Scottish Government

7. Implementation Plan

This section is only relevant should the Executive decide to proceed with some form of intervention.

Undertaking an intervention to address the 'not-spots' will not be straightforward or an immediate process. The demand base may change as BT addresses some cluster areas as part of normal business or through the remainder of the SSI project. Similarly the supply of new services through alternative means will not be straightforward, as a procurement process will have to be undertaken with the consequent timescales and overheads.

7.1 Margins

Before discussing possible implementation options in detail, as background it is useful to understand the margins available to a supplier, once the capital has been delivered and the network is in place. The following table shows typical figures and is based on the following assumptions:

• 47 clusters, each with 10 subscribers
• 90% are residential paying £20/month
• 10% are business paying £40/month
• DSL backhaul and WiFi distribution
• £50 site costs per cluster per month for backhaul location, all other sites provided at no cost
• One support staff employed to provide support and maintenance across all sites

Table 7.1: Typical Margins

It is clear that even with all available clusters, the supplier is still working with small margins. These figures also assume salaries and other supplier costs are accounted for elsewhere through their existing business.

7.2 Community Grants or Central Procurement

There are two main options for direction of funds used to bring supply to clusters:

• Community Grants
• Central Procurement.

7.2.1 Community Grants

Under this option, communities would be tasked with developing their own demand requirement and relationship with a supplier. This supplier could be chosen from a list of registered suppliers held by the Executive and who had complied with a previous registration scheme.

The community would work with the supplier and submit a proposal to the Executive for funding. Assuming this submission passed a set of required criteria - e.g. demand commitment, technical design - then a grant would be provided to the community to use with the supplier to bring service to that area.

The benefit of this approach is that after the initial project setup, the central team does not have to manage a procurement - with the timescales required - and resource is only required to manage these applications. The Executive could commit a budget and respond to community action with further budget released if required.

The downside to this approach is twofold. Firstly the suppliers are offered smaller subscriber numbers, which makes it much more difficult to build a sustainable and fully supported service. Suppliers need some reassurance of demand on which to invest in resource to install, maintain, support and develop the service, as the subscriber would expect. If the supplier has to compete with others for each small cluster, this is made much more difficult. Secondly, the approach relies on a well functioning community, which is able to generate interest and commitment amongst the potential customers and also manage the funding application to the Executive and the interaction with the supplier. Whilst there may be a few communities who have these skills and resources, many will not and will, therefore, be disadvantaged under this option. The numbers involved are low, which makes it unattractive for suppliers to spend on trying to generate interest. These issues have been learnt through the excellent practical experience obtained through the Hi-Wide project undertaken by HIE in the past.

7.2.2 Central Procurement

Under this option, the Executive would be required to work on behalf of the communities and subscribers affected by organising and managing a suitable supplier service. The Executive would initially set-up the project, which would work to define the clusters in more detail in order to develop a requirement to take to the market. This would need to include some commitment from the subscribers affected to take service when made available. A procurement would be undertaken to contract with a suitable supplier who would design, install, maintain and develop the service to all of the clusters identified. The subscribers would contract with the supplier directly.

The benefits of this approach is that a well-defined service can be developed with the appropriate support and maintenance built in from the start. Aggregation of the demand from the clusters identified will present suppliers with a stronger base, albeit still low, on which to build this service offering.

The drawbacks are that this will require EU procurement to be undertaken with typical timescales of at least six-nine months through to contract signature. The Executive may also need to add on additional timescales for notifying the Commission and obtaining approval before even starting the procurement - this could add several months to the timescale involved. In other words, it could take another year for this approach before implementation could begin, in 2008.

7.2.3 Hybrid Model

Both of the above approaches have benefits and drawbacks. Ideally, the solution should be delivered in a timely manner, but in the most sustainable way by being as attractive as possible to suppliers.

A suggested approach is as follows:

• Executive draws up a list of accredited suppliers
• Identified clusters are managed into a set of defined requirements with commitment to take service
• Requirements are passed to suppliers who are open to bid for a number, or all
• Executive reviews bids, and awards preferred supplier(s)
• Preferred supplier(s) work with cluster to develop final design and intervention funding level
• Cluster funds are divided by subscriber numbers and passed from Executive to cluster subscriber and on to supplier
• Supplier is awarded funding on subscriber connection.

This approach has the advantage that the Executive has control in the selection of suppliers, and the opportunity for all clusters to be addressed by one supplier as one possible option. It also avoids the requirement for EU procurement with its associated lengthy timescales.

The drawbacks are that the Executive has to commit resource to work with both suppliers and communities in order to ensure the most sustainable option is delivered. This will be essential to ensure that clusters do not fail due to poor design and support. In addition, the suppliers have an extra burden by working with individual grant mechanisms, rather than central management, and this overall overhead may be too great for all concerned. Finally, there is the issue of how the flow of funds would work in practice from the public agency through subscriber to supplier.

