“Litany” of DCMS failures means business and homes in rural areas could be locked out of gigabit broadband for years to come, say MPs

Alongside the November 2020 Spending Review on 25 November the government published a revised target of “at least 85%” coverage by 2025 - but it has committed less than a quarter of the £5 billion funding needed to support roll-out to the hardest to reach 20% of premises.

Based on DCMS’ performance to date, including:

• failure to make meaningful progress to tackle the barriers faced by operators in maximising gigabit connectivity by 2025,
• failure to demonstrate it has learnt lessons from the superfast programme for the detailed design of the gigabit programme,
• failure to demonstrate how its centralised procurement model will retain the people, skills and knowledge in local authorities that were critical to success in the superfast programme,
• failure to give any reassurance that local authorities will get additional funding to retain their expert resources at a time when local government finances are under severe pressure from the pandemic,
• failure to make any meaningful progress in delivering the policy and legislative changes deemed essential by industry to achieve rapid roll-out,
• failure “yet again” to prioritise consumers in rural areas

- the Committee is very concerned the reduced target will still be “challenging” and that the hardest to reach premises will be struggling with slow broadband for many years to come.

DCMS is still developing the £5 billion programme to subsidise roll-out to the hardest to reach 20% of the UK’s 31 million premises, and could not tell the Committee when it intends to deliver major milestones, such as the letting of contracts.

PAC is “increasingly concerned that those in rural areas may have to pay more, and may reach gigabit broadband speeds late” and is not convinced that “if and when rural users finally do get gigabit broadband, they will enjoy the same choice of service provider and the same protections as their urban counterparts”.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “With the grim announcement that the country and economy will be locked down for months, the Government’s promises on digital connectivity are more important than ever. But due to a litany of planning and implementation failures at DCMS, those promises are slipping farther and farther out of reach - even worse news for the “rural excluded” who face years trying to recover with substandard internet connectivity.

“For the foreseeable future, ever more of our lives is moving online, whether we like it or not. Government cannot allow digital inequality to continue to compound and exacerbate the economic inequality that has been so harshly exposed in the Covid19 pandemic. It needs to be clear about timelines in each area so that businesses and individuals can plan for their digital future.”

PAC report conclusions and recommendations

5 The pledge to deliver nationwide gigabit connectivity by 2025 has proven to be unachievable. When we took evidence from the Department in early November we expressed our concern that the pace of roll-out would require rapid acceleration of existing deployment levels to achieve nationwide gigabit connectivity by 2025. While the Department acknowledged the timetable to be extremely challenging, it was not prepared to admit that the 2025 date for nationwide coverage could not be met. Since we took oral evidence, the National Infrastructure Strategy has set out a revised target to reach “a minimum of 85% gigabit capable coverage by 2025” and has dropped the commitment to any date for achieving 100%. The Department wanted a multi-year funding settlement for the future programme. It received a four-year settlement, but totalling less than one quarter of the £5 billion it says needs to reach most of the final 20% of premises. The Department is waiting for Ministerial approvals before it determines the sequencing of its interventions and how quickly industry can complete the roll-out.

Recommendation: The Department should set out, on receiving business case approval or within 3 months, a clear timeline of what activities it intends to complete and by when to achieve its revised targets including the final dates by which key milestones must be reached in order to meet those targets. It should publish yearly updates on progress thereafter.

6 The Department has failed to make meaningful progress to tackle the barriers faced by operators in maximising gigabit connectivity by 2025. At the time we took evidence in early November, the Department expected that state aid rules would be a domestic matter from 2021 onwards and EU approval would no longer be required. However, it had not assessed the potential impact were this not to happen in practice. It has yet to secure the legislative and policy changes that industry deems necessary to address major barriers to delivering gigabit infrastructure at pace. Responsibility for addressing many of these barriers, including changes to planning regulations, business rates treatment of fibre and requirements for new build properties, are spread across other parts of government and we got no assurance that they are being addressed urgently. Suppliers believe that legislation recently introduced to enable easier access to properties while welcome addresses only part of the problem. The Department is not clear about the potential for delay or for cost escalation if these barriers are not addressed before suppliers start work. It is also vague on the potential costs and delays from removing telecommunications equipment supplied by Huawei.

Recommendation: The Department should identify which risks and barriers have the greatest potential to add delay and cost to the programme and provide a clear plan for how and when they will be addressed and the impact on time and schedule if they are not addressed.

