MIDDLESBROUGH COUNCIL

AGENDA ITEM

Report Title:Superfast Broadband Programme

Deputy Mayor and Executive Member for Finance and Governance

Executive Director for Economic Development and Communities

Date: 11 September 2014

PURPOSE OF THE REPORT

  1. To provide an up-date on the first phase of the Government’s national superfast broadband programme in Middlesbroughand to determine whether the Council wants to participate and commit additional match funding to a second phase of the national programme.
SUMMARY OF RECOMMENDATIONS
  1. Executive is recommended to:
  1. Approve option 2:
  • Commit £197k of capital funding from the Council to support phase 2 of the national superfast broadband programme. This will be matched by £197k of funding from government (Broadband UK) and £99k from BT, taking total investment to £493k. This is on the basis that at least 400 business properties will have access to superfast broadband as a result of the investment and that the Council is able to prioritise the investment options.
  • Require BT to provide plans for use of different levels of the remaining grant fundingfor consideration by the Council.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

33. / It is over the financial threshold (£150,000) / X
It has a significant impact on 2 or more wards
Non Key

DECISION IMPLEMENTATION DEADLINE

4.For the purposes of the scrutiny call in procedure this report is

Non-urgent / X
Urgent report

If urgent please give full reasons

BACKGROUND AND EXTERNAL CONSULTATION

  1. The Government launched the national programme to extend access to superfast broadband in 2011. Superfast broadband has download speeds in excess of 20 mega bits per second (mbps) as opposed to “standard” broadband which generally has a maximum speed of 8 mbps. The programme’s original objective was to deliver the infrastructure to allow at least 90% of homes and businesses access to superfast broadband by 2015, with the remaining 10% having access to speeds of at least 2 mbps. In the summer of 2013 the Government announced it wanted to deliver superfast access to 95% of UK properties by 2017.
  1. Broadband UK (BDUK), which is leading the programme, assessed the commercial rollout plans for superfast broadband by the main providers (in this area principally BT and Virgin Media) and identified gaps in coverage which would be eligible for funding. This was then allocated accordingly to county and single tier councils, with the BDUK funding to be matched by councils. Council and BDUK funding is then matched at 25% by the commercial provider (BT).
  1. The Superfast Broadband Programme has no direct impact on the Council’s ICT network.

Tees Valley and Durham collaboration

  1. Councils in the Tees Valley have been collaborating on the programme with Tees Valley Unlimited. A local Broadband Delivery Plan was agreed in 2012. This identified the Enterprise Zones sites in the Tees Valley as being the priority for investment. BDUK has required that the Tees Valley authorities partner with County Durham for procurement and delivery of the programme. Sunderland and Gateshead Councils are also part of this arrangement, known as Digital Durham.

Middlesbrough’s approach to Phase 1

  1. BDUK’s initial assessment of commercial rollout plans in Middlesbrough was that 92% of properties would have access to superfast broadband by 2015. Middlesbrough’s funding allocation for the first phase of the programme is £100k from BDUK. With match funding from the Council (£100k) and BT (£50k) this takes the total funding to £250k for phase 1. It is expected that this investment will deliver superfast broadband to the St Hilda’s Enterprise Zone site and a further 700 premises (including approximately 200 business premises). It will also ensure that all remaining premises have access to speeds of at least 2mbps. Work is due to start on Phase 1 at the end of 2014 and complete during 2015 and this will take Middlesbrough’s coverage to just over 93% of premises.

Phase 2: Superfast Extension Programme

  1. BDUK announced in 2013 that an additional £250m of Government funding was to be made available for a second phase of the programme, to deliver superfast coverage to 95% of premises in the UK by 2017.
  1. Local authority funding allocations for phase 2 were announced in April 2014. Middlesbrough’s allocation is £590k. Matching is the same as the first phase (100% Council, with BT matching the council and BDUK investment at 25%).
  1. Details of how this new funding can be utilised and matched have been drip fed over the period since the April announcement and it has taken some time to make sense of the available information and data, with BDUK making some changes over the summer to the approach to assessing eligibility for the use of the funding.
  1. The attached map (Appendix A) shows in grey the areas that will be superfast enabled as a result of the commercial rollout and the Phase 1 BDUK investment. The remaining (white) areas are eligible for phase 2 funding. It is estimated that there are around 4,450 premises in the areas eligible for investment, these are predominantly in the north of the town. It is estimated that around 40% of Middlesbrough business premises (1,200) will remain without superfast coverage and sit in the phase 2 eligible areas – despite overall there only being 7% of premises without coverage. There is some evidence from dialogue that the Council’s Economic Development team have had with businesses that connectivity is an issue for some SMEs in the north of the town. Riverside Park appears to be a particular issue.
  1. If the Council were to match the full BDUKphase 2 allocation, it is estimated by BT that 2,500 additional properties would have access to superfast broadband, out of 4,450 eligible properties, taking superfast coverage in the town to 97.1%. This could include around 700 business properties.