Based on this analysis of the options, it is suggested that undertaking a Central Procurement is the most feasible option and should be adopted within the Implementation Model.

7.3 Approach

The recommended approach is to pursue an Implementation Model, as outlined, and as described in the following flowchart.

Figure 7.1: Implementation Model

The Executive can determine how far to follow this model. The flow of activity matches the four categories of intervention from locations addressed through BT alone, down to one-off grants which may, or may not, be taken up.

The process places emphasis on action from BT, in the first instance, to deliver a solution. Following that, and only if the Executive determines that further intervention should be pursued, any other clusters are presented to the market to be addressed by the most appropriate and cost-effective solution. It is likely that there will be interest from some more local ISPs in particular around the results of this work but this is likely to involve moving the Intervention Model forward to a procurement phase.

The project duration has been set over a five-year period, which concludes as BT's 21 CN network is due for completion across the country. Although 21 CN will not resolve local access reach issues, 2011 appears a natural point at which to readdress possible supply issues.

The full implementation steps are expanded in more detail below.

7.3.1 Project Initiation - Month 1-2

As a first step to an implementation, a project team will have to be set-up. This may be entirely in-house or, as an alternative, may be outsourced to a suitable company using an internal project sponsor. External support could be commissioned to work with the internal team in a support role or, alternatively, the external support could be tasked with running the project for its duration and reporting in to the internal project sponsor.

The project team, however sourced, will be required to define the project tasks in full, define the model to be pursued, work with the identified clusters to finalise requirements, procure any solutions required, oversee implementation and provide ongoing project support, as required, for the duration of the project.

The Implementation Model requires to be fully defined by the team, such that key criteria and constraints are agreed, including factors such as:

• Overall financial limits available for intervention, - in stages if required
• Grant per premise (if a maximum is required) - e.g. not to exceed individual satellite grant levels
• Service specification (minimum specification) - e.g.ADSL equivalent.

In addition, the following will be required:

• Decisions made on how to interact with the cluster, e.g. through local champion
• Development of a database system ( e.g.MS Access) to accurately log issues and allow ease of update and information on progress through a range of reporting outputs
• Management of expectations through an updated communication strategy
• Consideration of state aid issues.

7.3.2 Working with BT - ongoing

This is an essential stage with an ongoing dialogue required with BT to work on possible solutions being delivered as part of normal business or through any SSI underspend, if available. If this underspend is significant, then a number of these initial clusters could be addressed without having to consider a lengthy and costly additional procurement process. The project team will have to refine the existing cluster information to present this to BT for possible solutions. Management of this process and maintaining pressure on BT for suitable options must be carried out with a suggested technical input also being available to the team. If clusters are solved, the team must update the database to maintain accuracy.

7.3.3 Refine Clusters - Month 3

The cluster information held in the Executive spreadsheet and reported on through the Cluster Analysis process will have to undergo a sanity check to determine more accurate numbers and locations of affected subscribers. The database (upgraded from the existing spreadsheet) will be required to capture details in full and with a mechanism provided for allowing clusters to contact the Executive and log additional subscribers. If the Executive manages to obtain additional information from BTe.g. unfulfilled orders, then this should also be added to the analysis to provide a fair prioritisation for solutions.

7.3.4 Procurement - Month 3 - 9/12

An OJEU notice will have to be issued and a Request for Proposal tender document developed along with evaluation criteria. Assuming the tender document and evaluation process is well defined, the Open Procedure may be the most appropriate as the number of full bids received is unlikely to be high.

7.3.5 Category 2 Provision - Year 2 onwards

Following selection of suppliers, the clusters that have not been addressed by BT will be presented to the suppliers for a final detailed design and costing to meet the cluster requirements. This will require a further visit to the cluster area, discussion with subscribers on most effective design and final implementation plan. The project team will further evaluate this and once agreed, the supplier will be awarded a contract to deliver the solution to the cluster(s) involved. Terms and Conditions for these contracts will have to be defined by the project team beforehand.

If, after receiving supplier bids, the solutions proposed for a Cluster Area do not offer value for money, and are not affordable, then the Cluster Area falls into Category 3. Note that the funding threshold needs to be clearly defined prior to assessing supplier bids for Cluster Areas.

7.3.6 Category 3 Provision

Where suppliers cannot supply a cluster at a funding level within the set criteria, the model moves the requirement into Category 3 where individual satellite grants are offered for the subscriber to take up if they wish.

In addition, there are a number of subscribers already identified by the Executive through the subscriber spreadsheet, which indicates the only feasible technical solution is satellite. These subscribers can be offered a one off grant at an early stage once the clusters and the database have been refined.