We must get business connected

18 March 2016

Sharon White, Chief Executive, Ofcom
Speech to the Federation of Small Businesses’ annual conference, Glasgow

Introduction

Thank you for inviting me today. I am delighted to be here in the very city where John Logie Baird transmitted the first long-distance television pictures way back in 1927.

That was a big year for communications, with the first telephone service established between the UK and America. In today's money, a call in that year to the States cost about £250 a minute.

Since then, innovation has changed things beyond recognition. Today we can watch Netflix on our laptop, tablet or connected TV. We can catch up on our favourite BBC shows on iPlayer, whenever we choose. Or make a transatlantic phone call over the internet, for just a few pence.

I have been Chief Executive of Ofcom, the communications regulator, for a year. From day one, my priority has been to help the UK achieve fast, reliable communications that are fit for the 21st century.

I know that in recent years, having a decent broadband connection has gone from a 'nice to have' to an essential service, as vital as gas, water or electricity.

Without it, people cannot pay tax on-line, buy or sell on eBay or take part in a social network. And businesses, particularly those just starting out, cannot reach the markets they need to grow and thrive.

Communications have transformed our lives and the way we run our businesses for the better. And - rightly - our expectations of our phone and broadband services are rising all the time, as we become more dependent on them.

I have seen the challenges faced by many small businesses. The FSB has been a powerful voice for change, working hard for things to improve. I welcome this and hope we can continue to work together, making a real difference for small businesses across the UK.

Small businesses are much less well served than big businesses, particularly when it comes to superfast broadband. Business parks have not had the same priority as residential areas.

In the words of one business owner: "It is extremely hard to understand why superfast fibre optic broadband is available at homes but not for businesses".

This frustration is made worse by the fact that many businesses pay the same - or significantly more - than residential customers for lower speeds.

And when small businesses do get a decent connection, too often they face problems with their service, and a poor response when they complain.

We have been told about a small business in the Guildford area which was without broadband for ten weeks last year, because of delays getting the fault resolved. Each time this customer complained, he was told the delays were caused by Openreach and there was nothing his own provider could do about this.

For a small business, reliable broadband can mean the difference between survival and failure.

That is why, at the end of last month, Ofcom set out a ten-year strategy to give the UK world-class communications - up there with the likes of Japan and South Korea. Widespread availability of fast, fibre-optic cables connecting offices and homes.

As we put that strategy into action, small businesses will be a priority for Ofcom. We must get business connected. And today, I want to explain what we are doing to ensure that happens.

First, improving broadband and mobile coverage

Let me begin with broadband and mobile coverage - because nothing matters more than getting these services in the first place.

"A high tech company with no high speed broadband".

That is how one electronics company in Teesside described itself for a report we did last year on SMEs.

Sadly, this is the experience of too many SMEs.

Only 68 per cent of SMEs can access superfast broadband, compared to 83 per cent of homes and businesses overall across the UK.

In Scotland, the figure is even lower: just 55 per cent of Scottish SMEs can get a superfast connection, compared to 73 per cent of all premises in Scotland.

SMEs have been overlooked in the past. When telecoms companies decided where to invest in their networks, they favoured areas of high residential demand.

Small businesses - located in business parks or dispersed in different localities - have been underserved.

There has been some progress. In the last year, SME access to superfast broadband in the UK grew by 8 percentage points, and by 12 points in Scotland.

But I want faster progress.

I want to see telecoms companies making it a priority to connect business parks - and rural offices - to superfast broadband.

BT is looking at how to connect its new ultrafast broadband - offering speeds of 300 Mbit/s - to business parks more quickly; and has set up a trial in Bradford. Those speeds would allow a medium-sized business, with a number of employees, to carry out simultaneous video conferencing and cloud-based working.

Virgin Media has launched ultrafast broadband for small businesses, with a focus on high upload speeds.

