Digital Scotland

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DigitalScotland

October 2010


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PrefaceTwo hundred years ago, Scotland was in the forefront of an industrial revolution based onnovel andpowerful energy technologies that led to fundamental changes in economies,societies andpolitical andsocial relationships. We are now caught up in anothertechnology-enabled global revolution of possibly similar magnitude.The coupling of newdigital technologies that permit acquisition and manipulation of massive amountsofinformation with devices that put instantaneous communication in the hands of all is again

revolutionising theglobal economy andsocial, political andpersonal relationships. It is arevolution thathas not yet run its course. It has both benefits and dangers, and its ultimatetrajectory is uncertain. What is not uncertain is the need for Scotland tobe at the forefrontof this revolution, as itwas in that of the 19th century.

The Royal Societyof Edinburghs newly created Business Innovation Forum identified thecrucial roleof national infrastructure in supporting the nationaleconomy and theactivitiesof companies competing in global markets. It identified powerful digital networks asincreasingly vital partsof this infrastructure, leading theSociety to set up theworkinggroup which has produced thefollowing report, which has also been endorsed by theBusiness Forum. Theworking group was chaired by Professor Michael Fourman, principalauthor of this report. The members of theworking group and of the Business InnovationForum are listed in appendix A. Responses to an interimreport circulated for consultationin July 2010, andsubsequent advice from many quarters (see appendixJ) have contributedsubstantially to this final report.

Thereport sets out why Scotlands digital future is a crucial issue, why Scotland needstoact, and what needs to bedone. It suggests how the enterprise could develop as adistinctively Scottish communityeffort, bringingbenefit to the whole of Scotland, withoutthe need for major Government funding at a timewhen public expenditure is undergreat pressure.

Professor Geoffrey BoultonFRSFRSEGeneral SecretaryRoyal Society of Edinburgh

The map on the front cover shows fibre reaching every community of 2,000 people (see paragraph 110)


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ContentsPreface 2

TheImperative 4

Summary 5

Recommendations 11

1 Why itmatters and why it isurgent 12The changing world 12

What are the benefits? 12International benchmarks 15A target for Scotland 15

2 Connecting Scotlands Communities 17Design model for a Digital Scotland 17Technology foresight 18Fibre to the Community 18

3 Making it happen20Funding and Financing 24

4 Reaping thebenefits access andcontent 29Access breaking down the digital divide 29Content accessing services and information 32Conclusion 34

Appendices 35A Contributors 35B Change why a long-term strategy is required 36C Benchmarks 38D Introduction to the internet 46E Technology facts why fibre is the best 49F The distribution of Scotlands population 53G Calculating the rural fibre required 54H Rating of communications infrastructure an obstacle to innovation 57I Glossary 60J Digital Scotland consultation evidence and assistance received 61

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The Royal Society of EdinburghDigital Scotland


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Summary

Why Scotland needs a digital strategy1 Digitalconnectivity enables innovation and wealth creation; it stimulates inward investment and

entrepreneurship. It also provides new tools for increasing equalityof opportunity in health andeducation, andfor reducing thecosts of the public sector. However, thegap between affluenceand disadvantagecan alsobe exacerbatedby a digital divide. Many of the poorest in society andthose living in remote andruralcommunities are unable to takeadvantage of thenew economyand the new society made possibleby digital communication.

2 One simplemeasure of thedigital divide is thegap between the median connection speed enjoyedby most and theminimum speed accessible to all. Most advanced countries have established adigital universal service obligation (USO) to limit the size of this gap.

3 This figure demonstrates thewideningdigital divide that results from current UK plans. The blueline represents the pace of technological innovation in modem speeds since 1976 from narrowband through broadband to optical.TheNeilsen line, in brown, represents the internet speedsavailable to consumers in well-provided metropolitan areas. The red line is the trajectory ofnear-universal provision under currentUK policy. It contrasts starkly with the Finnish universalservice obligation, in yellow.

4 Speeds increase by a factor of eight every five years. While Neilsen speeds are available to some,the speed available tomost across the UKin 2010 is less than 4 Mb/s, about fiveyears behind theNeilsen line. Significant partsof Scotland lagby a further five years, and still cannot achieve512 Kb/s. Instead of planningto catch up, current UK policy defers the Digital Britain targetof universal access to2 Mb/s in 2015, a point 12 years behind the line.

5 Scotland needs a digital strategy because current UK policy is, in the words of Jeremy Hunt,pitifully unambitious. Under this policy, a growingdigital divide will inflict lastingdamageon communities outwith the core metropolitanareas. Scotland will suffer disproportionatelyby virtue of its human andphysical geography.


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14 Digital systems have the capacity to enhance thedelivery of public services, and to reduce costsand improve delivery of health, education, social service andmany other areas of governmentresponsibility. The technology offersbetter information, better access and better interaction withpublic services (e.g. social security, taxation, licensing, legal services etc) and facilitatesmembershipof online communities from professional networks and advisory services to specialinterest or leisure groups.

15 Digital systems offer great benefits to consumers. Recent research by PwC found that theaverageUKfamily would miss out on savings totallingup to560a year if they did not use the internet toshop around for the cheapestdealson products like energy, insurance andhousehold items. Poordigitalprovision is already disadvantaging a significant proportion of the population.

16 Digital systems also offer great benefits to business. A recent survey of 1,000 IT managers inthe UK, by LMResearch, found 48% saying that theyhad had to turn down business improvementprojects because of lack of broadbandcapacity; 93% thought that a fibre connection wouldopennew possibilities for their business 4.

17 Digital systems offer a social andcultural stimulus by providingmoreopportunities andgreaterflexibility in both work and leisure. Rural areas distant from major centres, whichhave beendistant from the modern economy, can now be reinvigorated as digital engagement providesaccess to markets, jobs and distant relatives. Wikipedia now has over 15 million articles whichresearch hasshown to be as accurate as the Encyclopaedia Britannica. Facebook added over200 million users in less than one year and its membership would now place it as the thirdlargestcountry in the world, after China and India. In the USA, 17% of couples married in thelast three years first met online.

18 The internet hasbecome themost efficient and powerful meansof accessing andexchanginginformation in all its forms. It is a vital means by which the vision thatunderlies the developmentof Creative Scotland will be realised. Civil organisations use the internet to communicate,to share concerns, reach consensus, mobilise campaigns, organise events and provideinformation. A thrivingcivil society is a crucial aspect of social cohesion and thebedrockof democratic governance.

But weare becoming increasingly uncompetitive in digital provision19 The inexorable rise in takeup ofdigital capacity, a function ofsupply and demand measuredby

Neilsens Law(see 2), shows no sign of faltering. Median UK broadbandspeed (derived from the2010 Ofcom Speed Report) is below4 Mb/s, almost10 years behind the Neilsen line. This gap isa measure of the digital divide in which a largeproportion of the population is digitallydisadvantaged. It is also a measure of our internationaldisadvantage.

20 How great a digital gap can weafford? How far should wemakethose disadvantaged by lackof access lagbehind therestof society? Theuniversal target for the Scottish Broadband ReachProject (completed in May 2009) was set at 512 Kb/s, in 2008 when median speeds were justreaching 2 Mb/s. In 2010, 512 Kb/s represents a lag of fiveyears behind the current 4 Mb/s medianspeed a concrete measure of the digital divide and many in Scotland still cannot achieve the512 Kb/s promised by BroadbandReach.

21 This gap excludesusers from much of the value of the current internet. Many now find that a512 Kb/s service limits their digital participationand is not worthpaying for. While this speedis sufficient for transactions such as online banking, it cannot deliver the full range of benefitsenjoyed by other consumers. Thegap is widening as our cities are cabled for next-generationaccess. For reasons of social inclusion and equality of opportunity Scotland cannot afford thiswideningdigitaldivide.

4 http://www.computerworlduk.com/news/networking/3241514/virgin-offers-businesses-unlimited-bandwidth-with-big-red-internet-offer/


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22 To ensure international competitiveness, we must reduce the gap between our median provisionand the Neilsen line. To ensure equality of opportunity andenabledigital inclusion, we mustnarrow thenationalgap between the minimum speed available to alland the median speedenjoyed by most. Thecurrent aspiration of theUK Government, shown in the figure, falls far shortof international benchmarks. It is an unambitious target. Scotland should rise above it.

23 Wetherefore recommend that Scotland should plan to makespeedsabove 16 Mb/saccessibleto all by2015, rising to128 Mb/s in2020, and set a target for medianspeedsabove 64 Mb/sby 2015 and 512 Mb/sby2020.

24 On an international scale, these are modestgoals. Finland plans a rateof change thatwill bringits universal access to the Neilsen line before 2020, with a commitment to 100 Mb/s in 2015.

