Infrastructure and Capital Investment Committee

Meeting date: Wednesday, June 12, 2013

Official Report 373KB pdf

---

Broadband

Good morning and welcome to the 14th meeting in 2013 of the Infrastructure and Capital Investment Committee. I remind everyone to switch off their mobile devices as they impact on the broadcasting system but I also note that some committee members might be looking at their papers in digital format. We have received apologies from Adam Ingram, for whom Gil Paterson is attending as substitute.

The first item of business is evidence from the Cabinet Secretary for Infrastructure, Investment and Cities on broadband. This update was offered at the cabinet secretary’s infrastructure update session in March. I welcome to the meeting Nicola Sturgeon and, from the Scottish Government, Colin Cook, who is deputy director of digital strategy and programmes. I invite the cabinet secretary to make opening remarks.

Thank you, convener. Given what we are discussing this morning, it is appropriate that some members are viewing their papers on digital devices.

I appreciate the opportunity to update the committee on the Government’s broadband work. We discussed the issue at my previous appearance at committee in March, and this session provides a good opportunity to go into things in a bit more detail. Before I take questions from members, I will run through some of the headlines.

Shortly after my appearance here in March, Highlands and Islands Enterprise signed a contract with BT to deliver next-generation broadband across the Highlands and Islands. Not only is that a key and very important step on the road to fulfilling our ambition to become a world-class digital nation, but it represents investment of £126.4 million in what is, without a shadow of a doubt, one of the telecommunications sector’s most complex civil engineering programmes. It is worth highlighting some of the details of the project, because they are impressive in scale and complexity.

The Highlands and Islands project will deliver a fibre backbone stretching from Campbeltown in Argyll to Brae on Shetland, via new network nerve centres in dozens of towns, including Oban, Fort William, Aviemore and Ullapool. It will involve laying more than 800km of fibre on land; I have not calculated this myself, but I am told that that is enough to cross the Skye bridge 1,400 times. In addition, 400km of subsea cables will be laid to serve remote locations such as Islay, Jura, Stornoway and South Uist.

The project is enormous in scale and complexity and will have to deal with some of the most rugged terrain not just in Scotland or the UK but in Europe. Detailed technical and survey work is already under way, and HIE and BT expect to announce the first communities to be upgraded this autumn, with the first homes and businesses connecting to fibre by March 2014. The new network is expected to deliver next-generation broadband access to 84 per cent of premises in the Highlands and Islands and will provide a platform for future economic development and regeneration across the region.

The second piece of the jigsaw in the step change programme is a £156 million investment to provide next-generation access for the 27 local authorities and two national parks in the rest of Scotland. That has been negotiated against an incredibly demanding timetable. We and local authority partners are geared up to have all the required approvals in place and to make a decision on the tender this month, and we are preparing to move into the deployment phase of the project as quickly as possible after contract award.

Members will appreciate that, as the rest-of-Scotland procurement process is on-going, I am, by necessity, limited in terms of the details that I can give about supplier negotiations, but I will be happy to provide the committee with a detailed update after the summer recess, by when—I very much hope—implementation will be under way. However, I can say that the success of the step change programme will be based on the partnership that has developed between the Government and local authorities and which has seen 14 local authorities identify an additional £50 million to meet local needs and priorities on top of the coverage that is being provided from the national funding pot. At the same time, we are focused on delivering the national target of providing next-generation access to more than 85 per cent of premises across the whole country and on ensuring that all other premises have, as a minimum, access to infrastructure that is capable of providing basic broadband.

That is my update on the step change programme. Although that is the biggest part of our broadband policy, I want to briefly mention some other aspects. Community broadband Scotland is a £5 million initiative to support rural and remote communities and to help them deliver broadband solutions in their own areas. Work is under way in the first six communities that have been selected for support, and we expect them to be connected in the coming months.

