Broadband Delivery UK

1. Broadband Delivery UK NextGen10 Robert Sullivan, CEO 23rd November 2010

2. Summary • Background • Funding • Learning from the theoretical exercises • Superfast broadband pilots • What do we want to learn? • Enablers • Attracting service providers • What’s next • Superfast broadband pilots

3. Background • “…deliver the best superfast broadband network in Europe by 2015” - DCMS Structural Reform Plan • By 2015, the private sector will likely have made available superfast broadband to two thirds of the population • BDUK will be focused on the ‘final third’ of the population the private sector will not cover, some of whom cannot get even a standard level of broadband

4. Funding available • £530m from the TV licence fee was provided as part of the spending review to 2015 • As part of the licence fee settlement a further £150m a year in 2016 & 2017 (£300m total) may be available • There are sources of European funding (e.g. ERDF) to leverage funds provided by BDUK • Other public sector sources (councils, DAs etc) • Given the potential economic benefits and the possibility for enabling public service transformation, local public bodies may choose to provide additional funding for broadband projects • There are a number of models for the use of funding – gap funding investments, revenue shares, public ownership of assets • BDUK is investigating all possible funding models • Unlikely that there will be a single answer for every project

5. Theoretical exercises • Approach to the superfast broadband pilots will build on the lessons learned from the theoretical exercises: • Given the technologies proposed and the way they are implemented, the concept of the USC as a separate effort is not valid • Cost of backhaul is a major element in both the capex and opex, regardless of access technology • We always knew high capex was a large barrier to investment – however, generating sufficient revenue to cover the opex (even where capital is 100% funded) will be a challenge • Exercise confirmed a diverse mix of technologies will be required – fixed (fibre based and others), fixed wireless & satellite all become the most economic solutions in certain circumstances

6. Superfast broadband pilots • “Our aim is to use these pilots to discover exactly what needs to be done to make superfast broadband commercially viable...” – Jeremy Hunt 15th July 2010 • Want to test factors such as the reuse of public sector network assets and other infrastructure • Locations are: • North Yorkshire • Herefordshire • Highlands and Islands • Cumbria • Expect the value of the pilots to be between £5-10m each • Very different areas and potential projects – each will move at its own pace

7. Pilots - what do we want to learn? • What role should central government play in these projects? • Actual economics of deployment and operation in hard-to-reach areas • The potential for reusing public sector networks • The potential for demand registration and aggregation • The impact of open access to telecoms infrastructure • The potential of different commercial mechanisms • The cost effectiveness of different solutions

8. Pilots - enablers • Public sector networks are important – BDUK is exploring with the local bodies how to build this in to the pilots • Reuse of existing telecoms assets may reduce costs: • BT’s ducts and poles: Addressed by Ofcom in the Wholesale Local Access market review • Ofcom proposes a new Physical Infrastructure Access (PIA) remedy – BT has to produce reference offers for duct and pole access by mid-January 2011 with a view to launching a product by mid-2011 • Reuse of other utilities infrastructure may reduce costs: • Electricity poles most likely to be important in extending reach to more rural areas. • Responses to a discussion document issued in July included examples of commercial arrangements for sharing infrastructure supporting the view that legislation may not be required in this area.

9. Pilots – attracting service providers • No matter what or how we buy, we need to ensure that there will be a service for people to buy when the infrastructure is put in place • If a supplier can demonstrate a diversity of service providers, we’d like to reflect that in our assessment • However, we need to make sure that there are the market mechanisms in place for this to ensure that bidders can offer this diversity • BDUK are following industry efforts to make platforms available that will link service providers with networks

10. Pilots – what next? • The pilots are the first 4 projects that we will undertake • The first pilot procurement will start early next year, with others following later on • There will be further waves of funding for LAs to bid in to next year and in subsequent years • As part of the pilot selection process over 60 areas and projects submitted bids to the RDAs and DAs – there is plenty of demand for future funding waves

11. Conclusion • Having the best superfast broadband network in Europe by 2015 is a challenging target, even with the considerable funds we have • We will need to do everything we can to remove the barriers to ensure the money we have is used effectively • BIS will be publishing a broadband strategy paper in December which will set out our approach in more detail

12. Questions