7 The Department is not clear how, in a centralised procurement model, it will retain the people, skills and knowledge in local authorities that were critical to success in the superfast programme. The Department recognises that although it now intends to undertake procurement directly, it will still need the commitment and expertise accumulated previously within local authorities to support delivery under the gigabit programme. The Local Government Association has called for additional annual funding of £30 million for digital champions to co-ordinate delivery at a local level and to provide the additional capacity needed within highways and planning teams to support an accelerated pace of activity. The Department cannot give any reassurance that local authorities will get additional funding to retain their expert resources at a time when local government finances are under severe pressure from the pandemic.

Recommendation: The Department should set out in its Treasury Minute response to this report, what steps it is taking to support the retention of knowledge, skills and delivery expertise in local authorities so that the change in approach does not cause delays to the future programme.

8 The Department has been unable to show how it is has learnt lessons from the superfast programme into the detailed design of the gigabit programme. The Department’s objectives for its superfast programme were unspecific and delivery of the 95% broadband coverage target by 2017 sat largely with suppliers rather than being within the Department’s control. With full-fibre and gigabit coverage at 14% and 27% respectively on publication of the NAO’s report, which is behind other European countries, the Department is some way off its superfast programme objective to be “the best in Europe”. While the Department agrees that it needs to have clear objectives in place at the time of launching the subsidised element of its gigabit programme, we are not reassured that its new programme objectives will be any better. It is unacceptable that, once again, the Department has set a nationwide target for coverage (now revised from 100% to 85% by 2025), yet it has not published a realistic strategy for rolling it out, and has limited control over the levers necessary to achieve it. Indeed, the Department is relying on suppliers to deliver to 80% of UK premises without government subsidy. We are also concerned that the Department has not learned lessons about where to target areas for subsidy. The Department estimates that of the £1.9 billion public funding for the Superfast Programme, £0.9 billion is due to be repaid, which suggests that the subsidy was often not targeted at the areas in greatest need. It can take up to seven years before the amounts to be returned are calculated and repaid by suppliers.

Recommendation: As the Department finalises its approach to its gigabit programme it should set out how it is incorporating the lessons learned from the superfast programme including:

· Setting out clear programme specific objectives for the subsidised part of the future gigabit programme (the £5bn programme)

· How it intends to improve its targeting to ensure it covers only those areas in greatest need, particularly areas with a high proportion of premises which are uncommercial for rollout, and that any money that does need to be returned is done so as soon as possible

9 The Department is yet again failing to prioritise consumers in rural areas. The Department says that it intends to take an ‘outside-in’ approach to the roll-out of gigabit capable broadband, focussing on those areas that currently do not have access to superfast so that they do not remain left behind. But the most difficult-to-reach premises are not neatly grouped together, and the Department is not yet clear on how it will prioritise its interventions to ensure that they are served. The data available to help determine roll-out priorities is patchy and of variable quality. The Department acknowledges it is reliant on a good dataset but is not clear when it expects to have this in place. We had significant concerns that in the event of delays to the programme, the Department would look to

deliver to as many premises as possible in a bid to meet its ambitious timetable. In this case, those people who currently lack superfast broadband would once more go to the back of the queue. Government’s announcements since our oral evidence session, reframing the target to 85% coverage by 2025 and not allocating three-quarters of the £5 billion allocation until after 2024-25, heighten these concerns. This suggests that many consumers, particularly those in rural and remote areas, will have to wait until well beyond 2025 for gigabit broadband speeds and may not even get superfast speeds before then.

Recommendation: The Department should set out how it will establish which properties do not yet have superfast broadband, how reliable the data it will use to identify them is, and when they can expect to receive gigabit capable broadband.

10 The Department cannot provide certainty to consumers that they will have a choice of internet provider or be protected from overcharging should they become tied to the sole supplier in an area. The Department wants to encourage greater competition in the telecommunications infrastructure market, but in areas that need subsidy, smaller alternative suppliers may gain dominant positions by default through lack of wider commercial interest. The Department believes that provisions for wholesale access in the gigabit programme contracts should ensure that all internet service providers have access to subsidised networks. However, such access may not be taken up if the most popular internet providers find it commercially unattractive to offer their services over a patchwork of different networks each serving a low number of premises. Some consumers, particularly in rural areas, may not be able to sign up with their service provider of choice and may end up paying more for their services. The Department claims price control provisions should ensure that providers cannot price beyond what is reasonably comparable in a given area, but it is not clear how it will define an area nor how price controls will work.

Recommendation: In its Treasury Minute response to this report, the Department should set out how it plans to work with Ofcom, suppliers and industry bodies to ensure that all consumers will have a choice of service providers and are protected from overcharging, in particular where they become tied to a monopoly supplier.