1 Broadband Delivery UK NextGen10 Robert Sullivan, CEO 23 rd November 2010

2 Summary Background Funding Learning from the theoretical exercises Superfast broadband pilots –What do we want to learn? –Enablers –Attracting service providers –What’s next Superfast broadband pilots

3 Background “…deliver the best superfast broadband network in Europe by 2015” - DCMS Structural Reform Plan By 2015, the private sector will likely have made available superfast broadband to two thirds of the population BDUK will be focused on the ‘final third’ of the population the private sector will not cover, some of whom cannot get even a standard level of broadband

4 Funding available £530m from the TV licence fee was provided as part of the spending review to 2015 As part of the licence fee settlement a further £150m a year in 2016 & 2017 (£300m total) may be available There are sources of European funding (e.g. ERDF) to leverage funds provided by BDUK Other public sector sources (councils, DAs etc) –Given the potential economic benefits and the possibility for enabling public service transformation, local public bodies may choose to provide additional funding for broadband projects There are a number of models for the use of funding – gap funding investments, revenue shares, public ownership of assets –BDUK is investigating all possible funding models –Unlikely that there will be a single answer for every project

5 Theoretical exercises Approach to the superfast broadband pilots will build on the lessons learned from the theoretical exercises: –Given the technologies proposed and the way they are implemented, the concept of the USC as a separate effort is not valid –Cost of backhaul is a major element in both the capex and opex, regardless of access technology –We always knew high capex was a large barrier to investment – however, generating sufficient revenue to cover the opex (even where capital is 100% funded) will be a challenge –Exercise confirmed a diverse mix of technologies will be required – fixed (fibre based and others), fixed wireless & satellite all become the most economic solutions in certain circumstances

6 Superfast broadband pilots “Our aim is to use these pilots to discover exactly what needs to be done to make superfast broadband commercially viable...” – Jeremy Hunt 15th July 2010 Want to test factors such as the reuse of public sector network assets and other infrastructure Locations are: –North Yorkshire –Herefordshire –Highlands and Islands –Cumbria Expect the value of the pilots to be between £5-10m each Very different areas and potential projects – each will move at its own pace

7 Pilots - what do we want to learn? What role should central government play in these projects? Actual economics of deployment and operation in hard-to- reach areas The potential for reusing public sector networks The potential for demand registration and aggregation The impact of open access to telecoms infrastructure The potential of different commercial mechanisms The cost effectiveness of different solutions

8 Pilots - enablers Public sector networks are important – BDUK is exploring with the local bodies how to build this in to the pilots Reuse of existing telecoms assets may reduce costs: –BT’s ducts and poles: Addressed by Ofcom in the Wholesale Local Access market review –Ofcom proposes a new Physical Infrastructure Access (PIA) remedy – BT has to produce reference offers for duct and pole access by mid-January 2011 with a view to launching a product by mid-2011 Reuse of other utilities infrastructure may reduce costs: –Electricity poles most likely to be important in extending reach to more rural areas. –Responses to a discussion document issued in July included examples of commercial arrangements for sharing infrastructure supporting the view that legislation may not be required in this area.

9 Pilots – attracting service providers No matter what or how we buy, we need to ensure that there will be a service for people to buy when the infrastructure is put in place If a supplier can demonstrate a diversity of service providers, we’d like to reflect that in our assessment However, we need to make sure that there are the market mechanisms in place for this to ensure that bidders can offer this diversity BDUK are following industry efforts to make platforms available that will link service providers with networks

10 Pilots – what next? The pilots are the first 4 projects that we will undertake The first pilot procurement will start early next year, with others following later on There will be further waves of funding for LAs to bid in to next year and in subsequent years As part of the pilot selection process over 60 areas and projects submitted bids to the RDAs and DAs – there is plenty of demand for future funding waves

11 Conclusion Having the best superfast broadband network in Europe by 2015 is a challenging target, even with the considerable funds we have We will need to do everything we can to remove the barriers to ensure the money we have is used effectively BIS will be publishing a broadband strategy paper in December which will set out our approach in more detail

12 Questions