Report of the Next Generation Broadband Taskforce

SUBMISSION RELATING TO: Report of the Next Generation Broadband Taskforce June 2012 submitted by Ian McArdle Head of Regulatory Affairs Communicat...
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SUBMISSION RELATING TO:

Report of the Next Generation Broadband Taskforce June 2012

submitted by

Ian McArdle Head of Regulatory Affairs

Communications Workers’ Union 575-577 North Circular Road Dublin 1

Communications Workers’ Union Submission: Response to Report of the next Generation Broadband Task Force “Enabling a Connected Society” Introduction The Communications Workers’ Union (hereinafter referred to as “CWU” or the “Union”) represents approximately 16,000 workers employed in the Communications Sector in the Republic of Ireland, of which around half are employed in the telecoms and related sectors. The CWU represents staff working in the following telecoms and related companies:      

eircom Vodafone BT Meteor O2 KN Networks

As the trade union representing a significant number of workers in the telecoms market across a range of companies, the CWU welcomes this opportunity to respond to the report from the Next Generation Broadband Taskforce (hereinafter referred to as the “NGBT”). The CWU welcomes this report as a useful ‘next step’ to developing a national high-speed broadband network. The CWU considers the report to be a constructive and positive addition to the debate, bringing together as it does the views of the main stakeholders in the telecoms industry and clearly setting out their considered recommendations on how to develop Next Generation Broadband in Ireland, with a view to meeting the targets set out in the EU’s Digital Agenda. The Union notes the introduction by the Minister for Communications, Energy and National Resources, Mr Pat Rabitte TD, whereby he clearly states that the report is firmly focused on the challenge represented by how best to proceed with the rollout by the commercial operators of high-speed broadband infrastructure and technologies which are required throughout Ireland. The CWU notes that the report is silent on how, when and where the government might intervene to address possible market failures and we look forward to hearing more on this issue in the subsequent National Broadband Plan that will follow the consultation on this report. The report falls broadly into four different sections: demand stimulation; the removal of barriers currently perceived to hamper investment; private sector investment plans;

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and inspecting policy. The CWU will make general observations on the above in this submission. Next Generation Broadband – Enabling a Connected Society The evolution of the telecoms market in Ireland, and more specifically the development of a high-speed broadband network for the country, has been unduly hampered for some time as a result of a number of serious obstacles, including the lack of progressive government policy and leadership, short-sighted regulation and a lack of capital investment from key telecom stakeholders. Notwithstanding that, this initiative should be welcomed as an opportunity to finally address the serious shortcomings that exist within telecoms infrastructure in Ireland, with a view to meeting the targets that have been set out within the Digital Agenda for Europe, which strongly argues that “ultra fast internet access” is a critical building block for jobs and growth. The CWU fully supports this view and would elaborate further by saying Next Generation Broadband infrastructure should be truly national, genuinely accessible and developed on a basis that would encourage long-term sustainable investment and competition. The economic importance of developing this type of infrastructure cannot be overstated. In the current economic climate, the CWU accepts that the government will perhaps be limited in the level of investment it can make in this area, but that being said, this type of investment does represent a genuine long-term and sustainable path to growth and recovery that would create jobs in the short-term, whilst improving competitiveness and efficiency across the economy in the medium to long-term. In addition to this, there are funding opportunities available to the government which are set out later in this submission. It is the view of the CWU that high-speed broadband infrastructure and access should be treated as a utility, such as water or electricity. The UN ‘Information Economy Report’ (2006) argues that “quality broadband access is critical to the competitive advantage of business to such an extent that it should be compared to utilities such as water and electricity”. In the past this Union has argued that Next Generation Broadband should be treated as a high priority for government in the same way health services or education are classified in terms of capital investment. In recent history other governments have conveyed just how little importance they placed on broadband as part of our national infrastructure in circumstances where less than 1% of the budget for economic infrastructure (€435 million) was dedicated to broadband development, whilst at the same time tens of billions was spent on our road network.

