BDUK "state aid" to be brought into line with EU law and good practice

Thee is much to be welcomed in the BDUK “focused market engagement” exercise to get views, by 24th February, from Local Authorities and Network Operators on the replacement for its previous procurement arrangements to get superfast (whatever that means) broadband “to 95% of premises by 2017”. The State Aid decision which gave grudging, qualified and limited approval to the BT deficit funding model,  SA. 33761, expired on 30 June 2015. The aim is to bring any new BDUK arrangements fully into line with both EU law and good practice.

Local Authorities remain, of course, free to go ahead with plans akin to the many public private partnerships approved across the rest of the EU, including under the General Block Exemption Regulation II: “safe”  in the knowledge that there is now an army of lawyers waiting to take on BT, with the support of other network providers and potential customers, were it to try to repeat the exercise that blocked Birmingham’s aspirations to copy Stockholm.

It is worth quoting from the summary of the “National Broadband Scheme: Market Engagement on Procurement Approach“:
 
As part of these discussions between BDUK and DG Comp, a new approach has been developed which has incorporated learning from both organisations since the approval of the previous decision in 2012 and reflects the publication of the 2013 Broadband Guidelines.  A key principle of these Guidelines is that networks built with public funds should where possible offer full open access, which requires the network operator to offer access to any part of the network for any purpose (this is further described in section C below).

The proposed approach aims to achieve the following:
●    Optimise the number and quality of bidders, in particular reducing the hurdles to participation in procurements by smaller suppliers;
●    Align supplier incentives to maintain competitive tension as far as possible.

While Local Bodies have the option of procuring networks that would only require open access networks, based on discussions with the market, BDUK anticipates that such procurements may not always yield suitable bids.  For example, if potential bidders consider that the value from new broadband customers is offset by the risk to existing business customers as a result of opening up their network. 

Working with the Commission, BDUK has developed an approach to mitigate this risk through a procurement approach that would consider a reduced form of network access, where no suitable open access bids are submitted.  This would be compatible with State aid rules while supporting deployment in the context of the marketplace across the UK.”

I assume that “open access” means “networks which operate to international connectivity standards” while “reduced form of network access” (page 9 and 13) means extensions of the BT 21CN fibre to the Cabinet/G.Fast architecture and protection of its leased line business. 

I was concerned that the apparent mandatory requirement for “copper local loop access” (page 11) could be used to hobble support for fibre only networks while the references to NGA (Next Generation Access of 30 Mbs) also indicated an apparent desire to enable state aid for that which may would claim is already obsolete.

But those caveats apart, I was impressed by the document and the changes that now appear to be in prospect, bringing BDUK into line with good practice in other parts of the world and opening the way for incremental change (procurements broken into small chunks) on the scale (far more than BT can handle) necessary to create a “future proof” converged  communications infrastructure.  When I read the details on access and interoperability I began to ponder whether every state-aided BT exchange should now be viewed as a potential  open access local Internet Exchange. If so, how/should the necessary trust in the inter-operabiity and neutrality (as well as resilience and reliability) of their operation be assured.   

Yesterday I attended an excellent briefing on the need to devolve UK’s internet peering from LINX to local internet exchanges (not just Manchester, Edinburgh, Cardiff and Brighton but one for each aspiring “smart city”) to handle the rapid mushrooming of traffic generated by the UK’s 2,500 “autonomous systems” (access and content networks with direct access to the global internet): 700 of which do their Internet peering via LINX. LINX expanded its capacity by 50% last year and planned to install 15 new hundred gigabit port. In the event traffic growth and customer demand was such that it had to install 50.

I was interested to learn that Sky (which is likely to have completed its transition to IPV6 within a couple of months) has already publicly announced its support for local internet exchanges because of the way they help reduce latency: traffic generated within a smart city no longer has to go to London for transfer between networks while commonly used services (e.g. Netflix) can be cached locally.    

Hence my concern over allowing BDUK and/or Local Authorities to continue to provide “state aid” funding to support improvements to networks which are not fully “open access” and therefore risk becoming obsolete as the rest of world, as well as UK cities like Bristol, Edinburgh, Peterborough and York begin the creation of resilient fibre and wireless communications meshes capable of supporting both:
 

  • a smart society (from smart phones, consumer goods and telecare devices through smart buildings and cars to and smart transport and power grids) in which everything is connected and people die when networks are corrupted or fail, even for short periods

and

  • iGov (informed, intelligent and interconnected central and local Government and public service delivery) from policy formation, through implementation to performance monitoring: with all the associated challenges of privacy, security and democratic accountability, not just of technology

There may be a case for state aid to help Openreach upgrade/extend particular local networks because BT has an expensive and difficult transition to engineer: paying for the acquisition of EE at teh same time as competing with Sky to subsidise the Premier League. But councils need to apply the questions on page 6 of the Market Engagement paper to BT and not just to its competitors, large or small. There is, however, one very important missing question – arguably the most important of all: is the network being built and operated to common international standards: if so it can be completed, operated or taken over by any one of a growing number of network operators – albeit not necessarily at the same price. If not … then the other questions become important.      

It would be interesting to know how many of the MPs who supported the BIG report did so because they really believe a separated Openreach would do better, or merely because they wished to give BT and BDUK a kicking. Either way, it will interesting to see how many of them not only support their local authorities in giving measured, not merely robust, responses to this thoughtful (and thought-provoking)  consultation – but would go on to support the transition to a Victorian style competitive market: i.e. one in which co-operatives, mutuals and municipal enterprise competed with co-partnerships and stock companies to built most of the transport and utility infrastructures of today.   

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