Entrevista

This section details our work with the GLA reviewing London’s long-term digital connectivity infrastructure needs. The UK is in a phase of significant investment in new networks and technologies, and London has benefitted from this

investment. Future digital connectivity infrastructure investment will need to continue to address increasing demand, both from demographic growth and continued societal change.

The advent of the internet has heralded lifestyle and business change.179 The number of devices connected to the network continues to increase. More and more consumers are ‘multi-tasking’, using multiple devices, and numerous services, at the same time. Tastes and markets are changing. The rise of video on demand, and virtual shopping, for example, are encouraging even greater use of

telecommunications infrastructure. It is expected that the demand for data and faster broadband speeds will continue to rise. Future broadband infrastructure will be required to meet this increasing demand whilst maintaining adaptability to meet as yet unknown future uses.

The potential for innovation, coupled with limited existing knowledge of London’s digital connectivity infrastructure by London government, makes projecting future requirements difficult particularly when compared to other infrastructure sectors.

London’s telecommunications infrastructure is provided privately and regulated by the Office of Communications (Ofcom). A large portion of the capital’s existing broadband infrastructure is owned and/or controlled by BT Group (BT). Operators, including BT, have not been required by the regulator to provide comprehensive, granular geographic information on the availability of their networks.

Our approach has been to project possible costs associated with the development of London’s ‘dark fibre’180 network and other digital connectivity infrastructure, enhancing digital access and extending it to areas that are currently underserved and/or projected to be underserved. In particular, this work has focused on the infrastructure required to provide:

 Access to Next Generation Access (NGA)181

fibre broadband to every home by 2020 (i.e., an additional 150,000 underserved properties) – plus renewals thereafter;

 Public access Wi-Fi across London;

 4G mobile access to the internet from nearly every part182

of London (indoor and outdoor);

179

Ofcom, Infrastructure Report, 2013, available:

http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/infrastructure- report/IRU_2013.pdf.

180

A dark fibre or unlit fibre is an unused optical fibre, available for use in fibre-optic communication.

181

‘Next Generation Access’ (NGA) infrastructure networks make use of technologies such as fibre-to-the-cabinet (FTTC) and fibre-to-the-premises (FTTP) network architectures in order to increase average connection speeds.

 Next generation (‘5G’) mobile access to the internet from nearly every part of London (indoor and outdoor) from 2020; and

 Related cyber security costs.

We have modelled the cost of providing digital connectivity infrastructure making a series of assumptions around the potential demand for the infrastructure and the costs associated with its development. These assumptions have been based on Arup’s professional experience rather than detailed information provided by the regulator, private firms or other government agencies or bodies.

As we later detail, the capital and operating expenses associated with delivering these outcomes are projected to total some £10 billion over the period between 2016 and 2050. The majority of these costs are projected to be associated with capital enhancements, totalling some £8 billion between 2016 and 2050.

9.1

The case for investment

9.1.1

London’s “not spots”: the need for greater connectivity

Given rising business and consumer requirements, the availability and take up of super-fast broadband is of particular interest. Super-fast broadband, delivered via more sophisticated fibre-optic broadband networks, provides speeds in excess of 30 megabits per second (Mbits/s).183 In London and other urban centres average speeds are considerably higher than Britain as a whole, but not defined as ‘super- fast’. Ofcom reports that the average speed in urban areas is some 23 Mbits/s in urban areas. The average UK residential broadband connection was some 14.7 Mbits/s in 2013.184

There are gaps in London’s broadband network. Five percent of London’s premises have a broadband speed of less than 2 Mbp/s, below the basic requirement for a broadband service. Many other premises rely on slow connections. There is limited company or government data maintained on

connection availability or speed. Self-reporting by users provides some indication of slow broadband speeds.185 As shown in Figure 55 overleaf, slow and no service areas are distributed throughout the capital. The red circles indicate areas where services are less than 1 Mbit/s.

Whilst service providers understandably argue that investment in internet access is commercially driven and demand led, from a public policy perspective, in the coming decades, it is arguable that internet access may come to be defined as a necessity good.186

As we have discussed, increasing demand for internet access will relate in part to growing leisure use. Growing demand will also relate to increasing traffic to

182

For practical and technical reasons, it is virtually impossible and certainly not cost effective to provide coverage for every single part of London.

183

Ofcom, Infrastructure Report, 2013, p. 2 (1.9).

184

Ofcom, Infrastructure Report, 2013.

185

Self-reporting by users could provide a poor estimate of the infrastructure gap. For example, internet users with severely limited access may be less likely (or able) to report the lack of a connection.

186

In economic terms, there is reason to believe the demand for super high speed internet access will have a low level of elasticity relative to price.

complete routine tasks and business functions. This shift, already underway, will transform requirements around super high speed internet access, turning this fast connectivity from a “luxury” to a basic need, vital to individuals’ participation in the economy and society.

This requirement will raise important social equity considerations. Already, many countries’ governments have adopted laws aimed at ensuring access is broadly available and/or preventing unreasonable restrictions on such access.187

Figure 55: Self-reported distribution of slow broadband connections. Blue areas indicate a connection of less than 2 Mbps/s; red dots indicate no connection. Because this map is based upon self-reported incidence of low broadband speed, it should be regarded as only a potential indication of London’s shortfall. Actual incidence of slow or no connection is likely to differ significantly from the volume presented in this map. Source: broadband- notspot.org.uk.

