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Summary

On April 27, 2017, the Digital Economy Act received royal assent in the UK. The bill contains a commitment to implement a new broadband universal service obligation (USO) that ensures everyone in the UK has the legal right to request connections with download speeds of 10Mbps. This follows the government's rejection of an amendment made by the House of Lords that called for the USO to be 30Mbps. Instead, the government will maintain the original proposal, but it no longer has to be achieved by 2020. The government also added a stipulation that this minimum speed be reviewed by Ofcom once 75% of premises are subscribed to connections of 30Mbps.

Current take-up levels of superfast connections make it difficult to justify introducing a USO higher than 10Mbps

With demand for greater data volumes increasing and improvements in average connection speeds, the argument to introduce a broadband USO that better reflects today's technological capabilities and requirements has been growing stronger for some time. It is important that certain parts of the UK are not left behind, so the government's aim to make affordable broadband with download speeds of 10Mbps a universal right for everyone should be well received in the hardest-to-reach areas of the country. This is the speed Ofcom describes as being sufficient to allow multiple users to simultaneously use the internet, including web browsing, video streaming, video calling, and gaming. However, by May 2017, 3.3% of premises still did not have access to broadband with 10Mbps speeds. The UK's USO for broadband of 10Mbps puts it ahead of the majority of EU member states, which generally don't have targets higher than 1Mbps.

The existing USO in the UK includes functional internet access, which was previously defined as only dial-up speeds (28.8kbps). The House of Lords had recommended an even more ambitious target of 30Mbps, but this would have been a substantial jump from the existing requirement, raising concerns over whether it could feasibly be delivered. In addition, requiring a universal service provider to deliver 30Mbps connections might damage the growth of alternative network providers and distort competition in the market. The UK is not the first country to look into setting such a high USO target: Ireland too has previously announced that it is looking to adopt a USO of 30Mbps to reduce the urban–rural digital divide. By the end of 2016, only 70% of addresses in Ireland had access to a high-speed broadband service (30Mbps or greater). However, the Irish regulator has also decided not to include broadband in the USO at this stage. This is because it would like to see further progress made with the Irish national broadband plan, which aims to roll out 30Mbps speeds to an intervention area. Once this coverage is achieved, the regulator will reexamine the case for introducing a USO of 30Mbps to ensure universal availability outside the intervention area.

Ultimately, a USO is intended for cases where the majority of households have taken up a service but market forces have not ensured universal coverage, meaning certain users are at risk of being excluded. Considering take-up levels in the UK of broadband with speeds of 30Mbps have only reached 31%, despite coverage levels of 91%, this low demand would have made it difficult for the government to justify obligatory superfast broadband in all areas at this stage. Ofcom will need to review the USO's minimum speed once superfast take-up reaches 75%. This should ensure that the country's digital economy is more responsive to changing preferences and capabilities and should go some way to appease critics who think the target is too low and will quickly become obsolete.

Many unanswered questions remain around the implementation of the USO in the UK. According to the Broadband Stakeholder Group, the cost of introducing the obligation could be as much as £930m ($1.2bn), but the government has not outlined how this will be funded. Further details also need to be established, such as technology delivery method and cost limits for premises. The maximum cost of installing a connection can be funded through the USO, above which customers will have to bear any additional costs. In the future, it might also be worthwhile for Ofcom to include upload speeds in the target. This is due to the ever-increasing use of social media and cloud services by consumers, which not only rely on suitable download speeds but also upload speeds.

Appendix

Further reading

UK (Country Regulation Overview),TE0007-001097 (January 2017)

Fixed NGA and Universal Broadband Tracker: 2016, TE0007-001060 (December 2016)

Universal Service Obligations for Broadband, TE0007-001038 (August 2016)

"Broadband speeds of 30Mbps will soon become a legal right for all Irish citizens," TE0007-001033 (June 2016)

"The Digital Economy Bill aims to make the UK the most digital nation," TE0007-001049 (July 2016)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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