New build developments – delivering gigabit-capable connections: partial business and regulatory impact assessment

4. Options

Option 1 – introduce a new mandatory standard, together with new supporting guidance within the Technical Handbooks

Option 2 – do nothing

Sectors and groups affected

Sectors and groups affected include:

a) Building users – People living in or using buildings would benefit from easier broadband connectivity. Additionally, there will be some cost benefit to future occupants/users in relation to a reduced installation cost;

b) Building designers/constructors - All those involved with building design and construction would have to familiarise themselves with the new/amended standards and guidance through training etc;

c) Building procurement - Persons or companies procuring new buildings or building work would be required to bear any extra cost of the work;

d) Verification - Local authority verifiers would have to train staff in respect of the new building standard and associated guidance;

e) Network operators – providers of public communications networks;

f) Homebuyers

Benefits – option 1 - introduce a new mandatory standard, together with new supporting guidance within the Technical Handbooks

For the public, the availability of digital infrastructure is increasingly seen as essential and has an impact on various aspects of day to day lives for individuals, families, and communities.

It is recognised that the delivery of new connectivity networks drives benefits for the local economy. For example, a CityFibre build in Edinburgh through the Local Full Fibre Networks (LFFN) Challenge Fund included 324 public sector sites with approximately 7,000 businesses and 100,000 homes located within 250 metres. As a result, the deployment cost per premises was then estimated to have fallen from £550 - £600 per premises to around £400 per premises.

Deploying gigabit-capable connections at the outset can cost less and reduces the likelihood of further disruption than retrospective infrastructure deployment and enables futureproofing of digital infrastructure from the point of development.

New build housing developments therefore present an opportunity to reduce the costs of a deployment to nearby premises as it brings the networks closer to other areas where it might not otherwise be economically viable. This also builds on best practice and process already undertaken by developers.

Data on recent housing completions and operator data indicates that around 3% of new build housing developments currently do not receive a gigabit-capable connection in Scotland.

Whilst this represents a small proportion of new homes, introducing a requirement for developers to formally engage with network operators and confirm the provision of both infrastructure and the best available network connection to all new housing development provides assurance that the optimal outcome for householders is achieved at the initial point of construction.

Benefits – option 2 – do nothing

This option would result in the status quo remaining, and some new build homes put on the market without infrastructure for gigabit-capable connectivity and in some limited cases no infrastructure for broadband at all. This would put those specific households at a disadvantage.

It would leave the rollout of gigabit-capable infrastructure in Scotland at a disadvantage compared to the rest of the UK market. Regulations are in place in England as a result of the UK Government consultation on this issue. The Welsh Government published their consultation on 3 February 2023 and are currently analysing responses with a view to implementing regulations when Parliamentary time allows.

Such a situation may then require retrospective deployment - which could increase costs and the opportunity for new build housing developments to bring commercially funded gigabit-capable investment to an area from the outset would be missed.

Households affected will have a reduced ability to work remotely, access digital healthcare services, access digital learning or access commercial services (retail, entertainment) on online platforms.

In addition to leaving Scotland out of step with the rest of the UK market, the do-nothing option would not align with the ambitions of other Scottish Government programmes, the Scottish Government’s policy prospectus, and would be out of step with the Digital Strategy for Scotland. In their consultation response the UK Government estimates that 1% of new builds will be above the cost cap. The impact assessment published with the Welsh Government consultation utilises the same figure.

Costs – option 1 - introduce a new mandatory standard, together with new supporting guidance within the Technical Handbooks

The proposed mandatory standard and Technical Handbook guidance will apply to all new domestic buildings and those subject to major renovation. While the update will be reflected in changes to the guidance contained within the non-domestic technical handbook, the basic requirements will remain unaffected.

The costs associated with the implementation would be low given the limited number of occasions where gigabit capable infrastructure is not available at outset. In addition to this it has been agreed between the UK Government that telecoms operators will make operator contributions of up to £1,400 ahead of the maximum developer contribution of £2,000 per premises.

In those instances where a ‘next best’ connection is supplied this would in many instances be using the same kinds of passive infrastructure (e.g., ducts or poles) that gigabit-capable technology would be delivered through at a later point in the future.

Data from ThinkBroadband indicates that 96.6% of 14,978 new build homes identified in 2022 had a gigabit-capable connection installed at outset. We do recognise that this data represents those premises in new postcodes and a partial picture likely to skew towards sites in developments of where it is commercially viable for operators provide gigabit-capable connectivity free of charge. Openreach for example provide full fibre, gigabit-capable connectivity to new build housing developments of 20 or more premises or in those instances where the cost of installing a copper/fibre to the cabinet connection exceeds full fibre. However, we also understand from engagement to date that the figure for all new build housing identified by network operators as having a gigabit-capable connection from premises built to in 2022 is consistent with the ThinkBroadband figure. This figure has increased from 2020 where the figure identified by Openreach as not receiving a gigabit-capable connection at outset on their network stood at 6%.

We understand from engagement with the telecoms sector that in Scotland it is typically smaller sites of less than 7 plots, in particular single plot sites, account for the majority of homes built without gigabit-capable connections at outset.

Analysis based upon planning applications 2022 accounting for approximately 50% of housing sites puts the expected cost to developers at an average of £191 per plot across all sites.

For sites within the 10-19 plot range, we have modelled that 75% of these plots receive gigabit-capable connectivity under the current position. It is expected that the vast majority of the remainder of these sites would fall within the operator contributions or be delivered on commercially at no cost to the developer. The Openreach rate card indicates that the remainder would fall within developer contribution at a total cost of £160,000 to developers (£134 per plot).

Where the site size is in the range of 2-9 plots using the same model of 75% of plots the expected average cost per plot to developers would be £482 giving a total expected cost to developers of £794,500.

At this point there is no published pricing in relation to single plot sites creating a difficulty in modelling the expected cost to developers from the application of these proposals. Planning data from our sample of housing sites indicates that 786 single site applications have been mad. Adjusted for the whole of Scotland this would arrive at around 1,572 single site applications. Using the maximum contribution figure this would be £3,144,000.

Analysis in the Ofcom Connected Nations indicates that approximately 21,000 premises in Scotland cannot receive a connection meeting the requirement of the Universal Service Obligation at present - approximately 1% of all premises. Using this figure to estimate the proportion of premises eligible for an exemption would give a figure of around 220 premises per year lowering the costs by £440,000.

However, it would be anticipated that this figure will be lower for a number of reasons - due to the varying costs between different sites and the commercial arrangements that are in place across the industry it is possible for developers to reach agreements with a gigabit-capable operator for lower than the published costs.

The varying rates of operator contributions will mean that in some cases it is possible for agreements to be reached at a lower cost than the cost cap or no cost at all. The rise in the availability of gigabit-capable connectivity through commercial activity and gap funded build such as the R100 main procurements will bring networks closer to new build housing developments particularly in rural areas.

Proposals require that a connectivity plan be prepared for each new site to detail which supplier has installed gigabit capable infrastructure. This will result in additional time and costs in preparing and agreeing a connectivity plan to be submitted to the local authority.

Costs – option 2 - do nothing

This option imposes no new implementation costs on developers however there would be no reduction in the costs of retrospectively deploying gigabit capable connections to individuals and companies when providing broadband connectivity into new or renovated buildings that do not have passive infrastructure installed at outset.