Our demonstrating digital programme is about showcasing the art of the possible through trials and demonstrations of new or emerging technologies to give people today a glimpse of what digital technology can offer in the future. We have also launched the digital dialogue, which is a programme of events, seminars and demonstrations to stimulate debate and allow us to test ideas about the digital future, a key part of which was last month’s digital Scotland conference in Edinburgh.

Taken together, those programmes are a very ambitious but absolutely essential programme of work. These days, broadband infrastructure is as critical as road and rail to the nation’s overall infrastructure and it is essential that we do what needs to be done and invest what needs to be invested now to ensure that we have a world-class infrastructure that people can use and take advantage of.

I am happy to answer members’ questions.

Thank you very much, cabinet secretary. Elaine Murray will begin the questioning.

The Highlands and Islands procurement contract has now been finalised, but is the rest-of-Scotland procurement contract still on schedule to be finalised next month?

Yes. As I indicated in my opening remarks, we are up against a very challenging timescale in the rest of Scotland; indeed, that timescale has been made all the more challenging by the delay in tender return that has been caused by broadband delivery UK’s failed state aid application for the superconnected cities programme. That inadvertently necessitated a change to the intervention area for three of the cities that are covered by the rest of Scotland procurement—Glasgow, Edinburgh and Aberdeen—and we have, as a result, had to work with those cities to minimise the impact of that descoping and to allow BT sufficient time to remodel the bid. The timescales are challenging but, as I said, we expect to receive BT’s tender on Monday. Obviously we will have to give the tender and bid due consideration, but we expect to finalise all contractual details by the end of this month, with final contract signature by the middle of July.

The target was to give 90 per cent of Scottish households speeds of between 40 and 80 megabits per second by 2015. Is that on course to be delivered? Will that be challenging?

You have encapsulated the ambition for next-generation broadband, which is to give 85 to 90 per cent of households across Scotland those speeds.

The timescales are challenging. As has been made explicit in the contract for the Highlands and Islands project, our intention and ambition is to deliver as much access as possible by the end of 2015. Some of that work will go into 2016, but we are looking at all opportunities to accelerate roll-out. These are big projects but the commitment and the investment are there and we now need to get on and deliver. We have reached that phase with the Highlands and Islands project and I hope that in the next few weeks we will be in that delivery phase for the rest of Scotland.

I want to be very parochial for the time being. You might already have seen the letters that I have written to you—either that or they will be coming across your desk soon—about progress in the south of Scotland. As you will know, Dumfries and Galloway Council and Scottish Borders Council have committed fairly significant sums of money to a superfast broadband project for the south of Scotland, but it has been rolled up in the rest of Scotland project and no more information about its progress can be found on their websites. Can you update me on what is happening on that?

The information will become more expansive as we go through contract finalisation and into implementation. However, until we receive the BT bid, we cannot be clear about the areas of coverage in the contract, which would allow local authorities to be more specific about the areas of coverage that will be achieved through their additional funding.

I welcome the additional investment that has been committed by 14 local authorities across the rest of Scotland, and the relationship between the Scottish Government and local authorities on this work is very good and strong. The local authority funding is intended to top up provision from the national pot which—as we have said—aims to deliver 85 per cent coverage across the country and a minimum floor of 75 per cent coverage in each local authority area in the rest of Scotland. The money from the national pot will be used before any of the local authority funding is brought in.

Borders Council and Dumfries and Galloway Council are two of our biggest contributors to the overall programme. Once the tender is in and has been evaluated and signed, there will be a short period in which surveys will be carried out to verify some of the assumptions that have been made. As soon as we can, we will develop a national website that covers the rest of Scotland and Highlands and Islands contracts to give people a sense of when the roll-out will happen in their area. There will be total communication once the contracts are signed.

That would certainly be useful, because there is quite a lot of frustration in the areas that still have very poor coverage.

Have any lessons been learned in finalising the Highlands and Islands contract that could be used to benefit procurement in the rest-of-Scotland project?

