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01 / Introduction

The use of broadband and mobile phones is so universal that digital services are as essential a utility as water or electricity. However, the UK鈥檚 excellent connectivity is built on old foundations. While Openreach鈥檚 main distribution system to on-street cabinets uses fibre, the vast majority of final connections are still in copper. A 拢30bn nationwide roll-out is under way to upgrade the UK鈥檚 legacy infrastructure to variants of full-fibre connectivity 鈥� and legislation is planned that will require new-build housing developments to have full-fibre connections in place.

In addition, the Labour Party has made an election commitment to nationalise Openreach and provide universal free UK broadband by 2030. This massive programme underlines the importance of digital infrastructure to the UK.

Fibre to the premises (FTTP), which can be considered the optimum solution, covers 4% of UK premises and is being rolled out by a range of providers to 3 million households a year. This programme has been identified as a priority by the National Infrastructure Commission, which is targeting network completion by the early 2030s and the start of the switch-off of copper networks by 2025.

Copper-based broadband meets current consumer needs, but is not scalable and has much higher operating costs than full fibre. However, the fibre programme will come at a life-time premium cost of 拢10bn and, for private sector investors building the networks, it is not clear yet how much extra the consumer is prepared to pay in the long run for the enhanced service. Labour鈥檚 nationalisation plan could of course render these considerations unnecessary. 

Consumers do appear to be interested in 5G and the introduction of the technology could be a game-changer for full-fibre roll-out. In addition to enhanced mobile performance, 5G promises to support new business models based on the Internet of Things, such as connected and autonomous vehicles. This will rely on high data capacities, super-low latency and high levels of reliability to ensure safe operation and public acceptance.

The roll-out of 5G is dependent on the wide availability of fast fibre connectivity, and the arrival of this latest mobile technology could not come at a better time to generate demand to underpin investment by wholesale networks. 

Fibre roll-out has a high profile with politicians as a good way of demonstrating commitment to 鈥淒igital Britain鈥�. Globally, most investment in networks comes from the private sector. However, the public sector also has a key role 鈥� either by providing support to roll-out for remote areas or by eliminating barriers to delivery. Depending on the outcome of the election, the balance of investment in the UK could change quite dramatically.

02 / Digital market overview

The UK benefits from a highly competitive digital communications market. Both superfast broadband and 4G mobile provide high levels of geographical coverage and there are plenty of players. In domestic broadband for example, three major service providers 鈥� BT, Virgin and Sky 鈥� control about 80% of the final connections market, so there is little market dominance. 

The switch to FTTP has provided an opportunity for smaller 鈥渁lt-net鈥� providers to enter the market. Providers including Hyperoptic and B4RN have taken advantage of market niches, such as subsidised rural broadband.

Table 1 (below) shows that a wide variety of fast broadband services are available in the UK. FTTP has only a 4% share, but all of these technologies will meet service needs until at least 2025. Fibre to the cabinet (FTTC) will be phased out, potentially by as early as 2025, to ensure that users switch to faster services. In contrast, countries such as Spain, South Korea and Japan already have near-complete full-fibre systems 鈥� albeit capacity is not being utilised by current digital applications. 

The intensity of competition is reflected in the generosity of broadband and mobile pricing strategies. Popular 鈥渁ll you can eat鈥� bundles expose providers to increasing operating costs while capping revenues. Unlike copper, fibre networks are totally scalable and have an unlimited data capacity. This breaks the link between traffic volumes and transmission costs and provides future-proof infrastructure. 

Other factors encouraging investment include mobile operators acting as anchor tenants in anticipation of 5G, the diversification activities of utility firms such as SSE and the sponsorship of networks by local authorities backed by Local Full Fibre Networks funding. 

Fibre investment has its challenges. Most of the capital costs are sunk in a network that cannot be repurposed and are incurred ahead of sales. Demand risk is a particular problem as it is unclear when customers will switch to fibre and how much they will be willing to pay. As a result, the payback period on investment is 15 to 20 years, highlighting the importance of a cost-effective roll-out and the risks of over-building by competing networks.

One big factor that has encouraged accelerated investment was the separation of Openreach as an autonomous entity within BT in 2017. Openreach now operates the network between the exchange and the customer on behalf of more than 500 communication providers and is leading a fibre roll-out that aims to reach 15 million households by 2024. Openreach is also required to provide access to its duct network to competitors via the physical infrastructure access scheme 鈥� significantly reducing installation costs for other networks. 