Virgin is also inviting small and big businesses to have their say on where it should roll-out its network, as it seeks to increase cable coverage to 60 per cent of the UK from just over 40 per cent today.

I want to see more of these initiatives to help small business.

Equally, we must ensure that no business gets left behind. A crucial safeguard for small business will be the new universal right to request a decent broadband connection announced by the UK Government last year.

This new right will be as much for business as for residential customers. It will be initially set at 10mbits/s. That's enough for a microbusiness to carry out email, web browsing, internet calls, video streaming or cloud storage. Ofcom is working closely with the Government to implement the new right as soon as possible.

As business and residential demand grows over time, so should the speed at which the universal right is set.

This flexibility is critical. What may be sufficient today for a business of two or three people, and a turnover in the thousands, will be wholly inadequate as the company expands, turnover reaches a million, and services like Skype or cloud computing become essential for a significant number of employees.

Of course, it's not just broadband. Many of you spend time visiting customers and suppliers, and you need to work remotely and flexibly.

But in rural areas, especially, patchy mobile phone coverage means you can't reliably make a call or send an email.

Following an agreement between the UK Government and the four mobile network operators, there are now important coverage obligations for mobile. By the end of next year, all four networks must provide phone coverage to 90 per cent of the UK.

We also know that mobile data is increasingly vital to businesses. So we've set rules to ensure that virtually all homes and offices - 98 per cent - must receive an indoor 4G mobile signal by the end of next year.

That must include at least 95 per cent of homes and offices in each UK nation - including Scotland. Providing 4G in remote areas like the Highlands and Islands is more challenging, but no less important.

Wherever Ofcom can help to meet those challenges, we will. We know that mobile repeaters - devices that boost the strength of mobile signals - could make a big difference.

They are cheap and easy to use. But they can cause interference with other devices. So today we are launching a consultation on how we can make repeaters widely available without causing problems to others. And in the future, when we sell more spectrum - the valuable airwaves used for mobile - we intend to set rules to improve coverage in rural areas.

Secondly, making it easier for businesses to navigate the market

Of course, availability is only one part of the picture. Choice is another.

So we are also making it easier for businesses to navigate an increasingly complex broadband market.

One small business owner in Scotland told us: "It's too darn complicated."

I agree.

Many businesses want more than a residential service, but can't afford the high-end services designed for big business.

Yet the gap between the price of a residential package and a basic business tariff can vary significantly across different products, so it's hard to identify the best deal.

Another Scottish business told Ofcom: "I'm frightened to do anything because I don't know what I'm getting into."

We simply cannot have a situation where the market is so impenetrable that businesses are put off from finding the best deals.

In November 2014, we launched our dedicated online business portal.

This was designed to bring together all the information and advice you need to make the most of communication services, and help you make the best choices for your business.

We are also working with our sister regulator, the Advertising Standards Authority, to make sure that advertised broadband prices are clearer. Broadband prices should show the full cost of the service, including line rental, and any set-up costs should be clearly shown. The ASA will be making these changes this summer.

I am also concerned about the gap between the advertised speeds that people and businesses sign up for, and what they actually get. This is a real priority for me.

Virgin Media's CEO Tom Mockridge said in January: "To properly compare different broadband offers, consumers need to assess the whole deal: price and speed."

I agree.

Clearer advertising will help.

But the best way for providers to match their promises is to improve their speeds.

So I'm pleased that the UK's seven biggest broadband firms - including BT, TalkTalk and Virgin Media - have signed a new business broadband speeds code of practice, effective this September.

They will give their business customers clear and accurate information about what speed they are buying when they buy it.

If speeds then fall below an acceptable level, the customer can walk away from the contract and go elsewhere with no charge.

We also need to make it easier for businesses to shop around for the best service.

So today we have launched a mobile and broadband checker. By entering a postcode you can check the actual quality and coverage of the local broadband and mobile services.

If you're thinking about relocating, or expanding your business in a new place, you can compare the quality of phone and broadband in different areas.

