economic impacts of mobile communications in scotland report to

Economic Impacts of Mobile Communications in Scotland

Report to the Scottish Government

January 2014

Economic Impacts of Mobile Communications in Scotland Report to the Scottish Government

www.sqw.co.uk

Contents

Executive Summary ................................................................................................................. 1

1. Introduction .......................................................................................................................... 5

2. Barriers and enablers for improving mobile service levels ............................................ 9

3. Estimates of future coverage and service levels in Scotland ....................................... 29

4. Economic impacts of improved mobile service levels .................................................. 44

5. Recommendations ............................................................................................................. 63

Annex A: List of consultees ................................................................................................ A-1

Annex B: Summary of previous evidence on the economic impacts of mobile communications ................................................................................................................... B-1

Annex C: Summary of model assumptions for coverage, speeds and costs ............... C-1

Annex D: Glossary ............................................................................................................... D-1

Contact: David Mack-Smith Tel: 0131 243 0723 email: [email protected]

mailto:[email protected]


1

Executive Summary

1. In June 2013, the Scottish Government commissioned SQW, in partnership

with Real Wireless, to undertake a study into:

the barriers to improved mobile coverage, including 4G, and the means

through which these barriers might be addressed

the economic impacts associated with introducing improved mobile

coverage to non-commercial areas of Scotland (i.e. the impacts

attributable to addressing the barriers to coverage).

2. Our key findings are as follows:

The commercial roll-outs of 4G services over the next two to four years

will substantially improve coverage of both data and voice mobile

connectivity across Scotland.

As part of the 4G licence award, Telefónica O2 has a coverage

obligation to provide “a mobile broadband service for indoor

reception to at least 98% of the UK population … and at least

95% of the population of each of the UK nations … by the end of

2017 at the latest.”

Based on public statements and discussions with Mobile

Network Operators (MNOs), we anticipate that operators will

deploy combined 2G/3G and 4G technologies at all macro sites,

and that all operators will seek to provide 95% indoor 4G

coverage of Scottish premises by the end of 2015 – i.e.

significantly earlier than O2‟s licence obligation of 95% by the

end of 2017.

Beyond 2017, we anticipate an increased focus on 4G since it

will support voice without relying on 3G or 2G for voice service.

i.e. overall voice coverage is determined by 2G coverage up till

2017, at which point it is determined by the higher of 4G and 2G

coverage.

Once c. 95% indoor coverage is achieved, by 2015, further

gradual 4G coverage enhancements are expected, reaching a

plateau of 98% indoor coverage by 2023 (cf current 2G indoor

coverage of about 85% for our modelled „representative

network‟).


2

Our indicative estimates are that the average indoor mobile data

speed1 available across Scotland will increase from about 2.5Mbps in

2012 to approximately 36Mbps by 2023 – equivalent to an average

compound annual growth rate of 27% over this period.

Disaggregating this into the average speeds per local authority area

reveals a potentially surprising scenario by 2017, in which users in the

most densely populated areas such as Glasgow and Edinburgh may

not, on average, be experiencing speeds much higher than those for

people in the least densely populated areas such as Eilean Siar and

Shetland, as the more comprehensive coverage in the cities is offset by

the much greater contention issues. Areas in between these two

extremes – such as Midlothian, East Renfrewshire and

Clackmannanshire – may well benefit from having a combination of

very high 4G coverage and much lower low densities of users than in

the cities, resulting in relatively lightly loaded cells and high average

speeds.

Planning constraints on mobile networks are perceived to be

significantly more restrictive in Scotland than in the rest of the UK,

entailing greater uncertainty, delays and administrative resources for

operators, and there is a risk that Scotland could be put at a

competitive disadvantage because of this. In particular, with the

potential for large numbers of low cost small cells to be deployed, it will

be important to ensure that planning guidance for these sites is

unambiguous and consistently applied, minimising planning-related

uncertainty and administrative costs for MNOs.

Improved thermal insulation of buildings makes indoor coverage

increasingly challenging, as this also reduces the strength of mobile

signals. Operators offer their customers femtocells in order to improve

indoor coverage in a home/office, but current levels of awareness of

this option are not very high.

Otherwise, the barriers to improved mobile coverage are primarily

financial: the combination of capital and ongoing operational costs

associated with base stations, with relatively little incremental revenue

(bearing in mind the trend towards including monthly allowances for

voice and data usage within service plans) can make it unattractive to

1 This is a notional total figure which adds downstream and upstream speeds together.


3

roll-out service to sparsely populated areas unless there is a

competitive advantage to an MNO in doing so (or competitive

disadvantage in not doing so). In particular, the costs of power,

backhaul, site rentals and non-domestic rates are very important

contributors to the total costs of ownership for a cell site.

Our research highlighted both that non-domestic rates are an

important component of the overall costs of cell sites, and that there

can be significant uncertainty as to what the rates liability for different

types of site may be – which would only be confirmed through site-

specific assessments. For the potentially large numbers of small cells

in urban and rural areas over the next few years, a site-specific

assessment would appear to represent a disproportionate use of both

the assessors‟ and MNOs‟ time, adding to the total costs of these sites,

and hence reducing coverage.

Overall, the net Gross Value Added (GVA) impacts for Scotland

associated with improved business productivity through the projected

mobile service level improvements (since the 2012 baseline) rise to

£308 million p.a. by 2023 – equivalent to adding about 0.025% to

Scotland‟s annual economic growth rate over the period.

Additionally, the estimated value of the public sector productivity

impacts for Scotland associated with improved mobile service levels

(since the 2012 baseline) rise to about £116 million p.a. by 2023.

We have also modelled a potential set of interventions (reducing

planning constraints, reducing non-domestic rates in underserved

areas, and reducing site rentals through access to publicly owned

land/buildings). In summary, the assumed interventions could be

expected to make a material difference in accelerating the 97% and

98% indoor coverage levels in Scotland (e.g. pulling forward the 97%

coverage level by about four years) – though they are unlikely to be

sufficient to increase coverage much above the 98% coverage levels

over our modelling period.

The Present Value of the net GVA impacts associated with the

assumed set of interventions is £18 million over the period 2013 to

2023, and the PV of the value of public sector productivity benefits is

£7 million.


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3. Our study confirms that certain interventions could have a material impact in

accelerating coverage to parts of Scotland, and that this could have significant

benefits, both in terms of net GVA impacts and in the delivery of public

services. While there are some important constraints on which the Scottish

Government can have little direct influence (e.g. the cost of equipment, and

the cost of electricity supply in remote areas), there are some areas in which

public policy can help to reduce the barriers to rollout.

4. In the light of our study findings, we offer the following recommendations to

the Scottish Government:

Recommendation 1. Minimise the barriers for 4G roll-out in Scotland

over the next two to four years. In particular:

R1.1 Reduce planning constraints.

R1.2 Reduce the complexity and burden of non-domestic rates

on mobile cell sites, especially small cells in under-served areas.

R1.3 Explore the options for reducing the costs of fibre backhaul

for cell sites in underserved areas.

R1.4 Consider sharing with MNOs information on land and

buildings owned by public bodies in underserved areas, which

could potentially be used for mobile infrastructure.

Recommendation 2. Working with public sector partners, help to

incentivise operators to extend their networks as far as possible, by

putting a strong emphasis on the importance of coverage in the

competitions for public sector mobile connectivity contracts.

Recommendation 3. Review the need for supply-side interventions in

addressing the most remote areas, once the commercial 4G roll-outs

have been allowed to run their course.

Recommendation 4. Discuss with Ofcom the potential approaches for

monitoring changes in the real-world user experience of mobile

services.


5

1. Introduction

1.1 The Scottish Government considers the extent and quality of mobile coverage

across Scotland to be an important aspect of its aspirations for achieving

world class levels of connectivity.

1.2 In June 2013, the Scottish Government therefore commissioned SQW, in

partnership with Real Wireless, to undertake a study into:

the barriers to improved mobile coverage, including 4G, and the

means through which these barriers might be addressed

the economic impacts associated with introducing improved mobile

coverage to non-commercial areas of Scotland (i.e. the impacts

attributable to addressing the barriers to coverage).

1.3 In this introductory section of our study report, we:

briefly discuss the context for the study

outline the study methodology

set out the structure of this report.

Study context

Usage of mobile data is growing rapidly…

1.4 Our study was commissioned in the context of mobile data applications

becoming ever more important and widely used by both businesses and

consumers.

1.5 The increasing penetration of smartphones and tablets, combined with

growing usage of data-hungry video applications, has led to massive growth

in the amount of mobile data traffic. According to Ofcom, total data volumes

over mobile broadband increased by 48% in the UK between 2012 and 2013,

after doubling the previous year2.

2 Source: UK Communications Infrastructure Report 2013, Ofcom


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1.6 Furthermore, rapid growth is set to continue: Cisco forecasts3 that global

mobile data traffic will increase at a Compound Annual Growth Rate (CAGR)

of 66%, rising to over 11 billion Gigabytes per month by 2017.

…driving substantial mobile network investment

1.7 This growth poses major challenges for mobile network operators (MNOs),

and they have responded with substantial investments in spectrum and

infrastructure in order to improve the user experience, and to cope with

increased traffic.

1.8 The introduction of Long Term Evolution (LTE) technology is central to the

plans for increasing mobile network capacity, and the operators are currently

in the process of rolling out this technology across the UK following the 4G

spectrum auction in 2013 – with substantial collaboration and network sharing

between groups of operators in order to reduce implementation and

operational costs.

1.9 This roll-out entails substantial investments in increasing the number of base

station sites, as well as in the rights to the required spectrum. At the Digital

Scotland conference in Edinburgh in May 2013, O2 suggested that the UK

mobile network operators would invest a total of about £5 billion in 2013

alone, including the cost of spectrum and network upgrades.

Scotland faces particular challenges in terms of mobile coverage

1.10 MNOs primarily base their coverage decisions on a commercial basis:

whether the deployment of infrastructure at a location provides sufficient

return on investment. Hence, areas of poor coverage are generally those with

the lowest population density.

1.11 Historically, Scotland has been the most challenging part of the UK for mobile

coverage, due to the sparse population in large rural areas and the

mountainous terrain. Looking at the proportions of the country without

(outdoor) signal from any operator, we see (Figure 1-1) that Scotland‟s

geographic coverage is worst of the UK nations by a considerable margin for

both 2G and 3G technologies, with about 51% of Scotland‟s area lacking any

3G signal, and 26% lacking any 2G signal.

3 Source: Cisco VNI Mobile Forecast, 2013.


7

Figure 1-1: Proportion of geography/premises with no outdoor 2G/3G signal from any operator

Source: Ofcom 2013 UK Communications Infrastructure Report

1.12 In terms of premises coverage, Scotland also fares worst for 3G, with 3.4% of

premises lacking any outdoor 3G signal; although Scotland‟s 2G premises

coverage is actually rather better than that of Northern Ireland and Wales

(0.7% of premises in Scotland without any outdoor 2G signal, versus 1.5% in

Northern Ireland and 1.2% in Wales).

Study methodology

1.13 In assessing the barriers to – and enablers for – improved mobile service

levels in Scotland, and the economic impacts associated with this, our study

has drawn on the following:

Desk research - reviewing previous studies on the economic impacts

of mobile communications.

Consultations – with 22 organisations from the private and public

sectors, using structured topic guides agreed with the client.

Modelling of coverage, speeds and impacts – developing an

integrated model of the coverage and typical speeds available in

Scotland over time, and the economic impacts associated with

improved mobile service levels since the baseline year (2012) and with

certain potential interventions.

1.14 The main assumptions underpinning Real Wireless‟s estimates of future

coverage and service levels are summarised in Annex C, while the key

assumptions on the economic impacts are included in section 4 of this report.

4.6%

0.2%

6.0%

0.5%

26.2%

0.7%

50.5%

3.4%

8.0%

1.5%

13.3%

2.6%

15.7%

1.2%

21.9%

2.3%

0%

10%

20%

30%

40%

50%

60%

2G geographic 2G premises 3G geographic 3G premises

England Scotland Northern Ireland Wales


8

This report

1.15 Our report is structured as follows:

section 2 discusses the barriers and enablers for improving mobile

service levels, drawing on our desk research and consultations, and on

Real Wireless‟s own technical experience and expertise

section 3 sets out our estimates for future coverage and service levels

in Scotland, with and without intervention

section 4 presents our assumptions and findings on the economic

impacts of improved mobile service levels in Scotland, and those

impacts attributable to intervention

section 5 summarises our recommendations.

1.16 There are four annexes:

Annex A lists the organisations and individuals consulted for this study

Annex B presents a brief overview of current literature on the economic

impact of mobile communications

Annex C summarises the key assumptions used by Real Wireless in

estimating future mobile coverage and service levels.

Annex D provides a brief glossary of technical terms used in the report.


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2. Barriers and enablers for improving mobile service levels

2.1 'Mobile coverage' is a blanket term, used in various contexts to have rather

distinct meanings regarding the extent and quality of mobile service provided.

In this section, we will discuss different environmental, technical, market and

regulatory elements that can affect the provision of mobile services and

whether their quality is 'acceptable'.

Factors affecting acceptable signal quality

2.2 At its basic level, mobile coverage is the provision of adequate mobile signal

to locations of interest to mobile consumers (whether in their private or

business capacity). Adequate mobile signal depends on several factors:

The antenna height, transmit power and proximity of the serving

base station to the location to be covered.

The quality of the receiving mobile device (handset, tablet etc.) - this

can also include other factors (such as improved device antenna

features, or external antenna mounting).

The radiowave propagation environment between the base station

and the mobile location, including the presence of hills, trees and

buildings. The figure below depicts how the path loss (the loss in

signal level) varies in different environments. Note that in some

situations, especially in areas of a high density of usage it is an

advantage for the signal to attenuate rapidly to reduce interference in

other cells.


10

Figure 2-1: Propagation path loss at 800MHz, showing the path loss change versus distance for different typical radio propagation environments (this case used a base station antenna height of 16.5m, mobile height of 1.5m).

Source: Real Wireless (Figure taken from Figure 2-6 of Real Wireless report for Ofcom4 ).

In the case of indoor coverage, the construction of the building

where the mobile is located. Building construction is generally

becoming more thermally insulating, which in turn makes it more

challenging for mobile signals to propagate indoors from an outside

base station5.

The radio frequency involved, with lower frequencies (sub 1GHz)

generally (but not always) providing better coverage because the signal

strength decays more slowly versus distance than at higher

frequencies and building penetration and losses through buildings or

foliage are normally less.