Investment in broadband alone will not support London’s evolving digital

connectivity requirements. Whilst it is not possible to anticipate dramatic changes in this sector, it is widely acknowledged that investment in other technologies - particularly public Wi-Fi access and 4G and 5G enhancements - could support demand for connectivity over the short and medium-term.

187

See, for example, Wunsch, Silke, Deutsche Welle: “Internet access declared a basic right in Germany,” 27 January 2013, available: http://www.dw.de/internet-access-declared-a-basic-right- in-germany/a-16553916.

9.2

London’s digital connectivity infrastructure

requirements

We discuss these different infrastructure types in the sections below, noting primary assumptions important to determining the capital’s digital connectivity infrastructure requirements.

The different types of digital connectivity infrastructure discussed in this chapter are not mutually exclusive. No system will be robust or mature enough to operate independently or meet all market requirements. Some form of investment in each type of infrastructure is likely to be required in the coming decades.

Decisions around future action will require a much improved understanding of the capital’s existing digital connectivity infrastructure. As we have noted at present, no regulator or business-provided information appears to be able to identify reliably, areas of poor or more limited broadband coverage. More accurate information will be required prior to developing future investment options and appraising them.

A large portion of future investment in this infrastructure is likely to originate in the private sector. For example, nearly 80% of NGA infrastructure is owned by BT.188 In 2013, the company upgraded 176 service exchanges to FTTC. Should BT continue to upgrade its NGA infrastructure as planned, the availability of NGA infrastructure across London will increase to 91% by 2015.

9.2.1

Expanding the capital’s Next Generation Access (NGA)

infrastructure

In order to achieve superfast broadband speeds, new infrastructure is required. NGA infrastructure networks make use of technologies such as fibre-to-the- cabinet (FTTC) and fibre-to-the-premises (FTTP) network architectures in order to increase average connection speeds. FTTC and FTTP architectures increase speeds by increasing the proximity of the fibre optic connection to business and residential customers, reducing the need for connections via older technologies and copper wire.189 The availability of these NGA networks in increasing. By 2013, 73% of all UK premises were served by at least one NGA network, representing an increase in of more than two-thirds in a single year.190

188

Virgin Media is the second most active firm in the market. Other operators that own their fibre network infrastructure and provide services primarily to the business customers are: Colt, EasyNEt, Exponential-e, Geo Networks, KCOM, Level3, SSE, Surf Telecom, Talk Talk, Virgin Media Business, Vodafone and Vtesse.

189

Older mechanisms, such as the fibre-to-the-node (FTTN) architecture, supply fibre only to the street cabinet, often a considerable distance from customers. Because the fibre optic cable is a further distance from the user’s connection, speeds are reduced.

190

Figure 56: Estimated current and future availability of NGA infrastructure from BT and/or Virgin Media. Source: Analysis Mason for Ofcom, Cities Project (2013). As can be seen from Figure 56, London’s next generation connectivity outpaces the country’s less urbanised areas but remains lower than for some other UK cities. Analysis prepared for the Ofcom Cities Project concluded that 88% of all premises in the capital are served by at least one NGA network.191 Cambridge’s current NGA availability is some 5% higher, and Birmingham similarly is projected to see its NGA availability outpace London’s by 2015.

9.2.1.1

Next Generation Access (NGA): Residential

infrastructure assumptions

Ofcom has estimated that under the current plans of BT’s Openreach, around 5% of residents will remain without access to superfast broadband. This number is likely to diminish (as a proportion of the total) as new homes are built; it is virtually certain that all new homes in London will be provided with Fibre to the Home (FTTH) over time. Accelerating FFTH provision may require additional policy support in the short to medium term. We discuss this later in this section. Over the period to 2050, the number of homes without access to superfast broadband is likely to fall to about 3%, taking into account the development of newly constructed homes in the study period. That means an estimated 150,000 homes in all will require supplementary infrastructure.192

Homes in London are currently distributed at an average density of approximately 350 residences per kilometre of street.193 Unserved homes are likely to be less spatially concentrated (i.e. located in less densely built up areas). To estimate the cost of provision of FFTH to unserved properties, we assumed a “density” of 300

191

Analysis Mason, Cities Project, 8 July 2013: Final Report for Ofcom.

192

There are about 5.2m households in the GLA area.

193

residences per kilometre of road. The average cost per residence is the cost of one kilometre of network extension divided by the number of homes per kilometre.194 Adjusting for construction industry price growth, we have included capital expenses of some £220 million in our projections between 2016 and 2050.

9.2.1.2

Next Generation Access (NGA): Commercial

infrastructure assumptions

Several small business users in the same geographical area may represent sufficient demand to encourage a communications provider to extend its optical fibre network. Accordingly, Arup has assumed that, on average, each unserved business premises is 800 metres from the nearest point of connection to a public network.195 Arup’s capital expenditure estimation is therefore based upon the trench and duct installation from points of connection to premises of each of these notional businesses.

Arup estimates that a network extension of 800 metres would on average enable 20 additional businesses to be connected, with each requiring on average a further 10 metres of trench and duct installation. This implies 50 metres of network extension per connectable business.

9.2.2

Public access Wi-Fi

Wi-Fi is widely used in businesses and in homes, and in “hot-spots” such as coffee shops and railway stations. BT Wi-Fi claims to offer access to subscribers at over five million hot-spots in the UK and free public access at several thousand locations. A small number of councils also provide Wi-Fi networks.