We have tried throughout the process to bring about alignment and co-ordination between the Scottish Government and Highlands and Islands Enterprise on the Highlands and Islands step change project, and to provide appropriate feed-through to the rest of Scotland’s step change project. The two projects are subject to the same governance, and lessons are being shared between them. It is important to stress that the two programmes have been conducted through different procurement routes, but there is a high degree of similarity between the requirements in the contracts for each project.

It is probably slightly premature, given that the rest-of-Scotland project is still being negotiated, to speak in detail about specific lessons that are being learned from the Highlands and Islands project. Suffice it to say, however, that there is close alignment to ensure that appropriate lessons are learned and carried forward into the final stages of the negotiations for the rest-of-Scotland project.

BT won the Highlands and Islands bid, as the sole group remaining in the process. Is that the same for the rest-of-Scotland project?

Yes.

Good morning, cabinet secretary. How do we ensure that sufficient safeguards are built into the Highlands and Islands contract, which has been agreed, and the forthcoming contract for the rest of Scotland, in order to ensure that high standards of work are delivered?

One of the contracts has been—and the other is being—rigorously negotiated to ensure not only that they are capable of delivering on our targets, ambitions and commitment, but that they do so to a very high standard.

For the rest-of-Scotland project, there are a range of protocols in place involving the project team, the Scottish Government, local authority teams, utilities departments and BT to ensure that we are able to maintain quality. If needs be—and we hope that this will not be the case—there are processes in place to ensure that speedy action can be taken to correct failings.

Members will be aware of the fine that was recently levied on BT by the Office of the Scottish Road Works Commissioner in relation to a number of failures involving BT Openreach. BT is anxious to demonstrate that it is learning lessons from the failings in that exercise and that it will apply that learning in rolling out the contracts.

That is helpful. It is perhaps inevitable, given the scale and ambition of what is being proposed, that there will be failures from time to time. The key issue for the public and for the committee is to ensure that any fines that are levied on the contractor—BT, in this case—are met by that contractor and not by the taxpayer.

Absolutely. Fines are a matter for the Scottish road works commissioner, and a consultation is about to take place on raising the maximum level of such fines.

Fines are important if any company fails in its obligations, and the resulting bad publicity is also a deterrent. The contracts are high profile and there is a great deal of expectation around them, with regard not only to what they will ultimately deliver, but to the quality of work along the way.

We will work with the various parties to ensure that we minimise concerns about the quality of work and that we implement the contracts to ensure that they are fulfilled to the highest quality.

10:15

Finally, you talked about the investment by BT and by the Scottish Government and from the partnership with local authorities. Are you satisfied that sufficient investment is being made to deliver our ambitions on broadband?

Yes. We have got the funding pot topped up for the rest of Scotland by an investment of £50 million from 14 local authorities. As I indicated, the allocation of our national funding pot is that £126.4 million goes to the Highlands and Islands, £5 million goes to the community broadband Scotland initiative and the rest of the money goes to the rest-of-Scotland project, which is topped up by the contribution from local authorities. There is therefore significant public investment in delivering essential national infrastructure. I believe that that investment will allow us to meet our targets and achieve our ambitions to give people the access and the speed of broadband to which they aspire.

What would happen to the £50,000 that would be raised from a fine?

That is a good question. The Scottish road works commissioner levies the fine. I do not have the answer at my fingertips, so we will provide that information to the committee.

It is very important to put the broadband infrastructure in place. People and businesses must also be encouraged to support and to know how to use the technology. What work is being done to support businesses, particularly small and medium-sized enterprises, in using the technology?

That is a very good question. It is understandable that there has been as much focus as there has on provision of the infrastructure, because we cannot achieve any of our ambitions if the infrastructure is not in place. However, it is important to stress that although the infrastructure is essential, it is not sufficient for us to become the world-class digital nation that we want to be. That will depend on businesses and individuals making use of the infrastructure and using technology to transform how they live their lives and do business.