How can Scotland catch up?25 Digital Scotland needs to achieve twocomplementary goals:

> extend thecore network to deliver next generation broadband intocommunityhubs.This will stimulate local communities, companies and local government to create accessnetworks that can reach every businessanddwelling in Scotland;

> ensuredigital inclusion by stimulating themotivation, anddeveloping theskills to enableparticipation, and fosteringdigital communityhubs thatwillallow underserved communitiesand those without a personal connection to access thenetwork.

26 Extending the core network requires an infrastructurestrategy, together with a rating regimeand regulatory environment that focus on establishing long-life network infrastructure that willstimulate sustainable investmentand entrepreneurial activity.

27 Digital inclusion will require local hubs, based in existing facilities such as libraries andcommunity centres to provide walk-in and wireless internet access, to serve as connection pointsfor fixed and mobile local accessnetworks and bea sourceof support and adviceon the safe andeffective useof technology.

The community hub28 The two strands of physical infrastructure and individualaccess complement each other, andwill

often come together in the community hub.

29 A network hubwill provide an anchor tenant for the network provider, stimulating investment,and serve as a technological hub, providing a wifihotspot, a site for a mobile phone mast, and aconnectionpoint for wired or wireless local access providers.

30 A social hub will act as a focus for inclusion, and should allow those without a personal internetconnection to access online services.Users will include children researching for their homework,families shopping online, and grandparents communicating with remote grandchildren. Onceusers start to enjoy the benefits, no further intervention should be required.

What is needed from government?31 We advocatea general approach that could be embedded in a UK-wide strategy, if the UK

Government responds to the encouragement that it is now receiving from many quarters toadopt and implement a moreambitious broadband policy.

32 However, mostof our recommendations (42 below) require the exercise of devolved powersto make local changes. Even without anycommitment from theUK Government, we believe thatScotland could andshould itself adopt and implement itsown ambitious strategy to achieve thetargets we recommend.


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Scope33 We estimate that Scotlands corenetwork requires no more than 2,500 km of additional rural fibre

to makea high-speed connection accessible to everycommunity. We believe that a combination

of market forces and community actionwill deliver robust access networks once an affordablehigh-speedconnection is available.

Costs34 Detailed information on practical aspects of fibre provision are given in the EU FTTH Handbook 5.

The relative costs of laying fixed backbone, intermediate, andaccessnetworks are reported to bein ratio 1:3:10, and 80% of these costs is accounted for the holes and poles required to lay or carrythe cables 6. It therefore makes sense to reuse existing infrastructure, such as sewers 7 or existingtransmission poles and pylons 8, wherever possible, and to lay communications ducting, atminimal marginal cost, in conjunction with civil works (as is already happening in Orkney),

new build and refurbishment.35 The per population costsclearly increase with increasing distances and decreasing populations,

so small, distant communities are disadvantaged.

36 The BIS Broadband Strategy Group estimate the costs of laying rural fibre at between 15 and 40per metre. The lower figure is achieved by re-use of existing trunking; thehigher figurecorresponds to laying new trunkingandcables alongside roads. The cost of installation of the320 kmFibrespeed network in Wales and operation over 15 years is reported as 30m less than100 per metre.

37 Such figures underpin estimates of 100m to link all our communities (which wouldbe reducedpro rata if undocumented fibre is brought into thenetwork), with operatingcosts of 10m per

annum . An incomeof 25m perannum (which couldcome from user charges or other sources)would fund operatingcosts, internet connection charges, interest charges and repayment of the100m capital investment over a period of15 years. At the end of this period the fibreinfrastructure wouldstill have at least 15 more years of useful life.

Benefits38 TheSecretaryof the International Telecommunications Union hasargued that cost savings from

digital in as few as four areas (health, education, energy and transport)exceed the costs ofbroadband infrastructure 9.

39 An Analysys Mason report, Quantifying the benefits of NGA in the HighlandsandIslands,

commissioned by Highlands and IslandsEnterprise (HIE)cites a 46m fundinggap (betweenmarket anduniversal provision) for the Highlands andIslands, and 15 year benefits at 504m.It is consistent with OECD estimates for theHighlands andIslands, and is roughly five timesour estimate of the core infrastructure investment required for the entirecountry.

5 http://www.ftthcouncil.eu/documents/studies/FTTH_Handbook.pdf

6 http://arstechnica.com/telecom/news/2010/03/fiber-its-not-all-created-equal.ars/

7 http://www.h2onetworksdarkfiber.com/latest-news.php?n=Dundee-to-become-the-first-Scottish-Fibercity

8 http://uk.reuters.com/article/idUKLNE62A00M201003119 http://www.itu.int/en/osg/speeches/pages/2010-02-22.aspx


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Financingand funding40 The communications industry hasclearly stated that it will not fund 100% rollout of

next-generation access. Stimulus is required to develop thecorenetwork that, we argue,is a necessary foundation for Scotlands digital future. Public procurement shouldbe usedto stimulate investment andnarrow the fundinggap. It is possible, but in current economiccircumstances unlikely, that the UK Government would fund the remainingshortfall, eventhough our most pessimistic cost scenario wouldonly represent 0.2% of the total plannedcapital expenditurebudget over thenext 16 years. Nor woulda simplecapital injection ensurethat the infrastructure was managed to maximise long-termbenefits for society. We offertwo examples of options that would avoid these problems.

40.1 Procurement> Government could act as an anchor tenant by procuring connections at at least1Gb/s to

each community to allow hospitals, libraries, council offices and schools to benefit fromandcontribute to digital society. These nodes should actas community hubs, where localaccessnetworks can link to a high-speed connection to theglobal internet a so-calledbackhaul connection. A simultaneous procurement by all 32 councils might be effective,but would be difficult to coordinate at national level.

40.2 Non-profit delivery> TheScottish Futures Trust, set up to create moreefficient means of financing major

infrastructure, has advocateda special-purpose vehicle using a non profit-distributing (NPD)model. This couldmanage both the major capital investment programme and the long-termdeliveryof the open accessbackhaul required to stimulate private investment in local accessnetworks and in services delivered over those networks.

> A Digital Scotland Trust, established as a Non Profit DistributingOrganisation (NPDO) tocoordinate and operate a corenationalnetwork, coulddraw on existing andbuildnewphysical infrastructure, and connect these pieces in the national interest.

40.3 Financing> Thecapital investment could be financed through borrowing, with repayments over say15

years funded from connection charges levied by an NDPO. It might be advantageous if thecapital investment weremade by Scotlands local councils, who can borrow at advantageousrates. The NPDO could then progressively purchase thecapital asset from the councils,making payments sufficient to cover interest and repayments on the loan.

40.4 Funding> Initial financing would be repaid through commercial incomefrom customers. We estimate

that our proposals will bring fibre within reach of an additional 1m people (20% of Scotlandspopulation, ~400k households). Assuming a conservative, 50%take-up, thisnetwork wouldsupport approximately 200k domestic subscriptions andyield an annual revenue of around20m at 100 per household per year.

> Thecorenetwork wouldalso cater for business connections andenableother services suchas LTE 4G (supporting 100Mb/s mobileconnections) and TVoIP, thereby generating furtherrevenues.

> A preliminary model of the costs and revenues associated with implementation and operationof this network suggests that revenues would be sufficient to cover allcosts of financing,installation, operation and maintenance, and clear thedebt over a 15 year period. Surplusrevenues shouldbe applied for public benefit andcouldbe directed to supporthealth,education and digital inclusion.

Community41 If our proposal is taken forward, and if communityhubs providing a high-speed internet

connection point for local networks are funded through local initiatives, thewhole enterprisewill be a distinctivelyScottish communityeffort, designed to bringbenefit to the whole of Scotland,witha concomitant sense of community involvement and achievement.


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Recommendations42 A Digital Scotlandstrategyshould plan tomakea minimum speed of16Mb/saccessible toallby 2015, rising to128 Mb/s in2020. It should set a target for medianspeedsabove 64Mb/s

by2015 and 512 Mb/sby2020.

43 A DigitalScotland Trust should be createdasa Non-Profit Distributing Organisation. It should:> Develop an open national register of our strategic digital infrastructure.> Ensure that optimal use is made of existing resources, linking existing

infrastructure and enabling newadditions.> Deliver open access to backbone infrastructureandservices for everycommunity in Scotland.> Organise financing and raiserevenues for the project.

44 The Scottish Governmentshouldendorse a DigitalScotland Strategy aspart of itsstrategy fornational infrastructure. To facilitatedevelopment of the core network it should:> Remove the distortions in the ratingof optical fibre that currently disadvantagesmall networks.> Includein procurement of its own network connectivity a requirement that backbone

infrastructurecontributed to bids should be opened at wholesale level to communityusers and other providers.

> Review planningcodes to mandate infrastructure sharing for intrusive and disruptiveinstallations in order to minimise visual impact andmaximise economies andcompetition.

