The announcement in last week’s budget that the Scottish Government is committing £600 million to the first phase of the reaching 100 per cent superfast broadband programme is fantastic news for Scotland. I was keen to share the detail of that announcement with Parliament and to reflect on its significance for Scotland’s economy.
Over the past few weeks, there has been a great deal of conjecture and, quite frankly, disinformation about how Scotland is performing in terms of broadband delivery. This statement is an opportunity, therefore, to set out the facts. Here is the key fact: by the end of 2021, Scotland will be the only part of the United Kingdom where every single home and business can access superfast broadband.
The £600 million that was announced last week is the biggest public investment ever in a UK broadband project, and launches the first universal superfast programme in the UK. To put that fully in context, it is more than double the amount of public funding—£280 million—that has been committed to our current digital Scotland superfast broadband project, and more than three times the £190 million fibre fund that the Chancellor of the Exchequer announced for the whole UK in his recent budget. The programme is entirely unique to Scotland. This is the choice that the Scottish Government has made: superfast broadband for all.
Why is the project so crucial to Scotland and why do we need it now? It is simple, really. If we want a Scotland that delivers inclusive economic growth, that helps businesses in our rural and urban communities to innovate and to grow, that prepares our children for the workplaces of the future, that creates a digitally skilled workforce that is fit for the digital century, and which reforms our public services through digital innovation, we need a future-proofed digital infrastructure. The new procurement will help to deliver that; I will talk more about it in a moment.
First, it will be worth my while to reflect on the truly spectacular progress that has been made in recent years. Our investment, along with that of our partners in the digital Scotland superfast broadband programme, has genuinely transformed the availability of broadband across the country. Commercial investment alone would have delivered coverage to just 66 per cent of premises, largely in urban Scotland. Coverage in the Highlands would have been just 21 per cent, and there was no planned coverage at all for Orkney, Shetland or the Western Isles.
We recognised the unique challenges that Scotland’s geography poses, and concluded that a distinct approach is required. Rather than undertaking 32 small-scale procurements at local authority level, we took the joint decision with our local government partners to aggregate planned public investment into two large regional projects. That has created a project which is at a scale that dwarfs that of any other project in the UK, and which has extended broadband access to more than 800,000 premises across Scotland so far, with further deployment to follow throughout next year.
The success of the approach is demonstrated by the coverage figures. Ofcom figures continue to show that Scotland has made the fastest progress of any of the UK nations in extending superfast broadband access, and we are well on track to meeting our target of 95 per cent coverage by the end of this year.
Therefore, although the programme has had a massive impact, it has not reached everyone. We could have chosen to stop there, as the UK Government has done. We could have taken the decision that its universal service obligation, which is set at just 10 megabits per second, was sufficient for our rural communities—but we did not. We chose a different path. We concluded that the economic damage that would be caused by consigning large parts of rural and island Scotland to the broadband slow lane—and, by extension, to the economic slow lane—was simply unacceptable. That is why, even with broadband being reserved to Westminster, we have launched the reaching 100 per cent programme, and it is why, even although the UK Government was willing to commit only £21 million to R100, the Scottish Government has stepped up to ensure a £600 million investment in a vital piece of Scotland’s national infrastructure.
The procurement that was launched last week will build on the success of the DSSB programme, but it will be different in some key respects. Unlike in the DSSB programme, we plan to make the delivery of new backhaul in particular rural locations a requirement. That will help to create a truly national fibre network and ensure that all parts of Scotland are within reach of accessible fibre.
Allowing for currently planned commercial coverage, about 245,000 homes and businesses in Scotland cannot access superfast broadband. The initial investment will deliver superfast access to a significant proportion of them, but we do not expect it to deliver 100 per cent coverage on its own. There will, therefore, be further phases through which we will ensure that superfast broadband reaches each and every premises. We expect that to involve a wide range of superfast technologies, supported by a national voucher scheme that is to be available to individuals and communities.
However, the initial phase is the key phase. Extending a future-proofed accessible fibre network to remote rural areas will provide the essential platform for delivering superfast broadband for all. We are purposely targeting the funds at where they are needed most, which is in rural Scotland. Therefore, the first phase will not focus on cities. My firm belief is that coverage gaps in urban areas should be filled by commercial suppliers. I am greatly encouraged by emerging plans from the likes of BT, Virgin Media, CityFibre and Vodafone among others that suggest that that is beginning to happen.
The procurement will be split across three regional lots. That is designed to maximise competition, which is vital to driving value and innovation.
I am confident that the scale of our investment and of our ambition will attract interest from a wide range of telecommunications suppliers across the UK and Europe. It is a huge public investment, so it is vital that we get the right deal for Scotland. The procurement will therefore take some time—approximately one year. It is being run as a competitive dialogue, and such procurements generally take between 12 and 18 months to complete. We are confident that we will have suppliers in place—and ready to start building—by early 2019.
Crucially, broadband activity will continue on the ground between now and then. Alongside extensive commercial activity, the DSSB programme will continue to deliver throughout the coming year, with new investment that has been generated by early take-up of the new fibre network. That so-called gainshare funding plans for new deployment in every local authority area across Scotland during next year, thereby avoiding any significant gap between DSSB ending and R100 starting.
Much has been achieved over the past three years. The latest Ofcom figures show that superfast coverage in Scotland has increased by 26 percentage points since 2014, compared to 16 percentage points for the UK as a whole. We now want to finish the job.
Our £600 million investment is fantastic news for Scotland’s rural and island economies, and is a real statement of the Scottish Government’s intent to make Scotland a truly world-class digital nation. The investment will transform the economic prospects of rural Scotland. The fibre network that we will help to build will be the backbone for delivery of our R100 commitment and, beyond that, for the future development of Scotland’s digital economy. It will underpin a wide range of connectivity services long into the future, including 4G and superfast broadband today, and 5G and ultrafast broadband tomorrow. It will also help to drive innovation and growth across the economy by supporting new business models and industries, while ensuring that Scotland is competitive in the next digital age.
We can be a world leader in this digital century—a leader that is inclusive, innovative and outward looking, and one that drives technological and digital innovation and makes Scotland the most attractive place in the UK in which to invest.
Working alongside Highlands and Islands Enterprise and our local government partners, we have developed an enviable delivery track record through the DSSB programme, which has largely bridged the coverage gap between Scotland and the rest of the UK over the past three years. We will build on that success and, through the R100 programme, help to deliver a future-proofed national fibre network that will place rural Scotland among the best-connected places anywhere in Europe and will underpin economic growth.
I am happy to take questions.