4 Technical analysis of the cost of extending an 800 MHz mobile broadband coverage

obligation for the United Kingdom, a Real Wireless report for Ofcom. January 2012. http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/annexes/real-wireless-cost-analysis.pdf 5 For example, the Building Fenestration Rating Council has launched a system of rating of

the thermal insulation properties of windows, and this is incorporated in building regulations. Greater thermal insulation via metallised window coating translates almost directly into increased path loss for mobile signals

http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/annexes/real-wireless-cost-analysis.pdf



11

2.3 Whilst the provision of adequate mobile service certainly requires a sufficiently

strong mobile signal, this is not sufficient, in itself, to ensure an adequate

quality signal. This expanded view of „mobile service availability‟ additionally

depends on the following factors:

The level of interference received from other base station sites and

users, which in turn also depends on the service demanded by other

users and on the technical factors above (for example, lower

frequencies may under some circumstances actually produce a

degraded service when interference is considered).

The number of other users contending for resources on the same

base station and their demand for system resources (e.g. high data

rates).

The technology employed, for example 2G, 3G or 4G (LTE) - with

later technologies generally providing better service and coverage, all

other things being equal.

The mobile device capabilities (for example, support for later

technologies and the additional features incorporated, such as the

provision of multiple antennas and ability to use all available

technologies and spectrum).

The minimum acceptable service level. For example, the minimum

data rate to constitute „mobile broadband‟ in the eyes of consumers

rises with time, causing coverage to reduce over time6. Similarly, users

may consider a video streaming service to be unacceptable if the delay

or jitter in the data stream exceeds perceptions of acceptable limits, but

this could be acceptable for email.

2.4 Taking these factors into account, we can express an expanded view of

mobile coverage as follows: A viable mobile service is provided when the

capacity and radio capabilities of serving base stations is sufficient to provide

an adequate signal quality, in the presence of interference, to meet the

service quality expectations of the users within the coverage area of the cell,

given the requirements of the mobile devices they are using and the

applications and services they are accessing.

6 The effective range of a cell reduces when more resources are needed to be used to serve

different users. Users at the edge of a cell require more resources for an equivalent level of service then users closer to the base station.


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Barriers to enhancing mobile service availability

2.5 A number of barriers exist to enhancing mobile coverage, including the

following:

The cost of building new base stations sufficiently close to locations

which do not already have good service. Such locations are likely to

require more infrastructure to be deployed than in areas with good

service. Hence, each additional base station would serve relatively

fewer incremental customers than existing sites, and the cost per

additional customer, i.e. the incremental cost, may be too high for

operators to secure an adequate return on investment as a result.

An example of this cost dynamic is illustrated in the chart below,

which shows the estimated incremental cost of providing

sufficient network capability (via macrocells) to provide a

minimum 2Mbps service to indoor users using LTE technology

in the recently-awarded 800 MHz spectrum band. The chart

demonstrates that the incremental cost increases steeply as full

coverage is approached (e.g. increasing from the 95% coverage

level towards 100%), owing to the increased deployment cost of

providing services in increasingly remote areas and the reduced

population able to be served by any particular marginal increase

in network infrastructure.


13

Figure 2-2: Cost of providing 2Mbps indoor data services from 5MHz channel macrocells at 800 MHz in an example study area, as a function of the percentage of population covered

Source: Real Wireless (from Figure 4-6 of Real Wireless report for Ofcom7)

The annual cost of operating base stations can significantly affect the

profitability or viability of lightly used network infrastructure. This

includes the costs of site rental, utility costs, business rates, and

vendor equipment licensing, servicing and maintenance. The cost

of these items per base station varies according to the deployment

topology, with more being charged for high capacity macro cell site

rentals in areas where few suitable sites exist.

Regarding site rentals, feedback from our consultations with

operators suggests that prices demanded by landlords can be

unrealistically high in some cases, possibly because the

expectations for site rentals were set in an era when mobile

services commanded a higher premium, and were sold at a

higher margin than they are now.

7 Technical analysis of the cost of extending an 800 MHz mobile broadband coverage

obligation for the United Kingdom, a Real Wireless report for Ofcom. January 2012. http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/annexes/real-wireless-cost-analysis.pdf




14

On business rates, operators felt that public sector action in this

area could make a substantial difference in enabling wider

coverage. These annual payments can be a significant

proportion of the costs of operating a base station, and if the

business case for a potential new site is marginal, they can

make the difference between the site being viable or non-viable.

New base stations may also be hard to deploy for non-financial

reasons. These include planning restrictions, the availability and

time to acquire suitable sites, local community resistance and

concerns regarding potential health issues etc. Planning

restrictions can prevent deployment in some sensitive areas (e.g.

national parks), or can delay network rollout. To avoid development

bottlenecks, The Electronic Communications Code8 gives operators

code power rights to deploy communications infrastructure in many

circumstances but requires updating to reflect emerging deployment

variants. Permitted development rights further facilitate development

for sites below a given height, though ground-based masts are not

currently included as permitted developments in Scotland. Small cells

offer an opportunity to reduce incremental costs of coverage but the

planning situation is currently uncertain. If a small cell is counted as de

minimis then it can be deployed without individual planning consent,

but the definition of de minimis is left to individual planning officers,

creating a lack of consistency and a consequent disincentive for

operators. We are aware, however, that the Scottish Government does

intend to consult on changes to the planning system, with a view to

addressing such issues.

Mobile network sharing can be both a barrier and a stimulant to

mobile coverage. The main mobile operators are currently engaged in

a programme to share and consolidate their network sites much more

closely than previously, motivated primarily by a desire to reduce costs.

In the process of sharing they are reducing the “thickness" of their

networks by reducing the total number of sites available on aggregate,

which will reduce coverage for some particular customers, while

8 See, Ofcom‟s explanation of the Electronic Communications Code.

http://stakeholders.ofcom.org.uk/telecoms/policy/electronic-comm-code/

http://stakeholders.ofcom.org.uk/telecoms/policy/electronic-comm-code/


15

increasing the number of sites available to each customer in total,

increasing the overall "reach" or network coverage9.

Low frequency spectrum is in short supply. Until recently only

Vodafone and O2 had sub 1GHz spectrum and this was restricted to

2G and 3G services. Since the March 2013 spectrum auction, four

operators now have sub 1 GHz spectrum and all mobile spectrum has

been made technology-neutral following a recent statement10 by Ofcom

opening the way to widespread 4G service launches by the end of

2013. Despite these changes, the actual quantity of low frequency

spectrum held by each operator will limit the number of users who can

achieve adequate service at a given data rate and the distribution of

such spectrum is significantly different between the operators.

Additional spectrum at 700MHz is being promoted for

harmonised release within Europe11. Manufacturers will then

need to develop handsets that can use these newly released or

liberalised frequencies and end-users will have to replace their

handsets to take advantage of them. These factors may limit the

impact of the increase in spectrum supply in the short term.

At the recent 4G auction in the UK, O2 obtained 2x10MHz of

800MHz spectrum with a coverage obligation12 to "provide a

mobile broadband service for indoor reception to at least 98% of

the UK population (expected to cover at least 99% when

outdoors) and at least 95% of the population of each of the UK

nations - England, Northern Ireland, Scotland and Wales - by

the end of 2017 at the latest". While this obligation technically

only requires 2Mbps to be available to a single indoor user in

each cell13 (which would likely fall short of users' expectations, if

9 Note that in the rationalisation process to reduce costs and share mobile network resources,

whilst it is expected that the “capability” of the combined network will be superior to any of the original unshared networks, some areas can suffer a reduction in network capability owing to the reduction in overall network infrastructure. In particular the services available in some particular geographic areas could be lost if base station sites are removed, with alternative sites not supplementing all such coverage „gaps‟ 10

“Statement on the Requests for Variation of 900 MHz, 1800 MHz and 2100 MHz Mobile Licences”, Ofcom consultation statement published July 9th 2013. 11

GSMA Public Policy Position on the Preferred Band Plan for Digital Dividend 2 in ITU Region 1”, GSMA position paper for use of 700MHz for Europe, Middle East and Africa. April 2013. 12

Ofcom “Ofcom announces winners of the 4G mobile auction”, Feb 2013. 13

“The Licensee shall by no later than 31 December 2017 provide, and thereafter maintain, an electronic communications network that is capable of providing, with 90% confidence, a


16

the obligation was only just met), in practice we would expect

meaningful indoor mobile data speeds to be made widely

available within the coverage area, in order to satisfy customers

and generate revenue.

The increasingly challenging characteristics of buildings and the

increasing tendency of mobile service to be consumed indoors is

making provision of coverage using a conventional mobile network

from outdoors to indoors more difficult. This becomes more significant

when the growth in indoors traffic is considered. Telefónica predicts

that in the next few years around 90% of mobile usage will take place

indoors14 be it at home, in the office or in public buildings, with the

majority of that being in an individual user's home and main office

locations.

Other regulatory barriers can limit the opportunity to increase

coverage: roaming between operators, or sharing of spectrum or tighter

network integration would all require regulatory approval and could also

lessen an operator's ability to gain a competitive advantage over its

rivals, which in turn could reduce the incentive for operators to roll out

wider coverage (see the discussion on roaming in section 3).

Base stations require backhaul to inter-connect back to the core

network. In remote areas such backhaul may not be available or

require very expensive civil works to install. Backhaul is supported by

wired or fibre links or wireless fixed links. Providing this connectivity

can be both problematic and expensive - particularly in remote areas.

Providing sufficient capacity with low latency to support high data rate

4G services exacerbates this challenge. Related to this topic are the

recent contracts awarded to BT to extend the coverage of fixed

superfast broadband services in the Highlands and Islands and the

Rest of Scotland. As illustrated in the diagrams below, from a HIE

mobile telecommunications service with a sustained downlink speed of not less than 2 Mbps when that network is lightly loaded…” and Ofcom interprets “a „network [that] is lightly loaded‟ as having a single user demanding service within the serving cell, and the surrounding cells of the network are loaded to a light level“ http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/statement/4GCov-verification.pdf 14

Paolini M. “Mobile data moves indoors”, September 2011, http://www.senzafiliconsulting.com/Blog/tabid/64/articleType/ArticleView/articleId/59/Mobile-data-move-indoors.aspx

http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/statement/4GCov-verification.pdf

http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/statement/4GCov-verification.pdf

http://www.senzafiliconsulting.com/Blog/tabid/64/articleType/ArticleView/articleId/59/Mobile-data-move-indoors.aspx

http://www.senzafiliconsulting.com/Blog/tabid/64/articleType/ArticleView/articleId/59/Mobile-data-move-indoors.aspx


17

factsheet15, these should help extend the core fibre backbone, which

could potentially reduce the cost of backhaul for mobile sites in some

areas, as well as making fixed superfast services more available to

consumers.

Figure 2-3: Existing (left) and planned (right) fibre routes in Scotland

Source: HIE Factsheet, March 2013

Enablers for enhancing mobile service availability

2.6 Despite the potential barriers identified above, there are several factors which

could enhance mobile coverage:

The use of newer outdoor small cell sites, such as enterprise small

cells (picocells) or Wi-Fi, can potentially deliver mobile coverage at

lower cost and using equipment which may not require such complex

site acquisition or planning approval. An example project is currently

being piloted by Vodafone to provide 3G connectivity in the Shetland

Island village of Walls16 (population 300). Four sites provide coverage

to about 1/3 of homes in the village of Walls which was previously in a

coverage not-spot. This type of deployment reduces the capex and

opex per served user for clusters of users where larger scale base

15

Next Generation Broadband for the Highlands and Islands, HIE factsheet. March 2013. http://www.hie.co.uk/regional-information/digital-highlands-and-islands/next-generation-broadband/ 16

Vodafone trials femtocell 3G coverage in Shetlands village, from The Register. June 2013

http://www.hie.co.uk/regional-information/digital-highlands-and-islands/next-generation-broadband/

http://www.hie.co.uk/regional-information/digital-highlands-and-islands/next-generation-broadband/


18

stations would not be cost effective (for the small number of users

within coverage).

Figure 2-4: Example of Vodafone trial to use uprated femtocells to provide coverage to remote communities

Source: Shetland News

Using indoor cell types such as femtocells, picocells or advanced Wi-

Fi implementations, could be self-provided by consumers, businesses,

housing associations or councils. All four of the major UK operators

now offer femtocells for domestic use, but relatively few consumers are

aware of these. These solutions, however, need the connectivity back

to the operator's core network via some communications infrastructure

(such as a broadband internet connection). This method of augmenting

mobile coverage is therefore inappropriate where such connectivity is

not available. It is, however, particularly useful in providing high speed

indoor access where only outside coverage may otherwise be

available.

Use of 'hybrid deployments' where a network can extend indoor

coverage to users unable to access indoor services by using window-

mounted Customer Premises Equipment that can extend indoor

coverage more cheaply than conventional outdoor-indoor infrastructure

solutions. The left hand graph of the figure below shows that


19

incremental increases in coverage require proportionately more sites

for indoor and outdoor coverage. The right hand side of this figure

demonstrates how hybrid solutions can improve indoor coverage

without having to build so many new sites. This approach, does need a

minimal level of macro cell outdoor coverage to begin with and

sufficient capacity to support the indoor users.

Figure 2-5: The number of new sites needed to provide 2Mbps indoor and outdoor data services using 10MHz channel macrocells in an example study region. The use of a hybrid approach on the right hand side shows how fewer sites are required to provide the indoor service owing to the use of window ledge CPE terminals

Source: Real Wireless (from Figure 4-14 of Real Wireless report for Ofcom17).

Enabling and encouraging sub-national roaming amongst operators

could mitigate competition concerns identified previously, but improve

overall connectivity with a reduced cost infrastructure. There is

precedent for this in the Highlands and Islands project previously

undertaken by mobile operators for their 2G networks. Whist this

approach can reduce the total cost of infrastructure required to provide

network access in a geographical area, it can reduce competition

between operators and the incentives to innovate to provide new

services or deploy new technology (see the discussion on roaming in

section 3).

17

Technical analysis of the cost of extending an 800 MHz mobile broadband coverage obligation for the United Kingdom, a Real Wireless report for Ofcom. January 2012. http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/annexes/real-wireless-cost-analysis.pdf




20

Additional spectrum will be available to use for mobile services (the

UK government plans to release 500MHz of public sector spectrum18)

by 2020. In particular there are plans to release 40MHz in the 2.3GHz

band and 150MHz in the 3.4GHz band in the near future. The potential

redistribution of spectrum at 700MHz could result in the release of at

least 60MHz of spectrum for mobile use, and the 700MHz band could

be a good candidate to reduce the cost of providing extended mobile

capability. However, Ofcom‟s view19 is that “2018 is the earliest date at

which the changes needed to release the 700 MHz band could take

place”, and it would then take several years for handsets supporting

this band to diffuse widely across the customer base.