> Require the installation ofducting suitable for fibre as part ofall public works and new build.> Coordinate bids for European funding for backhaulprovision andcommunityaccess in

some high-costareas.

45 To enhance creative competitiontheScottish Government shouldwork withOfcomand theUK government to:> Develop and evolve an appropriate regulatory framework to ensure open and

competitive access to backbone infrastructure and services.> Ensure theavailability of wirelessspectrum with regulation appropriate to the needs

ofboth urban and rural areas.> Ensure that public service content is availableonline, so it is accessible to those not

reached by wireless transmissions.> Lower bureaucratic burdens for small, local access network providers.

46 To enabledigital inclusion, local and national Government in Scotland should also:> Establishpublic access hubs in allcommunities that are suitable for all ages, with priority

for provision in areas with least internet uptake, to enableuniversal access.> Locate interconnection points within these community hubs to facilitate cooperation and

competition.> Provide individual access, support and information within these communityhubs.> Foster tele-work, tele-medicine, e-governmentand e-learning to reduce costs, improve

services and increase equality of opportunity.> Buildeducationand training into existing programmes to ensure that all children and adults

can access theopportunities, reap the benefits, andmanage the risks of digital inclusion.> Require standards-based, open-source systems in its software procurements, in order

to facilitate reuseacross the public sector and to enable local innovators to adapt andbuildon public investment.

> Ensure open access to public data in Scotland.


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1 Why it matters and why it is urgent

Thechanging world47 The digital revolution of the last 20 years was largelyunanticipated, even the few who foresaw

major changes failed to predictmany now routine innovations. But the revolution is not over.The pace of change is likely to quicken rather than falter, which itself will create majorchallengesbecause, as recent history shows, the trajectoryof technological development is likely to beunpredictable, as will be many of the uses to which it will beput. We are however confident thatfurther advances in digital technologies will continue to change society.

48 In such circumstances, is it wise to invest in infrastructure? Is its futureutility predictable?Should Government and the public sector be involved in its planning or funding, and if so how?What might be the frameworkof regulation and incentive that couldencourage the private sectorto buildcreatively upon it?Can it avoid the inflexibility that would deter or disrupt unexpectedinnovations, and can we avoid expensive technological dead ends?

49 How can we maximise economic andsocial benefits? How can we makeICT infrastructure(and the power on which it depends) resilient, as, with increasingdependence upon it, failurewould be a major social and psychological as well as economic disaster? How can weensure thatthe exponentiallygrowing stock of allhuman knowledge 80% of whichhasaccumulated in thelifetime of those about to retire will be accessible toour children, in ways that are fast, correct,safe, trustworthy andfair?Andhow can we bridge the growingand damagingdigital divide? Andlast, not least, can Scotland or the UKafford to investat a timeof economic stringencyunprecedented in the last 60 years?

50 This report attempts toaddress these issues, but it starts with the question why? Why does itmatter?Why is this imperative importantenough to claimtheattention of Scottish society inthe face ofso many other difficult issues? The answer, which we justify below, is that it is crucialto Scotlands aspirations for sustainable economic growth, social cohesion and culturalvitality.

51 But first, notwithstandingtheuncertainties referred to above, we can quantify the inexorable risein bandwidth (the rate at which information can be transmitted along a channel measured inbits/second) that will be exploited by users. This has doubled every 20 months since 1976(so-called Nielsens Law): a 64-fold increase per decade that will continue at least to gigabit speeds.

52 Broadband is already an embedded essential of day to day life for many individuals and institutionsin Scotland and the UK, central toour current way of life and business. Median broadband speedsin the UKare already above 3 Mb/s, Neilsens law suggests that mostof the UKwill enjoy speeds

of at least 24Mb/sby2015, and 192 Mb/s by2020. Unless we act now, much ofScotlandwill beleft behind excluded from the benefits these technologieswill bring. Appendix B (p36) sets out infurther detail why a long-term strategy is needed.

What are the benefits?Benefits to theeconomy53 Digital connectivity is essential to enable theeconomic andsocial innovation that will allow

Scotland to play its role in theglobal knowledge economy. Digital communication is alreadythe meansby which mostof the other elements of national infrastructure are controlled,including transport networks, energy andwater. Its power determines the extent to which

systems operate in energy andcost efficient ways, and its resilience is critical to themaintenance of services during emergencies.


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54 Broadband communicationoffersdramatic increasesin economic efficiency through the reduction of

transaction costs and the openingof access to globalmarkets. These come hand-in-hand with advances indata collection and analysis. Improveduser-engagementprovides real-timecustomer feedback. Improveddecision-making reduces the reaction times ofbusinesses in responding to threatsand opportunities.Modellingand simulationare used to optimise designsand reduce risks.

55 Allbusiness sectors process transactions. The internet removes the need for physicalco-location: it reduces the costs of sellinggoods andservices, andof internal transactions.It creates savings in time, effort and resource for consumers andsuppliers.

56 Much discussion in the UK remains focussedon the relationships between content-providerandconsumer, the substitution of virtual,digital media for traditional,physical media, and theprotection of traditional IP values. However, much of the new value generated within the internetcomes from entirely new forms of social interaction, knowledge sharingand content (re)creation.

Social benefits57 Enhanced broadband capacity can be socially stimulating by providing more opportunities and

greater flexibility in both work and leisure. Both consumers andproducers benefit from a moreefficient economy. Telecommutingenables more people to contribute to the workforce.Rural areas distant from major centres that have been excluded from the modern economy can

now engagewith it in ways that can reinvigorate them. Parents staying at hometo raise childrenhave the opportunity to work flexiblehours from home. The ability to work from home, connectedby broadbandnetworks, also enables the elderly to remain productive later in life. Tele-presenceand real-time video links allow effective remote interaction withcolleagues, experts andcustomers, and should be used to reduce environmental impacts. Digital connectivity lets localbusinesses access global markets, and operate more efficiently.

58 The internet, and theWeb, which is a powerful means of usingit, have already revolutionizedsocial interactions amongst the young in particular. Social networkingsites, pervasivecommunication, and ready access to information and knowledge through instant search arenow an integral part of the social structure of modern life. In the USA for example, 17% ofcouplesmarried in the past3 years first met on an online dating site 10 .

59 The internet hasbecome themost efficient and powerful meansof delivering mail,music, videos,newspapers, books, magazines andphotographs. It is progressively substituting for thefax andtelephone, andcan substitute for much business travel, whilst Skype and other voice- and video-communicationsystems are increasingly used to maintaindistant family relationships. It makesreference libraries available, anytimeand almostanywhere. Together with its associatedtechnologies for collecting, storing, analysing, processing and visualisingdata and information,it bringsa hostofnew opportunities into the hands ofeveryone.

60 Information technology is also providing a powerful stimulus to thestrengtheningof civil society,in which many hopes were invested at the time of parliamentarydevolution. Civil organisationsuse the internet to broadcast their messages, mobilise campaigns, communicate withmembers,

organise events and provide information. A thrivingcivil society is a crucial aspect of socialcohesion and good governance.

10 http://cp.match.com/cppp/media/CMB_Study.pdf

Energy Smart metering systems existthat installed in homes and

businesses would allow theUKpower transmission and deliverysystems to be optimallyused tominimise power wastage, optimiseenergy use and better incorporateintermittent, renewable energyresources.


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61 Inclusion in the digital society digital inclusion has become as important as traditional formsof literacy in ensuring social inclusion andequalityof opportunity. Geographic areas or socialgroups deprived of broadbandaccess are increasingly disadvantaged in society. Exclusionarguably represents deprivation of a social right.

Benefits to public services62 Digital systems have the

capacity to enhance thedelivery of public services,and todo soat reduced cost,in health, education, socialservice and many otherareas of governmentresponsibility.

63 The technology offers better information, better access and better interaction withpublicservices (e.g. social security, taxation, licensing, legal services etc) and facilitates membershipof online communities from professional networks and advisory services to special interestor leisure groups.

64 Broadbandaccess is becoming an integral part of public service delivery. The InclusionThroughInnovation Report11 explores howinformation and communication technologies (ICT) can be usedto makemainstream public services includingeducation and training, health, employmentand benefits and housing more effective, efficient, andaccessible for socially excluded groups.It sets out numerous examples of innovative uses of technology to address exclusion.

65 The efficiency andqualityofdelivery of health servicescan beenhanced by the useof digital technology, givingrural patients the access toexpertise currentlyonlyavailable to those livingin major metropolitan areas.Universal deployment ofhigh-speed broadband willenablegreater use oftele-medicine, improvinghealth careoutcomes andlowering overall health care costs. Tele-care, remote monitoringand related assistivetechnologies can enableolder anddisabled people to remain in theirown homes rather thanin hospitalsor residential care savingmoney by reducing demand for residentialcarespace.