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The need for a clear strategic roadmap from government, and indeed the Regulator, is more pressing now than ever before. The NGBT report refers to the Forfás report ‘Ireland’s Advanced Broadband Performance and Policy Priorities’ which is a useful contribution to the debate and in the past Forfás has taken a strong position in relation to the need for this type of infrastructure, noting that “Ireland’s current telecommunications industry structure, infrastructure and market characteristics make the timely availability of next generation services very unlikely unless Government plays a strong role in processing the range of actions necessary to ensure that advance services become available in Ireland”. Given the open nature of the Irish economy and the benefits it has reaped from globalisation, it is clear that without this type of infrastructure we are in danger of marginalising our economy and ceding the competitive advantage of dynamic technology and quality broadband to other markets. In addition to the very real economic imperative for developing a next generation network, there are considerable social implications arising from decisions in this area, as alluded to in the NGBT report. As a small open economy on the fringes of Europe with a substantial rural and dispersed population, access to high-speed broadband will become an increasingly vital part of our sense of social cohesion and connectedness. Those areas that are left behind and denied access to this infrastructure will be at a serious economic and social disadvantage, and it is the view of the CWU that a genuine knowledge economy must be all-inclusive; access to Next Generation Broadband would be based on the principle of equal access regardless of location. The issue of broadband as part of the Universal Service Obligation (hereinafter referred to as the “USO”) is not addressed in the report and its absence is particularly noteworthy. The CWU would strongly argue that this issue should be addressed in the National Broadband Plan and that the report represents a genuine opportunity to review how the USO is funded and how it might include some level of broadband provision. The Digital Agenda for Europe has set out very clear targets, but there is nothing to prevent this government from proactively seeking to include broadband as part of the USO and it is worth noting that the Regulator is currently consulting on the provision of telephony services under the USO. Targets for the Rollout of High-Speed Broadband in Ireland The CWU notes with interest the information contained in the NGBT report wherein it states that by 2015 over 50% of the population will have access to headline speeds between 70Mbps and 100Mbps. A further 20-35% of the population will, by 2020, have access to headline speeds of between 30Mbps and 100Mbps, delivered through advances in copper mobile and 4G fixed wireless platforms. However what is striking about the report is the acknowledgement that up to 30% of the population may only have access to the basic level of services currently available by 2020 and that the

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delivery of high-speed broadband services on a commercial basis would be “cost prohibitive” in isolated rural areas. This is indeed a worrying admission and, if nothing else, underlines that the digital divide in this country will get significantly worse if there is no progressive government strategy to address the issue. In describing the current broadband in Ireland today the report notes that fixed wireless services of 30Mbps is currently available to 500,000 homes, but it is not clear which operators are providing this service and the CWU would very much question the veracity of this particular claim, in circumstances where there is no evidence provided to support it. It is important to bear in mind that an honest and frank assessment of the current telecoms infrastructure is absolutely necessary before an adequate government strategy can be properly developed. In this context it is vital that claims of broadband provision are supported by adequate detailed information. In the past discussions on the development of broadband infrastructure have been plagued by inflated claims on available speeds, league tables and other statistics that have made an open and honest discussion unnecessarily difficult. The Digital Divide The reality is that Ireland has a substantial rural (40%) and highly dispersed population. The average for Western Europe is around 5-10%. In contrast to this, 40% of the country’s population live in the greater Dublin area – a stark indicator of the extent of the urban-rural divide that exists on this island. Furthermore, it has been suggested that, in looking at CSO data, 70% of the population live on just 10% of the land mass available. Ireland’s urban centres, particularly those concentrated on the east coast, are ripe for cherry-picking and will most likely continue to operate competitive broadband markets. However, such is Ireland’s topography that extensive parts of the island will require state intervention and it is the view of the CWU that this could easily go beyond the 30% predicted in the NGBT report. When one considers the map that was published by the Department of Communications, Energy and Natural Resources which highlights municipal areas that are excluded from the Rural Broadband Scheme, the reality of the scale of this challenge becomes very clear. The digital divide has grown wider in recent years and with the advent of new technology in the telecoms sector which will enhance available speeds, especially to urban customers, this gap will continue to grow. In considering the issue of the digital divide, research conducted by the OECD noted that “In 2004 the average advertised DSL speed in the OECD was 36 times faster than a standard dial up connection, however by 2006 the average DSL connection was 160 times faster than a standard dial up connection”.

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This research applies to a different technological era, but the principle remains applicable today insofar as the speed available over fibre will mean that those citizens in the 15-30 % section of the population who are not seen as commercially viable customers will be left to languish with their current service levels if there is not adequate government intervention. As referred to in the NGBT report, the provision of high-speed broadband could prove to be a very potent engine for growth for small to medium enterprises across the country and given that many of these businesses exist in rural areas, the irony of the situation is that those areas which could stand to benefit most from high-speed infrastructure, are those least likely to benefit from access to high-speed broadband. As such, this will serve only to ensure that the digital divide not only grows, but becomes a permanent feature of the rural business landscape. The only remedy to this is state intervention and the OECD has even highlighted that “there are clearly some circumstances in which Government intervention is justified. For example, connecting underserved areas and promoting efficient markets”. These two issues are so intertwined that one is not achievable without clarity on the extent to which the state is prepared to intervene to remedy the other. Prior to the implementation of the Rural Broadband Scheme the government introduced the National Broadband Scheme, which was designed to ensure universal broadband access across the country based on a wireless 3G solution provided by mobile operator 3 Ireland. Since its introduction serious questions have been raised as to the value for money that this solution has offered to taxpayers. Around €80 million has been spent on the scheme and originally it was expected that 126,000 subscribers would sign up. However, just 35,500 have actually done so. A revised take-up target of 68,000 customers by 2014 has been introduced equates to roughly 34% of all homes in the target area. This equates to an approximate state subsidy of €1,180 per subscriber. In addition to this, the scheme has faced regular criticism from customers who claim to be dissatisfied with the download speed or the service coverage. In a recent report from the Office of the Comptroller and Auditor General it was stated that “20% of NBS customers had expressed their dissatisfaction with the service and 3 Ireland was asked to consider additional steps to address consumer concerns”. In any event it is view of the CWU that mobile broadband is only part of the solution to universal access. It is true that there has been huge growth in mobile broadband in this country, largely due to the lack of a viable alternative. However mobile broadband is not considered as a long-term viable alternative to the type of service and speed available via fibre. This platform does have a role to play, but is described by the OCED as “largely complementary access technology to wired broadband”. Furthermore a Ramboll Management study in 2007 conducted by Union Network International observes that “mobile technology is not sufficient to secure the

