My Lords, I thank the noble Lord, Lord Mendelsohn, for his attention and for meeting us. I also thank noble Lords from the Lib Dem Benches. We have had interesting discussions and I think that they have been beneficial
on both sides. I will apply that to the rest of the day’s proceedings so that we do not waste time being nice to each other for the rest of the day.
Amendments 1 and 2 seek to include a series of additional specifications on the broadband universal service obligation, all of which were discussed in Committee. Noble Lords, during the course of the Bill and already today, have commented on the Government’s lack of ambition. Let me say straightaway that the Government share the ambition for widespread availability of fibre-to-the-premises connections. More extensive fibre connectivity is crucial to the UK’s future digital economic growth—we agree on that. But the UK’s fibre market is still at an early stage of development. The Government want to encourage the market to do more to deliver fibre as widely as possible and we are already taking steps to drive FTTP deployment. In the Autumn Statement we announced more than £1 billion to support digital infrastructure, targeted at supporting the rollout of full-fibre connections and future 5G communications. Where we differ crucially is that we believe that it would not be appropriate for the universal service order to include a target for FTTP connections. Let me be absolutely clear why this would be a mistake.
I remind noble Lords that the regulatory regime for electronic communications is shaped by four European directives, adopted in 2002 and implemented in this country through the Communications Act 2003. Amendments 1 and 2, if they are to achieve what the noble Lord, Lord Mendelsohn, and others are seeking, must be consistent with this legal framework: in particular, the universal service directive. I struggle to see how a target for a 2 gigabits per second USO could possibly be compliant with EU law. First, the purpose of universal service requirements in the EU directive is not to force the development of a nascent market, such as the UK’s fibre market, but to ensure that a baseline of services is made available to all users where market forces do not deliver this. The USO is a safety net to prevent social and economic exclusion, not a statement of ambition: we are setting the minimum, not the maximum. This amendment is upside down, placing a ceiling on ambition rather than acting as a safeguard for those less well served by communications providers.
Secondly, the EU directive requires us to consider cost. Universal fibre to everyone’s door will be expensive as FTTP coverage is currently low. According to Ofcom’s latest Connected Nations report, only approximately 1.7% of UK premises have access to FTTP services. So clearly it would be very expensive to address this in the short term.
The recitals to the universal service directive indicate that any change in the scope of universal service,
“should be subject to the twin test of services that become available to a substantial majority of the population, with a consequent risk of social exclusion for those that cannot afford them”.
I have already explained that fibre to the premises is available to less than 2% of UK premises. This is far from a technology available to a “substantial majority” of the population. Furthermore, under the directive, connections provided under a broadband USO should be capable of supporting,
“data communications, at data rates that are sufficient to permit functional Internet access, taking into account prevailing technologies used by the majority of subscribers and technological feasibility”.
It may perhaps be argued that a sensible level of universal service for today should nevertheless be delivered using only fibre to the premises so as to be future proof. But again, this suggestion would not be compliant with EU law. The directive requires that universal service be implemented using,
“the most efficient and appropriate approach”,
which is also proportionate and minimises market distortions. To require fibre-to-the-premises connections capable of 2 gigabits per second would clearly not be the most efficient way of delivering for today’s needs and would in fact cost many billions of pounds.
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Both Amendments 1 and 2 would require the USO to specify that a superfast broadband connection will be available in every house by 2020. I am afraid that I cannot make such a commitment now, and it would not be right to do so. All the scenarios set out in Ofcom’s report are currently being given careful consideration. Once that work is completed there will be a public consultation on the design of the USO. These amendments would remove the need to consult by setting the USO requirements in stone. I have not been in this House very long but I cannot remember many times when the Opposition asked the Government not to have a consultation when they had already offered to have one.
Whatever appropriate minimum speed is set, the Government are clear that this will need to be increased over time to ensure that it keeps pace with consumers’ evolving needs. Once introduced, it will fall to Ofcom to monitor the broadband USO on an ongoing basis to ensure that it is effective in meeting the needs of customers.
Amendment 1 goes on to require the designated universal service provider to roll out in rural areas of low population density before deploying its network in urban areas. I do not think that would be appropriate. I know that there are rural consumers struggling with slow broadband speeds, as the noble Lord, Lord Wigley, mentioned—as have I in previous debates—but their needs are not dissimilar from those of consumers in urban areas who also have slow broadband. For urban customers on exchange-only lines, for example, the costs and civil engineering challenges can be significant, which is why they have not been included in commercial rollouts. As such, they should be treated the same. The USO is being introduced specifically to target those areas where commercial providers have not provided, and are unlikely to provide, connectivity, be they in rural or urban areas. Do we really think that social exclusion in rural areas is more important than social exclusion in urban areas? Surely we should tackle both.
Amendment 1 also requires SMEs to be prioritised in the rollout of the broadband USO. We agree that SMEs are crucial to the UK’s economy, and many SMEs are benefiting from the continuing rollout of the Government’s superfast broadband programme. Some local authorities have introduced SME voucher schemes and today Herefordshire, Gloucestershire, Shropshire and the Borough of Telford and Wrekin have launched a business broadband voucher scheme with grants of up to £25,000 for the installation of
superfast broadband. Businesses with speeds of less than two megabits per second can also apply for a grant under the better broadband subsidy scheme, which will provide a connection of at least 10 megabits per second.
It is in areas not served by commercial or publicly funded programmes that the broadband USO will have an important role—particularly rural areas. The extent to which SME connectivity can be prioritised under the USO will, however, depend on two things: the impact it has on the cost of delivering the USO; and whether SMEs request a connection.
Amendment 1 further requires the rollout of the broadband USO to be delivered on a fair and competitive basis. The requirements of the universal service directive dictate that the process for designating a universal service provider should be fair and open and that no one is excluded. The requirements of the directive are reflected in Section 66 of the Communications Act. We therefore do not believe that this part of the amendment is needed.
Finally, Amendment 1 specifies a USO for mobile. The universal service directive currently provides the regulatory framework for a broadband USO and, whilst it is dependent on the design of a broadband USO, there is scope for the USO connection to be provided using mobile technology such as 4G. But the directive only covers connections at fixed locations; it does not include mobile coverage. The EU Commission has regularly reviewed the scope of the USO and whether it should be extended to include mobile. The conclusion of the last review under the current framework was that the competitive provision of mobile communications had resulted in consumers having widespread, affordable access to these services so that there was no risk of social exclusion, and therefore no need for it to be included in the USO.
In summary, the amendment transgresses the EU directive, creating a law that would collapse on the first legal challenge; it creates an inflexible regulation, placing inappropriate detailed specifications on the face of the Bill; it may well be unachievable; and it implies that deprivation of an essential utility in rural areas is more important than in urban areas.
Many of us are frustrated by the difficulties faced by people with inadequate connectivity. For many, this debate is coloured by their own experience. The Bill is carefully designed to tackle these long-running issues, building a safety net so that no one is left behind.
I will finish by suggesting to noble Lords that if we pass this amendment today, while we may go home satisfied that we have publicly stated our ambition to do better, we may also set back progress. We will delay the implementation of the USO that will bring change, and we will feed frustrations and fuel anger among the final 5%. With that, I hope that noble Lords will not press their amendments.