Or if you want to upgrade your broadband, you can check whether faster services are available.

Thirdly, improving quality of service

Now I'd like to turn to quality of service for business telecoms customers.

Frankly, it's not good enough.

"They were very slow to rectify the problem, wouldn't listen to what I had to say, and cost me £400 worth of business."

This is one of many complaints we've had about outages and delays in getting faults fixed.

I've heard from one MP whose constituents run a hotel in rural Wales, where visitors won't return because the telecoms service is "shockingly bad".

I know of prolonged broadband failures in the Lakelands, causing considerable lost income for local businesses.

On the Isle of Lewis, local businesses suffered from a three-month mobile outage.

I'm sure many of you have your own personal experiences.

Service failures are a major source of pain for small businesses. It is absolutely critical that these are addressed quickly and effectively.

Ofcom will be placing tougher quality standards on Openreach, the part of BT that maintains the phone and broadband network on which most of you rely.

We introduced minimum standards for Openreach in 2014, and the company took on 3,000 extra engineers to meet them.

Next month, these rules will get tougher. Four in every five faults will need to be repaired in one-to-two working days - two years ago, a third of faults took longer than that.

And four in five new lines will need to be installed within 12 days - up from three in five before our rules came in.

We want to extend these rules further. There may be a case for setting standards for the absolute number of faults, in order to incentivise proactive maintenance of the network.

And when service does fall short, businesses need fair redress. So we intend to bring in automatic compensation when things go wrong. We will set out detailed proposals later this year that will bring telecoms into line with gas, water and electricity.

Running a small business is more than a full-time job; you should not have to spend time chasing your provider for compensation.

Whether your connection is at home - or to the office, shop, farm or factory - automatic compensation would mean you get a cheque in the post, or a credit on your bill when your service falls short.

Fourthly, increasing the number of providers serving SMEs

We want more providers to be serving SMEs. That is the surest way to increase choice and keep prices competitive.

Today, BT accounts for nearly half the revenue in the market for providing business broadband. No other operator has more than 10 per cent of revenues.

This must change. Central to our long-term strategy is opening up BT's network of telegraph poles and underground tunnels to rival companies, so they can lay their own, advanced fibre networks directly to homes, and businesses.

This will give businesses more choice, making them less reliant on Openreach.

We also believe Openreach must be more independent of BT Group, so it is more responsive to everyone who uses its network.

This is a fundamental change in the market, and later this year we'll put forward a detailed plan to make it happen.

I also want to see healthy competition in mobile. I believe this is vital for all consumers.

I recently outlined my concern about plans by Three, the UK's smallest mobile network, to become the biggest by acquiring its rival O2.

This follows a pattern of consolidation in other European mobile markets. I believe that competition is the best way to foster investment, and keep prices low for businesses and consumers.

We have explained our concerns to the European Commission, which is reviewing Three's proposals.

Whatever it decides, we will keep working to ensure the UK mobile market continues to deliver choice at affordable prices.

Conclusion

In concluding, I want to underline that there is much to do to make excellent communications available to all of your businesses - whatever your size, sector or location.

Your hopes and needs are my priority.

So we are working hard to ensure better mobile and broadband coverage across the UK.

We intend to make it easier for businesses to navigate the market, and we're working with the ASA and others to make it happen.

Quality of service must improve. So we're toughening the rules on Openreach, adding new protections for business customers, and planning automatic compensation when things go wrong.

A healthy, vibrant market is vital, so we are boosting competition and making it easier for providers to invest.

We must get business connected

We will continue listening - today and over the coming months - to ensure we understand your problems, and can act to address them soon.

The UK is already a world-leading digital economy, thanks in part to your hard work. Ofcom's job is to ensure that is supported by world-class communications networks.

I want our success to be judged on whether we deliver for small businesses like yours.

I realise we have some way to go. But I promise you, the work has already started.

Thank you.

ENDS