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necessary technological development of next generation networks, and investments in fixed-line infrastructure cannot be neglected”. In addition to this, there are serious service and contention issues with mobile providers where advertised speeds are not being delivered, a point that has been echoed by ComReg in its own consultations. The OECD has also noted that, where they are available, “wired connections offer the fastest connections and the lowest prices per Mbit/s in the OECD”. Relying on mobile broadband is an inadequate wireless solution to a problem that only can be properly solved with a comprehensive fibre network, with wireless activity taking place only in a complimentary context. On taking office in 2011 the current government outlined, in its Programme for Government, its vision for the development of a next generation telecoms network. It stated that NewERA would co-invest with the private sector and the commercial semi-state sector to provide Next Generation Broadband to every home and business in the state. It claimed that this would be achieved by delivering fibre to the home or kerb for 90% of homes and businesses in Ireland, with the remaining 10% provided with high-speed wireless or satellite broadband. This vision for the future is clearly at odds with the targets outlined in the NGBT report, which suggests that only 50% of the population will have access, by 2015, to headline speeds of between 70Mbps and 100Mbps which will be delivered via cable, fibre and fixed wireless. The remaining 50% of the population will be left with broadband delivered via copper or 4G wireless platforms and over half of those will see no improvement on the services available to them today, even by 2020. In this context it is difficult to overstate the challenge facing the current government and, in truth, a challenge of this scale requires bold and decisive action that has heretofore being lacking from previous governments. The challenge must surely begin with a clear statement from the various telecoms and cable operators on their investment plans to establish what contributions will be forthcoming from the private sector. It is notable that the NGBT report is completely silent on investment plans from the contributors to the report. In recent years there have been considerable investment announcements made by UPC and eircom in their respective cable and fibre networks, however other operators have not been forthcoming on their plans for investments in the Irish telecoms market. Bearing in mind that the Irish marketplace is now home to a significant number of multinational operators, it begs the question as to whether they intend to make any investment of their own or simply piggy back on network developments elsewhere? Equally absent from the report is any suggestion of a collaborative approach to network development, which had been touted by the industry as possibly the only viable long-term solution to Ireland’s high-speed broadband challenges. At previous public consultations and seminars attended by telecoms industry leaders it was

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suggested that future network developments should be planned on the basis of a collaboration between leading telecoms operators, which would be incentivised by government and the Regulator to develop infrastructure; those operators which failed to make a contribution to the network development would be charged a higher access price to ensure a return for the investors. It is disappointing that the NGBT report is silent on this issue, as one would have expected this group of business leaders to have taken the opportunity to put together a comprehensive collaborative plan, with a view to getting government input on how both public and private sector elements could be brought together in the most efficient way possible for the collective good of the country and the economy. It will be interesting to see how this situation is approached in the context of the National Broadband Plan for Ireland which the government plans to publish later this year. European Context In a European context the challenge of developing high-speed broadband remains equally difficult. The fact is, across Europe currently only 6.5% of broadband connections work on a 30Mbps speed and of these just 0.9% can achieve speeds of 100Mbps. As things stand, only 2% of internet connections in Europe are currently based on fibre and it has been estimated by analysts in Brussels that the cost of upgrading existing copper networks to achieve speeds of 30Mbps coverage for all by 2020 would range from €38 billion to €58 billion. Meanwhile it is suggested that deploying fibre to at least half of the EU population would cost between €181 billion and €268 billion. The European Commission is considering different solutions that could assist in financing this type of investment, including the use of project bonds and credit enhancements, which would be designed to improve the risk/return trade off for private investors, thereby making the NGA project commercially more attractive. 4G Spectrum Auction and Infrastructure CWU notes the upcoming spectrum auction and welcomes the fact that the report predicts this will advance the delivery of new infrastructure, including over 2,000 new mast installations. The CWU is not averse to this infrastructure being shared and notes that site sharing is one of the recommendations included in the report. Where appropriate, if public infrastructure can be utilised to reduce the number of new mast sites, this is to be welcomed, but planning guidelines and standards should be respected and adhered to in all cases. It is expected that the spectrum auction will yield around €400 million and it is vital that these revenues are ear marked for re-investment into the government’s digital plan. This windfall from spectrum could and should go a long way to underwriting

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government plans. The CWU looks forward to more detail on how these revenues might be utilised in the National Broadband Plan. The Connecting Europe facility also represents an opportunity for additional funding. This package, from within the EU’s Multi-Annual Financial Framework Budget 20142020, of €40 billion is designed to secure greater investment in energy, transport and ICT projects that will bring increased interconnectivity across Europe and provide better access to the internal market. A sum of €9 billion in this facility will be allocated to telecommunications projects.

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