FCS response to BIST Technology Adoption Consultation

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. These users typically seek bespoke services with higher levels of customer care.  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 BIST’s review into Technology Adoption.  Our members work in the digital and technologies sector and their innovative services underpin 10,000s of businesses across the other growth sectors identified by BIST.  Indeed, access to cutting edge, reliable data services is at the heart of much of the potential economic growth across the UK and so the digital and technologies sector is an incredibly important one.

On a general point, the FCS believes that the complex supply chain is often overlooked by regulators and Government policy makers and this undermines growth potential, particularly in the SME market, where we know that customers like to buy from other SMEs.  Current regulation can advantage vertically integrated providers and there are often economic incentives to favour their downstream retail arms.  A good example of this is the mobile market where there is no right to wholesale mobile products on fair and reasonable terms, which impacts competition and stifles technology adoption.

Our members require access to multiple technologies such as mobile, fixed (fibre) and integration services which are typically bought from different suppliers on often poor commercial terms.  These component services can have a long supply chain which brings complexity and can hinder technology adoption.

We believe that regulatory bodies and Government should have a greater understanding of the   complex supply chain and the benefits that smaller CPs and resellers bring. We note that research in this area is poor, which underlines the lack of focus on this important sector.   The FCS and many other players in the business telecoms market have been advocating for a nominated Business Champion in Ofcom for many years and believe that this is something that needs to be addressed as soon as possible. We believe that a greater focus on the business market will help promote competition, technology adoption and growth.

The FCS has focused its response on a small number of questions for the digital and technology sector:

2. What are the biggest barriers to technology adoption in your sector and/or across sectors? Does business size and geographic location affect how firms are impacted by these barriers?

The key aspect of technology adoption is the access to the telecoms infrastructure, be that fixed, mobile, wireless, radio or satellite.  Firstly, there needs to be national coverage that underpins super-fast access and despite some significant progress there is still a long way to go.  There are still too many areas of the country that do not have access to infrastructure, be it mobile or fixed, that will deliver the innovative solutions needed for growth.

An example of the impact of patchy geographical coverage was given by one of our members.  They noted that in the small business market, budget constraints often hinder the adoption of new technologies like faster broadband, and this is especially so where Fibre to the Premises (FTTP) is not available. For example, an FTTP 1GB service can cost around £40-50 per month if on-net with Openreach, but a leased line (which might be needed where there is no FTTP coverage) averages around £200 per month. Additionally, they noted that costs for other efficiencies, such as AI or cybersecurity, are challenging to justify within company budgets. Smaller companies often supply larger enterprises and can thereby affect the entire supply chain, underlining how important it is to have cost-effective access to infrastructure that supports superfast access.  

There needs to be continued private and public investment in infrastructure delivery, with the removal of barriers to building, making it easier and more efficient for the network builders.  

It is also vital that once built, there is appropriate access to infrastructure in a way that encourages competition and allows innovation to flourish across the complex supply chain. Currently, there are too many barriers to such access.  

The FCS points to the success of the equivalence of input obligations on Openreach as a model to be followed. However, the current regulatory approach focuses regulation on the existing key bottlenecks which is not fit for purpose for the new technologies that are emerging. Ofcom should consider looking at IP infrastructure, rather than the traditional silos that the current regulatory regime addresses. Regulation is needed to address both the physical infrastructure providers and the application providers, and the FCS believes that urgent work is needed to understand and address the new market realities that are shaping the industry.  

We agree that Regulation should be focussed at the infrastructure level, but there should also be access to the network building blocks irrespective of technology and the move to all-IP makes this even more important. These fundamental underlying infrastructures should be viewed as utilities and regulated accordingly. Currently, vertically integrated organisations can frustrate competition, for example there is no “right” to mobile connectivity across the complex supply chain, and this can lead to market problems and by extension, slow technology adoption.  

There are also often barriers to effective wholesale competition, which can have a negative impact on technology adoption. A particular problem experienced by our members is that it can be very difficult to change wholesale provider, and this is causing issues throughout the complex supply chain. We can divide this into two issues. Firstly, the interfaces into the suppliers will generally be different which means that our members have to modify their systems to consume the new services. Secondly, the supplier may hold a lot of information which can’t be extracted easily.  These issues can disadvantage both business and consumer customers they serve, as retail providers can be limited in both their commercial and product offerings.