Additional competition: At the recent 4G auction in the UK, BT won

2x15MHz and 1x20MHz spectrum in the 2.6GHz band. Speaking to the

Daily Telegraph in May 2013, BT‟s CEO “said that as well as offering

coverage via a mobile operator when customers are outside their

home, its 4G network would provide better coverage in homes via the

new Home Hub, BT‟s Wi-Fi router...BT‟s network of public Wi-Fi

hotspots will also be upgraded to provide 4G access”20. In October

2013, BT announced21 that it was moving towards a contract under

which BT would use the EE network to provide Mobile Virtual Network

Operator services to its customers and employees. The approach

appears to be for BT to use its own 4G spectrum and network for high-

intensity indoor data usage (via customers‟ routers and public

hotspots), relying on its partner‟s network for outdoor coverage. The

extent to which this will accelerate the overall coverage of 4G and other

mobile services is unclear at this stage, but the additional market

competition provided by this service should be a helpful extra incentive

on all MNOs to maximise their own indoor mobile coverage and

speeds.

18

Enabling UK Growth: Releasing Public Sector Spectrum – March 2011. DCMS Policy Paper. https://www.gov.uk/government/publications/enabling-uk-growth-releasing-public-sector-spectrum-march-2011 19

Future use of the 700MHz band. Ofcom. April 2013 http://stakeholders.ofcom.org.uk/binaries/consultations/700mhz-cfi/summary/UHF_SI_call_for_inputs.pdf 20

BT returns to mass market with 4G network. Daily Telegraph. May 2013. http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/10051578/BT-returns-to-mass-market-with-4G-network.html 21

BT and EE sign MVNO agreement. October 2013. http://www.btplc.com/News/Articles/ShowArticle.cfm?ArticleID=5ACEE20F-D47E-4D2A-AB38-911279D953E5

https://www.gov.uk/government/publications/enabling-uk-growth-releasing-public-sector-spectrum-march-2011

https://www.gov.uk/government/publications/enabling-uk-growth-releasing-public-sector-spectrum-march-2011

http://stakeholders.ofcom.org.uk/binaries/consultations/700mhz-cfi/summary/UHF_SI_call_for_inputs.pdf

http://stakeholders.ofcom.org.uk/binaries/consultations/700mhz-cfi/summary/UHF_SI_call_for_inputs.pdf

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/10051578/BT-returns-to-mass-market-with-4G-network.html

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/10051578/BT-returns-to-mass-market-with-4G-network.html

http://www.btplc.com/News/Articles/ShowArticle.cfm?ArticleID=5ACEE20F-D47E-4D2A-AB38-911279D953E5

http://www.btplc.com/News/Articles/ShowArticle.cfm?ArticleID=5ACEE20F-D47E-4D2A-AB38-911279D953E5


21

Additional means of delivery of mobile services could change the

nature of deployment to remote areas. For example, BT‟s recent

acquisition of mobile spectrum could potentially lead to a different

network deployment architecture22. Though the details are not yet

clear, it appears that BT is seeking to deploy small cells on street

furniture such as telegraph poles, CCTV poles and lighting columns,

using copper or fibre backhaul, in order to provide mobile infill services

in areas of the country suffering from non-existent or patchy coverage.

Relaxation of and/or clarification of planning regulations for

prescribed site types where this is helpful to mobile deployment (as

discussed above).

Encouraging infrastructure competition for fixed lines and enabling

satellite backhaul of mobile sites using appropriate technology

developments. Satellites are used in Norway and Japan, for example,

to provide the backhaul capability needed to support communications

in remote environments.

Providing access to public land at subsidised rates would lower the

cost of deploying new base stations, though the merits of doing so

would depend on the economic and societal benefits of any

incremental increase in coverage compared to the cost of the subsidy.

A potential solution would be to offer public buildings as a platform on

which operators could put small cells that could cover local

communities. This could be packaged into a multi-site arrangement

offering a portfolio of buildings or land that could be made available

under attractive terms (site rental, business rates) conditional on

coverage obligations.

Experience in other countries

2.7 At the recent 4G auction in the UK, one licence had a coverage obligation,

and it is expected that this will encourage other operators to compete to

provide coverage in more remote areas, thereby improving overall coverage.

It is, however, of interest to understand what other interventions have been

successful in other countries. We have discussed this with regulators from

22

BT Openreach to Conduct UK Field Trial of Rural Mobile Infill Solution. November 2013. http://www.ispreview.co.uk/index.php/2013/11/bt-openreach-conduct-uk-field-trial-rural-mobile-infill-solution.html

http://www.ispreview.co.uk/index.php/2013/11/bt-openreach-conduct-uk-field-trial-rural-mobile-infill-solution.html

http://www.ispreview.co.uk/index.php/2013/11/bt-openreach-conduct-uk-field-trial-rural-mobile-infill-solution.html


22

France, Sweden and Norway who have adopted different approaches to

encouraging improved network capability in rural areas.

Sweden

2.8 The Swedish 3G licence allocation process used a beauty contest to select

spectrum winners (in a beauty contest different operators compete to offer the

network that will meet coverage/service capability criteria to offer „the best use

of spectrum‟). The outcome was that the winners offered to support coverage

to up to 99.8% of the population (a surprisingly high commitment, driven by

intense competition between operators at the time). An incumbent, Telia,

failed to win a licence. Operators were allowed to share for up to 75% of their

coverage area in order to reduce the costs of meeting extensive coverage

commitments. Whilst the demand was for voice capability, this worked well,

but increasing demand for high data rates (50-70% of users have

smartphones) has resulted in complaints about poor network coverage and

the accuracy of operators‟ coverage maps, and is a political issue. Not-spots

are primarily outside the main city areas.

2.9 In their 4G auctions (of 2.6GHz spectrum in 2008, and 800MHz spectrum in

2011) there were no coverage obligations, other than for one of the 800MHz

spectrum blocks (FDD6, won by Net4Mobility) which was required to be used

to provide broadband coverage of at least 1Mbps to individual premises

identified by the regulator as having poor broadband coverage23. TeliaSonera

did win spectrum in this process (alongside Net4Mobility and Hi3G), and

stated its intent to deploy 4G at all its 2G sites, encouraging other operators to

respond. The outcome was the launch of the world‟s first LTE network (in

December 2009, by TeliaSonera), and reported levels of 4G coverage which

are already very high: for example, Net4Mobility (owned by Telenor and

Tele2) is already reported24 to have 99% population coverage of 4G; and

TeliaSonera expects25 to achieve 99% 4G population coverage (92%

geographic coverage) by 2015.

23

This is a rather modest number of premises, however. As of December 2012, PTS had identified about 600 premises which would be eligible under this coverage commitment. http://www.pts.se/en-GB/News/Press-releases/2012/Broadband-arrives-in-120-homes-and-companies-thanks-to-the-PTS-coverage-provision/ 24

http://www.telegeography.com/products/commsupdate/articles/2013/03/19/tele2-sweden-reaches-99-4g-coverage/ 25

http://www.teliasonera.com/Images/Widgets/460x195/Merrill%20Lynch%20Global%20Telecom%20and%20Media%20Conference%20-%20June%202013.pdf

http://www.pts.se/en-GB/News/Press-releases/2012/Broadband-arrives-in-120-homes-and-companies-thanks-to-the-PTS-coverage-provision/

http://www.pts.se/en-GB/News/Press-releases/2012/Broadband-arrives-in-120-homes-and-companies-thanks-to-the-PTS-coverage-provision/

http://www.telegeography.com/products/commsupdate/articles/2013/03/19/tele2-sweden-reaches-99-4g-coverage/

http://www.telegeography.com/products/commsupdate/articles/2013/03/19/tele2-sweden-reaches-99-4g-coverage/




23

2.10 To encourage improved service capability the regulator, PTS, has discussed

with operators how they can work together to reduce the marginal cost of site

deployment (such as providing access to rooftops, water towers, and

municipal fibre for backhaul). PTS has also worked with operators on them

producing more realistic coverage maps.

2.11 Looking forwards, PTS recognises that governments may need to recognise a

distinction between what a commercial market can support and the policy

needs for improved mobile coverage (for all). The telecommunications

industry is now a mature industry which can have challenges of maintaining

commercial viability at the edges of deployment. This debate is on-going in

Sweden.

France

2.12 Administratively, „Metropolitan France‟ (i.e the part of France located in

Europe) is divided into 22 regions, 96 departments, and about 36,000

communes. Each commune has a nominal centre termed the „centre-bourg‟.

2G coverage improvement

2.13 In 2003, France identified „not-spots‟ as the centres-bourgs that did not have

2G coverage from any one mobile network; this involved more than 3,000

communes. Local roaming was mandated by legislation in 2004, and has

reportedly26 been implemented at 70% of sites, with site sharing at 30%.

2.14 This “zones blanches” programme was divided into two phases27: Phase 1

received public funding for passive infrastructure (provision of sites, etc.), and

was intended to cover 1,937 centres-bourgs with 1,258 sites; Phase 2, fully

funded by the operators, aimed to cover 1,373 centres-bourgs with 976 sites.

Obligations under this programme were included in the renewed 2G licences

of the three operators, together with a commitment that each operator must

cover at least 99% of France‟s population by the end of the programme.

Across France, levels of 2G coverage now stand at over 99% for each

operator (99.9% Orange, 99.5% SFR, 99% Bouygues)28.

26

http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/not-spots/PA_Consulting_main_report.pdf 27

http://www.arcep.fr/uploads/tx_gspublication/rapport-bilan-couverture-QoS-2g-3g-nov2012.pdf 28

http://www.arcep.fr/?id=8161

http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/not-spots/PA_Consulting_main_report.pdf


http://www.arcep.fr/uploads/tx_gspublication/rapport-bilan-couverture-QoS-2g-3g-nov2012.pdf

http://www.arcep.fr/uploads/tx_gspublication/rapport-bilan-couverture-QoS-2g-3g-nov2012.pdf



24

2.15 From 2007, the operators‟ 2G licences also oblige them to cover a total of

57,000 km of priority roads across France (with outdoor coverage).


2.16 France used a beauty contest for the award of 3G licences, through

successive calls for applications, resulting in four operators obtaining licences:

SFR and Orange (in 2001), Bouygues (in 2002) and Free Mobile (in 2010).

Each operator therefore has a different coverage commitment in their licence,

with SFR having the highest committed coverage, at 99.3% for both voice

coverage and for coverage of a 144kbps data service, within eight years of

the licence award (a deadline subsequently shifted to December 2013).

2.17 In 2009 an obligation was brought into law requiring operators to develop a

framework network sharing agreement, focused on the not-spot areas

addressed by the 2G „zones blanches‟ programme, plus 300 additional sites.

Operators have also been asked to respond to ARCEP29 with plans as to how

3G rollout could be further improved, in particular in those departments with

more than 10% of the population not covered by all mobile operators, and in

those departments in which more than 1% residents do not have access to a

mobile service.

2.18 As of January 2012, 3G population coverage in France stood at 98% for SFR

and Orange, 93% for Bouygues and 27% for Free Mobile30.


2.19 For 4G, ARCEP included coverage obligations in the 2011 spectrum auction

process, to ensure that coverage of rural areas proceeds in parallel with the

densely populated areas.

2.20 Overall, the 800MHz spectrum holders are required to cover 99.6% of the

population within 15 years (by 2027), with at least 95% coverage in each

department.

2.21 More specifically, a sparsely populated „priority area‟ was defined, covering

18% of the population (63% of geography), in which the 800MHz operators

are obliged to provide 40% coverage within five years, and 90% coverage

within ten years (by 2022).

29

France has separate regulators responsible for radio licensing (ANFR) and for competition issues (ARCEP). 30




25

2.22 Additionally, 800MHz operators have been obliged to implement joint pooling

of frequencies in order to cover the areas addressed by the „zones blanches‟

programme, within 15 years.

2.23 ANFR maintains a list of every site that is planned or deployed in France (this

is published online every month and identifies frequency band, transmit

power, technology used, and the number of antennae at each site for each

operator). In this way the status of network infrastructure deployment is

publicly accessible.

Norway

2.24 The main mobile operators in Norway are Telenor, NetCom (owned by

TeliaSonera) and Tele2; the recently concluded 4G spectrum auction has also

introduced a new market entrant: Telco Data.

2.25 Norway has 2G coverage levels of about 99.9% of the population (80%

geography). The 3G coverage is achieved using low frequency (450MHz

band) spectrum previously used for 1G services in Scandinavian countries.

The 3G licences were allocated through a beauty contest in which coverage

requirements were the main selection criteria. This resulted in very high bids

on coverage, which were subsequently included in the licences. As of

December 2013, the largest mobile operator, Telenor, claimed to have 95%

population coverage31 for 3G.

2.26 4G services were first launched - by TeliaSonera - in Norway in 2009, using

2.6GHz spectrum allocated in 2007. The 800MHz licences have recently

(December 2013) been awarded, to Telenor, TeliaSonera and Telco Data32.

All winners of 800MHz spectrum are obliged to provide mobile broadband

services offering average access speeds of at least 2Mbps to 40% of the

population within four years. In addition, the block won by TeliaSonera entails

an obligation to ensure that 98% of the population have access to mobile

broadband services offering average access speeds of at least 2Mbps, within

five years (i.e. by the end of 2018). This compares with Telenor‟s current

31

http://www.telenor.com/media/press-releases/2013/4g-from-telenor-in-over-100-municipalities-in-norway/ 32

http://eng.npt.no/portal/page/portal/PG_NPT_NO_EN/PAG_NPT_EN_HOME/PAG_NEWS?p_d_i=-121&p_d_c=&p_d_v=142984

http://www.telenor.com/media/press-releases/2013/4g-from-telenor-in-over-100-municipalities-in-norway/





26

(December 2013) 4G coverage of 100 municipalities, covering more than half

of Norway‟s population33.

2.27 NPT (the Norwegian regulator) provides speed monitoring utilities that report

that the 3G network can achieve data rates of 9Mbps, with an average of

2Mbps (indoor). NPT notes that competition based on high quality service

availability appears to work extremely effectively in Norway for many areas. In

Norway, operators respond to complaints to fill coverage holes. Operators

appear to be genuinely driven by market pressure.

2.28 One element that encourages this competition is that Telenor (the largest

operator, and the incumbent fixed line telco) must allow other operators

access to their masts and ducts, etc. Tele2 has a national roaming agreement

with Telenor anywhere it does not provide its own coverage, under

commercial terms. Tele2 has been encouraged to support more subscribers

by having a permit allowing a higher termination charge on their network.

This permit will be coming to an end soon.

2.29 To encourage broadband coverage into more remote areas, Norway

established the Høykom state aid programme, which ran from 1999 to 2007,

through which local authorities could bid for broadband funding. During the

period 1999–2005, the programme received more than 1,000 such

applications and co-funded nearly 400 projects, allocating a total of NOK400

million (c. £40 million)34. Since 2006, the state has contributed more than

NOK 1 billion (£100 million) towards broadband rollout in areas with no

commercial broadband service35.