The government has been working hard to create a positive environment for organisations looking to invest in fibre, with interventions ranging from funding in areas where there is evidence of market failures through to the 鈥渂arrier busting鈥� activities of the Department for Digital, Culture, Media and Sport (DCMS). Based on current projections, 80% of the UK market should have coverage within 20 years. 

Table 1: Broadband technologies adopted in the UK

Technology	Description	Download speed	Upload speed	Supplier
Fibre to the cabinet (FTTC)	Street cabinet connected to the home using existing copper network	70-80Mbps	40-55Mbps	BT, Sky etc provided via Openreach
GFast	Copper network boosted with shorter connection lengths	160-330Mbps	30-50Mpbs	BT, Sky etc provided by Openreach
Fibre to the premises (FTTP)	Final connection to the home using fibre	Up to 1GB	Up to 400Mbps	Virgin Media, Openreach, Cityfibre, Hyperoptic
Cable broadband	Hybrid using coaxial cable rather than copper	Up to 1GB. Upgrade to 10GB possible	Up to 100Mbps. Upgrade to 1-2GB possible	Virgin Media

03 / Network roll-out

Unlike other huge infrastructure undertakings such as Crossrail or Hinkley Point C, the 拢30bn fibre roll-out is a civil engineering project that will be undertaken at a local scale. The physical work 鈥� duct laying, cable blowing and connections 鈥� is relatively straightforward, scalable and replicable, but the size of the programme and the complexity of aspects of permitting, administration and quality control of streetworks create significant delivery risks.

Fibre broadband installations typically cost between 拢300 to 拢600 per premises depending on whether existing ducting can be accessed. In London, the 鈥渄ig once鈥� methodology has seen a duct backbone installed along the length of the Cycle Superhighway to reduce future roll-out costs. For greenfield development, where new trenches and ducts may be necessary, innovative techniques such as microtrenching may be widely adopted if highways authorities can be convinced the technique does not affect road durability. The technique can reduce the duct installation costs to below 20% of conventional works and increase productivity by four to five times. 

Administrative issues

Much of the complexity lies with the burden of administration and the potential for inconsistent practice by different contractors, local authorities, infrastructure owners and landlords. Across the 32 London boroughs,for example, there is no common permitting process, so there is plenty of potential for waste associated with system set-up and learning curves.

One area of concern is streetworks to lay new ducts. Problems could emerge around planning and quality control of civil works, as well as a barrage of permitting, planning, road traffic management and highway authority requirements that can cause delay and add cost if not managed effectively. The Broadband Stakeholder Group has highlighted 19 potential blockers that could potentially slow down the roll-out process.

The solution is a collaborative approach between a network, their supply chain and affected public bodies. This in turn requires an upfront investment in people and systems to manage the process. However, the additional overhead will contribute to the elimination of delays and rework 鈥� optimising the overall productivity of the roll-out and reducing the overall cost of the programme.

Public authorities have a further role to play in promulgating standard practice. Wide adoption of the City of London鈥檚 Digital Infrastructure Toolkit or the DCMS/Department for Transport Street Works Toolkit, for example, would avoid reinventing the wheel and enable network developers to invest more in the IT-based integration of their rollouts.

Another big issue holding back the roll-out of fibre is obtaining wayleaves 鈥� essential legal access agreements that need to be in place before work on private property starts. The City of London estimates that more than 7,500 commercial tenants are missing out on ultrafast broadband connectivity because of delays associated with wayleave agreements. Whereas regulated utilities such as gas and water have a statutory right of access that simplifies the wayleaves process, fibre companies do not have this right. Even running a cable across private land requires permissions, costing a minimum of around 拢2,000 for the simplest of agreements. 

Wayleave requests

If an owner does not respond to a wayleave request, the installation cannot proceed and, as a result, an operator has claimed that the easy connection of 750,000 properties in apartment buildings has been blocked. This can cause major problems for area-based rollouts. Legislation was planned to address this issue, but this may not be prioritised by the incoming government. 