Another issue faced in some areas is that users and some suppliers are not willing to adopt a new technology due to the limited benefits that new technology will bring. For example, alarm and telecare systems may work well on the on the old analogue PSTN but will not work on VOIP based platforms that are used in broadband and full fibre connections. The effect therefore is that some users are unwilling to adopt the new technology due to the cost of replacing incompatible kit and so would rather ‘sweat the asset’ as it is basically doing what the customer wants.  

Another example is the lack of standardised wholesale battery back-up products, which will be increasingly important in an All-IP environment, where phone lines will not work in the event of a power cut.  This could have significant implications for technology adoption. The FCS believes that a standardised wholesale battery back-up offering should be available to the complex supply chain. We are increasingly worried that the existing piecemeal approach will lead to competition issues and sub-optimal customer outcomes. For example, it should be easy for a consumer or business customer to switch retail provider, but unless there is standardisation of battery back-up, the cost and potential impact of difficulties when switching will remove the incentive to switch and, indeed, creates significant disincentives. Vulnerable customers should not be put in a situation where they have, in effect, no choice of provider. There will also be other services where battery back-up is required. Once again, without wholesale access to a

standardised product with appropriate back-up periods, the vibrant market that we have today, which contributes so much to the UK economy, is at risk.  Additionally, this will undoubtedly have a negative impact on technology adoption.

Technology adoption can also be held back by lack of industry knowledge and understanding of what new technologies can do. For example, IP infrastructure and application convergence is important to many of our members, but they need education and understanding of how it affects them commercially, technically and in regulatory terms. Their commercial success, and that of UK plc, will come from understanding and taking advantage of this new environment and being able to innovate and develop the new IP applications and services needed by their customers (e.g. private 5G networks for factories to control robots, automation, etc.).  The FCS would like to work with Ofcom and BIST to help develop this understanding across our sector.

Finally, public awareness and fear of change can have a significant impact on technology adoption.  Many FCS members point to a limited general awareness of the need to move from the existing PSTN network to all-IP solutions.  Often, customers fear they are being railroaded into a change they do not want and are happy that their existing products meet their needs. There is a general lack of awareness of digital switch over in the telecoms market and a lack of a national campaign has hindered progress.

6. How effectively does the UK support the adoption of new technology? What could be improved in your sector and/or across sectors?

The Government could explore greater use of grants to help businesses, small businesses in particular, cover the initial costs of setting up new technologies.  Additionally, ways of promoting and explaining new technologies to small businesses should be explored and accelerated.

The FCS believes the Government has a significant role to play in the promotion of

Cybersecurity, which will be increasingly important to help technology adoption. As simple anti-virus solutions are no longer sufficient the adoption of advanced cybersecurity products in the small business market, previously reserved for enterprise-level customers, is crucial. This reduces attack spread, allowing businesses to focus on operations with reduced risk. Improvements in Cybersecurity could increase technology adoption as businesses and individuals would have more faith in new technologies.

8. The availability of skilled employees is a significant enabler of technology adoption. What are the main skills needs across the economy/in your sector required to drive technology adoption and where are the most significant gaps?

Undoubtedly there are significant skills gaps across a number of areas. With the rise of AI and machine learning, employees will need a deeper understanding of advanced mathematics and computer science, skills which are not readily available.  

The Government needs to encourage, incentivise and promote STEM subjects throughout the education system. There is a skills gap in experienced technology workers; learning how a technology works and applying it in the field are distinct skills. Apprentice schemes are helping to close this gap, but greater awareness and funding could improve this further.

14. What approach or policies should government consider to accelerate technology adoption across the economy and/or within sectors?

The Government should focus on national roll-out of the underlying infrastructure that will power many new technologies. Funding should be increased to provide faster broadband in remote locations or invest in satellite broadband for hard-to-reach areas. Government should redouble efforts with the infrastructure builders to remove barriers to build.

The Government should examine the current regulatory structure/regime in the telecommunications market to see if it has the right mandate/guiding principles to be fit for purpose for the fast-changing IP environment (e.g. which encourages new entrants and drives innovation).  

The Government should also encourage Ofcom, through its Strategic Priorities for Telecoms, to appoint a business champion with a remit to focus on increasing access to infrastructure throughout the supply chain, which will help technology adoption rates.

The Government should work with small business providers to understand the barriers to adoption and where it can use its influence to promote new technologies which will deliver growth.  It should also continue focus on helping businesses to understand cybersecurity risks and how to mitigate them.

If it would be helpful, the FCS is very happy to discuss the submission with BIST.

February 2025