2.30 The current model is that local communities form groups which are able to bid

for funding support. These local groups state what they can contribute, what

they would like the government to contribute, and what the benefit will be36.

Based on this „business case‟ the top ranking bids receive the required

funding. Communities who contribute more have a stronger bid. So far about 33

http://www.telenor.com/media/press-releases/2013/4g-from-telenor-in-over-100-municipalities-in-norway/ 34

http://ftp.iza.org/dp7762.pdf 35

http://www.regjeringen.no/en/dep/kmd/documents/white/propositions/2012-2013/meld-st-23-20122013-2/3/1/5.html?id=729018 36

For example, by forming a group, then the route of any required trenching and the permission to cross all required landowners‟ land and perhaps also the digging itself (an expensive element of infrastructure deployment) can be done using local connections and expertise. In the case of mobile networks, MNOs provide information on their needs and requirements and the community works as a group to identify what they could „bring to the party‟. This reduces infrastructure costs, encourages buy-in and reduces the risk of any one party blocking deployment that is generally favoured in the community.



http://ftp.iza.org/dp7762.pdf

http://www.regjeringen.no/en/dep/kmd/documents/white/propositions/2012-2013/meld-st-23-20122013-2/3/1/5.html?id=729018

http://www.regjeringen.no/en/dep/kmd/documents/white/propositions/2012-2013/meld-st-23-20122013-2/3/1/5.html?id=729018


27

55,000 broadband connections have been established using this funding

(mostly fixed broadband – but some fixed wireless access and WiMax

network connectivity). Whilst the main target is fixed broadband, mobile not

spots can also benefit by this initiative.

2.31 Robustness of the mobile network is a key concern in some areas, for

example where there is very rough weather and/or poor electricity supply.

NPT provides a limited subsidy (c. €3 million p.a.) to help operators achieve

higher service availability than would otherwise be provided through purely

commercial investment decisions.

2.32 Indoor coverage is becoming more challenging in Norway. With improved

building insulation, it is more difficult to provide indoor coverage from outdoor

cell sites, and there are many new buildings for which it is difficult to provide

coverage. However, operators do have commercial femtocell offerings for

users suffering from poor indoor coverage (note that the consumer needs a

fixed broadband connection for the backhaul).

Summary of barriers identified by the mobile industry

2.33 During our consultation with other mobile industry stakeholders we sought

input on perceived barriers to improved rural network capability. Whilst some

of these stakeholders have vested interest there are many areas where

common views are held.

Almost all operators stated that if it was commercially viable to deploy,

they would do so.

Mobile industry stakeholders all noted that the planning process was a

greater barrier in Scotland than in England and Wales and noted that

“speeding up planning, e.g. de minimis rules” would “facilitate small cell

deployment” and speed up and simplify logistics. Changes to the Town

and Country Planning (General Permitted Development) Order in

England in 2013 have further simplified deployment for both macrocells

and small cells there, potentially increasing the gap between the

respective planning regimes.

The majority of industry stakeholders were not in favour of national or

localised roaming, seeing it as an „expensive stopgap‟. Other

stakeholders noted the potentially adverse impacts on competition.

The majority of operators thought that direct subsidy to extend the

network beyond current footprint would be helpful with many noting that

this could apply to business rate relief, ranked as the number one issue

by two operators and number two issue by one.


28

Small cells were seen as a useful contribution, the impact of which

would primarily be in urban areas, but which could also play a part in

extending coverage to small rural communities where backhaul was

available.

Improved access to backhaul was seen as the key issue by all

operators. Some operators also called for increased competition for

access to fibre.

One operator wanted to know if any cell sites that were previously

subsidised for O2 and Vodafone (in the Highlands and Islands37) would

be opened to all operators.

37

This was a joint project in the late 1990s between Cellnet (now O2) and Vodafone, brokered by Highlands and Islands Enterprise, to extend 2G coverage in the Highlands and Islands, involving £4 million of public funding. See Appendix 3 of UK online: the broadband future, Cabinet Office, 2001 - available at http://ctpr.org/wp-content/uploads/2011/03/ukonline-the-broadband-future.pdf

http://ctpr.org/wp-content/uploads/2011/03/ukonline-the-broadband-future.pdf

http://ctpr.org/wp-content/uploads/2011/03/ukonline-the-broadband-future.pdf


29

3. Estimates of future coverage and service levels in Scotland

3.1 In developing our estimates of economic impacts, the key driver is the „user

experience‟ of mobile services. In the absence of seamless roaming between

networks, this user experience is determined by the coverage and speeds

available on their serving MNO‟s network (rather than the combined coverage

of the MNOs‟ networks). For example, if a user is on the Vodafone network, it

is the coverage available from that network – rather than the combined

coverage of Vodafone, O2, Three and EE – which determines whether they

can make a call or access mobile data services.

3.2 For coverage and speeds, therefore, Real Wireless has developed estimates

for a single „representative‟ network operator. The assumptions underpinning

these estimates are set out more fully in Annex C. As most mobile usage

takes place indoors (Cisco, for example, estimates that about 80% of mobile

data usage is indoors38), we have focused on indoor coverage, as the

parameter which is most closely linked to the user experience (indoor

coverage is lower than outdoor coverage, as walls, insulation and windows in

buildings reduce the signal strength).

3.3 The speeds quoted here are notional total indoor speeds – adding together

downstream and upstream speeds, in recognition of the increasing

importance of upstream bandwidths, e.g. for video communications and cloud

computing applications. Care should be taken when comparing these

estimates with speeds quoted elsewhere, bearing in mind both downstream

and upstream bandwidths, and also the differences in indoor vs outdoor

performance.

38

http://www.cisco.com/en/US/solutions/collateral/ns341/ns524/ns673/solution_overview_c22-642482.html




30

With no intervention

Coverage

3.4 The key assumptions on coverage, in the absence of intervention, are as

follows:

Current outdoors coverage of 2G across Scotland, for our

representative network, is assumed to be 93% of premises, which

translates to approximately 85% indoor coverage.

As part of the 4G licence award, Telefónica O2 has a coverage

obligation to provide “a mobile broadband service for indoor reception

to at least 98% of the UK population (expected to cover at least 99%

when outdoors) and at least 95% of the population of each of the UK

nations – England, Northern Ireland, Scotland and Wales – by the end

of 2017 at the latest.”

Based on public statements and discussions with MNOs, we anticipate

that operators will deploy combined 2G/3G and 4G technologies at all

macro sites, and that all operators will seek to deploy to provide 95%

indoor 4G coverage of Scottish premises by the end of 2015 – i.e.

significantly earlier than O2‟s licence obligation of 95% by the end of

2017.

Operators have expressed their intent to upgrade cells to support LTE.

Since this has improved coverage, and all operators will have access

to sub 1GHz spectrum, overall coverage will improve.

Beyond 2017, we anticipate an increased focus on LTE since it will

support voice without relying on 3G or 2G for voice service. i.e. overall

voice coverage is determined by 2G coverage up till 2017, at which

point it is determined by the higher of 4G and 2G coverage.

Once c. 95% indoor coverage is achieved, by 2015, further gradual 4G

coverage enhancements are expected at about 0.5% per year,

reaching a plateau of 98% indoor coverage by the end of the modelling

period.


31

3.5 The resulting estimates of indoor coverage for 2G, 3G and 4G technologies –

and for voice coverage – are shown in the table below, for the period 2012-

2017 and for the final year of our model, 2023.

Table 3-1: Assumed end-of-year indoor coverage of Scotland, for a notional representative MNO

2012 2013 2014 2015 2016 2017 2023

2G 85.0% 88.3% 91.6% 95.0% 95.0% 95.0% 95.0%

3G 75.0% 81.7% 88.3% 95.0% 95.0% 95.0% 95.0%

4G 0.0% 23.0% 59.0% 95.0% 95.5% 96.0% 98.0%

Voice coverage 85.0% 88.3% 91.6% 95.0% 95.0% 96.0% 98.0%

Source: Real Wireless

3.6 At local authority level, the improvements in coverage over the next few years

should be very significant for those areas which currently have relatively low

levels of mobile voice and data coverage. In Figure 3-1 below we show the

estimate indoor voice coverage for our notional representative operator in

2012 and 2017; and Figure 3-2 shows the estimated indoor 3G coverage in

2012, and the projected indoor 4G coverage in 2017. This illustrates that the

more rural local authorities (e.g. Eilean Siar, Orkney and Shetlands) will move

onto a more level playing field, in terms of mobile voice and data coverage,

over this period.


32

Figure 3-1: Indoor mobile voice coverage of premises by Scottish local authority, for a representative MNO, in 2012 and 2017

Source: Real Wireless and SQW analysis

97%

97%

95%

96%

95%

95%

94%

94%

94%

92%

91%

89%

89%

89%

85%

88%

87%

89%

87%

83%

78%

80%

72%

73%

68%

66%

63%

62%

57%

34%

39%

21%

100%

100%

100%

100%

100%

100%

99%

99%

99%

100%

100%

98%

98%

97%

99%

99%

97%

99%

99%

98%

94%

92%

92%

90%

86%

86%

89%

83%

81%

76%

81%

74%

0% 20% 40% 60% 80% 100%

Edinburgh, City of

Glasgow City

Dundee City

Aberdeen City

West Dunbartonshire

Renfrewshire

Inverclyde

East Renfrewshire

East Dunbartonshire

North Lanarkshire

Falkirk

South Lanarkshire

North Ayrshire

East Ayrshire

Midlothian

West Lothian

South Ayrshire

Fife

Clackmannanshire

East Lothian

Angus

Stirling

Moray

Perth and Kinross

Scottish Borders

Dumfries and Galloway

Aberdeenshire

Argyll and Bute

Highland

Shetland Islands

Orkney Islands

Eilean Siar

Indoor voice coverage of residential premises - 2017

Indoor voice coverage of residential premises - 2012


33

Figure 3-2: Indoor mobile data coverage of premises by Scottish local authority, for a representative MNO, in 2012 and 2017


Speeds

3.7 Modelling future user speeds is an inherently difficult and uncertain task for

mobile networks. In particular, the more mobile data users there are in a given

area, and the more data they consume over their mobile connections, the

more contention there is for the available spectrum – which tends to degrade

the average speeds experienced by users. The operators seek to counter this

effect through using additional spectrum, improved spectrum efficiency and

upgrades in technology (e.g. to LTE), increased numbers of base stations,

and increased backhaul capacity – in order to maintain and enhance the user

experience.

93%

92%

88%

88%

86%

85%

84%

84%

82%

82%

81%

80%

79%

77%

77%

77%

77%

76%

76%

74%

68%

63%

59%

59%

55%

54%

49%

46%

43%

28%

28%

15%

100%

100%

100%

100%

100%

100%

99%

99%

99%

100%

100%

98%

98%

97%

99%

99%

97%

99%

99%

98%

94%

92%

92%

90%

86%

86%

89%

83%

81%

76%

81%

74%

0% 20% 40% 60% 80% 100%

Edinburgh, City of

Glasgow City

Dundee City

Aberdeen City

West Dunbartonshire

Renfrewshire

Inverclyde

East Renfrewshire

East Dunbartonshire

North Lanarkshire

Falkirk

South Lanarkshire

North Ayrshire

East Ayrshire

Midlothian

West Lothian

South Ayrshire

Fife

Clackmannanshire

East Lothian

Angus

Stirling

Moray

Perth and Kinross

Scottish Borders


Aberdeenshire

Argyll and Bute

Highland

Shetland Islands

Orkney Islands

Eilean Siar

Indoor 4G coverage of residential premises - 2017

Indoor 3G coverage of residential premises - 2012


34

3.8 While MNOs tend to dimension their networks on the basis of projected „busy

hour‟ performance, our study has focused on the average user experience

over the working day, as this is a more meaningful driver of economic

impacts. As previously noted, the speeds quoted here are notional „total

speeds‟, which combine downstream and upstream speeds.

3.9 Using the assumptions set out in Annex C, we estimate that average speeds

available in Scotland (i.e. averaged across all of Scotland‟s output areas) will

increase from about 2.5Mbps in 2012 to approximately 36Mbps by 2023, as

shown in Figure 3-3– equivalent to an average compound annual growth rate

of 27% over this period.

Figure 3-3: Indicative average total (down + up) indoor mobile data speeds available across Scotland, for a representative MNO, without intervention


3.10 Disaggregating this analysis into the average speeds per local authority area

reveals a potentially surprising scenario by 2017, in which users in the most

densely populated areas such as Glasgow and Edinburgh may not, on

average, be experiencing speeds much higher than those for people in the

least densely populated areas such as Eilean Siar and Shetland, as the more

comprehensive coverage in the cities is offset by the much greater contention

issues. Areas in between these two extremes – such as Midlothian, East

Renfrewshire and Clackmannanshire – may well benefit from having a

combination of very high 4G coverage and much lower low densities of users

than in the cities, resulting in relatively lightly loaded cells and high average

speeds.

0

5

10

15

20

25

30

35

40

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mb

ps


35

3.11 The possibility of this scenario emerging is supported by Ofcom‟s testing39 in

2010 on actual mobile performance, which found higher speeds in the „urban

sprawl‟ area between Manchester and Liverpool than in the „dense urban‟

case study of Birmingham:

“However it is notable that the distribution of speeds from the urban sprawl study between Liverpool and Manchester shows better performance than the results from the urban city study of Birmingham. Capacity can be significant factor in densely populated urban centres, and contention may have contributed to some of the slower speeds measured during the urban city study.”

3.12 We reiterate, however, that there are many uncertainties inherent in projecting

these speeds, including the capacity of backhaul solutions actually

implemented in rural areas and the extent of mobile data usage growth. The

estimates presented here should therefore be taken as „indicative‟ rather than

„fact‟.

39

http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/bbspeeds2010/Mobile_BB_performance.pdf




36

Figure 3-4: Indicative average total (down + up) indoor mobile data speeds available per local authority in 2012 and 2017, for a representative MNO


With interventions

3.13 In commissioning this work, the Scottish Government was seeking insights as

to the extent to which market interventions could potentially improve mobile

service levels across Scotland, and the economic impacts associated with

doing so.

