UK5G board members came together a couple of weeks back to discuss project progress, barriers and to answer questions on the insights gained from their ventures in the quarter from July to September 2018.
In this article, I look at what the Government’s Department for Digital, Culture, Media and Sport (DCMS) had to say about the state of the market and the work it is doing in this space.
Government gearing up
So firstly why does the government need to intervene in the state of connectivity in the UK? On the full fibre side, when looking at the UK compared to international markets, Spain and Portugal for example, the percentage of households with full fibre broadband is rather low. Around one million homes, which is about 4-5% of the UK, have fibre broadband. Compare this to Spain – which has delivered to 17.5 million homes with a deployment penetration of around 33.9% – and you can see some work needs to be done here.
On the mobile side of things, the geographic coverage of 4G mobile is 89% (according to one operator) though there are still issues with connectivity in some rural areas. The government is also seeing problems with coverage indoors, on the rail and on the road – all gaps that also need addressing. To some extent, the mobile industry is very competitive, but there is pressure to invest and pressure on margins too.
There were several market models looked at, particularly on the fixed side around franchising and national providers. And then there was the obvious statement about “why are you building two/three network, why not just one”. In terms of the benefits of dynamic efficiencies and innovation, the department is looking at a long-term future of 20 – 25-year windows. What it didn’t want, was a model that delivers something that forever needs regulation and upgrading because market dynamics aren’t working.
So innovation particularly on the fixed side is important, but also clearly on mobile side, given there’s so many opportunities in the 5G space around verticals and different use cases.
Fixed on fibre
As DCMS looked at the modelling of full fibre, it looked at what the market might deliver and found big pressures on the likes of BT, Virgin Media, etc. For about half the country, rollout will be quick. The other half mainly represents rural areas, part of which will be slow, but it’s the last 10% that will be a real struggle. In fact for the last 10%, full fibre might not even be an option; operators will instead need to investigate using wireless solutions.
So while market will deliver up to a certain extent though, as mentioned, the government needs to intervene, and it is looking at different ways to do so. One main method of intervention for superfast broadband was to subsidise and build in different areas through competitive tendering, creating competition for market environments. It’s likely that this will form the basis of what the government does with ultrafast. What it’s going to do over the next months and years, is to really refine that process and find the optimal way to intervene in the market to get the desired results.
DCMS found that interestingly, on the capital side, there’s a lot of money out there. Investors have money to spend on UK infrastructure, and there’s a lot of enthusiasm and optimism about the market in the UK and the opportunity (given where we are in full fibre).
Thus, rather than investment, the focus was on more the ability to deliver and whether the market dynamics were right for operators. In two-thirds of the country at least, there was evidence of competition between fibre players.
There were a number of criteria against which DCMS assessed different future market models on the mobile side of things. It looked at the status quo, it looked at a single wholesale network, it looked at consolidation in the market, and it also looked at the “market expansion model”. After it assessed different models and different future scenarios against a range of criteria, it concluded the market expansion model to be the best one to meet government ambitions and set out various policies to support this model. So what is it? It’s a model that maintains the benefits of network competition, but also encourages solutions to specific connectivity challenges, be it rural coverage in buildings, coverage alongside transport networks.
Find out more about the testbeds and trials currently going on and see if you’d like to join any projects or even start a new one.