PUBLIC CONSULTATION. Next Generation Broadband in the Highlands and Islands of Scotland. Start Date: 12 th July 2012
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1 PUBLIC CONSULTATION Next Generation Broadband in the Highlands and Islands of Scotland Start Date: 12 th July 2012 End Date: 13 th August 2012
2 TABLE OF CONTENTS 1. Introduction 1.1 Project Purpose 1.2 Policy and Perspective 1.3 Aims and Objectives 1.4 Specifications 1.5 Procurement Approach 1.6 State Aid 2. The Project Area 2.1 Settlement Pattern and Population Density 3. Existing Provision 3.1 Private Hard Infrastructure 3.2 Local Loop Unbundling 3.3 Wireless Provision 3.4 Public Sector Networks 4. Likelihood of Market Investment in the future 4.1 Current Situation 4.2 Known Upgrade Plans 4.3 Early Market Engagement 5. Conclusion 5.1 Description of Proposed Aid Measure 5.2 Proposed Target Areas 6. Feedback Process 6.1 Consultation 6.2 Contact Appendix 1 Indicative 50 settlements Appendix 2 Map A Basic Broadband Map B Next Generation Broadband
3 1. Introduction 1.1 Project Purpose The purpose of this project is to provide affordable Next Generation Broadband (NGB) services to all parts of the Highlands and Islands. The project is part of a wider programme which has the aim of maximising the benefits of improved digital connectivity. The desired outcomes are economic growth, stronger communities and improved delivery of public services. This is a transformational project for the Highlands and Islands with the potential of bringing superfast broadband to the majority of premises by This would provide a step change in connectivity for businesses, citizens and the public sector across a region covering more than half of the land mass of Scotland. This project is part of a larger programme of work to bring NGB to all by Policy and Perspective Modern digital connectivity is widely recognised as an enabler of business productivity and a driver of innovation and international trade. It provides a means of minimising the exclusion of geographically remote communities bringing the potential to boost economic development, retain young people and attract new residents. It is also a significant contributor to a low carbon economy. Research shows that the adoption and exploitation of ICT 1 as a result of enhanced connectivity can have a significant effect on GVA 2 and the competitiveness of regions (for example The Impact of Broadband on Growth and Productivity a study on behalf of the European Commission by Micus 2008). In 2009 HIE commissioned research which calculated that the potential impact of NGB for the Highlands and Islands was a Net Present Value of 504m over 15 years. This equates to a GVA uplift of over 70m per annum being achieved within 15 years. This project is aligned with the wider aims of the Scottish Government, UK Government and the European Union and will seek to stimulate private sector investment across the region in order to facilitate the provision of universal Next Generation Broadband services. Scotland s Digital Future (2011) sets out the Scottish Government s aspirations and plans that next generation broadband will be available to all by 2020, with significant progress being made by This target is set in the context of wider activity to ensure that Scotland is positioned to take full advantage of the opportunities offered by the digital age, including: Improving the delivery of Public Services; Positioning Scotland at the forefront of the Digital Economy; Increasing the rate of broadband take-up and digital participation. 1 ICT = Information and Communication Technology 2 GVA = Gross Value Added, economic indicator of the value of goods and services
4 The follow up document Scotland Digital Future Infrastructure Action Plan (2012) sets out the Government s commitment to world-class, future proofed digital infrastructure by 2020 with a step change by The Plan recognises the role of HIE s NGB project and procurement in bringing forward early infrastructure improvements in some of Scotland s most remote and rural areas. As the Scottish Government s economic and community development agency for the Highlands and Islands, HIE works with private businesses, communities, and both public and voluntary sector organisations to build sustainable economic growth across the region. The organisation and its partners are committed to developing the Highlands and Islands as a competitive region that is home to successful high growth companies, strong communities and that provides an excellent quality of life. HIE s current Operating Plan states Modern digital connectivity is an essential component of competitiveness. Universal access to high quality, affordable broadband is a prime goal which underpins all of HIE s strategic priorities. The HIE area covers over half Scotland s land mass, including all of Scotland s inhabited islands, and has some enduring challenges in many of its more remote communities. HIE supports projects in these area, recognising difficulties in bringing forward development in remote areas and the additional costs which living and operating in these locations involve. However, capitalising on opportunities where the Highlands and Islands has a comparative advantage such as renewable energy combined with the development of the University of the Highlands and Islands (UHI) and the early provision of NGB, will put this region in a strong position to attract ideas, investment and people. The connectivity improvements required to rollout NGB will unlock the ability to deliver benefits secondary to the main project objectives, for example: it will provide a valuable contribution towards the sustainability and growth of fragile communities and meeting the demands of the wider population to access new digital services; it is crucial in supporting new developments in tele-health, remote education, delivery of public services and will help maximise growth in key sectors; improve backhaul access for 3G operators to roll out further coverage; will provide the connectivity required to deliver 4G (LTE) in the region; will help the delivery of community-led solutions; it will upgrade connectivity links to 3 main island groups this is a key economic development constraint at the moment; it will provide the core connectivity required to support the development of the renewable energy sector; it will reduce the impact of distance-related charges which are a key constraint in the region; delivering high-quality connectivity into the main settlements is expected to decrease the cost of providing public sector connectivity to the main Pathfinder North when the contract is re-procured in 2014; it will help support the roll-out of universal service commitment services.