3.14 In particular, we identified four potential policy levers in discussion with the

client:

reducing planning constraints on new sites in underserved areas

reducing the burden of non-domestic rates at new sites in underserved

areas – whether through rates relief or through an indirect mechanism

0 5 10 15 20 25 30

Aberdeen CityAberdeenshire

AngusArgyll and Bute

ClackmannanshireDumfries and Galloway

Dundee CityEast Ayrshire

East DunbartonshireEast Lothian

East RenfrewshireEdinburgh, City of

Eilean SiarFalkirk

FifeGlasgow City

HighlandInverclydeMidlothian

MorayNorth Ayrshire

North LanarkshireOrkney Islands

Perth and KinrossRenfrewshire

Scottish BordersShetland Islands

South AyrshireSouth Lanarkshire

StirlingWest Dunbartonshire

West Lothian

Average speed (Mbps)

2012 2017


37

helping to reduce site rentals by providing low cost access to publicly-

owned land and buildings in underserved areas

providing a direct subsidy for new sites in underserved areas.

3.15 A further potential area for (regulatory) intervention would be to mandate

localised roaming across networks in underserved areas. This would, for

example, allow an EE subscriber to make a call in an area where there was a

signal from, say, the O2 network, but not from the EE network. However, our

consultations highlighted the complexities around this issue.

In particular, there would be high up-front costs for operators in

adapting their systems and processes to enable, manage and bill for

this. Localised roaming restricted to defined underserved areas (as

opposed to UK-wide national roaming) would also necessitate ongoing

coordination of information about each other‟s network developments

in these areas.

Furthermore, roaming reduces the ability of operators to differentiate

themselves through coverage, and therefore has potentially adverse

effects on competition (reducing the incentives on operators to

maximise their coverage quickly).

Given these complexities we have not included an analysis of the

potential impacts of roaming in this report. We would suggest that, with

significant improvements in voice and data coverage anticipated over

the next few years, through the roll-out of 4G networks, it would be

premature at this stage for the Scottish Government actively to pursue

(national or localised) roaming as a solution to mobile not-spots:

the emphasis should be on encouraging and enabling operators

to roll out their competing 4G networks (and hence improve data

and voice coverage) as quickly as possible; putting roaming on

the agenda could potentially be counter-productive, by adding

uncertainty into operators‟ assessments of the commercial

advantages of serving lower population density areas, hence

delaying or constraining roll-outs in these areas

until the MNOs‟ 4G roll-outs are substantially completed, it

would be impossible to define stable geographic boundaries for

any localised roaming arrangements

we would suggest re-visiting this issue towards the end of 2015,

by when we anticipate that the MNOs‟ 4G roll-outs will be largely


38

completed, and the extent of the remaining (complete and

partial) not-spots will be clearer.

3.16 In order to assess the potential impacts of the above four potential policy

levers, we have assessed the extent to which they could reduce the cost per

additional premises associated with mobile cell sites, and hence the extent to

which additional premises could be commercially viable for coverage. We

have assumed the following:

The average capital and operating costs for different cell sites, in the

absence of intervention have been assumed to be as follows:

Table 3-2: Assumed capital costs per cell site for a representative MNO, without intervention (£k, 2013 prices)

Macro cell Community cell Small cell

Civil engineering and equipment 66.6 45.8 4.3

Planning 3.4 2.5 1.4

Total capex £k 70.0 48.3 5.7

Source: Real Wireless and SQW estimates

Table 3-3: Assumed operational expenditure per cell site for a representative MNO, without intervention (£k p.a., 2013 prices)


Site rental 1.7 1.5 0.2

Site rates 4.4 2.5 1.1

Other opex (incl power & backhaul) 12.6 9.2 1.7

Total opex £k p.a. 18.7 13.2 2.9

Source: Real Wireless and SQW estimates

The assumed planning costs (within the capital expenditure)

have been informed by the research on the administrative costs

of securing planning approval cited in the Department for

Communities and Local Government‟s impact assessment of

extending permitted development rights for mobile connectivity

in England40, bearing in mind that the Scottish planning

regulations for mobile network infrastructure are currently

perceived to be more restrictive than those that apply in the rest

of the UK.

40

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/225302/Extending_permitted_development_rights_for_mobile_connectivity_in_England_-_Technical_consultation_-_Impact_assessment.pdf





39

The above non-domestic rates per annum assume the current

„poundage rate‟ of 47.1p for large businesses in Scotland (i.e.

47.1% of the rateable value is due in rates each year), with a

rateable value of £9.3k for a macro cell, £5.3k for a community

cell and £2.3k for a small cell, based on the guidance in the

current Scottish Assessors Association practice note41 (for the

2010 revaluation). It should be noted, though, that the

assessments of rateable value are site-specific, and may vary

considerably from these assumed average values depending on

the local circumstances. We discuss later in this report the

challenges this uncertainty brings for the deployment of small

cells.

Our main with-intervention scenario assumes no direct subsidy per

site, but very material interventions through the other three policy

levers:

a reduction of 100% in the non-domestic rates burden on cell

sites in underserved areas – either through legislation or through

some indirect mechanism

an average reduction of 90% in the costs of securing planning

approval for cell sites in underserved areas (remembering that

the current planning regime for cell sites in Scotland is more

restrictive than that in the rest of the UK)

an average reduction of 20% in the site rental costs in

underserved areas, by facilitating access to publicly-owned land

and buildings.

Discounting the costs over a 20 year period, using a 3.5% discount

rate, the resulting Present Values of the total costs per cell site without

and with intervention are shown below, together with the percentage

contributions to the cost reductions from the different policy levers

(note, again, that we have assumed no direct subsidy per site in this

scenario). The above interventions reduce the Present Values of the

cost per site by about £70k for a macro cell, £42k for a community cell,

and £17k for a small cell.

41

http://www.saa.gov.uk/resources/265603/Telecommunications_Subjects_Wireless.pdf

http://www.saa.gov.uk/resources/265603/Telecommunications_Subjects_Wireless.pdf


40

Table 3-4: Indicative 20-year Present Values of the total costs per cell site, for a representative MNO, without and with intervention (£k, 2013 prices)


Without intervention 336 235 47

With intervention 266 193 30

Total cost reduction due to intervention 70 42 17

Of which:

due to reduced planning constraints 4% 5% 8%

due to reduced non-domestic rates 89% 85% 90%

due to reduced site rentals (through access to public land/buildings)

7% 10% 3%

due to direct subsidy per site (assumed to be zero in this scenario)

0% 0% 0%


Informed by its previous modelling work for Ofcom, Real Wireless has

provided estimates of how the cost per additional premises varies with

the extent of indoor coverage in Scotland, as a function of the cell site

cost. Combined with the above assumptions on the reduction in costs

through intervention, this leads to the without- and with-intervention

costs per additional premises illustrated in the chart below for the area

of most interest (95%+ coverage levels). Note that the discontinuity at

99.6% indoor coverage is due to an assumption that operators would

switch to individual small cells at this coverage level and above –

serving individual premises in very dispersed communities (community

cells are assumed to be used between the 89.1% and 99.6% coverage

levels).


41

Figure 3-5: Indicative costs per additional premises as a function of indoor population coverage level, for a representative MNO, without- and with-intervention (20-year Present Values in £, 2013 prices)


The interventions assumed above are assumed to apply from 2015. In

order to estimate the additional coverage which might then be provided

by our representative operator, given the cost reductions achieved

through the interventions, we have simply looked at the Present Value

of the cost per premise of achieving the counterfactual level of

coverage (e.g. c. £5.7k at the 95.0% indoor coverage level, without

intervention), and calculated the equivalent coverage at that same level

of cost, with intervention (e.g. c. 96.9% for £5.7k per additional

premises, with intervention).

3.17 The resulting indicative indoor 4G coverage in Scotland for the representative

operator is shown below, for the without intervention and with intervention

scenarios. In summary, the assumed interventions could be expected to make

a material difference in accelerating the 97% and 98% indoor coverage levels

in Scotland (e.g. pulling forward the 97% coverage level by about four years)

– though they are unlikely to be sufficient to increase coverage much above

the 98% coverage levels over our modelling period.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

95.0% 96.0% 97.0% 98.0% 99.0% 100.0%

Co

st

pe

r a

dd

itio

na

l p

rem

ise

(£

, 2

0 y

ea

r P

V)

Indoor coverage level

Without intervention With intervention


42

Figure 3-6: Indoor 4G population coverage in Scotland, for a representative MNO, without and with intervention (note that 2013 and 2014 coverage levels are not shown as this chart focuses on the 90%+ coverage levels)


3.18 The impacts of this additional 4G coverage on Scotland‟s average mobile

broadband speeds are rather minimal, as the additional coverage is only

affecting 1% to 2% of the population. The increase in average total (down plus

up) speed, attributable to intervention, peaks at about 0.4Mbps in 2015.

3.19 However, for those beneficiary communities (in the 1% to 2%) the speed

increase will be very substantial - probably going from having no indoor voice

(let alone data) mobile coverage to having 4G services available.

3.20 Looking at 2015 (the year in which we estimate that the difference between

with- and without-intervention coverage would be greatest), we see that there

are substantial differences in the additional 4G coverage due to intervention,

at local authority level: ranging from 0% (for Glasgow, Edinburgh, Aberdeen

and Dundee) to 13% for the Orkney Islands (Figure 3-7).

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Ind

oo

r c

ove

rag

e f

or

4G

Without intervention With intervention


43

Figure 3-7: Indoor 4G coverage by local authority in 2015, for a representative MNO, without and with intervention


0% 20% 40% 60% 80% 100%

Aberdeen City

Aberdeenshire

Angus

Argyll and Bute

Clackmannanshire


Dundee City

East Ayrshire

East Dunbartonshire

East Lothian

East Renfrewshire

Edinburgh, City of

Eilean Siar

Falkirk

Fife

Glasgow CityHighland

Inverclyde

Midlothian

Moray

North Ayrshire

North Lanarkshire

Orkney Islands

Perth and Kinross

RenfrewshireScottish Borders

Shetland Islands

South Ayrshire

South Lanarkshire

Stirling

West Dunbartonshire

West Lothian

4G coverage 2015

With intervention Without intervention


44

4. Economic impacts of improved mobile service levels

4.1 In this section we set out:

the routes to impact which have been modelled, and a brief discussion

on those that have not been included in the model

the key impact assumptions used

our estimates of the economic impacts associated with improved

mobile service levels in Scotland, without and with intervention.

Routes to impact

4.2 The key routes to impact which we have modelled are as follows:

Improvements in business productivity, for mobile-using workers.

We assume that improved mobile service levels will help private sector

businesses with mobile-using workers improve their productivity,

through two separate effects:

Better mobile voice coverage will immediately allow mobile-

using workers to keep in touch more easily with colleagues,

customers and suppliers – allowing them to make more efficient

use of their time while on the move or away from base.

Better mobile data speeds will enable businesses to exploit

new mobile data applications, providing easier access for

salesforce/field personnel to company systems, increased

process automation through machine-to-machine

communications etc. However, there will be a lag associated

with this impact, as it will take some time for companies to adopt

the higher speed technologies, invest in new applications, and

re-engineer processes.

Improvements in public sector productivity, for mobile-using

workers. We assume that the above two effects (of better voice

coverage, and better mobile data speeds) will also help public sector

productivity - for example, through allowing emergency services

workers to keep in touch more easily, providing healthcare and social

care workers with readier access to decision-assisting information and

central systems, and enabling police officers to spend less time on

paperwork by entering information on mobile devices away from base.


45

However, public sector employment and GVA will be

constrained by national budgets for public expenditure, and we

have not assumed that better mobile service levels will lead to

an increase in public expenditure in the foreseeable future,

given the need for deficit reduction. Although we put a monetary

value on this improvement in public sector productivity, using

GVA per worker metrics, in practice, the benefits will be realised

in terms of improvements in the quality of service delivery rather

than in changing the economic output associated with the public

sector. We have therefore kept this value of public sector

productivity separate, rather than simply adding it onto the

projected GVA impacts associated with private sector

productivity gains.

4.3 There are various other potential routes to impact which we have considered,

but chosen not to include in this study‟s model for various reasons. These are

summarised briefly in the table below.

Table 4-1: Potential routes to impact from improved mobile service levels not included in the model

Potential routes to impact

Comments

Construction effects

The investment associated with building out mobile network infrastructure leads to jobs and GVA being created or safeguarded, in the MNOs and their supply chains, and through induced effects from employees spending their wages in the economy.

However, this study‟s primary interest is on the economic impacts arising from the usage and exploitation of mobile services, rather than the construction effects. Moreover, meaningful estimates of the latter for Scotland would require research into the geographical sourcing of the equipment and labour used in MNOs‟ network roll-outs, which is beyond the scope of this study.

Tourism impacts There is an argument that a lack of mobile coverage deters some potential visitors to more rural and remote areas (including business tourism for conferences in rural locations, who may be put off from return visits if the mobile service at the conference venue is poor).

However, there is a counter argument that more mobile base stations can reduce visual amenity, which could reduce the attractiveness of these destinations somewhat. Furthermore, for some tourists, the prospect of being out of touch for a while may be an attractive benefit of visiting a more remote area.

Given the potential negative as well as positive aspects associated with this potential route to impact, and the sparse evidence available to help quantify them reliably, we have not attempted to include these tourism impacts in our model. Note though that the productivity benefits for tourism businesses (though their own use of mobiles) will be included in our overall business productivity impact estimates.

Creation of new business ecosystems

Improved mobile devices and connectivity bring opportunities for the development of new business models, and new business sectors, including mobile app development.

Given that the primary interest of this study is on the economic impacts associated with addressing the final few percent of premises left without coverage (e.g. going from c.95% to 98%+ coverage in Scotland), the incremental effects on the creation of new business models/ecosystems in the


46

Potential routes to impact

Comments

UK and Scotland is likely to be negligible: critical mass levels of say 75%+ coverage across the UK of 4G services will be sufficient to stimulate these new developments.

Digital inclusion of low income groups

Various sources note that pre-paid mobile broadband packages are more attractive to some low income groups than fixed broadband contracts, and can make an important contribution to enhancing their educational attainment, skills and employability.

However, the vast majority (95%+) of families with school-aged children now have internet access at home, and the scope for increasing this further is minimal. Moreover, Scotland‟s digital inclusion issues are primarily in urban areas (e.g. 20.1% of adults in Glasgow have never used the internet, versus 12.1% in the Highlands and Islands

42), so the extension of mobile coverage

into the most remote areas is likely to have only a very minimal impact on digital inclusion of low income groups in Scotland.

Peace of mind, and safety impacts

One of the benefits cited for mobile coverage is the peace of mind through consumers having the option to call Emergency Services, or for other help, if necessary – including isolated workers such as farmers.

We have not attempted to put a value on this peace of mind, nor attributed values to the lives potentially saved or injuries mitigated

43. Note, though that

the productivity benefits to emergency services workers (through their own use of better mobile connectivity) will be included in our estimate of the productivity impacts for public sector organisations.