66 Video-chat can allow those housebound to maintain social contact. Tele-medicine is a usefuland effective tool in the delivery of care. Improved access to interdisciplinary teams enhancescoordination of care, decreases isolation for both patientsand their families, andprovidestimely interventions, all while avoiding the complexities associated with transporting people tomultiple providers.

11 http://www.cabinetoffice.gov.uk/media/cabinetoffice/social_exclusion_task_force/assets/publications_1997_to_2006/inclusion_final_report.pdf

GovernmentHer Majestys Revenue and Customs accept self-assessment taxreturns and payments online. Information on services from adviceon foreign travel to finding out how and where to register a birthare all found through the Government website www.direct.gov.uk.Every local authority in thecountry also provides information andopportunities to access services online. A further roll-out ofgovernment services online is planned for 2012.

HealthThe Scottish Centre for Telehealth, part of NHS 24, hasalreadybeen helping individualNHS boards devise ways of usingtechnology to reach out to patients in our more isolated areasand those with mobility issues. Work is now underway to establishnationally deliverable tele-health services. Their website providesnumerous case studies of theuse of tele-health to deliverspecialist services efficiently to people in theirown homes andcommunities. Demand,particularly in rural areas, threatensto exceed services available.


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International benchmarks67 Would it matter whether Scotland is lesswell provided with broadbandcommunication than other

countries? It does! Scottish companies without access to competitive broadbandcommunications

will not have access to the efficiencies and customer-supplier processes available to theircompetitors.

68 In June 2010, the UKSecretary ofState for Culture, Media and Sport, Jeremy Hunt, set out a targetthat within this Parliament [by2015], we want Britain to have thebest superfast broadbandnetwork in Europe. In July he deferred the target date for universal access to2 Mb/s acrossthe UKto2015 threeyears later than previously planned.

69 The caseof Finland, a country with a population the sizeofScotland, is instructive. It hasintroduced a legal right for broadbandaccess at reasonableprice. It is based on the assertionthat communication links are no longer a luxury, but necessary tools for day-to-day life, andthatwithoutadequate communication connections, citizens cannot access information societyservices, which are as important in rural areas as in cities. It has set a benchmark for a 100%100 Mb/s universal service by 2015. By this standard, the current UK ambition is lamentable.Appendix C (p38) considers a range of benchmarks, both international and at local level wheregreater initiative has been taken.

70 Inferior access will hobbleScottish companies anddeter inward investment. The social andcultural consequences wouldalso be significant: diminished social andcultural capital, in adigital backwater unequippedfor engagement witha developingglobal culture.

71 In the latestannual International Telecommunication Union ICT development tables, the UKranks 8th in Europe, and remains at10th worldwide the position it alreadyheld in 2002 12 .Current BT estimates are that a purelymarket-driven roll-out of next generation access(NGA) with fibre-opticbroadbandwill leave out 34% of the UK population.

72 Meanwhile, our competitors will not stand still: both Sweden andFinland have announcedplans for universal access to 100 Mb/s.

A target for Scotland73 Broadbandspeeds currently experienced in Scotland range from 0.3 Mb/s to ~50 Mb/s.

Mostof Scotland lacks2G coverage, with even sparser 3G coverage. Our analysis indicates thatneither the UK Governments pitifully unambitious 2 Mb/s fixed broadband target nor 3Gmobilebroadband can be delivered across Scotland without significant investment in fibre.

74 Already, we find 0.5 Mb/s is inadequate to support a family's useof many of today'sapplications,such as gaming, streaming video and video chat. By 2015 the world will havemoved on: generally,speedswill have increased eight-fold. Users in 2015 will find 2 Mb/s as pitifully slowas wefind a256 Kb/s connection today. The best networks in Europe, including the networks in FinlandandSweden, will provide far higher speeds. Economic, social and cultural imperatives require thatScotland take decisive steps to enhance its broadbandcapacity.

75 We take 2 Mb/s as our benchmark minimum speed in 2010. This is onlyabout 5 years behindthe Neilsen line but fiveyears is a long time. Fiveyears ago, Facebook was new-born and therewas no Twitter. The iPhone first appeared three years ago. Everyfive years produces a newgeneration of devices and uses that exploit the latest technologies. Five years is a lifetime.A five-year gap leaves those on the far side behind, in a previous era.

76 Scotland should plan for minimum speeds of 16 Mb/s to be universally accessibleby 2015, and128 Mb/s by 2020.

12 http://www.itu.int/ITU-D/ict/publications/idi/2010/


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77 In the next section we describe thegeneral technical principles that determinewhat must be doneto enableaccess to these speeds across Scotland. Scotland needs a digital trunk network,

analogous to the network of trunk roads or the electricity grid. We argue that access to thisnetwork would stimulate investment and community action to develop local access networksin a shared national effort.

78 A later section suggests ways in which a trunk network could be financed and funded withoutcalling on government tobe a major funder, although government does havea key role toplayin developing, endorsing and coordinating a DigitalScotland strategy, in stimulating investment,in exploiting the technology to increase the efficiency of public services, and in ensuring thatthese developments are managed to stimulateeconomic and social creativity.

79 Our final section considers theactions required to maximise inclusion andrealise the socialand economic benefits of the digital society.

80 Our general approach could be embedded in a UK-wide strategy, if the UK Government respondsto the encouragement it is now receiving from many quarters toadopt and implement a moreambitious policy for Digital Britain.But much of the action required is local and theScottishGovernmentwould still have toplay a key role.Even without such commitment fromthe UKGovernment, we believe that Scotland couldand should take responsibility for itsown DigitalStrategy.

81 The plan we recommend could be implemented usingScotlands devolved powers, and wouldincrease Scotlands ability to benefit from the UK nationalactivities of Broadband Delivery UK.

Much of Scotland's population will be best reached by wireless access networks


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2 Connecting Scotlands CommunitiesDesign model for a Digital Scotland82 Theeconomic, social and cultural arguments for developing a more ambitious vision and taking

action to enhance Scotlands digital capacityare powerful.How could this be achieved withoutcreating a systemthat rapidly becomes technologically obsolescent? How would the mostcost-efficient system be designed? Could thesystem stimulate innovation? How would it beregulated, and how can universal accessbe achieved without excessive demands on publicfinances? To addresssuch questions we must first consider the nature of the internet.

A networkmetaphor83 The internet can be likened to other distribution networks such as the road system or the

electricity grid. While theanalogy is loose, there are certainkey points that can be taken fromthese other networks. We expand on the transport metaphor in appendix D (p46)

83.1 There mustbe a "backbone", analogous to themotorways and trunk roads or thenationalelectricity grid which serve to connect allusers of the system.

83.2 The backbone musthave sufficient capacity to satisfy the aggregated demand from thepopulation it serves. Road capacity is measured in vehicles per hour, for communicationslinkswe count bits per second, in thousands (kilobits Kb), millions (megabitsMb),or billions (gigabits Gb).

83.3 The network should offer multiple routes between any two points, both to allow trafficto be re-routed around temporary local obstructions or failures, and to provide flexiblecapacity in case of unusual traffic volumes.

83.4 Whether or not the backbone is publiclyfunded, it is a matter ofgovernmentalresponsibility to ensure that it exists and is fit for purpose: a national infrastructurestrategy must include communications as well as transport and energy. Governmentshould ensure that thewhole countrymay share in the benefits of universal access.

83.5 National planning is needed for the backbone. Thelocal distribution systems that connectindividualscan be planned and implemented locally, but they requiregood connections tothe national network.

Internet architecture84 Theinternet is a network of networks. Each network is composed of linksbetween nodes.

Access networks bring traffic from different end-users together at so-called backhaul nodes,where theaccessnetworks links to a high-speed connection to theglobal internet. Thebackhaullink must have thecapacity to accommodate the combined traffic from the entire community.

85 Lack of backhaul capacity limits the provision of local access, thedelivery of next-generationspeeds to homes andbusinesses, and therollout of mobile data services. A high-speed backhaulinfrastructure would stimulate investment to build these local access networks.

86 The per capita costs of local accessnetworks are governed by population density. Locally, mostofScotlands population lives at higher densities than the population of England. So, market-drivenprovision of local access in Scotland, should cover a greater proportion of thepopulation than inEngland (for detailson thedistribution of Scotlands population, see appendix B (p36).

87 Several remote communities in Scotland have built their own high-speed local accessnetworks.Their internet speeds are limited because they must share a slow backhaulconnection. Theavailability of high-speed backhaulwould enable these and other communities in the last thirdof the population to build innovative wireless access networks andconnect these to thehigh-speed backbone.


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Technology foresight88 When transport networks become overloaded with traffic, we can increase flow by removing

obstructions, speeding up thetraffic and increasing the number of lanes. Capacities vary by a

factor of roughly 10, ranging from750 vehicles per hour (v/h) in each direction for a two-lanehigh-street to 7,200 v/h for an 8-lane urban motorway 13 .