5 1.3 Aims & Objectives In line with the Scottish Government, the UK Government and the European Union, HIE has the following requirements: - Requirement 1 To ensure the region meets its aspirations by securing:- The delivery of NGB (through whatever medium) at 30Mbps or above to all within the Highlands and Islands Enterprise area by 2020; A market place that provides the ability for individuals, communities and businesses to access a choice of NGB services at an affordable market price. Requirement 2 To ensure significant progress towards Requirement 1 has been made by 2015 and to ensure that: The market provides the ability for all individuals, communities and businesses to access a standard broadband service (through whatever medium) at a minimum of 2Mbps or above; The market place provides the ability for individuals, communities and businesses to access a choice of standard broadband services at an affordable market price; Where possible a scaleable and flexible upgrade route from standard broadband to NGB is provided. 1.4 Specifications At this stage, there are some principles which can be agreed as forming the main part of the requirement of this project. These are: The target for HIE is for coverage of NGB to all within the Highlands and Islands area by 2020; The overall strategy is to build out from a number of key settlements which have been identified by HIE representing a mix of population levels, fragility and employment deficit. HIE suggested these 50 settlements (see Appendix 1) as an initial position for the bidders to work from but with recognition that the rollout may differ depending on bidder solutions; In addition to NGB provision in these key settlements, wholesale access Points of Presence (PoPs) will also be required to be provided at these locations. These PoPs provide access to a range of high speed data services which are particularly important to more data intensive customers such as larger commercial and public sector organisations. These PoPs may also encourage community based broadband services to develop in these areas by providing affordable backhaul links; Once coverage is made available in the settlements, this will be widened to at least a 20km radius from each settlement. The rationale being that this will reach
6 a high percentage of the population (~80%) and use the building blocks provided in the settlements as a platform from which to expand; Providing Next Generation Broadband to the most remote locations will be encouraged throughout the rollout as the service coverage extends into the region. Potential Providers will be specifically asked how they would address these final few locations. 1.5 Procurement Approach The procurement process began in June 2011, before the BDUK Framework was in place. Therefore there were five routes open to projects over the EU threshold: four through OJEU and one through Buying Solutions: OJEU - Open procedure; OJEU - Restricted procedure; OJEU - Negotiated procedure; OJEU - Competitive Dialogue; Buying Solutions - Pre-competed framework The Office of Government Commerce provide a number of questions to assess which procurement procedure the Contracting Authorities should undertake. On the basis of this analysis, the Competitive Dialogue procedure was deemed the most appropriate procurement route for the project. HIE intend to enter into a contract with the successful bidder from this procurement. The duration of the contract will depend on the bidder s capability to address the NGB target requirements. It may become clear that even the most attractive bidder can only reach so far without making unacceptable compromises which HIE may feel could be better addressed through a different model. This will be brought our through negotiations with the bidders in which case HIE may look to alternative routes to supplement the main contract route. 1.6 State Aid This project will follow all relevant State Aid conditions including those specific to the intervention in NGA networks. These rules aim to minimise any distortion of competition within the EU arising from any aid or subsidy granted to a commercial undertaking by the public sector. The project will only invest where it is compatible with these rules. HIE intends to use the BDUK State Aid umbrella scheme to comply with State Aid requirements.