One additional challenge 鈥� specific to low density, new-build residential development 鈥� concerns the installation of mobile telephony infrastructure. Unlike fibre broadband, which is increasingly installed as part of the residential infrastructure package, mobile aerials and backhaul cable will not be installed in a development until volumes of traffic justify the investment. As a result, there is a possibility that the pristine hard landscaping of a new scheme could be dug up soon after completion 鈥� creating disruption and potentially ruining its looks. 

Making early provision for mobile telephony and even providing shared infrastructure on a neutral host basis is an option for the developer, although the opportunity to secure rental income from mast sites has been constrained by Ofcom鈥檚 Electronic Communications Code. 

Looking forward to the introduction of 5G, developers will need to think even further ahead 鈥� possibly installing data and power provision for a dense network of small cell base stations that would be no more than 250m to 500m apart. Without action, the streetscape could become cluttered by a profusion of aerials and control boxes.

04 / The mipact of 5G on existing networks

The commercial roll-out of 5G in the UK began during summer 2019. In advance of commercial applications, the government has invested 拢200m in test beds such as West Midlands 5G, examining the potential for wider applications such as healthcare as an integral part of the four Industrial Strategy 鈥済rand challenges鈥�. 

Network operators are currently able to install 5G capacity on existing sites and this patchwork approach is likely to be adopted as the technology is rolled out 鈥� using different frequencies and systems depending on the volume of traffic. Some problems to be faced include the management of emissions levels from clusters of mobile antenna, the physical weight of the equipment and the design of antenna networks to provide complete coverage. Furthermore, as 5G signals may not travel well into buildings, indoor networks will be needed to enable mobile communications.

From a network infrastructure perspective, the 5G roll-out relies on access to power and fibre. The 5G programme will trigger a further civils programme where locations for small cell sites such as lampposts require duct access. If operators are prepared to converge around shared infrastructure based on a neutral host model, this would reduce further the requirements for roll-out.

Ahead of a universal national roll-out, some interesting additional opportunities could emerge from the entrepreneurial use of unused spectrum that will be allowed by changes to the regulatory model. This means independent operators will be able to set up 5G networks in buildings, events venues or even construction sites, using an 鈥渙perator-free鈥� approach similar to password-controlled wifi. Overall, the implications of 5G for infrastructure roll-out are less than those associated with full fibre, which in effect is likely to be the last major physical digital infrastructure investment for many years, but there will be the need for a continuing investment in the UK鈥檚 digital infrastructure.

05 / Case study 鈥� improving the performance of a major broadband roll-out programme

Arcadis has been working with a major network operator for more than 18 months, seeking to expand the network and improve certainty and control of a multibillion-pound ultrafast full-fibre roll-out programme. 

Given the complexity, size and scale of the programme, we are working closely with the client to provide certainty and predictability around cost and result. By helping to develop an effective operating model and business processes, as well as identifying, tracking and managing benefits, we were able to find many opportunities for cost efficiencies, establishing the quickest and most effective route to market for the client. This has delivered a 5%-10% cost reduction and will help to bring the benefits of ultrafast broadband connectivity to millions of homes and businesses.

As part of our work, we have defined and developed a strategic approach around physical infrastructure access (PIA), using duct infrastructure owned by other parties. PIA marks a disruptive change in the industry around developing 鈥渘o build鈥� solutions. Arcadis assessed the impact of PIA on crucial parts of the business that would be affected by the change and developed an operating and resource model to support PIA鈥檚 implementation. 

Other aspects of the improvement plan cover strategic resourcing and procurement. Our work included reviewing and defining how cost savings could best be realised, then providing support to ensure cost-saving measures could be implemented effectively through a new and upskilled commercial management function.

06 / Conclusion

The UK鈥檚 拢30bn full-fibre roll-out is accelerating from a slow start to become a programme employing thousands of skilled engineers and technicians. Through its emphasis on the use of shared infrastructure, the programme is an exemplar for minimum-build solutions with as much emphasis on the management and co-ordination of the access and permit rights as there is on the installation works themselves. 

The efficiency of the roll-out is particularly important 鈥� not only to ensure a commercial return in a competitive market but to make sure the public investment in support to the programme delivers social benefits as quickly as possible.

Given the critical role that the full-fibre network will play in enabling the UK鈥檚 forthcoming 5G revolution, the timely and cost-effective roll-out of the infrastructure is a mission of national importance.