We have a range of initiatives under way to try to improve digital participation in Scotland. We have a digital participation charter and a ministerial advisory board, which Fiona Hyslop chairs. We also have a digital assistance database, which is intended to help to signpost the public to training opportunities in digital services. We are identifying in each of the 32 local authority areas digital champions who will have a specific role in supporting communities to identify the barriers to digital access and helping them overcome those barriers.

We have worked closely in recent months with our enterprise and skills agencies and with key industry representatives to set out how we can build on existing measures to support businesses in making the transition to a digital economy. I recently announced additional funding of £7 million to take forward the recommendations that came from that work in order to ensure that we provide businesses with support, training and guidance to realise their ambitions in making the transition to digital working. The funds will also support businesses that can benefit from the digital economy on the supply side of the economy.

When the cabinet secretary appeared before the committee in March, we were told that £240 million of public sector funding had been secured for the step change programme that would last until 2015. What is the breakdown of how that money has been allocated so far?

As I said, the breakdown is that £126.4 million is for the Highlands and Islands project, £5 million is for the community broadband Scotland initiative and the remainder is for the step change programme for the rest of Scotland.

Is there any further detail on how the remainder of that money will be broken up?

The remainder of the money will be the whole sum that supports the contract for the rest of Scotland.

As I said in response to Elaine Murray, an additional £50 million has come from 14 local authorities, which will be spent in those specific local authority areas. Exactly where local authorities intend to spend the additional sums will become clearer when the contract is signed and we know the coverage of the main contract.

On the £50 million-plus that has come from local authorities, it is interesting that only 14 local authorities out of 32 have become engaged in part funding the project. Why are only 14 local authorities contributing?

Those are decisions for local authorities. It is important to point out that the 14 contributing local authorities in the rest-of-Scotland project represent the areas that have the lowest commercial coverage. They are outwith the central belt and city areas, where there is a higher level of commercial coverage and, therefore, not the same need for state intervention.

In essence, the public money is to fill the gaps in commercial coverage. Combined, the 14 local authorities cover almost 80 per cent of the landmass of the rest-of-Scotland area, which for the most part corresponds to our target area of intervention. The local authorities that have made the contribution are those that have the lowest level of commercial potential and so need to spend to compensate for that.

At first glance, some people might worry that the differing levels of funding might result in different levels of service across Scotland. Are the differing levels of funding designed to even out the level of coverage?

The rest-of-Scotland project will, together with the Highlands and Islands project, deliver the 85 per cent coverage country-wide. Within that, there will be a floor in each local authority area of 75 per cent coverage. That will come from the £240 million national funding pot. Therefore, the local authorities that have contributed money will have done so to get to coverage above the 75 per cent minimum. I should say that it is a minimum and that the national scheme might get some local authorities above that level. However, to be honest, it is unlikely that all local authorities will have the same level of coverage when the scheme is delivered, which is why it is important that there is the minimum, or floor, of 75 per cent coverage, so that we achieve a degree of consistency.

Obviously, for areas that will not be covered by the scheme, particularly rural and remote areas, initiatives such as community broadband Scotland become important, because they are about finding solutions that will cater for some of those areas.

Are Scotland’s local authorities doing their bit as part of the programme?

Undoubtedly, that is the case.

Are there any weak spots?

Local authorities have to make careful judgments about whether and to what extent they contribute. Authorities such as Glasgow City Council are in a different position from authorities in rural areas, because of the extent of commercial roll-out and coverage that will be possible. I am happy that local authorities are working with us on the project and are, where it is in the interests of the populations that they serve, putting their money where their mouths are.

It is fair to say that the UK Government, under the auspices of BDUK, is the overarching body that is responsible for delivering broadband throughout the UK. It seems to have got itself in a bit of a mess over the superconnected cities project, which has fallen foul of European Union state aid regulations. Do you want to comment on that? Can anything be done to support, for example, Edinburgh in resolving the situation?