7 2. The Project Area The Highlands and Islands region covers the following Local Government areas: The Highland Council; Orkney Islands Council; Shetland Islands Council; Comhairle nan Eilean Siar (CnES); Argyll and Bute Council; North Ayrshire Council (Arran and Cumbrae); and Moray Council. In 2009, the population of the Highlands and Islands was 447,043. This represents an increase of 3.14% since 2001 and compares to a 2.48% increase overall in Scotland. Unemployment in the Highlands and Islands has been consistently below the Scottish level. In 2009 the largest employment sector was Health accounting for 18.5% of jobs. Construction, retail, transport and storage, accommodation and food services, public administration and defence, education and arts, entertainment, recreation and other services also account for a higher proportion of employees in the Highlands and Islands than in Scotland. Business start-ups in the Highlands and Islands have been slightly higher than in Scotland. In 2010, there were 3.6 new start-ups per 1,000 of the population compared to 3.0 per 1,000 in Scotland. 2.1 Settlement Pattern and Population Density The Highlands and Islands of Scotland is an area covering over half of Scotland s land mass but accounts for less than 10% of its population.. The region includes almost 100 inhabited islands and is characterised by low population density, proportionately high levels of public sector employment and large numbers of small and medium sized businesses. Figure 1 below shows population density levels in 2009.
8 Figure 1: Population Density, 2009.
9 3. Existing Provision 3.1 Broadband Infrastructure The HIE region has a total of 389 BT exchanges serving postcodes in the region with 379 of these exchanges are located within the region. 62 exchanges in the region are Exchange Activate exchanges which have limited delivery of fixed broadband speeds at 0.5Mbps. 21 exchanges in the Western Isles have not been upgraded for ADSL provision. Broadband speeds achieved in the region significantly lag behind the UK average of 7.6Mbps 3. Indeed, research conducted in 2009 showed that even in the Highland capital of Inverness broadband speeds averaged just 2.5Mbps, compared with over 6Mbps in Edinburgh and Glasgow. Many parts of the region are only able to achieve 0.5Mbps due to distance from the local telephone exchange or the use of Exchange Activate technology which is present in some of the region s smallest exchanges. Also, whilst 80% of the UK has access to local loop unbundling broadband services which can offer speeds of up to 20Mbps, within the Highlands and Islands, only 20% of phone lines have access to these services 4. Ofcom classifies areas by Market Classification, based on the following definitions: Market 1 - those geographic areas covered by exchanges where BT is the only operator; Market 2 - those geographic areas covered by exchanges where there are 2 or 3 Principal Operators present (actual or forecast) AND exchanges where there are forecast to be 4 or more Principal Operators but where the exchange serves less than 10,000 premises; and Market 3 - those geographic areas covered by exchanges where there are currently 4 or more Principal Operators present AND exchanges where there are forecast to be 4 or more Principal Operators but where the exchange serves 10,000 or more premises. There is one Market 3 exchange and nine Market 2 exchanges. All other exchanges are Market 1. Virgin Media do not have any cable broadband coverage in the Highlands and Islands. 3 Broadband Speed Research, Ofcom. 4 There are 10 exchanges unbundled in the area: Buckie, Dingwall, Elgin, Forres, Fort William, Inverness Culloden, Inverness Macdhui, Lossiemouth, Nairn.
10 3.3 Wireless Provision There are 21 exchanges in the Western Isles which have not been upgraded to deliver full ADSL broadband. In these areas, the Western Isles Connected Communities network delivers broadband services to both public and private sector organisations, including residential customers. The network uses a common high performance broadband network infrastructure to deliver wholesale broadband access to customers. The network is owned and operated by HIE. Using digital microwave radio as the predominant transmission medium, the Connected Communities network provides public sector connectivity ranging from 2Mbps to 100Mbps, supporting high performance services such as VoIP, Video Conferencing and Remote Access Services (RAS). Currently the network provides connectivity to 35 schools, 3 hospitals, 16 GP practices and over 50 other public sector locations. The network also provides wholesale Internet Service Provider (ISP) access enabling the delivery of symmetrical broadband connections to homes and businesses throughout the islands. Currently the network connects over 1750 residential and business customers. Connected Communities network assets are available for re-use as part of this Procurement process. There are a number of wireless community networks operating in the region: Tiree Broadband; Tegola project in Arnisdale; Hebnet operating in the Small Isles Public Sector Networks The Pathfinder North contract was signed on 21 March 2007 between Thus, now part of Cable & Wireless Worldwide, (C&W), and The Highland Council, acting on behalf of itself, and the neighbouring local authorities: The Moray Council, Orkney Islands Council, Shetland Islands Council and Argyll and Bute Council. Pathfinder North provides a managed network service to a total of 785 local authority and schools sites with broadband connectivity ranging from 2Mbps to over 500Mbps. The network is open to other users where service can be provided through one of the 14 PoPs located across the region. In this way several other customers such as the NHS and the University of the Highlands and Islands have benefited from affordable connectivity. The local authorities do not own any of the assets used for the delivery of Pathfinder with ownership resting with C&W and third party suppliers.