Consumer surplus

Consumer surplus is the extent to which mobile connectivity is of more value to consumers than they are actually paying for it. Some studies have estimated the consumer surplus associated with faster broadband (that is, the aggregated difference between what consumers would be willing to pay for faster broadband and its market price). While this is a valid theoretical approach, it is problematic for forward-looking studies, given the rapid changes in quality and price. Moreover, note that consumer surplus makes no contribution to Scotland‟s GVA.

Source: SQW

42

Source: ONS Internet Access Quarterly Update, Q3 2013 43

By way of context, HSE reports a total of 29 fatal accidents in the GB‟s agriculture, forestry and fishing industry in 2012/13 (2/3 to self-employed, and 1/3 to employees), and 375 major injuries to employees. Applying the same ratio to employees vs self-employed for major injuries as for fatal injuries, this suggests in the order of 29+375*3=c. 1.15k p.a,. Scotland has c. 13% of GB employment in this sector, suggesting c. 4 fatal and 158 major injuries to people in this sector p.a. in Scotland. However, it is not known what impact better mobile coverage might have had in avoiding any of these fatalities, or in getting treatment more rapidly for any of these major injuries.


47

Key impact assumptions

Business impacts

4.4 Our key assumptions regarding the business impacts from improved mobile

service levels are set out below.

Employment and GVA per worker

4.5 As well as considering geographic variations in mobile coverage/service

levels, we need to remember that productivity levels vary by geography. In

order to account for this, we have assessed GVA per private sector worker, by

local authority area, from an analysis of ONS regional GVA accounts for non-

public sector industries by NUTS3 area, combined with information from the

Business Register and Employment Survey (BRES) on the number of private

sector workers in each NUTS3 area, matching local authorities to the most

relevant NUTS3 area. The resulting assumed GVA per private sector worker,

by local authority, ranges from about £34k to £58k p.a.

Proportion of workers which are mobile-using

4.6 Not all workers use mobile connectivity for work purposes, however. We have

assumed that 50% of private sector workers do so, informed by a Citrix

survey44 which found that 47% of staff in UK SMEs are using their personal

mobile devices for work purposes, and a CIO UK survey which found that

50% of the workforce using mobile devices for work45.

Uplift from increased voice coverage

4.7 We have assumed that better voice coverage will lead to improved

productivity for mobile-using workers, with a notional maximum of a 1.5%

productivity uplift for the hypothetical case of a local authority going from zero

mobile coverage to 100% coverage, with a linear interpolation between these

points as illustrated in the chart below. That is, the better the coverage in the

mobile-using worker‟s local authority area, the more productive they can be,

as they can keep in touch with colleagues, customers and suppliers more

easily.

44

http://news.citrixonline.com/wp-content/uploads/2013/06/Citrix-Mobile-Workstyles-Small-Business.pdf 45

http://www.cio.co.uk/insight/mobile/fewer-than-half-of-enterprises-implementing-byod-policies/

http://news.citrixonline.com/wp-content/uploads/2013/06/Citrix-Mobile-Workstyles-Small-Business.pdf

http://news.citrixonline.com/wp-content/uploads/2013/06/Citrix-Mobile-Workstyles-Small-Business.pdf




48

4.8 The maximum 1.5% uplift is informed by Gruber and Koutroumpis46 who

estimated that mobiles contributed c. 0.37% to annual productivity growth in

the UK in the period 1990-2007, which would be equivalent to a total of c.

3.8% uplift over 10 years (our modelling period). The period analysed by

Gruber and Koutroumpis was dominated by voice services, though

Blackberries had become popular in the later years. We assume that ~3%

uplift can be attributed to voice, with the impact split equally between

coverage and take-up (i.e. for a given take-up level, doubling the coverage

leads to double the impact; for a given coverage, double the take-up leads to

double the impact). Hence the total impact associated with coverage going

from 0% to 100% is estimated as 0.5*3% = 1.5%.

4.9 As there is no need for a change in the mobile devices used, nor any

additional investment required in changing company systems and processes,

in order to benefit from the additional voice coverage, we assume that the

productivity impacts will be pretty much immediate – i.e. better mobile

coverage will immediately allow companies in the affected areas to operate

more efficiently.

4.10 Note that the modelled increases in indoor voice coverage per local authority

for our representative MNO are between 11% and 52%, so the modelled

productivity impacts are at the lower end of the values shown in the chart

below.

46

Gruber, Harald, Koutroumpis, P, 2011, Mobile telecommunications and the impact on economic development, Economic Policy Volume 26, Issue 67, pages 387–426


49

Figure 4-1: Assumed relationship between increase in voice coverage in a local authority area and uplift in productivity per mobile-using employee

Source: SQW estimates

Uplift from increased mobile data speeds

4.11 The profile of productivity uplift from increased mobile speeds is somewhat

different. It will take some time for mobile devices with the new functionality

(e.g. 4G connectivity) to diffuse through the mobile-using workforce, and also

time for companies to adapt their systems and processes in order to exploit

the higher mobile speeds fully. We assume that each year‟s increase in

mobile speed will have no impact on productivity in that year, but that the

impacts will be realised over the following three years.

4.12 The assumed extent of the productivity uplift from an increase in speed in

each year is illustrated in the chart below. The shape of this curve is primarily

determined by the assumption on the extent of uplift associated with an in-

year doubling of available mobile speeds (i.e. 100% increase). The equivalent

number for fixed broadband is 0.3% in the UK Broadband Impact Study47,

derived from Imperial College and Bank of England research on contribution

of telecoms to productivity growth in the UK. Ofcom's Communications Market

Report 2013 shows that time spent using mobile phone is roughly half that

spent using fixed internet (29 mins vs 68 mins in 2012), so we have taken the

47

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/257006/UK_Broadband_Impact_Study_-_Impact_Report_-_Nov_2013_-_Final.pdf

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0% 20% 40% 60% 80% 100%

Inc

rea

se

in

GV

A p

er

wo

rke

r a

ss

oc

iate

d w

ith

in

cre

as

e in

vo

ice

co

ve

rag

e i

n L

A

Increase in voice coverage in local authority area




50

assumed impact of a doubling of mobile speed to be 0.3%*29/68 = 0.13%.

There are likely to be diminishing returns with higher increases in speed, and

we have assumed that this curve asymptotes towards a value of 0.26% (twice

the impact of a doubling in speed). That is, whatever the in-year increase in

mobile speeds available, the productivity impacts from that will not exceed

0.26%.

Figure 4-2: Assumed relationship between an in-year increase in mobile data speeds available in a local authority area and the uplift in productivity per mobile-using employee (realised over the following three years)

Source: SQW estimates

Displacement and multipliers

4.13 As our assumptions on productivity uplifts have been derived from economy-

wide analyses, we have assumed that displacement and multiplier effects are

already reflected in our assumptions, and we have therefore not applied

further adjustments for these effects.

Public sector impacts

4.14 The assumptions for the relationship between increased voice

coverage/mobile speeds and productivity uplifts have been assumed to be the

same for public sector workers as for private sector workers. However, there

are differences in other assumptions as follows:

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0% 50% 100% 150% 200% 250% 300%Up

lift

in

GV

A p

er

wo

rke

r a

ss

oc

iate

d w

ith

in

-ye

ar

inc

rea

se

in

mo

bil

e d

ata

sp

ee

d

In-year increase in indoor mobile speeds in Local Authority area


51

The assumed proportion of public sector workers which use mobile

connectivity for work purposes. We have assumed 66% (cf 50% for

private sector workers), which is informed by a survey48 in 2010 which

found that 80% of health professionals carry a mobile while at work, of

which 82% use their mobiles for communicating with colleagues.

The employment and GVA per public sector have been derived from an

analysis of ONS regional GVA accounts for public sector industries by

NUTS3 area, combined with information from the Business Register

and Employment Survey (BRES) on the number of public sector

workers in each NUTS3 area, matching local authorities to the most

relevant NUTS3 area. The resulting GVA per public sector worker, by

local authority, ranges from about £24k to £47k p.a.

Economic impact estimates

Without intervention

Business impacts

4.15 Without intervention, the resulting estimated effects of improved mobile

service levels (coverage and speed) on private sector productivity per local

authority area, by the end of our modelling period, are shown in the table

below.

Table 4-2: Estimated real private sector productivity uplifts (versus 2012 levels) by 2023, through improved mobile service levels, by local authority, without intervention

Local authority

Uplift due to improved

voice coverage

Uplift due to faster mobile data speeds

Resulting total uplift

Resulting uplift in GVA per

mobile-using worker (£ p.a.,

2013 prices)

Aberdeen City 0.38% 0.39% 0.77% 428

Aberdeenshire 0.56% 0.50% 1.06% 587

Angus 0.38% 0.44% 0.82% 352

Argyll and Bute 0.37% 0.49% 0.86% 311

Clackmannanshire 0.28% 0.43% 0.71% 293

Dumfries and Galloway 0.41% 0.48% 0.89% 357

Dundee City 0.25% 0.37% 0.62% 266

East Ayrshire 0.24% 0.43% 0.67% 284

48

http://www.d4.org.uk/research/survey-mobile-phone-use-health-professionals-UK.pdf

http://www.d4.org.uk/research/survey-mobile-phone-use-health-professionals-UK.pdf


52

Local authority

Uplift due to improved

voice coverage

Uplift due to faster mobile data speeds


Resulting uplift in GVA per

mobile-using worker (£ p.a.,

2013 prices)

East Dunbartonshire 0.22% 0.42% 0.63% 292

East Lothian 0.37% 0.44% 0.81% 357

East Renfrewshire 0.25% 0.42% 0.66% 306

Edinburgh, City of 0.17% 0.34% 0.51% 296

Eilean Siar 0.78% 0.65% 1.42% 534

Falkirk 0.29% 0.42% 0.71% 340

Fife 0.36% 0.43% 0.79% 326

Glasgow City 0.17% 0.35% 0.51% 242

Highland 0.58% 0.49% 1.07% 412

Inverclyde 0.16% 0.40% 0.56% 258

Midlothian 0.47% 0.43% 0.91% 402

Moray 0.44% 0.47% 0.91% 340

North Ayrshire 0.45% 0.43% 0.87% 372

North Lanarkshire 0.47% 0.42% 0.89% 393

Orkney Islands 0.78% 0.60% 1.38% 473

Perth and Kinross 0.37% 0.46% 0.83% 362

Renfrewshire 0.46% 0.40% 0.87% 398

Scottish Borders 0.35% 0.46% 0.81% 299

Shetland Islands 0.63% 0.55% 1.18% 429

South Ayrshire 0.29% 0.43% 0.72% 341

South Lanarkshire 0.43% 0.42% 0.85% 350

Stirling 0.50% 0.45% 0.95% 415

West Dunbartonshire 0.21% 0.40% 0.61% 281

West Lothian 0.53% 0.43% 0.96% 473

Source: SQW analysis

4.16 Overall, the net GVA impacts for Scotland associated with improved mobile

service levels (since the 2012 baseline) rise to £308 million p.a. by 2023, as

shown in the table below.

Table 4-3: Net annual GVA impacts from improved mobile service levels since the 2012 baseline (£m p.a., 2013 prices), without intervention

2013 2014 2015 2016 2017 2018 2023

Aberdeen City 8 14 22 26 28 28 31

Aberdeenshire 4 7 13 16 19 21 25

Angus 1 1 2 3 3 4 5


53

2013 2014 2015 2016 2017 2018 2023

Argyll and Bute 0 1 2 2 3 3 4

Clackmannanshire 0 1 1 1 1 1 2

Dumfries and Galloway 1 2 4 5 6 6 8

Dundee City 1 3 4 5 6 6 7

East Ayrshire 0 1 2 2 3 3 4

East Dunbartonshire 0 1 1 2 2 2 3

East Lothian 0 1 2 3 3 3 4

East Renfrewshire 0 1 1 1 2 2 2

Edinburgh, City of 5 13 20 26 27 28 32

Eilean Siar 0 1 1 1 1 1 2

Falkirk 1 2 4 5 6 6 7

Fife 2 6 9 11 12 13 15

Glasgow City 8 17 24 30 32 33 37

Highland 3 6 9 11 13 14 16

Inverclyde 1 1 1 2 2 2 3

Midlothian 1 2 3 3 4 4 4

Moray 1 2 2 3 4 4 4

North Ayrshire 1 2 3 4 4 5 5

North Lanarkshire 5 9 12 14 16 16 17

Orkney Islands 0 0 1 1 1 1 1

Perth and Kinross 1 3 4 6 7 7 9

Renfrewshire 3 6 8 10 10 11 12

Scottish Borders 1 1 2 3 3 4 5

Shetland Islands 0 1 1 1 1 1 2

South Ayrshire 1 2 3 4 5 5 6

South Lanarkshire 3 7 10 12 13 14 16

Stirling 2 3 4 5 6 6 7

West Dunbartonshire 0 1 2 2 2 2 3

West Lothian 5 7 10 11 12 13 14

Scotland 61 124 189 233 257 269 308


4.17 To put this into context, if we assume that Scotland‟s total GVA in 2012 was

£112 billion in 2013 prices (2011 GVA was £108 billion in 2011 prices,

according to ONS Regional GVA estimates), then an uplift of £308 million by

2023 would be equivalent to adding about 0.025% to Scotland‟s annual

growth rate over the period 2013 to 2023. By way of comparison, the UK


54

Broadband Impact Study estimated that faster mass market fixed broadband

adds about 0.074% to the UK‟s annual growth rate over the period 2009 to

2024.


4.18 The estimated value of the public sector productivity impacts for Scotland

associated with improved mobile service levels (since the 2012 baseline) rise

to about £116 million p.a. by 2023, as shown in the table below.

Table 4-4: Value of improved public sector productivity from improved mobile service levels since the 2012 baseline (£m p.a., 2013 prices), without intervention

2013 2014 2015 2016 2017 2018 2023

Aberdeen City 2 3 5 6 6 7 7


Angus 0 1 1 1 2 2 2











Falkirk 0 1 2 2 3 3 3

Fife 1 3 4 5 6 6 7

Glasgow City 3 7 9 12 12 13 14

Highland 1 2 4 4 5 5 6



Moray 0 1 1 1 1 1 2








55

2013 2014 2015 2016 2017 2018 2023




Stirling 1 1 1 1 1 2 2


West Lothian 1 2 2 3 3 3 3

Scotland 22 46 71 87 97 101 116


With intervention

Business impacts

4.19 Under the with-intervention scenario, the estimated effects of improved mobile

service levels on private sector productivity per local authority, by the end of

our modelling period, are shown in the table below.