It is disappointing that the superconnected cities programme has fallen into difficulties. As you said, it is a UK programme and not one that the Scottish Government was directly involved in. The problems have materialised around a failure to get state aid clearance. In short, that means that the programme cannot deliver broadband infrastructure. The three cities in Scotland that were in line for inclusion in the programme were Edinburgh, Aberdeen and Perth. As a result, they are having to remodel their plans away from infrastructure provision towards things like vouchers for SMEs. As I said earlier, that has had a bit of a knock-on effect on our rest-of-Scotland planning.

We are collaborating with Scotland’s cities through the Scottish cities alliance. We have been assisting the three cities specifically with redesign of their superconnected cities plans and we want to ensure that any future funding for broadband in cities is planned properly from the outset, in conjunction with the European Commission, in order that we do not fall foul of state aid rules. We are working with the cities as closely and collaboratively as we can and we see the cities alliance as a way of taking forward that collaborative work. However, there is no getting away from the fact that the serious hampering of the superconnected cities programme is a blow to those cities—and a blow more generally.

Are you aware of how BDUK got into that situation? As I understand it, the rules from Europe have not changed.

I can only speculate that there was a failure to properly plan ahead and to get all the necessary approvals in place before, so it got ahead of itself in terms of the programme. Colin Cook will correct me if I am wrong or fill in any technical details; in short, state aid cannot be used to provide infrastructure in urban areas where it is deemed that commercial roll-out would be viable. That is the problem in a nutshell. Why BDUK did not predict that or get it resolved at an earlier stage is a question that would have to be directed at BDUK.

You might remember that ACSEF—Aberdeen city and shire economic future—which was the city and shire working in partnership, had a fairly good worked-up bid. I do not have the quotation here, but your predecessor said to the committee that funding of that work would not be held up because the rest of Scotland had to catch up. All that work seems to have gone by the wayside because BDUK is talking about cities as if there is a ring fence around them, and not about the hinterland of cities being part of a wider economic unit.

I absolutely understand the frustration that is felt. As I said, there is a limit to what we can say on behalf of BDUK because superconnected cities was a programme in which it was very much the lead. However, I am more than happy to ask BDUK, on the committee’s behalf, to provide more information about what went wrong and how it is trying to put it right.

It is worth saying that Aberdeenshire Council is the largest contributing local authority to the rest-of-Scotland programme, so we are taking forward its ambitions within that programme. Through the cities alliance we are working with Aberdeen, Edinburgh and Perth in particular to see how we can meet the connectivity requirements that they had identified for the urban broadband fund through different routes, if that is possible. As the cabinet secretary said, that may be things like promoting the use of voucher schemes to try to encourage the market to fill those areas.

A UK Government report said that the BDUK projects were red or red/amber, which I presume means they are not going anywhere very fast and that there is serious doubt about them. Have you or the Cabinet Secretary for Culture and External Affairs had any discussions with your opposite numbers at the UK Department for Culture, Media and Sport to ensure that Scotland’s interests are being taken into account?

I have not had any direct discussions with UK ministers on that particular report, but the Scottish Government keeps in close contact with the UK Government, as is appropriate, on all those matters. The Major Projects Authority review, which I think is what you are referring to, was an exercise in which we had no direct involvement. It was undertaken by the UK Government’s Major Projects Authority and looked at the range of broadband projects that were being supported by BDUK and identified a risk that delivery timescales would slip beyond 2015.

It is fair to say that there are some capacity issues in the UK Government in terms of broadband delivery. We, too, are working to challenging timescales and are not immune to some of the complexities around this work. On the previous question, there has also been the wrangling between the UK Government and the European Commission about state aid approval.

For our part, we are focused on delivering these major step change programmes with as much infrastructure as possible being delivered before the end of 2015. That means ensuring that we are working with suppliers and local authorities to pursue any opportunities to accelerate the roll-out. We have focused hard on delivering against the targets that we have set ourselves.

