Broadband in Wales

Lord Vaizey of Didcot Excerpts

Wednesday 6th July 2016 Westminster Hall

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

I am grateful for the opportunity to speak under your superb chairmanship, Mr McCabe, and I thank the hon. Member for Ceredigion (Mr Williams) for this important debate about broadband.

Let me echo the words that were said about tonight’s football match, which is an incredibly important game. Unfortunately, I will be at the Art Fund museum of the year dinner with the Duchess of Cambridge, but I know that her father-in-law is particularly keen on a Welsh victory tonight, as is the whole country. Gareth Bale sits firmly in midfield in my fantasy league team and Sam Vokes is a striker, so we are hoping for a good result tonight.

If the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) thinks a Welsh sporting achievement and Andy Murray managing to make it to the quarter finals will rub English noses in it, let me remind him of the England rugby team and its 3:0 whitewash of Australia. It does not stop there either: perhaps we should talk about the test victory over Sri Lanka—I do not think Scotland plays cricket, but they may a bit. Of course, today Mark Cavendish won his 28th stage in the Tour de France, thus matching the record of the great cyclist, Bernard Hinault. [Interruption.] I see the Clerk leaning over to you, Mr McCabe, saying that I am out of order—that I have gone off the subject of broadband—but thousands of Welsh people tonight will be watching television and perhaps through a broadband connection, thanks to me.

[Chi Onwurah]

I admire the way the Minister has manged to segue from football back to broadband. Does he agree that it is to be hoped that all those in Wales watching the match tonight do not stream it from broadband connections, as their pleasure is likely to be interrupted regularly by the circle of death?

[Mr Vaizey]

No. I encourage them to watch it online. They can watch it online, on their iPads or on ITV Player.

Let me turn to the subject in hand. I have been in this job for six years and it may feel like wading through treacle, but when I hear someone as distinguished as the hon. Member for Ceredigion say those four words, “vast improvement in provision”, it makes those six years of hard labour worth it, because we have made a difference. I will come to some serious points, but I want to say that we have achieved a great deal and I will explain where we are.

I have always made the point that we had targets we wanted to achieve. We never said 100% of people would get superfast broadband under our programme. We said 90% would get it by the end of 2015 and we achieved that with 4 million additional homes and businesses, which will be 5 million by the time the programme effectively ends at the end of 2017. We have already completed 36 of the 44 phase 1 projects and we are well into phase 2, and on track to get to 95% by the end of 2017.

People seem to forget the baseline we started from when the programme was on the way. In Wales, fewer than one in three homes had access to superfast broadband in 2011, yet by the end of phase 2, which finishes this time next year, 96.7% will have been reached. This project alone will have provided access to superfast broadband for almost 750,000 homes in Wales. Half of all homes will have broadband because of this project. The figure is already almost 600,000 homes. The audited figure is 582,300, so we have probably passed 600,000 because we are always three months behind in auditing the figures.

It is worth remembering that in the constituency of the hon. Member for Ceredigion, for example, no superfast broadband was provided commercially—he reminded the House that I had made that point previously. Even though his figures are below the national figures and therefore look poor, it is telling that 55% of homes—20,000—in his constituency that now have access to superfast broadband have it because of this programme. Another 10,000 will be added by the middle of next year, with 85% superfast coverage in 30,000 premises that would not have been covered. Coverage in constituencies of Members across the House ranges from a lowly 79% in that of my hon. Friend the Member for Brecon and Radnorshire (Chris Davies)—luckily he has left the Chamber, so I can mention that figure publicly—up to around 92% in Ynys Môn.

[Albert Owen]

I know that the Minister would not want to mislead the Chamber—he would not be allowed to—but when he says “to homes”, he means to the cabinet. There is a technical difficulty in getting broadband from the cabinet to many homes. The cabinets may have been upgraded to provide a signal to homes, but it may not reach those homes.