Table 4-5: Estimated real private sector productivity uplifts (versus 2012 levels) by 2023, through improved mobile service levels, with intervention

Local authority

Uplift due to improved voice

coverage

Uplift due to faster

mobile data speeds


Resulting uplift in

GVA per mobile-

using worker (£ p.a., 2013

prices)

Aberdeen City 0.38% 0.39% 0.77% 428

Aberdeenshire 0.56% 0.50% 1.06% 591

Angus 0.38% 0.45% 0.83% 355

Argyll and Bute 0.39% 0.50% 0.89% 321

Clackmannanshire 0.28% 0.43% 0.71% 293

Dumfries and Galloway 0.42% 0.48% 0.91% 362

Dundee City 0.25% 0.37% 0.62% 266

East Ayrshire 0.25% 0.43% 0.68% 291

East Dunbartonshire 0.22% 0.42% 0.64% 292

East Lothian 0.37% 0.44% 0.81% 358

East Renfrewshire 0.25% 0.42% 0.67% 306

Edinburgh, City of 0.17% 0.34% 0.51% 296

Eilean Siar 0.79% 0.64% 1.42% 534

Falkirk 0.29% 0.42% 0.71% 340


56

Local authority

Uplift due to improved voice

coverage

Uplift due to faster

mobile data speeds


Resulting uplift in

GVA per mobile-

using worker (£ p.a., 2013

prices)

Fife 0.36% 0.43% 0.79% 327

Glasgow City 0.17% 0.35% 0.51% 242

Highland 0.59% 0.50% 1.08% 418

Inverclyde 0.17% 0.40% 0.57% 261

Midlothian 0.48% 0.43% 0.92% 405

Moray 0.44% 0.47% 0.92% 343

North Ayrshire 0.45% 0.43% 0.88% 373

North Lanarkshire 0.47% 0.42% 0.89% 394

Orkney Islands 0.78% 0.60% 1.37% 472

Perth and Kinross 0.38% 0.47% 0.85% 370

Renfrewshire 0.46% 0.40% 0.87% 398

Scottish Borders 0.36% 0.46% 0.83% 305

Shetland Islands 0.64% 0.56% 1.20% 435

South Ayrshire 0.29% 0.43% 0.72% 341

South Lanarkshire 0.43% 0.42% 0.85% 352

Stirling 0.51% 0.45% 0.96% 420

West Dunbartonshire 0.21% 0.40% 0.61% 281

West Lothian 0.53% 0.43% 0.96% 473


4.20 Overall, the net GVA impacts for Scotland associated with improved mobile

service levels (since the 2012 baseline) rise to £310 million p.a. by 2023

under the with-intervention scenario, as shown in the table below.

Table 4-6: Net annual GVA impacts from improved mobile service levels since the 2012 baseline (£m p.a., 2013 prices), with intervention

2013 2014 2015 2016 2017 2018 2023

Aberdeen City 8 14 22 26 28 28 31


Angus 1 1 2 3 4 4 5





57

2013 2014 2015 2016 2017 2018 2023








Falkirk 1 2 4 5 6 6 7

Fife 2 6 9 11 13 13 15

Glasgow City 8 17 24 30 32 33 37

Highland 3 6 9 11 13 14 16



Moray 1 2 2 3 4 4 4










Stirling 2 3 4 5 6 6 7


West Lothian 5 7 10 11 12 13 14

Scotland 61 124 189 233 264 274 310



58

4.21 Comparing the with-intervention and without-intervention scenarios, we

estimate that the net annual GVA impacts for Scotland associated with the

interventions described in the previous section would peak at about £6.4

million by 2017 (Table 4-7).

Table 4-7: Net annual GVA impacts of improved mobile service levels, without and with intervention (£ million, 2013 prices)

2013 2014 2015 2016 2017 2018 2023

Without intervention 61 124 189 233 257 269 308

With intervention 61 124 189 233 264 274 310

Net GVA from intervention 0 0 0 0.44 6.39 4.67 1.51


4.22 Discounting the net GVA impacts at 3.5%, as per HM Treasury Green Book

guidance, using 2013 as year zero, the Present Value of the net GVA impacts

associated with the assumed set of interventions is £18 million over the

period 2013 to 2023.

4.23 Of this total, the bulk of the economic impact is associated with the assumed

reduction in business rates in underserved areas. The table below illustrates

the net GVA impact of each potential policy lever taken on its own (note that

these individual impacts total to more than the £18 million combined impact,

because there are diminishing returns as costs are further reduced, allowing

coverage to be extended into ever sparser areas).

Table 4-8: Individual net GVA impacts of the four policy levers considered in this report

Present Value of the net GVA impacts from intervention

over the period 2013 to 2023 (£ million, 2013 prices)

Due to reduced planning constraints 1.6

Due to reduced non-domestic rates 16.3

Due to reduced site rentals (through access to public land/buildings) 2.6

Due to direct subsidy per site (assumed to be nil) 0.0


4.24 Considering the differing net GVA impacts of the assumed set of interventions

by local authority, it would appear that the greatest absolute impacts would be

seen in Aberdeenshire, Highland and Perth & Kinross (Figure 4-3). The value

in Aberdeenshire is particularly high, relative to other local authorities, due to

a combination of relatively high private sector employment and high GVA per

worker plus a relatively high level of coverage uplift from the assumed

interventions in this area.


59

Figure 4-3: Present Value over the period 2013 to 2023 of the net GVA impacts associated with the assumed interventions, by local authority (£m, 2013 prices)



4.25 Under the with-intervention scenario, the estimated value of the public sector

productivity impacts for Scotland associated with improved mobile service

levels (since the 2012 baseline) rise to about £117 million p.a. by 2023, as

shown in the table below.

Table 4-9: Value of improved public sector productivity from improved mobile service levels since the 2012 baseline (£m p.a., 2013 prices), with intervention

2013 2014 2015 2016 2017 2018 2023

Aberdeen City 2 3 5 6 6 7 7


Angus 0 1 1 1 2 2 2


0.04

4.15

0.70

0.70

0.07

1.46

0.00

0.40

0.16

0.14

0.25

0.04

0.22

0.10

0.78

0.00

1.92

0.19

0.11

0.59

0.46

0.11

0.21

1.76

0.13

0.95

0.24

0.36

0.84

0.81

0.09

0.37

0.00 1.00 2.00 3.00 4.00 5.00

Aberdeen City

Aberdeenshire

Angus

Argyll and Bute

Clackmannanshire


Dundee City

East Ayrshire

East Dunbartonshire

East Lothian

East Renfrewshire

Edinburgh, City of

Eilean Siar

Falkirk

Fife

Glasgow City

Highland

Inverclyde

Midlothian

Moray

North Ayrshire

North Lanarkshire

Orkney Islands

Perth and Kinross

Renfrewshire

Scottish Borders

Shetland Islands

South Ayrshire

South Lanarkshire

Stirling

West Dunbartonshire

West Lothian

PV of net GVA impact (£m)


60

2013 2014 2015 2016 2017 2018 2023










Falkirk 0 1 2 2 3 3 3

Fife 1 3 4 5 6 6 7

Glasgow City 3 7 9 12 12 13 14

Highland 1 2 4 4 5 5 6



Moray 0 1 1 1 1 1 2










Stirling 1 1 1 1 2 2 2


West Lothian 1 2 2 3 3 3 3

Scotland 22 46 71 88 99 103 117


4.26 Comparing the with-intervention and without-intervention scenarios, we

estimate that the value of the public sector productivity benefits from

intervention would peak at about £2.4 million by 2017 (Table 4-10).


61

Table 4-10: Value of the public sector productivity impacts of improved mobile service levels, without and with intervention (£ million, 2013 prices)

2013 2014 2015 2016 2017 2018 2023

Without intervention 22 46 71 87 97 101 116

With intervention 22 46 71 88 99 103 117

Net value from intervention 0.00 0.00 0.00 0.16 2.38 1.70 0.59


4.27 Discounting the values of the public sector productivity impacts at 3.5%, using

2013 as year zero, the Present Value of the public sector productivity benefits

associated with the assumed set of interventions is £7 million over the period

2013 to 2023.

4.28 Again, the bulk of the public sector productivity impact is from the assumed

reduction in non-domestic rates, as shown in the table below (as before, these

individual impacts total to more than the £7 million combined impact, because

there are diminishing returns as costs are further reduced, allowing coverage

to be extended into ever sparser areas).

Table 4-11: Individual net public sector productivity impacts of the four policy levers considered in this report

Present Value of the net public sector productivity impacts from intervention

over the period 2013 to 2023 (£ million, 2013 prices)

Due to reduced planning constraints 0.6

Due to reduced non-domestic rates 6.0

Due to reduced site rentals (through access to public land/buildings) 1.0

Due to direct subsidy per site (assumed to be nil) 0.0


4.29 Considering the differing public sector productivity impacts of the assumed set

of interventions by local authority Aberdeenshire, Highland and Dumfries &

Galloway show the highest absolute impacts by this measure (Figure 4-4).


62

Figure 4-4: Present Value over the period 2013 to 2023 of the value of net public sector productivity impacts associated with the assumed interventions, by local authority (£m, 2013 prices)


0.01

0.84

0.31

0.34

0.03

0.68

0.00

0.23

0.05

0.05

0.10

0.01

0.14

0.04

0.36

0.00

0.75

0.12

0.04

0.22

0.18

0.04

0.15

0.55

0.05

0.39

0.20

0.16

0.35

0.21

0.07

0.09

0.00 0.20 0.40 0.60 0.80 1.00

Aberdeen City

Aberdeenshire

Angus

Argyll and Bute

Clackmannanshire


Dundee City

East Ayrshire

East Dunbartonshire

East Lothian

East Renfrewshire

Edinburgh, City of

Eilean Siar

Falkirk

Fife

Glasgow City

Highland

Inverclyde

Midlothian

Moray

North Ayrshire

North Lanarkshire

Orkney Islands

Perth and Kinross

Renfrewshire

Scottish Borders

Shetland Islands

South Ayrshire

South Lanarkshire

Stirling

West Dunbartonshire

West Lothian

PV of public sector productivity impact (£m)


63

5. Recommendations

5.1 In the light of our study findings, we offer the following recommendations to

the Scottish Government:

Recommendation 1. Minimise the barriers for 4G roll-out in

Scotland over the next two to four years. Our study confirms that

certain interventions could have a material impact in accelerating

coverage to parts of Scotland, and that this could have significant

benefits, both in terms of net GVA impacts and in the delivery of public

services. While there are some important constraints on which the

Scottish Government can have little direct influence (e.g. the cost of

equipment, and the cost of electricity supply in remote areas), there are

some areas in which public policy can help to reduce the barriers to

rollout. In particular:

R1.1 Reduce planning constraints. While this study has not

attempted a detailed analysis of planning issues, our

consultations indicated that the current planning permission

regime for mobile communications infrastructure is significantly

more restrictive in Scotland than in the rest of the UK, entailing

greater uncertainty, delays and administrative resources for

operators. While appropriate safeguards need to be maintained,

of course, we suggest that the current situation risks putting

Scotland at a competitive disadvantage in attracting MNOs‟

network investments. In particular, with the potential for large

numbers of low cost small cells to be deployed, it will be

important to ensure that planning guidance for these sites is

unambiguous and consistently applied, minimising planning-

related uncertainty and administrative costs for MNOs. We note

that the Scottish Government does intend to consult on changes

to the planning system, with a view to addressing such issues.

R1.2 Reduce the complexity and burden of non-domestic

rates on mobile cell sites, especially small cells in under-

served areas. Our research highlighted both that non-domestic

rates are an important component of the overall costs of cell

sites, and that there can be significant uncertainty as to what the

rates liability for different types of site may be – which would

only be confirmed through site-specific assessments. For the

potentially large numbers of small cells in urban and rural areas

over the next few years, a site-specific assessment would


64

appear to represent a disproportionate use of both the

assessors‟ and MNOs‟ time, adding to the total costs of these

sites, and hence reducing coverage. We suggest that the

valuation approach to small cell sites falling within defined

footprints/volumes should be standardised, irrespective of

specific power levels, equipment value and site rental charges

etc., at appropriate (low) levels. In areas likely to be

underserved (e.g. where the population density is lower than

some threshold), there may be a case for discounting the rates

due by up to 100%.

R1.3 Explore the options for reducing the costs of fibre

backhaul for cell sites in underserved areas. The up-front

and ongoing costs of extending fibre backhaul to remote areas

are key barriers to extending the coverage of 4G services. The

current fixed superfast broadband interventions in the Highlands

and Islands and the Rest of Scotland should help to bring down

the costs of this backhaul, as they entail the extension of BT‟s

core fibre network. We suggest that a first step should be a

more detailed analysis, in discussion with BT (which is, in

practice, the dominant provider of backhaul in rural locations), of

the likely impacts of this subsidised roll-out for the pricing of fibre

Ethernet backhaul for MNO cell sites in areas of low population

density – perhaps taking a representative sample of locations

across Scotland. This should highlight the geographies in which

fibre backhaul would still be prohibitively expensive, once the

current subsidised roll-out is complete. Options for addressing

the cost of backhaul in such areas should then be assessed;

these may include: further supply-side intervention under the

„World Class 2020‟ initiatives; potentially sharing connectivity

with publicly owned sites in such areas – including sites served

via the Scottish Wide Area Network (SWAN); and community

funded approaches.

R1.4 Consider sharing with MNOs information on land and

buildings owned by public bodies in underserved areas,

which could potentially be used for mobile infrastructure.

Site rentals are an important component of the costs of cell

sites. The public sector has many land/building assets across


65

Scotland49, and offering low-cost rentals for cell sites hosted on

land/buildings owned by public sector bodies could potentially

play a part in helping to reduce the costs of rolling out

infrastructure to underserved areas. There would clearly be

challenges in sharing information on these assets with MNOs,

including: sensitivities around including some classes of

publicly-owned property on such a list (e.g. schools); the need to

maintain the data; the ongoing rationalisation of assets; and

considering how best to price cell site rentals on publicly owned

assets. In the interests of minimising administrative overheads, it

may be best to restrict the shared information to those assets

located in potentially underserved areas (e.g. with population

densities falling below a certain threshold). The Scottish Futures

Trust (SFT) has a programme management role in improving

property asset management across the whole of the Scottish

public sector, and we would suggest that this recommendation

should initially be taken forward in discussion with SFT, with the

pros and cons then explored with other public sector partners

and the MNOs.

Recommendation 2. Working with public sector partners, help to

incentivise operators to extend their networks as far as possible,

by putting a strong emphasis on the importance of coverage in

the competitions for public sector mobile connectivity contracts.

Public sector organisations are major customers of the MNOs, through

their contracts for mobile connectivity for staff. The extent and quality of

mobile coverage (whether for emergency services or for „non-blue light‟

services) can have important impacts for the efficiency and quality of

public service delivery in rural areas, and we suggest that the relative

coverage of voice and data services should be key considerations in

the evaluation of competitive tenders for providing mobile services to

public sector organisations, and that there should be ongoing

monitoring of the actual user experience throughout the contracts to

highlight any areas where the winning suppliers are falling short of their

coverage commitments.