89 Speedup options for internet traffic are more dramatic:speedsof trunk connectionsusing differenttechnologies vary by factors of tens of thousands. Beforewe can quantify requirements forScotlands backhaul infrastructure, we need to brieflyconsider the technological options available.

90 Transmissionmedia are thephysical pathways that connect computers, other devices,andpeopleon a network they constitute the links that comprise the information network. Theinternet istechnology neutral. It connects diverse networks that use a wide range of link technologies.Different technologies can carrydata at faster or slower speeds over longer or shorter distances.Appendix E (p49) provides detailed consideration of different transmission media.

91 For practical purposes, thereare three transmission media available: wired, using twisted pairor coaxialcopper cables to carry electrical signals; wireless, using high-frequency radio wavesto carry radio signals; and optical,usingsilica fibres to carryoptical signals.

92 Existing telephone wires can onlycarryhigh-speed data signals over a limited distance lessthan 2 km is a generous rule-of-thumb. A wireless link can make line-of-sight connections thatdeliver hundreds of megabits per second over tens of kilometres.

93 A singlewired or wireless link can onlyserve the needs ofa limited number ofsubscribers. Asbusinesses and families require ever greater connection speeds, so the number of subscribersthat can besupported by a single link gets smaller.

94 A singlefibre can carry up to15 Tb/s thirty thousand times the capacity ofa copper or wirelesschannel. So once there is fibre to the community there is capacity to support foreseeablegenerations of improvements to the local access networks.

Fibre to the Community95 A key barrier to delivery of universal access acrossScotland is that individualcommunities

are more isolated than those in England. However, 90% of Scotlands population, including muchof the population of remote areas such as the Highlands andIslands, lives in communitieswith population densities marginally greater than those enjoyed by their peers in England.Appendix F (p53) gives moredetail on the distribution of Scotlands population.

96 These demographic facts suggest that we can level the playing field by bringing fibre to thecommunityacross Scotland: a one-off investment in fibre infrastructure thatwould underpinthe development of Digital Scotland for several decades.

97 We recommend that Scotland should bringa fibre hub to each communityof2,000people any circle drawn onthe map ofScotland to include a settledpopulationofat least 2,000people, should also include a hub.

13 http://www.standardsforhighways.co.uk/dmrb/vol5/section1/ta7999.pdf


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Is this necessary?98 To deliver an adequate 16 Mb/s service toa community ofmore than 2,000 people is beyond the

capacity of a singlewired or wireless channel. However, a fibre link will easily support thedelivery of much higher speeds to such a community and will provide service for years tocome.Thelevel of penetration we propose would also bring fibre withinwireless reachof almost all ofthefinal 10% the most widely-scattered decile of Scotlands population.

99 Scotlands backhaul infrastructure is currently barely adequate to support universal access to512 Kb/s. Although it has not been possible for us toaccess detailed or comprehensivemaps ofcurrent fibre infrastructure, we understand that thepopulation northof Oban and west ofInverness (some 250,000 people) depends entirelyon wireless or copper connections to theinternet. To movefrom512 Kb/s even to2 Mb/s (which would be too little, and too late), withoutinvesting in fibre, would require existing wireless infrastructure to be scaled up four-fold.While the scale-up of wireless provision would be a high-maintenance, temporary stop-gap,bringing fibre deeper into the Highlands andout to theWestern Isles would provide a future-proof

infrastructure requiring negligible maintenance.Once fibre is within reach, speed to the premisesis limited onlyby the local access network.

100 A corollary is that every fibre in Scotland will havemassive spare capacity for many years tocome the rating regime should take this into account. It will provide a long-term infrastructureinvestment (fibrehas an lifespan of 30+ years) that wouldmakecurrent and futurecommunications technologies as accessible across Scotland as they are in England.

Wireless connections can reacheven the most isolated homes


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3 Making it happenA national plan

101 To make16 Mb/s internet accessible to allof Scotlands population will require concertedand coordinated infrastructure planning, and sustained commitment. Our analysis suggeststhat a coordinated national strategy will be required to deliver any significant improvementon the status quo to communities outwith the major conurbations.

102 A detailed plan will require a comprehensive scheduleof the installed infrastructure, andassessment of local conditions. It should be integrated with other aspects of infrastructureplanning. Herewe onlypresume to identify the key infrastructure that mustbe developed,estimate the scope of works required, andoutline thekind of planning that is required.

103 As noted earlier, mostpeople in Scotland live at comparable population densities to those inEngland. For each postcode in Scotland we have calculated how large a circle is requiredto encompass 800 neighbouring addresses corresponding to a population of roughly 2,000(see figure, p63). We find that 69% of Scotlands residential addresses have 2,000 neighbourswithin500m, and99% have their 800 nearest neighbours within12km.

104 These figures show that standardlast mile access technologies willcater for thevastmajority of Scotlandspopulation. Low-cost wirelesstechnologies reaching distributedpopulations over distancesof 20kmand more are alreadybeing usedbysome Scottish communities in the

last1%. Fibre to the community withthe penetration we recommendwillmake next-generation speedsaccessible to all.

105 Theissue is to bridge thegaps between communities, connect them together, andconnectthem to the internet. Most of these gaps will require fibre links to provide adequate bandwidth.Scotland should also use wireless links to bridge the gaps between smaller communities, butfibre is the only transport medium that can bring nextgeneration speeds tomore than a fewthousandpeople. Scotland will need more trunk fibre than England, per head of population.

How muchfibre doweneed?

106 A detailed quantification of the investment in fibre infrastructure that would be required to allowallcommunities in Scotland to access a given level of internet connectivity is beyond thescopeof this report. However, we have made a preliminary analysis that provides an upper bound onthelength of fibre required, andsuggests a five-year rolling programme for extendingScotlands fibrebackbone network.

107 There is already extensive fibre running in the central belt, and from theEnglishborder,up the eastcoast of Scotland toOrkney and Shetland and beyond to the Faroes and Iceland.We calculate that 750 km of fibre couldextend the current network to provide a suitably locatedfibre connection for every 16,000 people, and that a further 1,700 km of fibre couldprovide localfibre to every communityof 2,000.

108 Theformer is required to support speeds of 2 Mb/s reaching everyone in Scotland. However,significant further investment in local access networks wouldalso be required to realise eventhese speeds and there would be calls for these tobe increased tohigher speeds as soon astheaccessnetworks were built. The latter would bring fibrewithin reachof every community inScotland, andenable the construction of local access networks to supply next-generationspeeds.

speed 25:1 contentionsubscribers population

128 Mb/s 100 25016 Mb/s 800 2,0002 Mb/s 6,400 16,000512 Kb/s 25,600 64,000

How many subscribers will a 512 Mb/s backhaul connection support?


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109 This fibre infrastructurewouldenablemarket andcommunity investment to light the fibres(i.e. to bring the fibres into use) and build local access networks. Ultimately, fibre will penetrateto the business and, for all but the most isolated families, to the home. Wireless links willcomplement the fixed network to completeuniversal access.

110 The map, which alsoappears on the front cover, shows a minimum spanning tree the shortestnetwork linking all of Scotlands census output areas. It is shown as a communications networkrooted in the centre ofGlasgow. Links are coloured toshowthe sizes of the populations they serve.

The map, which also appears on the front cover, shows a minimum spanning tree the shortest networklinking all of Scotlands census output areas. It is shown as a communications network rooted in thecentre of Glasgow. Links are coloured to show the sizes of the populations they serve.


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111 Theminimum spanning tree provides a good estimate for theamount of fibre required, but doesnot identify thespecific routes that the fibre will take. Detailed planning will be required toidentify routes that take advantageof existing infrastructureandprovide therequired redundancy.

112 Green links serve populations greater than 64,000 (a large virtual population is placed at the

northern tipof the Shetland Isles to include communications via the international fibres goingNorth from Shetland). These linkscorrespond well to thecurrent extent of fibre, andwe takethis as an approximation to the status quo in 2010.

113 Blue linksserve populations of less than 2,000. They should be served by local accessnetworks.Links shown in redare the links longer than 1 km that serve populations of more than 2,000,but less than 64,000. They represent the rural fibre required to bring backhaulwithin reachofall parts of the population, and havea total length of2,458 km.

114 This is the first step in elaboratinga detailed practical plan. It highlightsareas that will requireattention, and provides preliminary quantification of the resources required. A more detailedplan should be informed by a survey of existing infrastructure. It will (literally) takeshort-cuts.It will also avoid obvious obstacles, andexploit opportunities for low-cost routes providedby existing roads, rivers, canals, sewers and railways. A robust plan will also introduceredundancy to reduce or eliminate single points of failure.

