Britain’s cultural and economic potential is being hampered by its broadband services – and co-ops have a significant role to play in putting this right, say key players in the movement.
Critics say the problem lies with BT’s ‘natural monopoly’ of broadband infrastructure – a remnant of the days of nationalised telecoms – and BT’s failure to invest in faster networks at the expense of homeowners and businesses.
But in its once-in-a-decade review, telecoms regulator Ofcom decided not to separate BT and its infrastructure subsidiary Openreach. The announcement came on 25 February disappointed many analysts and competitors.
Plunkett Foundation and the Independent Networks Co-operative Association (INCA), the co-operative trade association for next-generation broadband service providers, say the decision makes the role of co-ops even more important.
Malcolm Corbett, chief executive of INCA, says: “Part of the problem BT has is it’s not commercially attractive to invest in new infrastructure. It’s hard to persuade the City that it makes sense to replace the copper wires with fibre-optic cables – there are no new customers, not much new revenue.
“That’s why it’s difficult for BT to justify investing millions. Most of our members would prefer to see BT split up.”
But, he says, co-ops can bring investment to the sector. “The community and co-ops can play a significant role in areas where the community is prepared to invest. It’s patient capital.
“People who are investing in co-ops are investing in getting a service as much as they’re looking for a return on their investment.”
Community benefit societies like Cybermoor, Broadband for the Rural North (B4RN), and Fibre for Rural Nottinghamshire (F4RN) offer an alternative way of getting high-speed access. Members pay a set fee– say, £500 each – which gets them a connection and, Mr Corbett says, could add 10% to their house prices.
“B4RN has taken a rural area with a dreadful service to an area that’s now world class,” he says. “If you get it right you end up making money very quickly.
“We need to ensure that people in rural areas understand that there are options available to them.”
He added: “At the moment there aren’t very many examples, and there isn’t much information or training available.”
The UK has underused the co-operative model for broadband development compared with many other places in the world […] but there is still a chance to do more
Peter Couchman, chief executive of the Plunkett Foundation, agrees.
“The UK has underused the co-operative model for broadband development compared with many other places in the world,” he said. “While many opportunities have been missed, there is still a chance to do more.
“We know that such development needs consistent well-funded support if co-operatives are to thrive. It would be great if that could be achieved.”
BT claims introducing a faster standard line (G.fast) and better signalling equipment will enhance the performance of the existing copper wire network. Mr Corbett says this is simply an attempt to prolong the life of an outdated system.According to the British Infrastructure Group’s report on broadband, BT has received £1.7bn of taxpayer cash to deliver broadband to remote areas, but 5.7 million people still cannot access the internet at Ofcom’s required 10 megabits per second.Some 42% of small and medium size enterprises report problems with internet connectivity, at an estimated cost of £11bn to the British economy.
The report says BT benefits from more generous subsidies than its competitors, yet owns and profits from the infrastructure it creates. With a 40% share of the retail telecoms market and a 70% share of the wholesale market, it is “abusing the monopoly” by not giving equal access to other internet providers.
Competitors including Sky and TalkTalk, which pay BT for use of its network, say Openreach has little incentive to invest in upgrading cables and fixing faults quickly. They want Openreach to be separated from BT and run independently to give other telecoms providers an equal access to its infrastructure.
The broadband report says: “Openreach has historically generated the majority of BT’s profits leaving a big question mark over what incentives BT has to invest properly into the broadband infrastructure. As a result, coverage suffers, as do download speeds and customer service.
“BT should be forced sell off Openreach so it becomes entirely separate company. This would address the reasons BT has to discriminate against competitors and increase Openreach’s incentives to invest in the network and improve performance and customer service.
“We have a monopoly company clinging to outdated copper technology with no proper long-term plan for the future. We need to start converting to a fully fibre network so we are not left behind.”
INCA says Ofcom’s review was a chance to overhaul a framework which delivers poor competition and quality of service. It recommended to Ofcom that it refer the sector to the Competitions and Markets Authority (CMA), but Ofcom did not take heed.
Malcolm Corbett said: “We’re disappointed that Ofcom hasn’t gone further to challenge the control BT exercises over the communications market.”
But he welcomed Ofcom’s recognition that “significant change is needed, particularly in regard to BT and Openreach”.
“However, INCA members will welcome steps to open up the Openreach infrastructure to competitive providers,” he added.
Ofcom now plans an overhaul of Openreach’s governance and further independence from BT.
A new set of regulations and targets will mean more external control of Openreach’s budget and strategy and will force BT to make it easier for rivals to lay optical fibres along the Openreach network.
Ofcom also wants new rules to improve BT’s repair and installation services. It plans to develop a set of proposals with the European Commission to ensure the UK’s network access is open to all.
If BT fails to meet its demands, Ofcom reserves the right to reconsider separation.
“INCA members build new fibre and wireless networks, often in the most challenging areas of the UK,” said Mr Corbett. “For too long they’ve struggled to make sense of the rules and restrictions surrounding access to BT’s ducts and poles.
“Steps to make it easier for competitors to use the existing infrastructure are welcome. It means faster deployment of the high speed, affordable broadband services that consumers and businesses need.
“The UK needs to adopt a more ambitious approach to connectivity, which maximises competition and investment from all players, if we’re to achieve the digital communications network we need.”
He added: “The phone network has served us very well for a century but it’s now running out of steam.
“It’s all about investment in infrastructure for the long term. Co-ops could play a role if we can support their development.”