The Federation of Communication Services (FCS) response to the Department for Science,

Innovation and Technology (BIST) consultation; Digital Connectivity: Reviewing the broadband Universal Service Obligation

The FCS represents companies which provide professional communications solutions to business users. Our members deliver telecommunications services via mobile and fixed line telephony networks, broadband, satellite, wi-fi and business radio. Our members’ customers range from SMEs, home-workers, and micro-businesses up to the very largest private enterprises and public sector users. FCS is the largest trade organisation in the professional communications arena, representing the interests of circa 350 businesses which supply B2B services nationwide.

The FCS welcomes the opportunity to respond to this consultation and supports the Government’s aim that everyone should have access to broadband services. Digital connectivity is a key building block of economic growth, particularly in rural areas which often have poor connectivity. An effective Universal Service Obligation (USO) which allows businesses to flourish, can help to transform rural economies, delivering a growth economy and contributing to the Government’s levelling-up agenda. 

The FCS has several general points to make and has followed the sections in the consultation:

Section 2 – Policy Objectives – The FCS supports the need for the USO and recognises the impact that the absence of connectivity can have on local communities and economic growth; everyone should have access to sufficient connectivity.

Small and medium-sized businesses are the lifeblood of the UK economy. Local businesses can provide much needed economic boosts to rural economies and can assist in the levelling up of the country.  Digital connectivity is often the difference between economic success and failure. It is therefore imperative that all areas of the country have access to a standard of broadband connectivity that enables business to flourish. This is of particular importance given the PSTN switchoff at the end of 2025.

Current regulation places the USO on the retail provider, however, given the level of competition in the market, the FCS believes that this should change.  In future, USOs should be imposed at the infrastructure level, together with open access obligations on the wholesale providers.  This would encourage downstream competition and support the further development of increasingly available innovative solutions.  

The new regulatory framework should be developed to provide all Communications Providers (CPs) with the ability to understand where USO premises are and to access funds to service them.  The increase of innovative solutions, particularly Fixed Wireless Connectivity, which are often geography- specific, requires a more innovative regulatory approach.

If the current regime continues, we believe that any connections provided under the USO should be available for switching to another provider at the end of the initial minimum contract period, where the customer wishes to do so. This should be the case irrespective of the technology used to satisfy the USO. For example, where EE provides a Fixed Wireless connectivity solution it, or Openreach as its agent, should be obliged to grant wholesale access to other downstream suppliers on equality of access terms. This will ensure that resellers and smaller providers are not prevented from competing for these customers. Currently, access to mobile networks is a gift rather than a right and customers often have no option but to remain with the USO supplier.  

Satellite technology is being developed and, if used to support the USO, regulation is needed to ensure that there is fair and equal access to ensure effective competition.   

Section 3 – Service requirements and eligibility – the technology needs of consumers and small businesses are increasing, and it is important that the USO requirement keeps pace with industry standards.   

The FCS believes that current USO standards are insufficient to support the needs of business and suggests that either the overall standard needs to increase, or there should be a differentiation for business customers. As an example, Openreach provides a breakdown of the business services its current portfolio supports^[1].  The FCS believes that 330 Mbps download and 50 Mbps upload will provide most business customers with the connectivity required.  This is particularly important given the PSTN switch off in 2025 and it is expected that businesses will need additional bandwidth to provide the new products that will be required.   

In practice it is hard to differentiate consumer and business lines and currently there is no standard industry definition of a business line. Industry systems and processes are not set up to differentiate lines and the FCS believes that Ofcom should be required to introduce a definition of a business line and require industry systems and processes to recognise these. Indeed, the FCS believes that Ofcom should have a duty to promote the interests of business customers in the same way it does currently for consumer customers.

Any USO process needs to make it easy for CPs to offer services. This requires more information to be made available to CPs, so they have knowledge of USO locations.  

Under the current system, consumers and businesses must prove a lack of appropriate broadband services to be able to apply for a service under the USO.  A better system would be for interested CPs to know where the USO applies in order to develop and provide services to consumers and businesses in those areas. To ensure competition, the USO wholesale provider would be required to inform customers of CPs operating or willing to operate in their location.

Section 4 – Scheme awareness and application journey.  The FCS believes that consumers and businesses should be updated on an annual basis as to the status of the USO. This requires the Universal Service Provider (USP) to review publicly available information from alternative network providers.  Given the current regulation, there is little incentive for the USP to provide information about competitor services.

It will be important that information about potential services is complete and used only for the purpose of providing USO information. It is difficult to see how CPs would be willing to share potentially commercially sensitive data with BT and it may well be that the only way of safeguarding data is for information across the industry to be provided to an independent third party.  

If USO regulation were focussed on the infrastructure level rather than the retail level, then the risk of commercial information being misused will be reduced.   

Section 5 – Sufficiency of data and governance  

Governance – For good governance it is often thought best to split the responsibility for setting the rules and monitoring them. This suggests that Ofcom may not be best placed to monitor the USO. However, Ofcom is well established and respected, and any alternative could increase the cost of the USO, which is not desirable.

There is, however, understandable industry concern about providing commercial information, particularly about future network roll-out plans, to Ofcom and BT. This would only be alleviated by BT providing its information to a third party which would be responsible for collating industry information and confirming what services are available. This would also help to ensure that the USP did not gain an unfair advantage and only offer its own products.  Once again, any risks would be mitigated if the USO applied at the infrastructure level, rather than the retail level.  

USO reporting – The FCS supports appropriate data being available, particularly to ensure that USPs confirm offerings from other CPs where available.

Sufficiency of data – The FCS actively supports the provision of applicant and location data to nonUSO service providers.  It would be particularly useful to CPs to have such information, as it may influence their commercial plans.  It would be helpful if the data could identify consumer and business premises, if possible.

Complaints –The FCS supports the role of the Ombudsman in the process.

Section 6 – Industry delivery – The FCS supports any changes that provide CPs with the opportunity to address USO delivery.  This would require CPs being provided with the locations of potential USO properties and given the opportunity to “bid” for work and any associated funding.  Given the nature of the industry, a more local approach might be beneficial.  However, there would still need to be a backstop USP to ensure that consumers/businesses are assured access to USO services.   

Supplier neutrality – The FCS supports the creation of a “supplier-independent” body which provides details of all available options, if such body can be established in a cost-effective manner.

Market competition – The FCS believes that competition is vital to drive the best outcome for USO consumers and businesses. We support proposals to inform other providers of a USO connection, if a

simple and cost-effective way of doing so can be developed. Once again, if the USO were applied at the infrastructure level, rather than at retail level, several market competition concerns would be addressed.

Section 7 – Costs, including the Reasonable Cost Threshold and costs to recipients – The FCS believes that it is important for USPs to have certainty over payments and supports the need for up-front payments in certain situations.

FCS November 2023

[1] Ultrafast Full Fibre Broadband for business | Openreach