11 4. Likelihood of Market Investment in the future 4.1 Current Situation Over the last 10 years, the Highlands and Islands has seen considerable advances in telecoms connectivity due to the joint investment of the public and private sectors. Almost 14 million of public money has helped provide good coverage of both basic broadband and 2G (voice and text) services. It is estimated that around 95% of premises in the region can access broadband through their phone line, with the remaining 5% able to receive a service through HIE s Connected Communities project in the Western Isles and the Scottish Government s Broadband Reach project using wireless and satellite technology. Although current generation broadband availability is good when compared with many other European countries, broadband take-up is lagging behind UK levels (64% in Highlands and Islands compared with over 70% in the UK). In terms of mobile services, 2G coverage is comparable with other remote parts of the UK. However, there are still many parts of the region where 2G coverage is not satisfactory. Furthermore, around 80% of the UK now has access to 3G (mobile broadband) services, compared with only 16% of the Highlands and Islands. HIE is not aware of any further upgrades taking place in the region which would improve broadband speeds to more than 2Mbps. 4.2 Known upgrade plans Highlands and Islands Enterprise is aware of recent announcements published by BT regarding their plans to roll out NGB to parts of Inverness, Nairn and Oban. HIE is not aware of any other plans to roll out NGB in the region. 4.3 Early Market Engagement In spring 2011, HIE consulted with the following telecoms and infrastructure providers to understand their plans for the area: Aerelink, AFL, BT, Cable & Wireless Worldwide, Cassadian, Fujitsu, Geo Networks Ltd, MangoIT, MLL, Updata, Wireless Infrastructure Group. 5. Conclusion 5.1 Description of proposed aid measure Highlands and Islands Enterprise in association with the Scottish Government and Broadband Delivery UK (BDUK) has secured an initial funding allocation of 120m. In order to deliver the full project aspirations outlined in Section 1.4, HIE will seek to source additional funding from public sector sources within the UK and the EU.
12 In addition to public sector funding, HIE will expect private sector investment for extending provision of basic and next generation broadband throughout the region. 5.2 Proposed target areas The target areas for intervention (white areas) are detailed in Appendix 2. These maps are based on the European Commission s definitions for basic and next generation broadband. The maps detail postcode areas and are not indicative of telephone exchange area boundaries or of settlement boundaries. Map A provides details of basic broadband availability, which is defined as an access line speed of at least 2Mbps. This is based on mapping data from BDUK. The basic broadband map designates the availability of basic broadband as: Basic black: areas where two or more suppliers already, or are expected to, offer basic broadband services within the next three years; Basic grey: areas where one supplier is already, or is expected to supply basic broadband services within the next three years; Basic white: Areas that currently do not and are not expected to receive basic broadband on a commercial basis within the next three years. Map B provides details of next generation broadband availability. NGB is defined as an access line speed of at least 30Mbps: NGB black: Areas where two suppliers already, or have stated they expect to offer NGB services within the next three years; NGB grey: Areas where one supplier is already, or has stated that they expect to supply NGB services within the next three years; NGB white: Areas that currently do not, and are not expected to receive NGB on a commercial basis within the next three years. Once further information on the exact coverage and achieved speeds are known in the areas BT has announced for commercial rollout, some areas currently classified as grey may change to white. 6. Feedback Process 6.1 Consultation Telecoms providers The final target area for intervention will be based on feedback from this consultation. Any operator already delivering or is planning to deliver services that exceed what has been detailed in this document within the next 3 years should make their plans known. It is imperative that public sector funds do not duplicate the provision of basic or NGB services by providers. To this end, in accordance with EU State Aid guidance, we require evidence in the form of a business plan and detailed calendar deployment plan before any changes to the scope of the project are considered.
13 Internet providers HIE also seeks feedback from other stakeholders and business involved in the provision of broadband services which may be taken into account to shape the final solutions. Other businesses and residents HIE is also seeking feedback from residents and businesses about the accuracy of its coverage maps in Appendix A and, in particular, the accuracy of where there is currently basic broadband performance. 6.2 Contact Responses should be sent to digitalhighlandsandislands@hient.co.uk by 13 th August HIE is committed to open government and to meeting their legal responsibilities under the Freedom of Information (Scotland) Act 2002 (FOISA). Accordingly, all information submitted to a public authority may need to be disclosed by the public authority in response to a request under FOISA. The Authority may also decide to include certain information in the publication scheme, which the Authority maintains under FOISA.
14 Appendix 1: Indicative 50 settlements
15 Appendix 2: Classification Maps Map A: Basic Broadband - Black, Grey, White Classification
16 Map B: Next Generation Broadband - Black, Grey, White Classification
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