115 In appendix G (p 54) wesketch a five-year plan that would roll out this additional fibre in stages,to progressively increase the minimum bandwidth thatcould be supportedacross Scotland.Such a five-year plan wouldbring fibre to the output area (FTTOA) for two million of Scotlandspopulationand, more importantly place fibrebackhaul within reach of all of Scotlands population.


2010 2011 2012 2013 2014 2015

Mb/s 0.5 1 2 4 8 16

maximum 64,000 32,000 16,000 8,000 4,000 2,000fringepopulations

km fibreadded rural statusquo 278 564 596 599 716

urban 200 282 300 391 333

Fibrereaches Glasgow, Oban Skye Mull of Kintyre Arran Islay

Edinburgh, Skye Harris Pitlochry Ullapool Lochboisedale

Aberdeen, Dumfries Lewis Grantown-on-Spey Aviemore KillinDundee, Kirkcudbright Kirkcudbright Fort William Mull AberfeldyStirling, Stranraer

Inverness, ColdstreamPerth, Kelso

Orkney, ForfarShetland Creiff

Blairgowrie

FTTOA popn 780,631 900,277 1,089,865 1,296,162 1,590,438 1,950,580

total fibre 2475 2953 3799 4695 5685 6734


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Impact116 Achieving this target would enable the development of local access networks bringing

next-generation speeds to the entire population of Scotland. It willprovide government,

public services andbusinesswith thehigh-speed connectivity they need to innovate inoperational efficiency, supply-chain management, service delivery and customer engagement.It would also provide the backhaul required to enablemobile operators to roll out 3G andLTE 4G mobilebroadband across Scotland.

117 The directbeneficiaries will include domestic broadbandsubscribers, government andbusiness users, andmobile operators. A conservative estimate is that this would enablenext-generation access for 20% of Scotlands population one million peoplewho wouldotherwise be left without by extending next-generationaccess from 70% to 90% ofScotlands population.

118 Taking20% of national figures to giveorder-of-magnitude figures, we find that this 20%accounts for around 400,000 households, a GVA of 20bn, and public expenditureof 10bn,whichwill include much of Scotlands annual5bn expenditure on agriculture, forestryand fisheries.

119 For mostof the population we anticipate that accessnetworks would use the sametechnologies as are employed elsewhere in the UK, and wouldbe provided by themarket.For many of the rest, weexpect local innovation to fill the gaps.

120 Some of our most sparselypopulated communities wouldbenefit immediately. They havealready built community-led accessnetworks, anddemonstrated that these can be cheapand effective.These include Tiree 14 , Eigg, and Knoydart 15 . TheAngus Glens BroadbandCooperative 16 already has detailed plans to provide a Fibre-to-the-Home (FTTH) broadbandconnection to everyproperty in the Angus Glens. This includes approximately 2,400 homesspread across some 500 square miles of ruralglens. To deliver next-generation speeds theyneed access to high-speed backhaul.

Costs121 The key target for a long-termstrategy is investment in dark fibre. Analysys Mason, working

for the BIS BroadbandStrategy group, have estimated the costs of laying rural fibre at between15 and 40 per metre. The lower figure is achieved byre-use of existing trunking; the higherfigurecorresponds to laying new trunkingand cables alongside roads. Thecost of installation ofthe 320 km Fibrespeednetwork in Wales and operation over 15 years is reported as 30m lessthan 100/m.

122 These figures underpin our estimates of 100m for laying the 2,500 km of new cable requiredto link allour communities (which would be reduced pro rata if undocumented fibre is broughtinto the network), and 10m perannum for operationandmaintenance of the corenetwork: atotal 250m for installation andoperation over 15 years.

123 We make no allowance for the submarine cable thatwill be required tobring fibre to theWestern Isles, because we understand that this will be installed along with a submarine powercable linking Stornoway to Little Loch Broome, which is planned in connection with renewableenergy projects.

14 http://www.tireebroadband.com/

15 http://tegola.org.uk

16 http://www.angusglens.co.uk/glensbroadband/broad.php


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124 A detailed assessment of existing trunking andexisting fibre will be needed to validate ourfigures. The discussion of financing andfundingbelow wouldapply, mutatismutandis, evento a pessimistic scenario in which they weredoubled.

125 There is certainly moreinstalled fibre in Scotland than is publicly documented. In a rationalworld this existing fibre infrastructurewouldbe linked together, andsupplemented by new fibrewhere required, to produce a core interconnect for Scotland s networks. Identification andcoordination of existing infrastructure could significantly reduce the length of newfibrerequired.

126 We are alsoaware thatBT is extending its fibre tomore exchangesand that the recentlyapproved BDUK pilot in theHighlands and Islands will also bring fibre to morecommunities.The importantpoint is to ensure that they deliver open access to affordablebackhaulat fibrespeeds. These welcome initiatives will reduce the scope and lower the costof the infrastructureprogrammerequired.

Funding andFinancingThecommunications industryhas clearly stated that it is not economic for it to finance 100% rolloutof next-generation accessas thecosts of comprehensive rollout are too great to be funded over acommercial time frame by charges that it anticipates users wouldbe prepared to bear. Wholly privatefundingandfinancing will thereforenot be enough andsome form of stimulus is required.

127 The core network that provides thisaccessibility is fundamental to Scotlands infrastructurefor the 21st century. It has tobe paid for, either bythosewho use it or bygovernment fromgeneral taxation. This is known as the funding of the infrastructure. If users pay thecostof the infrastructureas part of a broadbandaccesscharge, or government makes paymentsas the infrastructure is used, then financing is required tomeet the up-front costwhich is thenrepaid over time. Both funding and financing can comefromthe public or private sectors, asshown in the table:

128 Thecapital investment of 100m required for our mostpessimistic scenario would represent just 0.2% of Scotlands total planned capital expenditurebudget of 50b over the next 16 years.However, capitalbudgets areunder great pressure with a predicted cumulative shortfall overthenext 16 years of 14b, compared with continued investment at 2010 levels. Furthermore, asimple capital injection would not ensure that the resulting infrastructure was managed tostimulate innovation and maximise the long-term benefits for all.


Government from taxation

Up-front as assets are built or overtime as they are used. Requirespublic sector procurement

Users through servicecharges.

Business and personal, either justbeneficiaries or expansion or allusers

Local Authority borrowing

Couldchange if ScottishGovernmentgainedborrowingpowers

Corporate borrowingor project finance

Borrowingby theindustryor specificfinancing of roll-out projects

Public Private

Funding

Financing


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Funding129 Funding the 250m costof installation, charges for connection to the global internet, and

operation over 15 years will require ramp-up to a steady-state cash flow of around 25m perannum .

130 In considering future fundingmodels it is necessary to consider theextent to which fundingshould come from the beneficiaries of the rollout andhow much should be universal.The figure presents a funding-sharing hierarchy.

131 Using a pure user pays model, this would befunded by the 1m population served.> Assuming 50% domestic take-up of

next-generation broadband, it couldbe funded entirely from domesticsubscriptions by a charge of 125 perannum per active subscriptionin the area served.

> If funded entirely from charges to businessand public sector users it wouldamountto 0.125% of the relevant GVA.

> The core network would also enableother servicessuch as LTE 4G(supporting 100Mb/s mobile connections)and TVoIP, generatingfurther revenues.

132 Alternatively, the costscould be shared across Scotland.> An industry levy of around 25 per annumper domestic broadbandsubscription

could pay for thenetwork expansion.> A 1.25% increase in council taxes wouldprovide the necessary fundingfrom households.> A similar 1.25% increase in non-domestic rates would provide the entire funding

from business.> Alternatively, funding could be providedby prioritising the 100m potential up-front

investment and 10m ongoingoperating cost within the Governments existing capitaland revenuebudgets, or financing the up-front cost and making 25m (approximately

0.1% of annual revenue budgets) available to service debt andmaintain the network.As discussed in 129-130 some or all of this funding would be released through costreductions and efficiency gains in deliveringpublic services.

133 Given the magnitude of the challenge, and the pressures on household, business andGovernment budgets it seems likely that a combination of theabove approaches will berequired. Examples of interventions that could form a part of the picture include:133.1 Procurement> The government couldact as an anchor tenant by procuring connections delivering

at least 1 Gb/s to each community, to allow hospitals, libraries, counciloffices andschools to benefit from andcontribute to digital society. To deliver these services,providers would have to invest in fibre.

> These nodes would actas community hubs to which local accessnetworks can connectfor backhaul. A simultaneous procurement by all32 councils coulddeliver significantbenefits of aggregation, but wouldbe difficult to coordinate at national level.

