Written Statement - Further investment in broadband

Following my oral statement last month I want today to set out our plans for further investment in deploying superfast broadband beyond the Superfast Cymru project.  These plans will also be presented in an oral statement during plenary on Tuesday 8 November.

As we have outlined in Taking Wales Forward, our aim is to bring fast reliable broadband to every property in Wales. The real benefit of Superfast broadband is how it can improve lives and support businesses now and in the future.

Since 2012, the Welsh Government has invested over £162 million of EU and public funding in broadband infrastructure across Wales where the commercial market alone could not make the case for investment.

Our flagship Superfast Cymru project has already brought high-speed broadband to nearly 614,000 premises across Wales and is forecast to deliver over 100,000 further premises before it closes in 2017. Our Access Broadband Cymru project has operated in parallel, providing broadband to over 5,000 premises using a range of technologies delivered by multiple suppliers.

Our Programme for Government reinforces our commitment to broadband investment and this is reflected in the recent budget settlement.

Over the next year we intend to meet our existing commitment to the final year of the Superfast Cymru project by investing up to £62 million. In addition we are currently assessing the responses to the recent consultation with the telecoms industry in relation to an additional £12.9 million to extend the reach of the Superfast Cymru project next year. This is the amount that BT forecasted last year will be returned to the public purse through a gain-share clause within the current Superfast Cymru contract.

The gain share clause allows Welsh Government to benefit from the success of our investment in BT’s network via the Superfast Cymru project.  When the take-up of broadband services exceeds the level forecast by BT at the outset of the contract, a proportion of the profit made on every further wholesale service they sell must be placed into an investment fund.  The investment fund can be either reinvested in the project, or returned with interest, to Welsh Government in 2023. Subject to detailed analysis and dialogue with BT, we expect that this additional funding outlined above will enable additional premises to be reached through the Superfast Cymru contract by December 2017.

In anticipation of the conclusion of the Superfast Cymru contract next year, we have now embarked on the preparatory work necessary to establish a successor broadband investment project.

Modelling and forecasting by both the Welsh Government and the UK Government indicates that the Superfast Cymru investment fund will eventually yield between £30 million and £50 million by 2023 as take-up of fibre services funded by our investment reaches between 35 per cent and 50 per cent over that period.   Take-up of fibre services within the Superfast Cymru intervention area currently stands at around 29 per cent.

So, should we reach the 50 per cent target we set ourselves in July 2015, around £50 million will be released. Of this up to around £37 million will be available to re-invest in providing access to superfast broadband to additional premises after the 12.9m reinvested in to Superfast Cymru is taken in to account.

We committed £20 million in the recent budget over the next four years to support this activity and we will use this funding to leverage significant additional investment.

We are in discussions with the Welsh European Funding Office to secure a further £20 million of Structural Funds to continue the roll-out of superfast broadband.  We are in the early stages of the application process but we remain confident that the funding will be available, subject to WEFO approval, as a result of the UK Treasury’s guarantee to honour EU bids approved prior to exit from the EU.

We also have an outstanding commitment from the UK Government of £2 million towards a new superfast broadband project. We will continue to press the UK Government for additional investment in Wales that builds on the success of Superfast Cymru and contributes to UK Government policy goals.

Overall, we anticipate that the successor to Superfast Cymru will be underpinned by a public sector budget of up to £80 million.  This, in turn, will leverage private sector match funding to further extend broadband coverage to the hardest to reach premises across Wales by 2020.

We are also renewing our commitment to the Access Broadband Cymru scheme with further of £1.5 million over the next two years to ensure that this vital lifeline continues to operate in parallel to Superfast Cymru and successor projects with equivalent funding in place to extend for a further two years beyond 2018.

In November, we will launch an Open Market Review to establish at a premises level where superfast broadband has been delivered to date, both through Superfast Cymru and through commercial deployment. We will also consult on where the market plans to invest over the next three years. We will engage with the telecoms market over the next weeks and months to help shape and inform our intervention area and procurement strategy. In developing the next intervention, value for money will continue to be a priority.

We currently aim to launch the procurement process in February 2017 so that a contract can be awarded in sufficient time to enable delivery to commence in January 2018, following project closure of Superfast Cymru in December 2017.