Business case for supporting phase 2

  1. Any further investment by the Council in the programme would be supporting Outcome 1 (securing economic development) but is not guaranteed to deliver any direct cashable benefits to the Council (under state aid rules there isscope for payback of a proportion of investment if broadband take up reaches certain thresholds but this is difficult to quantify at this point). The economic benefits of fast, reliable broadband internet access are well documented. The quality of telecommunications and technology infrastructure is considered one of the most critical factors driving inward investment decisions. This is particularly important for digital and creative industries, which Middlesbrough has been successful in growing. However it is increasingly important across all business sectors.
  1. Superfast broadband has the ability to enable businesses to secure efficiencies, access new customer bases and markets, transform business processes, and to drive innovation. It is the basis of successful business growth into the future. Specific examples of business benefits include:
  • Increase efficiencies – including reducing the need to travel through telephone or video conferencing, and enabling home and remote working.
  • Increase innovation – through applied and emerging technology.
  • Access new domestic and global markets – through website and internet enabled marketing promotion and data transfer.
  • Access to ‘Cloud’ based services, providing a host of benefits including increased capacity, server storage, cost savings, and enabling business to interact more efficiently with customers.
  • Online file sharing - get instant access to shared online workspaces and take collaborative working to a whole new level.
  • Data transfer / accessing media-heavy files –uploading/downloading large, media-heavy files in seconds rather than minutes.
  • Business use of Social Media – sites such as LinkedIn and Facebook are used for everything from organising events, product promotion to market research.
  1. In addition to the economic benefits, full use of the phase 2 investment would also support digital inclusion. There is the potential to enable access to around 1,800 homes, likely to be in more deprived areas, using the full investment allocation. Although the cost of subscribing to superfast services may be prohibitive for some residents in these areas, some ISPs do provide subsidised rental agreements.
  1. Set against this are concerns about value for money and control over the investment. BDUK attempted to address the first point by introducing a VFM review as part of the procurement process for each of the programmes. However BT is the only commercial provider involved in the programme and the approach is a one size fits all solution, with potential innovation using the funding stifled, principally due to state aid issues. The approach is to enable telephone exchanges and then telephone cabinets. More innovative uses of the funding, for example deploying wireless networks, have not been a feature of the Digital Durham programme and can present state aid issues with the use of the funding.
  1. In terms of control over the investment councils are able to set more specific priorities for the use of the phase 2 investment. As its focus will be purely be on providing the superfast infrastructure it should be possible to secure great control over the targeting of the investment. However experience to-date in relation to transparency from BT about further commercial rollout and the costs and coverage for phase 1 has been mixed.
  1. If the Council decides to participate in phase 2 of the programme, work on the ground is likely to take place in 2016 and 2017. The detail and timing of this would be subject to further discussion and negotiation.

IMPACT ASSESSMENT (IA)

  1. A stage 1 impact assessment has been completed and is attached at Appendix B.

OPTION APPRAISAL/RISK ASSESSMENT

Option 1: Do nothing

  1. The phase 1 investment will result in around 93% of properties in the town having access to superfast broadband. Of the areas without coverage, commercial rollout is likely to pick up the mainly residential areas in the south and west of the town, although this may be at a slower pace than if there was intervention through the programme and some gaps will remain in these areas.
  1. There are significant gaps in coverage in industrial/business areas in the town centre and the north and east of the town. Many of the businesses in these areas will be SMEs that may struggle to fund their own dedicated broadband lines.
  1. The Council may face criticism from government for not using any of the phase 2 funding allocation, as an opportunity for an important infrastructure improvement. There may also be criticism from local businesses and business groups, such as the Chamber of Commerce.

Option 2: Use and match proportion of the investment to target superfast broadband for business premises (recommended option)

  1. Whilst more than 90% of residential premises will have access to superfast broadband, it is estimated that around only 60% of businesses will have access (although some will have their own dedicated broadband lines). The Council could target investment at the town centre and business / industrial sites in the north and east of the town, in order to improve the infrastructure for existing businesses and support future inward investment.
  1. Balancing some of the issues associated with the programme alongside the clear gap in superfast coverage for business premises, it is suggested that initially the Council commit to use a proportion of the fundingtargeted at business premises. This would allow the Council to participate in phase 2 of the programme, through Digital Durham, and leave open the option of extending this, dependant on impact and value for money, to other areas.
  1. It is suggested that one third of the available grant is used and matched by the Council, with a requirement that at least 500 business premises gain access to superfast broadband and that the Council is able to prioritise the areas that benefit from the investment. This would increase the proportion of business property with access to superfast broadband to around 75%. The Council should also require BT to provide proposals for use of two thirds and the full grantfor consideration for further investment. This option would also improve coverage to residential properties in some of the more deprived areas of the town, although without detailed proposals the extent cannot be estimated.
  1. Such an approach supports delivery of Outcome 1 and would be a clear and straightforward demonstration of the Council’s commitment to the regeneration of the town. Given the economic development challenges facing the town and the need to attract inward investment, it is proposed that the Council adopts this option. It also leaves open the option for greater investment using BDUK match funding to further target business premises or address gaps in residential coverage.