Funding sharinghierarchy

UsersBusiness Private

Extended network beneficiariesAll fast broadbandusers

Allbroadband usersAll fixed telephone line users

EveryoneBusiness Private

Business RatesCouncil Tax

General Taxation U n i v e r s a l i t y

U s e r P a y s


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Cost savings138 We understand current networking charges paid by thepublic sector in Scotland are high

estimates vary from 53m to200m per annum. V irgin have just announced a 1Gb/s

connection with unlimited use at 22k perannum . Prices for connections in Scotland are muchhigher. For example, theConnected Communities networkon the Western Isles pays BT140k pa for a 34 Mb/s backhaul connection. A backhaul market that madeopen access tofibre available to everycommunity, wouldenable competition and bring marketprices forhigh-speed broadbandaccess in Scotland in line with metropolitan UK London prices. This wasone effect of theWelsh FibreSpeednetwork, delivering savings for both public and private sectors.

139 The International Telecommunications Union says thatcost savings from digital efficienciesin just four areas: health, education, energy and transport usingwhat they term a conservativeestimate of 0.5% savings exceed thecosts of broadband infrastructure. Reported savings arein the range 0.5%- 1.0%. Each year, Scotland spends 10bn on health and 7.5bn on educationand training; the GVA for the energy sector is 5.5bn, and for transport around 3bn: a total of26bn. Savings of0.5% on 20% of this activity would exceed 25m per annum.

140 Realising the potential savings in cost and service delivery that could come from reducedconnection costsand digitalefficiencies will require a collaborative approach both betweenpublic sectororganisations, and between the public and private sectors. The cross-sectornature of communications has been recognised by Scottish Government in defining Telecoms,including Network and Data Communications as a "Category A" commodity in its procurementvocabulary,worthy of collaboration andprocurement at a singlenational level. It appears thatfixed voice telephony contracts are already in place, but no single data capacity contracthasbeen developed for the public sector at either the Scottish or UK levels. A collaborativeapproach, with aggregated procurement of capacity across public sector bodies, and innovation

to offsetcost though commercialisationof excess capacity could deliver savings, serviceimprovements andeconomic benefits far in excess of itscapital andoperating costs.

Obstacles141 Obstacles to theefficient use of fibre to provide a backbone network include both the rating

regime, anda lack of the open access that is required to develop cooperative competition.

142 Networks effectsmean that collaboration, which is essential to get optimal coverage acrossScotland from the fibre investments of several competing providers, can provide mutual benefit.Openness is required to ensurecompetition, both in the extension of the fibre network,and in local accessprovision where we expect local innovation and specialisation to introduce

newtechnological and business models adapted to localgeographies and economies.143 On October 7th Ofcom announced regulations requiringBT to allow competitors to have

access to a dedicated virtual link over new fibre lines laid by BT, and requiring BTto offeraccess to its underground ducts and to its telegraph poles. TheEuropean Union has "largelyendorsed" this action, with the caveat that full physical unbundlingshould follow as soon aspossible. Many UK operators believe that unbundled access to BTs dark fibre will be necessaryto allow them to innovate effectively in competition with BT 19 .

144 The rating of fibre is distortionary, and the rating ofwireless masts takes no account ofpopulation densities and therefore inhibits their use in sparselypopulated areas. We examinethe rating of communications infrastructure in some detail in appendixH (p57), and recommend

that Scotland should act to remove these distortions.

19 EU approves Ofcom's unbundlingplans for BT's fibre| Broadband | News | PC Prohttp://www.pcpro.co.uk/news/broadband/358387/eu-approves-ofcoms-unbundling-plans-for-bts-fibre#ixzz12oJa1hIE


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145 Thereare existing relief schemes of which local providers, such as communitygroups,could takeadvantage.This will depend on the typeofvehicle set up to implement andmanage the localnetwork.

145.1 Small BusinessBonus Scheme> The Small Business BonusScheme provides relief to businesses with a rateablevalue

of18,000 or less, ranging from100%relief for a value up to10,000, to25% for a valueup to18,000. To takeadvantage of this schemethe provider mustbeset up as a businesswith an entry on the valuation roll, and apply for relief through the local council.

145.2 Charities> Where an organisation is set up as a charity, and registeredwith the Officeof the Scottish

Charity Regulator, it may be eligible for 80% mandatory rates relief. Furthermore, the local

authority hasdiscretionary powers to extend this relief up to 100%.145.3 Other non-profit making organisations> These are not automatically entitled to relief but local authorities again have discretionary

powers to grantup to 100% rates relief where theorganisation is providing a service whichis of benefit to the community.

Further opportunities146 Scotlands current link to theglobal internet is through LINX in London, one of thebusiest

internet exchange points in the world. Scotland's connectivity would be greatly enhanced byhavingour own internet exchange, as mostother European countries do, servicing Scottishproviders (andUK providers withsignificant business in Scotland), government and education.

147 This wouldprovide greater resilience andsecurity of supply, allowingScotland to become ahubfor telecommunications, and to compete moreeffectively at a global level, attractingmoreinternational players. It would also reduce the latency(for glossary, appendix I p60) ofcommunications between two points in Scotland (currently, almostall such localcommunications go viaEngland, making many hops on theway).

148 Connectivity could be further strengthened by linking in existing international communicationsproviders, such as the existing Farice/Danice and Hibernia cables. Installinga further directcable to the Amsterdam exchange (one of the primary exchanges world wide) would improveconnectivity to mainlandEuropeand beyond.

149 In addition to providing the connectivityScotland needs, Digital Scotland Trust wouldbe able toact for Scotland, in thepublic interest, to address such obstacles andseize the opportunitiesthat will arise.



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4 Reaping the benefits access & contentBroadband is particularly important because it delivers benefits rightacross every sector of society. Thats why broadband needs to reach allpeople, in all nations. 20 Hamadoun Tour, Secretary-General ITU, May 2010

150 We envisage a digital infrastructureand levels of access and digital literacy that will enableallof Scotland to enjoy thebenefits by:

> Enablingallour industries creative, rural, urban, large andsmall to exploitdigitalopportunities for efficiency and invention, allowing us to reshape traditional industriesand extend their markets, and provide Scotlands entrepreneurs withnew opportunitiesfor innovation.

> Supporting the provision of moreefficient public services at lower cost.> Encouraging wide-spread use of digitalaccess to government, potentially enhancing civic

societyand democratic engagement.> Openingpublication of public data to increase transparency and decrease cost. This stimulates

effectiveuse of this data to the benefit of the local economy andprovides opportunities forinnovation that can seed the development of new products andservices.

> Supporting education through access to digital resources andproviding new ways of learning,not only for those in formal education, but throughout life.

> Creating moreefficient processes for the support of public health and the provisionof medical services.

> Providingconsumers with the meansof finding, paying for and producing feedback on productsand services thatbest suit their needs and means.

> Providinga rich cultural andsocial resource for individual citizens andgroups.

151 These benefits require citizens to have access to a sufficiently powerful broadband resourceand to engage with it, and the development of internet content that will link them to theservice of function they require.

152 Motivations for digital engagement, and reasons for digitaldisengagement vary. TheCommunications Consumer Panel provides a framework with five broad aspects that mustall be addressed for successful engagement: to get interested; to get online; to make it work;

tomanagerisks; toenjoy benefits. There are no magic bullets here: all sectors havea role toplay in ensuring that all members of society share in the benefits of a digital society.

Access breaking down the digital divide153 A broadbandsystem is onlyable to deliver universal benefits to citizens if they have both access

and themotivation, opportunities andskills required to use it effectively. Digital inclusion the inclusion of every individualwithin thedigital society requires that each person hastechnical meansof access, skills that enableautonomy of use, andappropriate social supportnetworks. Digital inclusion should be a universal right, because it stimulates social inclusionand extends equality of opportunity.

20 http://www.egovmonitor.com/node/36327


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The Royal Society of EdinburghDigital Scotland: an interim report for consultation

Social exclusion162 Uptake of digital communications is not onlya question of local access. People remain

unconnected for a variety of reasons of cost, availability and choice. Those well-connected use

the internet to accessgoods and services, jobs, benefits, friends andrelations. Those alreadymostdisadvantaged are least likely to be connected.

163 TheOfcom Communications report for 2009 identified that only 39% of households in Glasgowwereconnected to broadband, which compares with 73% of households in Aberdeen and72%in Edinburgh.

164 In 2005 broadband take up in Scotland stood at31% (England 36%;N. Ireland 25%;Wales24%).In 2010 Scotland at 61% has fallen behind, with the lowest broadband take up ofall (England73%; N. Ireland 70%; Wales 64%).

165 In 2010, Scotland has the UKs highest figure for involuntary non-ownership of internet services 15% of the population. Outside the coreareas of Glasgow, Clyde, Lanarkshire, Lothian, Forth,Grampian, Tayside& Fife this rises to 18% of the population.

166 Whole communities risk beingleft behind in the transition to a digital society 21 . Increasingly,theconcept of socialexclusion needs to include digital exclusion since moreandmoreopportunities andservices depend upon online communications. Scotland hassome of themost deprived neighbourhoods in Europe. Ensuring access for members of these communitiesmust be an essentialpart of urbanandsocial regenerationstrategies 22 .