10:30

That takes us nicely on to future work and monitoring. The Scottish Government has indicated that it intends to develop a new overarching measurement framework for the digital strategy that will allow Scotland to measure its progress against the various targets that it is seeking to achieve. Will you provide some detail on the types of measurements that you plan to include as part of the framework and the work that will be necessary to establish how such measurements can be collected?

Some detail on that is set out in the digital economy strategy. In particular, there is an attractive diagram that tries to set out how we are going to do it. I will try to explain it as coherently as I can.

The first thing to say is that the measurement framework that we published for the digital economy as part of the digital economy strategy is focused on the digital economy, but it also has an application for the broader digital strategy. Basically, we are looking to measure progress in the digital economy across both the supply side of the economy and the demand side.

On the supply side, a range of businesses have opportunities, whether that is in providing infrastructure, digital products or skills to support the growth of the digital economy. The potential indicators around measuring success on that side are, to a large extent, official statistics. We can look at gross value added per head, the number of enterprises that are working in the area, business set-ups as a proportion of total business growth, employment in knowledge-intensive sectors, and the employment rate. We will look at the provision of official statistics to allow us to demonstrate, over time, the success that we are having on the supply side of the digital economy.

On the demand side, it is more about companies’ adoption, usage and exploitation of the digital potential. Potential indicators of adoption are the percentage of premises that have next-generation broadband coverage, the percentage of businesses with broadband access and the percentage of businesses that do not have that but have access to basic broadband. On usage, we will look at the percentage of businesses with a website, the percentage of businesses that either buy or sell online and the percentage of businesses that use public authorities’ electronic procurement systems. On exploitation, we will look at the percentage of businesses that have adapted their business strategy as a result of digital technology.

Those are the potential indicators that we are looking to work up to give us a clear measurement framework. Having run through some of that at speed, I will be more than happy to provide the committee with regular updates as we define the indicators and start to measure progress against them.

Is it possible for your colleague, Mr Cook, to update us on the timescale for the publication of that type of data?

We have a commitment to update or review progress against the digital strategy every year. The previous update was published last September. We will publish another one around that time this year, and it will include the new framework.

Will all the indicators that the cabinet secretary ran through be included in that update?

The update will set out the framework that we intend to use. As the cabinet secretary outlined, some of the indicators are populated by official statistics. Some might require additional work and might not be collected in time for the September update, but the framework will be set out.

There might be a diagram or two.

Undoubtedly.

The London Olympics were described as the Twitter Olympics. Athletes and spectators were in continuous contact with each other, sharing images and comments as events happened. Are there plans for Scotland, in 2014, to pick up where London left off? Will our Commonwealth games be the first multimedia Commonwealth games?

I hope so—that is definitely the ambition. Indeed, it is the ambition of all those associated with the Commonwealth games to ensure that the games fully utilise the technology to bring the experience to as many people as possible, and that those who are physically attending benefit, too.

We—and Shona Robison in particular—work closely with the Commonwealth games organising committee, Glasgow City Council and other partners to ensure that that ambition, which relates not only to the games, but to the legacy that we are aiming to achieve, is met and that we have a world-class digital Commonwealth games.

The fifth Glasgow 2014 progress report, which was published last month, focuses on some of the highlights to date. For example, I am aware that the new Glasgow Hydro arena has been in the news recently. Its digital specification includes a wi-fi system that is capable of supporting 12,000 concurrent users, which is pretty massive. Visitors to the games will be greeted by more than 100 digital screens and totem poles, which are masts that will be positioned around the external landscaping to show people where to go and provide information through a range of digital signage.

Information technology partners are fully engaged in ensuring that we fulfil the digital potential of the games. I hope that the Commonwealth games will meet that ambition not only in a digital sense, but in many other senses and that the digital element will be as good as that for the London Olympics. Given developments in technology, it might even do better—who knows?

Thank you very much, cabinet secretary. We look forward to getting the further information that you have promised us.

I briefly suspend the meeting to allow the witnesses to leave.

10:36 Meeting suspended.

10:37 On resuming—