[Mr Vaizey]

I know that the hon. Member would not want to mislead the House, and the quotation I hope he would take from what I said was “have access to superfast broadband”. There is a lot of terminology in this debate, but basically, yes, it is called fibre to the cabinet—it goes to the big green box—and sometimes people in homes who think they will have access to superfast broadband do not get it, but it is important to stress that the numbers we use are audited and tested by Broadband Delivery UK. We do not simply say, “Here’s a cabinet and therefore any home in the vicinity is going to get broadband.” We audit the figures and we are well aware that homes may be near a cabinet but do not get access to superfast broadband, because sometimes the circuit from the cabinet is confusing. [Interruption.] I am doing this for the benefit of Hansard, to see how they record it in the Official Report—perhaps it will say, “Minister waves his finger around in an odd way.”

The other good thing is that there is more money to be spent. The hon. Member for Ceredigion asked whether areas are being needlessly subsidised, so not only do I have to contend with colleagues; I have to contend with BT’s competitors, who are always keen to get in the door and tell everyone how useless BT is because they are promoting themselves. They say BT is being needlessly subsidised. We saw that one coming and constructed the contract so that if areas effectively become quasi-commercial because more people than we expected took up broadband, we get money back.

As I am sure hon. Members are aware, we have already gained £130 million and it is important to point out that BT has made that money available now. Under the strict terms of the contract, it could have held back for another seven years. We are expecting around £250 million back when the contracts are completed.

We have had additional money committed from BT and from underspend. We believe that with the existing money we can get to 97% rather than 95% of homes, albeit not by the end of 2017, but probably a little later. The underspend is around £150 million, to add to the gain share, so we are looking at about £400 million coming through. That will make a real difference and should help us to reach 97% of homes by the end of 2020.

Another of the points made—I think by the hon. Member for Ceredigion, although the Opposition spokesperson also talked about competition—was about the monopoly aspect. As we move to phase 2 and the contracts become smaller and a smaller number of premises are in play, we are able to bring in smaller providers—for example, we have got companies such as Gigaclear—who would simply not have had the capacity for the big phase 1 roll-out. As part of our market test pilots, to work out how to get to rural areas as cheaply as possible, companies such as AB Internet in Monmouthshire, for example, have already connected 1,500 premises as part of its pilot. The smaller players are now coming into play, and we are actively engaging with a wider supplier base. In total, five different suppliers from BT now have contracts under phase 2, and we have had approval for our new state aid national broadband scheme, which means we can power forward on phase 2.

Some other points were made. I want to reassure hon. Members that the ERDF funding is secure until the end of 2020. We want to put to bed the idea that somehow the European money will disappear. The hon. Member for Ceredigion said that Wales was left behind or left out. I really want to nail that one down. It is important to stress that no part of the United Kingdom was left behind. As I think was mentioned, the total amount of funding available to Wales was in the region of £220 million, and I talked about 750,000 premises being connected—some in very hard-to-reach areas. I think there was also mention of Wales being ahead of the game, in terms of broadband roll-out, compared with the rest of the country.

I want to turn to the future. We talked about the universal service obligation and we learned an important new fact, which is that that is not Government policy; it is the policy of the hon. Member for Ynys Môn (Albert Owen). And it is not the universal service obligation; USO actually stands for “You’ve got service from Owen.” That is how it will be known from now on. In fact, he is such a genial-looking character that I think we might use him in the adverts when the universal service obligation comes to bear. I hope he will take part in the Second Reading debate on the Digital Economy Bill, because I think my second roll-out of that terrible joke might get a better reception if he is better prepared for it. The universal service obligation is there as a safety net. As I said, I think we are going to get very far with the roll-out, but just to give the hon. Gentleman and, indeed, the Opposition an open goal, we have not yet worked out the detail of how the universal service obligation will work. We are working with Ofcom on a range of options, which we will consult on. There is a range of ways in which the USO can be put together.

Of course, the hon. Member for Berwickshire, Roxburgh and Selkirk, who knows his onions when it comes to this subject, made a point that really only the aficionados would have picked up on, which is about how flexible it is possible to be with a USO. As he rightly notes, to have simply a demand-led USO for one individual premise, with a cost cap if it reached over a certain amount, would be potentially a very inefficient way of delivering broadband. We have to be more thoughtful and flexible about how we can deliver broadband to the lowest area.

