I return to the theme of the importance of mobile connectivity. I was about to mention the transformative potential of what is generally known as the internet of things, which we see on the horizon. It is becoming more of a reality day by day, and will involve a tremendous number of devices being hooked up and the aggregate power of the internet really bearing fruit. With that, the demand for mobile connectivity is only going to increase.
Mobile data will underpin the use of new technologies such as precision farming, driverless cars, remote healthcare and smart energy grids. We are already seeing the cutting edge of the process coming into play with the increasing use of immersive augmented reality apps such as Pokémon Go, which is the reason why my phone is currently broken—thanks to my two sons, it went for an 8 km walk to hatch an egg, but that is a different story. At the same time, media companies are increasingly adapting their content for mobile users, and technology is constantly pushing the parameters of what mobile devices are capable of.
It is clear that we know why we want to transform mobile data connectivity, but I want to focus on how we can make that change happen. We know that the Government agree that connectivity represents a fourth utility, but they need to match the rhetoric with unambiguous action. I put it to them that we have moved far beyond the stage at which spectrum licensing could be seen as a cash cow for the treasury. Previously, the 3G spectrum auction raised about £22 billion, while the 4G licence auction raised £2.34 billion. In contrast, other countries sought to raise much less, in return for operators delivering greater coverage.
Spectrum should be considered in terms of the wider economic and social benefits it can provide, particularly when considering the ongoing challenge of rural connectivity. The UK’s approach to the mobile sector has left more than a quarter of Scotland’s landmass without any voice coverage, and nearly half of it without any data coverage. Across the mobile networks, indoor coverage drops to 31% in rural areas, compared with 91% in urban areas. Those are exactly the kind of disparities that 700 MHz could be pivotal in redressing.
The problems currently facing rural mobile customers are well documented, and will be particularly familiar to rural MPs. Unless the Government tackle the problems at the outset, when they are setting the terms for spectrum licences, they will end up having to apply retrospective sticking-plaster solutions to problems ultimately of their own making. We saw that with measures such as the mobile infrastructure project, which delivered only one tenth of the 600 potential mast sites identified in its original plan.
Although we can recognise the pragmatism behind such projects and the current positive direction of travel on getting more from existing licences, the UK should be moving much further, much faster on rural connectivity. As new licences for spectrum become available, let us get things right from the outset. There is an historic opportunity to redress centuries of rural isolation and exclusion by making mobile a truly universal service, which means access to the internet on any device, any time, anywhere.
That is why we need a better picture of the Government’s thinking on spectrum policy at this crucial moment. One solution that was proposed recently—it has received a great deal of coverage, but in my view that coverage was unwarranted—is so-called national roaming. That may be attractive on the surface but it is fundamentally flawed, because on its own it will not encourage mobile network operators to improve coverage. In fact, it could end up acting as a disincentive to the improvement of coverage.
What the proposal for “national roaming” demonstrates is the basic difficulty we face when it comes to making the mobile marketplace work. Currently, mobile network operators lack the significant profit motive to roll out infrastructure and improve rural coverage. A network operator’s revenue comes from subscriptions and the consumption of content. So from a purely market-driven perspective, those companies have little incentive to invest in comprehensive rural infrastructure.
To get the best outcome from 700 MHz, we can learn a lot by looking at licensing models that are already in use throughout Europe. In Germany, coverage obligations for 700 MHz state that providers must get broadband coverage to at least 98% of households nationwide and at least 97% of households in each federal state. Indeed, across Europe we see far more comprehensive 4G coverage on offer than is the case here. If Swedish network operators can offer 99% population coverage for 4G, in a country that has a larger landmass and a lower population density than the UK, why are we lagging so far behind?
How competition works in practice is also key. The UK has gone from having an equitable distribution of spectrum holdings to having the worst spectrum imbalance in the G20 countries. With half of UK operators now constrained by small spectrum holdings, the competitive pressure that kept prices in the mobile market low is lessening. Will the Government consider a cap on spectrum allocation to redress that imbalance, and will they consider having a fundamental review, which will be needed anyway when 5G comes?
We also need to consider additional mechanisms that target market failure in areas of low population density. As with broadband, getting mobile connectivity to households that are very hard to reach will be a challenge, but not an insurmountable one. In Germany, the 800 MHz
licence involved an “outside to in” approach across four stages, requiring operators to provide 90% coverage in smaller towns before moving on to the next stage. Will the Government consider using such a model?
One nation—one small nation—that has made strong is the Faroe Islands. With challenging topography and a population density of 91 per square mile, it now has 100% population coverage and 98% geographic coverage for 2G and 3G, including 100% coverage on roads, even in tunnels, and in a radius of about 100 kilometres in the seas around the islands. The Faroese are currently in the process of rolling out 4G, which is expected to achieve a similar level of coverage to 2G and 3G. Faroese Telecom has shown that that is the way forward, and it is keen to offer solutions for rural Scotland and engage with the challenges we face, which are similar to those it has already faced. I believe that the Minister or his officials may already have a meeting coming up with its representatives.
Such willingness only underlines the case, which I know Ofcom recognises, for a “use it or share it” solution in rural areas. Such a policy is a sensible and workable alternative to a step such as national roaming. As groups such as Faroese Telecom show, there are organisations willing to step forward to fill any gap. I look forward to hearing the Minister’s views on such a policy, which has already been put in place in other countries, including the US.
If digital connectivity is now considered a utility, a radical shift towards comprehensive mobile data coverage is required. Will the Government commit to looking at the examples I have cited as they consider the criteria for new licensees? Will the Minister also consider setting new targets of 95% landmass coverage and 99% population coverage indoors, not only for voice but for data?
I want the debate around spectrum policy to acknowledge that where there is market failure, it is incumbent on Ofcom to intervene to address the situation. Spectrum is a public asset and we must do all we can to make sure that it gets used in the public interest where possible.
There is a compelling case for fresh thinking and a longer-term view of mobile connectivity from the Government. They ought to accelerate the move away from the traditional revenue-focused approach and instead consider this asset in a holistic manner factoring in all the social and economic benefits that comprehensive mobile connectivity can provide.
Before I finish, I will explain the need for universal connectivity in terms that are closer to home. I want visitors to my constituency to enjoy a rail service with world-class connectivity when they travel from Edinburgh down the Borders railway, which was recently recognised as the best tourism project in the UK. I want visitors who opt instead to take in the stunning coastal scenery along the Berwickshire coast to get constant access to mobile data throughout their visit. On arrival in my constituency, I want all visitors to have constant access to online information about local businesses and landmarks. I want them to visit hotels and restaurants that can receive electronic payments. When they take to the hills around Liddesdale, I want them to be connected when they visit remote but remarkable sites such as the imposing Hermitage castle, so that they can make use of an immersive app to enhance their experience. I want people in every corner of these islands to have the
option to experience the benefits that connectivity brings, and I want them to be able to do so on any device, any time, anywhere.
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