on it and not sharing it. It is in the Minister’s power to ensure that that information is disclosed.

[Mr Vaizey]

I am happy to correspond with the hon. Lady on that matter, because it is important that I fully understand the point she is trying to make. In the speech I am making this afternoon, I will try to address that point as well as I can, and if I have got things wrong we can correspond or indeed have a meeting about this issue, along with the hon. Member for Hackney South and Shoreditch (Meg Hillier), who has been very vocal about this subject, and indeed my hon. Friend the Member for Cities of London and Westminster (Mark Field), who was referred to in the hon. Lady’s speech.

BT’s copper network is managed by Openreach, which is part of BT, and it is open to competition—what is known as local loop unbundling. That means that other operators, such as TalkTalk and Sky, can make a retail offer to residential customers and indeed to businesses that want to use, as it were, a consumer service. That has helped us to drive down the price of broadband. Indeed, those other operators are able to put their own electronics into cabinets.

[Emily Thornberry]

I am very grateful to the Minister for giving way again. May I raise another issue with him? BT is not sufficiently transparent in relation to its policy for small and medium-sized enterprises. Some of my constituents have told me that if they ring BT on one day and speak to one person, they are told one thing, but then they ring the next day and speak to somebody else, and are told something else, or told, “Oh, we’ve got to refer it to x, y and z.” So, there is not sufficient transparency for these SMEs to understand how they can get this vital utility into their business at a price that is affordable and competitive.

[Mr Vaizey]

As I was saying, my understanding is that these sectors are separate parts of BT’s business. So, a residential customer who wants a BT line will get a BT line, but that line will also be open to BT’s competitors, such as TalkTalk and Sky, to run their service across that line. The business market is different, and BT is under no obligation to share its commercially sensitive data about which business customers it has and which business customers it is targeting. BT is a private company; it is not a national company. It is not running a not-for-profit service; it competes vigorously with other business providers. It is important to stress that in most areas there is a very vibrant business market, with a lot of different suppliers supplying it, whether that is in central London, Manchester or elsewhere.

Because we could not get state aid directly to subsidise the build-up of fibre, we wanted to support individual businesses to get the connections they needed. So we have made available, for example in London, connection vouchers, which would allow a business such as Proudfoot TV to apply for a voucher and to have the connection charge met by that voucher. In London, 2,500 businesses have taken advantage of that scheme. The other interesting thing we learned from that exercise was that the total number of potential suppliers—bearing in mind that the service was available in 22 cities—ran to something like 500 or 600 companies.

I hear a lot of criticism about BT in debates such as this one, and I sometimes feel that I am BT’s spokesman in the House of Commons because I am constantly having to defend it, either on customer service or on the grounds of competition, but it is interesting to note that where money, and a good margin, can be made, there is a competitive market. So, if someone is in the centre of a city such as London, with a lot of SMEs, they will find a lot of suppliers willing to build up networks and supply that marketplace. However, if someone is in a village in a very rural area, the only game in town tends to be BT. That is the problem we are addressing.

[Meg Hillier]

rose—

[Emily Thornberry]

rose—

[Mr Vaizey]

I will give way to the hon. Member for Hackney South and Shoreditch.

[Meg Hillier]

There is hot competition to challenge the Minister on that.

I thank the Minister for his comments, and for the move to reduce the cost of Openreach prices to some of the competitor companies. I say that because one of the issues is the overall cost of superfast broadband, both for businesses and residents. Would he, along with the Department for Communities and Local Government, look into this issue about changing planning, for wayleaves—to gain access across property—and to allow other technologies to be installed on or in buildings, because currently the planning rules make it harder for competitive technologies to enter the market?

[Mr Vaizey]

I am certainly happy to look at the planning regulations. Through the Infrastructure Bill, we were proposing some changes to the electronic communications code, mainly to help those erecting mobile masts. We withdrew those amendments when it became clear that there was some concern over whether mobile operators could use them to go on to each other’s masts and make changes. We will consult and are keen to make those kind of amendments. We would certainly look at any other planning changes that could make life easier for anyone who wants to build a mobile network, a fibre network, or something between the two.

While I am talking about mobile, it is important to remember that in most urban areas, and in particular in central London, the roll-out of 4G is continuing apace. We have the fastest take-up and roll-out of 4G of pretty much any country in the world. It is important, however, to stress the difference between the business market and the residential market. When you or I are at home, Mr Crausby, we will want a connection of 2 to 3 megabits and probably of 7 to 8 megabits, and with that connection, we would want do the normal things that one would expect, such as watching something on iPlayer or sending a document back to our office by e-mail. We would not necessarily, however, be uploading a very data-heavy two-and-a-half minute film. If a business has at its core the transmission of huge packets of data, one would expect it to be prepared to invest in the kind of business lines that are legion in London. An ethernet line is available in St John street in Islington. Virgin Media is in that street. It would cost that business perhaps £200 to £300 a month, once it had the connection established, to run it.