The hon. Gentleman also talked about whether leaving the European Union might change our potential to increase the speed, but although we have left the European Union, we cannot change the laws of physics. The reason we have gone for 10 megabits is that it is the most realistic speed that we can get in a cost-effective way to the most hard-to-reach areas, but of course satellite connections, for example, could exceed that. Obviously we do not want to write the speed into the Bill, because we want to be flexible to ensure that the USO keeps pace in the future as average broadband speeds increase.

We are also bringing in the electronic communications code. I heard what the hon. Member for Llanelli (Nia Griffith) said about whether it should cover wholesale providers. We have rejected that because the wholesale providers are really on a par with the communication providers, with the mobile network operators, and we think it would be quite wrong to give the mobile network operators a commercial advantage over the wholesale providers that have built a business based on supplying the marketplace. We want the electronic communications code to be—a bit like the USO—a fall-back position whereby, in relation to an individual landlord who is not in the telecoms business but is providing land either for a wayleave or a mobile mast, there is a forum and a tribunal where any dispute can be worked out and worked out quickly. We want to bring the roll-out of broadband infrastructure into line with the roll-out of all other kinds of infrastructure, such as electricity, to try to bring down the costs.

I will make a serious point here. This may well prove to be controversial with some landowners, but we have dealt with a lot of the stakeholder groups in the landowning community, who are realistic and know that you can’t have your cake and eat it. People cannot charge relatively high rents and at the same time complain about rural coverage. I hope that hon. Members will see the bigger picture and support these important changes, because, as the hon. Member for Llanelli said, we have taken a pretty tortuous route to get here.

Those are the two main changes that will come forward in the Digital Economy Bill. Going back to where we are on broadband roll-out, I have been looking at some interesting international comparisons. For example, if someone says that France has 25% coverage for fibre to the premises, people think, “Well, that’s terrible; we’ve been left behind because we only have 2% coverage for fibre to the premises,” but what we should be looking at is the outcome. Then we discover that cable, fibre to the cabinet and fibre to the premises are all in effect in the same geographic areas in France, so actually about 75% of the country does not have access to superfast broadband, whereas 90% of the UK does have access to it.

In fact, we have been very British about this. We have been incremental in how we have rolled out technology; and now, as we come to the end of phase 1 and phase 2, we are about to introduce G.fast, for example. Virgin Media, as hon. Members know, is investing £3 billion or £4 billion for 4 million more homes. We are starting to bring forward what one could call the ultrafast speeds just at the point when the public are ready, as consumers and businesses, to invest in them.

Again, we need to look at the outcomes. I was struck by another figure: how much data do people use in different countries? The average amount of data used in the UK is twice as much as the French use. In fact, the amount of data used by UK consumers has doubled in the last year while prices have remained the same, so arguably data for the consumer—the stuff we watch on the telly or the documents that we download—have halved in price. The UK consumer is actually getting a very good deal.

Obviously I do not want to underestimate the concerns of hon. Members, who have spoken very knowledgeably in the debate. As they rightly point out, broadband is a very big issue. It is a major issue in the rural MP’s postbag, and every MP who has spoken has shown their extensive knowledge not just of the situation in their own constituency, but of the situation with national broadband roll-out. We are coming through to the end of this phase and people are now beginning to see the tangible benefits of the programme, but of course there is more to do.

[Albert Owen]

I will not quote the Minister directly, but he said that he has not thought through how the universal service obligation will work—he has not worked out the details—but is he looking at geographical areas? If we have not spots of 1% or 2%, it is easier to concentrate on that than to have a hit and miss across the country. That is the first point. Secondly, when will we see the consultation, and how will Members of Parliament be able to feed into that?

[Mr Vaizey]

We have already consulted once overall about this, but we will consult during the passage of the Bill or shortly after it is passed, because we want to pass the principle into law. The hon. Gentleman is right: there are a number of ways of looking at this. We could have, for example, regional providers. If we wanted a USO in Ynys Môn, we might have two or three local providers rather than simply having one or two or three national USO providers. To pick up again on the point made by the hon. Member for Berwickshire, Roxburgh and Selkirk, we may want communities themselves to get a USO, rather than an individual. But as I said, I think the corner has been turned in terms of rural broadband roll-out. We are now looking forward to the publication of our digital strategy and the passage of the Digital Economy Bill, which will set out our plans to help the last 5%, but also be more ambitious for the whole country in terms of achieving a gigabit Britain.