167 It is clear therefore that access is only a first step. A number ofdigital divides remain importantandwithout policies to address them, universal access will not lead to universal digitalinclusion. These divides include:>

generational (younger peopleare more tuned in than older people)> technological (communities with slower connectivity are left further and further behind)> wealth (those who can affordneither access nor substitutes such as travel,

are excluded)> gender (men generally have better access to digital technology although this may

be changing)> educational (those with higher levels of education are more likely to benefit).

168 Many of these digitaldivisions exacerbate existing inequalities and disadvantages. However,experience shows that catchingup can be relativelyswift, andcan help address otherdisadvantages. But it is not likely to happen without targeted interventions.

169 TheCommunications Consumer Panel , set upby the CommunicationsAct 2003as anindependent body to influence Ofcom, government and industry to protect and promotethe interests of citizens, witha particular responsibility for vulnerable consumers, includingolder, disabled and low income people, hasset out a framework for digital participation thatstresses the need for:

> Support in purchase and set-up. Many need help in choosingand settingup equipment,particularly the elderly and disabled.

> End-to endsupport. Ready, patient andcompetent support is needed in gettingonline andlearning to exploit the internet.

> Addressing theneedsof thedisabled. Disabled peoplehave particular problems due to the

lack, or high cost, of accessibleequipment and software.

21 Many of these are being explored throughprojects at dot.rural, the rural digitaleconomyhub at theUniversityof Aberdeen.22 Bailey,N., J. Flint, et al. (2003). Measuring Deprivation in Scotland: developinga long termstrategy. Final Report.Edinburgh,

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170 Public accesspoints are crucial, both to providean opportunity for those without a personalconnection to get online, and to providea safeenvironment where users can learn from peershow tomake it work and manage risks. Such accessand support points are already beingcreated through Scotlands 542 public libraries. They werefounded to provideaccess to books,

butas broadband joins the printed wordas a cultural and social resource for thecommunity,their role is beingand should be expanded.

171 Many rural and city libraries are playing an increasingly important role in this. In Edinburghfor example, thereare 26 libraries with free broadband internet access. They have developedandsupported the use of social media, have created innovative processes of communicationandare collaborating with bodies such as theBBC in learningcampaigns (see evidence fromCity of Edinburgh Libraries). Although libraries should be important components of a publicaccessstrategy, other locations, such as communitycentres couldalso provide access in bothinner city and rural areas.

172 It has been suggested to us however, that for older anddisabled people, accessandsupport

are not enough (see evidence fromProfAlan Newall), but that a major reason for the digitalexclusion amongst this group is thedesign of web sites andother interfaces between humanbeings, computers and the internet. The recentlypublished Manifesto for a NetworkedNation23 reported that a halfof those aged 65-74 and over threequarters of those over 75are offline. Of those people over 65 who do not use the internet, greater than 60% say IT isnot for me, and more than 30% say I do not have the skills. Research implies that themajorityof those who voluntarily exclude themselves are probably tooscared and/or confusedby the technology to beprepared to try touse it. This is a faultofdesign and shouldbe tackledfrom that perspective as well as attempting to educate older people to battle with badly designed technology. Possible options to address thiscould be:

> Government procurement rules to require inclusive design;> Government requirement thatdesigners of government web technology should be made

aware of theneeds of older anddisabled people;> Government promotingeducation and training for designers;> Encouraging research into design of technology suited to older people.

173 TheCommunications Consumer Panel stresses the need for Government action to increaseaccessibility by ensuring that itsown web sites andservices are fully accessible, enforcingcurrent accessibility guidelines and including accessibility requirements in all new contracts.But it is also recognises that there is a relatively small, but highly resistant core of peoplewhowill almost certainlynever use the internet, such that suitableofflinealternatives to online

public service delivery must be retained.

Content accessing services and information174 Effective use of the internet in educationandpublic services, and the online availability of public

data and public service broadcasts decreases the costs of providing services and increase thevalue of an internet connection to the user. By exploiting digital technologies public services canbe provided moreeffectively at lower cost. Public procurement can drive the adoption of openstandards that favour usability and accessibility. Public procurement of open source solutionscan stimulate further developmentand use. Procurement should recognise thatopen sourcesolutions can bringadditionalvaluebecauseopen source allows others to reuse and buildonthepublic investment they embody. For a matureexample, see gvSIG 24 , a project of theRegional Ministryof Infrastructure andTransport of Valencia, Spain. They find that makinglocal solutions open sourcecan bring a far wider rage ofexpertise tobear on local problems,seed communities of both developers and users, and stimulatenew entrepreneurial activity.

23 http://raceonline2012.org/sites/default/files/resources/manifesto_for_a_networked_nation_-_race_online_2012.pdf24 http://www.gvsig.org/web/home/organization/mission-vision-and-values/



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175 Internet access provides newopportunities in health andeducation. In health it has thepotential to help evaluate thestate ofhealth ofcitizens andprovide remote diagnosis,particularly for those in remoteregions. In education it can beinteractive and include real-timeinteraction with remote peers,experts, and environments. It isbeingused to roll out innovationsin curriculum and deliveryimmediately available to anentire population of students.It expands educationalopportunities, both in the classroom, by givingstudents accesstoexpertise and experiences not offeredat their local school and for those who may bephysically unable toattend. The benefits of which spill over tosociety as a whole.

176 A wide range of government services can already be accessed online, either providinginformation on how to access public services, or increasingly to fully carryout all of thefunctions of a particular service. Government can also stimulate development of thedigitalsociety by making public data open i.e. freelyavailable for use and, importantly, reuse.Providingopen access to data not only reduces costs, by removing theneed for registrationand authentication of both internalandexternal users. It also stimulates innovation andentrepreneurship by providingopportunities for innovative mash-ups thatbring datatogether in novel ways, for analysis, visualisation and exploitation.

177 Advocates of open access argue that government data is public data, collected and analysedat public expense. Where this data has social value, economic theory suggests it should bemade availableat marginal cost. In the digital world, this marginal cost is practicallyzero.In fact, making data open reduces the costs of managingauthentication andaccess. The UKGovernment publishes much of its data through the websitewww.data.gov.uk, building on thework of the Open Knowledge Foundation. We believe that Scotland should establish itsownopen data portal to stimulate thereuse of public data resources for the analysis, management,exploitation and marketingof social assets.

178 Finally, an open sourcepolicy for publicly-fundedsoftwaredevelopmentwould allow differentbranches of governmentto benefit from each othersinvestments, while retainingflexibility for localcustomisation andimprovement. Thiswouldreduce total IT costs forgovernment across Scotlandand also stimulate the localeconomy by increasing theIP capital available to localbusinesses seeking to buildadded value onto thesepublic investments.

25 http://www.pathfindernorth.co.uk/benefits/how-fast/26 http://www.ltscotland.org.uk/glowscotland/about/Whatisglow.asp

EducationPathfinder7 25 is an initiative that hasdelivered high speedinternet access to over 1,200 sites (including primary &

secondary schools, council offices, libraries and harbours)across 7 of Scotlands rural and remote Local Authorities(ScottishBorders, Dumfries & Galloway, Argyll & Bute,Highland, Moray, Orkney Islands and Shetland Islands).

Glow26 , is a Scottish national intranet for education. Glowwill break geographical andsocial barriers andallowjoined-up working the length andbreadthof Scotland. This willtransform the wayeducation is delivered. Itwill workalongside Curriculum forExcellence to build capacity andensure universal access to a first-class education for Scotland.

Culture

Scran is a digital resource drawn from cultural collections acrossScotland for use at all levels and managed by the Royal Commissionon the Ancient andHistorical Monuments of Scotland (RCAHMS).

It is one of the biggest online cultural digests in the UK, receiving1million hits a day, available in all schools in Scotland, nearlyall thecolleges and universities, two thirds of the libraries and over 5,000teachersas at home users as well as being available to individualsubscribers from allover theworld.

RCAHMS, in itsevidence to us stressed the importance ofcoordinating collection, collation and making available informationabout the historic environment, which is progressively lost through

natural decay andphysical re-development. In a digital world, it isvital that allpublic bodies that gather such evidence should collectonce, butmake available for use many times.


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179 The provision of public open accessWiFi can also stimulate the local economy by providinglocals andvisitors with access to location-based services. For example, Historic Scotland is thelargest operator of visitor attractions in Scotland, with 345 properties, ranging from neolithic

standingstones to historic castles. Of these, the vast majority are unstaffed, andmany lie inrelatively remote areas. WiFi at these sites could enablemuch richer location-basedinterpretation,and provide a platform for services directed at residents and tourists.

180 We have not considered issues of broadcasting policy in any dep

Digital Scotland

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