Option 3: Use and match the full BDUK phase 2 funding allocation to maximise general coverage

  1. As detailed at paragraph 14 above it is estimated that using and matching the grant in full, with a target of maximising general coverage, would enable a further 2,500 properties across the town, including around 700 businesses. Alternatively the Council could seek to target use of the full grant to business premises. Given the concerns identified earlier in the report about value for money and transparency it is not proposed that the Council commit to use of the investment at this point.

FINANCIAL, LEGAL AND WARD IMPLICATIONS

Financial

  1. The timescales for decision-making on participation in phase 2 requires a decision by September. This does not fit with the review of the Council’s investment programme that is currently taking place. If the recommended option is supported, the required funding will need to treated as an exception to the current investment programme review process and will require a further report and individual Executive decision. Council investment would be matched fully by BDUK and further matched by BT, taking the total investment to £493k. The investment position is summarised in Appendix C. As part of phase 1 of the programme, the Council is already committed to £100k of investment.

Ward Implications

  1. The Superfast Broadband Programme has an impact on all wards, as part of the programme is to ensure as a minimum that all properties have access to basic broadband speed of 2mbps. Areas eligible for phase 2 of the programme with the highest density of properties are largely in wards across the north of the town, including the town centre area, and the east of the town.

Legal

  1. Delivery of the project, at the direction of BDUK, is through Digital Durham. In the first phase of the programme, procurement of a commercial delivery partner has been undertaken by Digital Durham on behalf of its partner authorities and in accordance with the nationally procured framework contract for delivery of the national broadband programme. Similar arrangements are to be put in place for delivery of phase 2 of the programme.
RECOMMENDATIONS
  1. Executive is recommended to:
  1. Approve option 2:
  • Commit £197k of capital funding from the Council to support phase 2 of the national superfast broadband programme. This will be matched by £197k of funding from government (Broadband UK) and £99k from BT, taking total investment to £493k. This is on the basis that at least 500 business properties will have access to superfast broadband as a result of the investment and that the Council is able to prioritise the investment options.
  • Require BT to provide plans for use of different levels of the remaining grant fundingfor consideration by the Council.
REASONS
  1. The recommendation:
  • support the delivery of Outcome 1 (securing economic development); and
  • propose a pragmatic approach to use of the available funding, leading open the option for further investment
BACKGROUND PAPERS

No background papers were used in the preparation of this report.

AUTHOR:John Polson, Lead Officer

TEL NO: 729017

______

Address:

Website:

APPENDIX A

Superfast Broadband rollout (Commercial and BDUK funded – shown in the grey areas)

1

Appendix B

Level 1 Equality Impact Assessment

Subject of assessment: / National Superfast Broadband Programme: use of phase 2 funding allocation
Coverage: / Use of grant and capital funding to support improvements to superfast broadband infrastructure in Middlesbrough in areas where no investment by commercial providers is planned in the medium term.
This is a decision relating to: / Strategy / Policy / Service / Function
Process/procedure / X Programme / Project / Review
Organisational change / Other (please state):
It is a: / New approach: / Revision of an existing approach: / X
It is driven by: / Legislation: / Local or corporate requirements: / X
Description: / The national Superfast Broadband Programme seeks to improve the UK’s broadband infrastructure. The delivery body for the programme, BDUK, has allocated funding to council’s to support improvements to the broadband infrastructure in areas where the market currently has no plans to invest. Nationally there is a target of having the infrastructure in place to allow 95% of properties access to superfast broadband by 2017.
The Council is already committed to investing £100k as part of the national programme. This report proposed investment of a further £197k. Residents and business across the town will benefit from the investment in terms of having access to basic broadband as a minimum, with the Council investment supporting access to superfast broadband in areas where not currently part of commercial delivery plans.
The intended outcomes are to support economic development and maximise use of investment in improving access to superfast broadband for businesses and residents, which has a variety of economic and social benefits.
Live date: / From mid 2015
Lifespan: / Three years
Date of next review: / To be determined - if the Council wishes to make use of a further portion of the BDUK funding allocation.
Screening questions / Response / Evidence
No / Yes / Uncertain
Human Rights
Could the decision impact negatively on individual Human Rights as enshrined in UK legislation?[*] / X / Improvements to broadband infrastructure do not impact on Human Rights.
Equality
Could the decision result in adverse differential impacts on groups or individuals with characteristics protected in UK equality law? Could the decision impact differently on other commonly disadvantaged groups?* / X / No, the investment will improve access to broadband across the town and as a result support greater access to digital services, with a variety of economic and social benefits.
Community cohesion
Could the decision impact negatively on relationships between different groups, communities of interest or neighbourhoods within the town?* / X / Access to improved broadband services does not impact on relationships between communities.
Middlesbrough 2020 – Our Vision
Could the decision impact negatively on the achievement of the vision for Middlesbrough?* / X / Decision supports delivery of Change Programme and Outcome 1 (supporting economic development).
Organisational management / Change Programme
Could the decision impact negatively on organisational management or the transformation of the Council’s services as set out in its Change Programme?* / X / As above, supports delivery of Change Programme and Outcome 1.
Next steps:
If the answer to all of the above screening questions is No then the process is completed.
If the answer of any of the questions is Yes or Uncertain, then a Level 2 Full Impact Assessment must be completed.

1