Unlocking value with rural broadband: a policy rethink

Access to affordable and adequate broadband services is becoming increasingly important, as the digital component of national economies continues to grow. We focus on the question as to how policy and strategy can be developed to enable efficient rollout of broadband services meeting the needs of rural areas in the UK.

The rural challenge

Delivery of adequate telecommunications services to rural areas is a challenge in many countries, and certainly not a new one. Fundamentally, this is because of the sparseness of users in rural areas and the technical, operational, and economic difficulties that arise in serving them.

However, rural areas can provide important economic contributions at national levels, and industry and governments are keen to avoid the so-called ‘digital divide’ – where divergence in service quality levels can leave rural communities behind. Consequently, public intervention is required to deliver adequate services.

Of course, one can question ‘what is adequate?’ With the importance of digital infrastructure to modern service-based economies, ‘adequate’ means reliable, affordable, and comprehensive access to good quality internet services.

Does rural connectivity matter?

Digital infrastructure, as a critical enabler to digital economies, is widely reported to add incremental economic value. A recent Ofcom study found evidence of a causal relationship between investment in broadband solutions and economic growth, with an increase of around 0.5% in GDP per annum, or several percentage points on national GDP.

Recent analysis by Plum has investigated the economic benefits of bringing digital infrastructure to rural areas: broadly, today, some 17% of population are recorded as residing in rural areas, which cover around 75% of the landmass. The UK’s economy could stand to benefit by several percentage points on GVA with developments of digital infrastructure (around £17bn over 10 years).

In short, rural areas typically contribute materially to national economies, and digital connectivity can be expected to bring incremental benefits.

Rural areas remain behind

Latterly, there is a trend for policy makers to promote the development of fibre-based infrastructure. 5G wireless also features prominently in national policies, such as the UK Government’s Future Telecommunications Infrastructure Review. 

The European Electronic Communications Code provides an updated regulatory framework to reflect evolving market needs. The Code promotes deployment of ‘very high capacity’ infrastructure (fibre and 5G networks) and requires that affordable broadband services be accessible for all end-users.

However, replacement of copper networks is both capital intensive and time consuming, and with economies of scale yet to develop in the 5G market, the question arises as to whether singular focus on particular solutions is appropriate.

With a long history in copper networks, and despite a good ongoing flow of capital investment in fibre networks from both Government and private investors, the UK still ranks low in full fibre connectivity by international standards.

Access to high quality fixed broadband services in rural areas in the UK remains limited. Recent data and reviews indicate the following situation [1].

• Around 10% of premises (c. 600k) in rural areas cannot access USO level services.
• Around 20% of premises (c. 1.2m) in rural areas are unable to access superfast service levels, and as the Government’s BDUK funding programme closes in 2022, increases in access to superfast services are likely to slow down.
• Approximately 10% of UK premises (c. 3m), largely in rural and remote areas, would be unlikely to receive gigabit-capable connections commercially by 2033.
• Around 33% of the UK landmass does not have 4G coverage from all mobile operators, 9% of landmass has no 4G at all, and in rural areas c. 58% of premises do not have access to 4G services indoors from all four operators [2]. 

Complexity drives inefficiency

Whilst some good successes have been achieved with individual policies, the variety of schemes is resulting in complexity and uncertainty in the market.

Fragmented approaches may not be efficient, and can give rise to significant gaps:

• Market gap: Various stakeholders with both public and private sector interests in rural areas have commented that the specification currently defined by the Universal Service Obligation (USO) is not sufficient to meet the needs of users in rural areas. Broadly, ‘adequate’ now means superfast or better service quality, at affordable prices (around £30 pcm for services), but not necessarily ultrafast on full fibre. Not all end-users need or want ultrafast services now.
• Cost gap: 5G and fibre may not be the most cost-efficient solutions for rural areas. New technologies are naturally more costly during early stages of market development, as economies of scale are typically not well developed, and vendors seek to recover R&D investments with relatively high margins. With ‘fragile’ investment cases in rural areas, there is therefore some tension in deployment of novel solutions. This calls for innovative ways of thinking.
• Timing gap: Comprehensive rollout of 5G and fibre networks to rural areas is likely to take some years; meanwhile, end-users need adequate broadband solutions now and in the mid-term.

Mobile matters too

Our primary focus has been towards fixed broadband services in rural areas. However, mobile service also matters, and there is a degree of overlap between fixed and mobile markets, as mobile technology solutions can be used to provide fixed services. For example, 4G LTE mobile technology is able to provide fixed wireless access to internet services at superfast speeds [3]. 

Time for a rethink

Full fibre and 5G will provide valuable digital infrastructure solutions in the long term and are the right goals for national policy. However, blind ambition and singular focus on these technologies should not prevent adequate solutions for those in rural areas still struggling with the lowest broadband speeds.

Various national initiatives have been successful in increasing availability of superfast and full fibre services. However, the variety of schemes in some regions is now causing confusion and inefficiencies, resulting in some rural areas remaining ‘digitally stranded’.

A less fragmented approach supporting rollout of broadband infrastructure is needed, with recognition of the variability of regions, market requirements, available solutions and cost structures, and levels of competition.

The design of any new approach will need to set clear objectives, taking account of available budgets, regulation, industry positioning, and factors such as state aid rules and regional frameworks.

A coherent approach, leveraging experience and positive elements from various schemes may be the way forwards – removing uncertainty, and enabling effective return on valuable and limited resources.

References:

1. Ofcom 'Connected Nations 2019 - Spring Update', Rural England 'State of Rural Services 2018', DCMS 'Rural Gigabit Connectivity (RGC) programme'

2. We note that Ofcom’s mobile coverage data is derived using propagation modelling; in many cases, this has proven inaccurate, and crowd sourced data may be preferable.

3. Quality of service however may not be sufficient to support continuous / streamed services reliably.

Ian Corden is a Director at Plum, bringing over 30 years of experience in industry and consulting within telecoms and technology. His experience and focus includes commercial and technology strategy, programme delivery, and policy and regulation.

His work has been used by operators, vendors, investors, and law firms in regulatory, commercial, and technology strategy development and solutions delivery, and by governments and regulators to inform on policy development and regulation implementation.

Ian is a Visiting Professor at The University of Surrey / 5GIC (Telecoms & DSP, Faculty of Engineering and Physical Science).

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