Another key point is that although we have some of the lowest broadband speeds anywhere in the world—the lowest compared with the EU5 and the USA—it will not astonish the Chamber to learn that the faster the speed, the higher the cost. Sometimes, my hon. Friends and colleagues say to me, “I have just been in such and such a country. You know what? The bloke I was staying with had a 1 gig connection. It was amazing. They could download a film in two minutes. It was incredible.” They never bother to ask that bloke how much he is paying for that 1 gig connection. If someone wants a 1 gig connection, they will pay more than if they want a 1 meg connection.

[Emily Thornberry]

The Minister has spoken about vouchers. I am sure the vouchers have been of some assistance to those businesses that have applied for them. The vouchers, I believe, are for £3,000, but to get a dedicated line costs £5,000. It then costs £400 a month and the business has to sign up to a contract that could last for many years. Those costs are a huge outlay for a small business just starting up and trying to establish itself in Tech City, exporting videos, music videos, adverts and all the sorts of things that are made in Tech City.

When I left Proudfoot TV, I bumped into a couple of BT engineers and said, “Are you going to give them some broadband? What are you up to?” They started to explain to me that they were putting in a dedicated line to a building two doors down. For Proudfoot TV to have a line put in, it would have to pay as if there had not been a line before and would have to start all over again. It would go to box 17, I believe, which is the problem in that particular area. It seems to be nonsense, when businesses have such a lot to be doing, to be unable to get such a basic utility without having to go through all these hoops and climb over all these hurdles.

[Mr Vaizey]

We are getting to the crux of the matter. Fundamentally, this debate is not about whether broadband is available, but whether businesses that use a huge amount of data should get a cheap broadband service. My contention is that, first, broadband is available and, secondly, it is a highly competitive marketplace. I will, however, highlight some of the changes.

The hon. Lady is quite right; there may be an established business with 10 or 20 employees that understands the need to invest in a leased line, because it is moving large amounts of data. A start-up business with one, two or three people may, however, find those kinds of costs prohibitive in the early stages. Is the market competitive enough to give them the kind of broadband speeds they need to get going? The championing, if I can put it that way, of this issue by the hon. Members for Hackney South and Shoreditch and for Islington South and Finsbury and by my hon. Friend the Member for Cities of London and Westminster on at least three occasions in the House has led to progress, so they should take pride in that. It is a good reminder to us all that it is sometimes worth raising these issues in the House, even if we sometimes think that no one is listening. Virgin Media Business is working closely with the Tech City team and is offering businesses a 50 meg symmetrical service for around £200 a month and a 100 meg symmetrical service for £249 a month. You may still say, Mr Crausby, that that is too much money, but it slightly takes the heat off BT, as it illustrates what a competitor that would dearly love to take all of BT’s business has to charge to make a return.

[Meg Hillier]

I appreciate the Minister’s generosity in giving way once more. He suggested that the argument boils down just to cost, but let me be clear that there are still companies in Shoreditch that cannot easily get a physical connection. My hon. Friend the Member for Islington South and Finsbury has told me that there are also such companies on her side of the roundabout. Alternative technologies would open up the market, make it more competitive and help drive down the price.

[Mr Vaizey]

Our speeches almost seem to be synergising. The next point I was going to make was that thanks to the campaigning of the hon. Lady and others, Virgin and BT have said that they will increase their footprint. Virgin will cover an additional 100,000 premises in east London and BT is aiming to cover an additional 400,000 premises in cities, with 250,000 of those in city centres and 100,000 of those in central London. UK Broadband is launching a superfast wireless broadband service across central London, including the Cities of London and Westminster. CityFibre and Hyperoptic are looking at delivering those kinds of services in other cities outside of London.

On planning, we are seeking to reduce red tape by introducing legislation to permit the installation of broadband, street cabinets and new overhead lines without prior approval from local planning authorities for five years. We also introduced changes to streamline the process to support the deployment of mobile infrastructure. Those are areas where we have made progress.

The City of London has talked about building its own network. Thanks to campaigning by the hon. Members for Hackney South and Shoreditch and for Islington South and Finsbury and my hon. Friend the Member for Cities of London and Westminster, we had a meeting with the City of London corporation and BT. BT is trialling “fibre to the basement” technology to try to overcome some of the technical obstacles in providing broadband for multi-dwellings. I am also pleased to say that the Mayor and the London Assembly are taking ownership of the issue. He has set up a connectivity advisory group, which has been formed to bring actors together to improve digital connectivity across London.

A great deal of progress has been made, but I sympathise with any business that is looking at the kind of costs that have been mentioned. Ofcom is due to launch a consultation on business-leased lines in spring that will report, we hope, in early 2016. It will look at competition on business-leased lines.

[Emily Thornberry]

Is the Minister aware that if one looks at the access to superfast broadband, London looks like a doughnut? It is much easier in outer London than in the centre, and a great deal of work is being done to expose that. I hope that he remains on top of that issue, because as the picture is established, it will become clear that Government intervention is necessary.

[Mr David Crausby (in the Chair)]

Order. I am about to suspend the sitting for a Division in the House. Is the Minister about to wind up?

[Mr Vaizey]

I simply wish to conclude by saying that I congratulate the hon. Lady on an excellent debate and note the points that she has made.