49

For example, a report by the Scottish Futures Trust in 2011 found 4,200 assets in South East Scotland alone, managed by councils, the NHS and emergency services. http://www.scottishfuturestrust.org.uk/files/publications/Asset_Management_-_The_Local_Civil_Estate_-_September_2011.pdf

http://www.scottishfuturestrust.org.uk/files/publications/Asset_Management_-_The_Local_Civil_Estate_-_September_2011.pdf

http://www.scottishfuturestrust.org.uk/files/publications/Asset_Management_-_The_Local_Civil_Estate_-_September_2011.pdf


66

Recommendation 3. Review the need for supply-side

interventions in addressing the most remote areas, once the

commercial 4G roll-outs have been allowed to run their course.

Our report highlights that the 4G roll-out will mean substantial

improvements in the coverage and quality of both voice and data

services over the next few years, through commercial market forces. It

is difficult to say with any certainty at present exactly where in Scotland

will be left without coverage, bearing in mind ongoing improvements in

technology, the potential benefits for backhaul pricing of the current

superfast fixed broadband interventions, and the potential benefits for

coverage of our other recommendations above. It would therefore

seem premature at this stage to invest in substantial supply-side

interventions to subsidise mobile coverage to the last few percent of

Scotland‟s population, and the prospect of such a subsidy could

potentially lead to MNOs‟ commercial roll-outs stopping short of where

they would otherwise get to. We suggest that the case for supply-side

interventions should be reviewed once the commercial 4G roll-outs

have been substantially completed (e.g. in late 2015).

Recommendation 4. Discuss with Ofcom the potential approaches

for monitoring changes in the real-world user experience of

mobile services. In developing our estimates of economic impact, it

became apparent that the current measures of coverage are not as

closely aligned to the actual user experience as they might be – as

they currently focus on outdoor coverage, and on aggregated

measures rather than the coverage experienced by a typical user of a

single network (% without signal from any operator, and % with signal

from all operators). While acknowledging the difficulties of modelling

indoor coverage, we suggest that it will be increasingly important to

monitor this (not least in assessing licence obligation compliance), and

we would also suggest that a market-share weighted coverage

measure (i.e. the mean coverage of the four operators weighted by

their respective market shares) could be a helpful indicator of the

coverage experienced by a typical user.


A-1

Annex A: List of consultees

A.1 We are very grateful to the following individuals and organisations who were

consulted in the course of this study:

Table A-1: List of study consultees

Organisation Consultees

ANFR (National Frequency Agency - France) Bernard Celli

Arqiva Adam Jahr

BT Mark Harrop

Department of Culture, Media & Sport Jeanne Grey

Everything Everywhere (EE) David Salam

Federation of Small Businesses Scotland Barry McCulloch

Highlands and Islands Enterprise Stuart Robertson

Mobile Operators Association John Cooke

NHS Scotland Andrew Inglis

NPT (Norway) Bjørn Erik Eskedal

Ofcom Huw Saunders & Richard Moore

Ofcom (Scotland) Vicki Nash

PTS (Sweden) Bengt Mölleryd

Scottish Assessors Association Alasdair MacTaggart

Scottish Enterprise David Byers

Scottish Government (Planning and Architecture Division) Alan Cameron

Scottish Tourism Alliance Stephen Leckie

Telefónica O2 Andy Conway & Sarah Craig

Three Phil Sheppard & Madeline Hutton

Virgin Media Kevin Baughan

Vodafone Paul Morris

Wireless Infrastructure Group Scott Coates & David Webster

Source: SQW


B-1

Annex B: Summary of previous evidence on the economic impacts of mobile communications

B.1 Our literature review on the economic impact of mobile coverage revealed

that empirical research in this area is, as yet, relatively unexplored. Also much

of the existing research50 focuses on the impact of mobile telecommunications

for developing economies, rather than that for developed countries.

B.2 While the proliferation of mobile impact related research studies on developed

economies has increased somewhat in recent years - the methodologies,

approaches and estimations varied considerably between studies. Potential

routes to economic impact considered in these studies (though not

necessarily quantified) included: construction effects, productivity effects,

creation of new business ecosystems, digital inclusion of lower income groups

and improvement of public services.

The majority of existing studies focused on productivity effects as a route to economic impact….

B.3 A number of studies attempt to quantify the impact of mobile services on the

economy through wider productivity gains. This includes a recent study by

Deloitte51 which examined the productivity benefits of mobile devices. This

included labour productivity benefits (communication on-the-go, productive

use of downtime, productivity apps, document review and decision making)

and capital productivity benefits (M2M technologies, replace fixed desktop

devices, teleworking reducing desktop space and rent, M-commerce reduces

bricks and mortar retail). This paper estimated economic productivity benefits

of $11.8 billion over the next decade, due to the current wave of mobile

technology driving labour efficiency with „productivity apps‟ and use of „down

time‟ and also increasing capital productivity.

50

Examples include: Gruber, H & P Koutroumpis (2010), Mobile telecommunications and the impact on economic development, Centre for Economic Policy Research; Deloitte (2008), Economic Impact of Mobile Communications in Serbia, Ukraine, Malaysia, Thailand, Bangladesh and Pakistan, available at http://www.telenor.com/wp-content/uploads/2012/03/Economic-Impact-of-Mobile-Communications.pdf 51

Deloitte for AMTA (2013), Mobile Nation: The economic and social impacts of mobile technology, available at http://www.deloitte.com/view/en_AU/au/insights/browse-by-industry/education/47f2e0e7791bc310VgnVCM2000003356f70aRCRD.htm

http://www.telenor.com/wp-content/uploads/2012/03/Economic-Impact-of-Mobile-Communications.pdf

http://www.telenor.com/wp-content/uploads/2012/03/Economic-Impact-of-Mobile-Communications.pdf

http://www.deloitte.com/view/en_AU/au/insights/browse-by-industry/education/47f2e0e7791bc310VgnVCM2000003356f70aRCRD.htm



B-2

B.4 A 2011 study52 found across a broad range of alternative econometric

specifications that the contribution of mobile telecommunications

infrastructure to economic growth for low penetration countries is smaller than

for high penetration countries, suggesting increasing returns from mobile

adoption and use. The study finds that mobile penetration has a significant

and positive effect on productivity in both low and high penetration countries –

however high mobile penetration countries enjoyed considerably more than

50% higher returns compared to low penetration countries (0.062 versus

0.035). This translates into much stronger network effects from higher

penetration levels, which result in higher productivity gains. This study found

that the Netherlands and Germany enjoyed the highest contribution of mobile

telecommunications to productivity growth, equal to 0.39% annually, followed

closely behind by other West European countries such as Finland, and

Portugal with 0.38%, whereas on the opposite end of the spectrum were

Canada with 0.23% and Mexico with 0.22%. Among the various policy

recommendations in this study derived from the productivity gains result is

that from an economic developmental point of view it would make sense to

provide additional support for mobile telecommunications infrastructure.

B.5 The report, “The Impact of 4G Technology on Commercial Interactions,

Economic Growth and US Competitiveness53,” looked at the economic

dynamics surrounding 4G technology. It estimated that US investment in 4G

networks could fall in the range of $25-$53 billion during 2012-2016;

conservatively, these investments could result in labour and capital

productivity benefits that could account for $73-$151 billion in GDP growth

and 371,000-771,000 new jobs. The report noted that high-performance

wireless capacity, coupled with cloud infrastructure and other advances,

proliferates new offerings and capabilities that exceed what has been possible

with 3G technology.

B.6 An earlier 2008 study54 also focused on productivity gains as the route to

economic impact and emphasised six areas where mobile broadband would

have tangible benefits from reductions in labour costs, these were: resources

and inventory management and documentation, healthcare efficiency

enhancements, field service automation, inventory loss reduction, sales force

52

Harald Gruber and Pantelis Koutroumpis (2011), Mobile telecommunications and the impact on economic development, Economic Policy July 2011 pp. 387–426 53

Deloitte (2011), The Impact of 4G Technology on Commercial Interactions, Economic Growth and U.S. Competitiveness, available at http://www.deloitte.com/us/impactof4g# 54

R. Entner for CTIA (2008), The Increasingly Important Impact of Wireless Broadband Technology and Services on the U.S. Economy

http://www.deloitte.com/us/impactof4g


B-3

automation and replacement of desktops with wireless devices. As a result

the report estimated productivity gains and cost savings of approximately

$860 billion between 2005 and 2016 as mobile broadband service become

more prevalent.

B.7 Research55 into the case for providing seamless wireless connectivity on the

rail link between the cities of Edinburgh and Glasgow used a model to assess

the economic benefits of improved voice and data in terms of the value of time

that would be saved. The study showed that improved voice connectivity

would result in savings of around £0.4 million p.a. by 2011/12 and improved

data connectivity would result in time savings of £3.1 million p.a. by 2011/12

…while some others focused on the construction effects of mobile infrastructure and the creation of new business ecosystems as routes to impact

B.8 Significant investments in spectrum and other infrastructure required to

support the deployment of mobile networks can deliver positive economic

impacts. In the United States, research56 estimated that new wireless

broadband investments of $17.4 billion would, within 24 months of making this

additional investment, increase gross domestic product (GDP) by 0.9% to

1.3%, which translates in dollar terms to $126.3 billion to $184.1 billion, and

would result in an increase of between 4.5 million and 6.3 million jobs. This

estimate was based on direct and indirect effect of capital investment. “By

investing in wireless broadband access infrastructure, both jobs and income

are increased, not only by the direct investment in building new wireless

towers and modifying existing towers, thereby expanding existing network

capacity, speed, and reliability, but also by the indirect benefits of filling

coverage holes and providing wireless broadband services to more of the

United States.”.

B.9 Another route to economic impact identified was the creation of new business

ecosystems. This is where mobile has allowed the creation of new business

models - ecosystem value chain includes a variety of stakeholders including

manufacturers, and both international and domestic companies involved in the

provision of a range of online portals and specific m-applications. An

55

SQW (2007), Wireless on the Move 56

Pearce and Pagano (2009), Accelerated Wireless Broadband Infrastructure Deployment: The Impact on GDP and Employment


B-4

assessment57 of the economic impact of wireless broadband in Taiwan

showed that increased mobile coverage can lead to increases in GDP

through, among other things, spend on ecosystem elements using wireless

broadband.

Some research looked at the direct contribution of the mobile industry to the economy, in terms of revenues and impact on public finances

B.10 As well as analysing the wider routes to economic impact of mobile

telecommunications through productivity effects, etc. some studies estimated

the direct value of the mobile industry by sales and employment. This method

was used by Deloitte58 to review the economic contribution of mobile

telecommunications to the Australian economy which looked at industry

output (direct and flow-on) measured by GVA and FTE workers.

B.11 Likewise an overview59 of the European mobile industry estimated that

European mobile operators‟ total revenues grew from €88 billion in 2000 to

€174 billion in 2011, with the mobile industry contributed approximately 1% of

total European GDP. This overview estimates that in total, the mobile industry

contributes to the employment of an estimated 1.7 million Europeans.

370,000 employed directly by mobile operators and their direct

suppliers, of which 230,000 directly employed by mobile operator

735,000 indirect jobs, from support services and the mobile industry‟s

contribution to public funding;

555,000 are generated by the multiplier effect, i.e., by the mobile

industry‟s direct and indirect employee spend.

B.12 It was also highlighted that the mobile industry makes a significant

contribution to European public finances, through a variety of levers including

VAT/indirect tax, corporate tax, social security taxes of direct and indirect

employees, income taxes and regulatory fees. In 2010, it is estimated that the

57

Analysys Mason for GSMA (2011) , Assessment of the economic impact of wireless broadband in Taiwan, available at http://www.gsma.com/spectrum/wp-content/uploads/2012/03/analysismasontaiwanreport.pdf 58

Deloitte for AMTA (2013), Mobile Nation: The economic and social impacts of mobile technology, available at http://www.deloitte.com/view/en_AU/au/insights/browse-by-industry/education/47f2e0e7791bc310VgnVCM2000003356f70aRCRD.htm 59

GSMA (2011), European Mobile Industry Observatory 2011, available from http://www.gsma.com/publicpolicy/wp-content/uploads/2012/04/emofullwebfinal.pdf

http://www.gsma.com/spectrum/wp-content/uploads/2012/03/analysismasontaiwanreport.pdf

http://www.gsma.com/spectrum/wp-content/uploads/2012/03/analysismasontaiwanreport.pdf



http://www.gsma.com/publicpolicy/wp-content/uploads/2012/04/emofullwebfinal.pdf


B-5

industry‟s total contribution to public funding in Europe amounted to €83

billion.

B.13 In addition, mobile operators contributed substantially to EU public finances

with over €100 billion paid in 3G licence fees in the early 2000s. Equally, 4G

licence allocations are ongoing and expected to further contribute to EU public

finances.

Many of the studies highlighted impacts of mobile coverage on the economy from a qualitative perspective rather than quantified

B.14 The reviewed literature indicated that the potential impacts of mobile on the

economy were wide-ranging. However these highlighted impacts were not all

quantifiable. Here we provide a flavour of these wider impacts of mobile.

Research60 showed that mobile coverage was a more important factor than

cost for consumers when choosing a mobile operator. Mobile coverage can

have many ramifications on wider economic dynamics through efficiency

gains manifested via mobile applications, these could include61:

mobile payments (m-commerce, Near Field Communications), m-

ticketing and mobile financial services – mobiles offer convenient

mechanisms for carrying out payments, transfers and ticketing. For

example Public Authorities using mobile services to provide convenient

and cost-effect means of payment for transport and parking, banks

offer mobile banking services and mobile check-in is widely used by

the travel industry

mobile retail – including m-advertising, m-coupons and smart posters

mobile monitoring and surveillance – mobile technology enables the

monitoring of equipment, people and the natural environment remotely.

For example law enforcement agencies are using mobiles to track

criminals and smart home products allow consumers to remotely

control devices in their home

60

Communications Consumer Panel (2010), Can I Cancel? Mobile coverage and contract cancellation, available at http://www.communicationsconsumerpanel.org.uk/Can%20I%20cancel_main%20report_FINAL.pdf 61


http://www.communicationsconsumerpanel.org.uk/Can%20I%20cancel_main%20report_FINAL.pdf

http://www.communicationsconsumerpanel.org.uk/Can%20I%20cancel_main%20report_FINAL.pdf



B-6

telematics – examples from the automotive sector include connected

navigation, insurance telematics and remote diagnostics. Also there is

the EC eCall project which introduces a new in-car safety system that

will automatically dial emergency services after a crash, and is

expected to save 2,500 lives per year in the EU

Machine-2-Machine (M2M) systems – mobiles can offer smart

logistics applications for „smart grids‟ and intelligent metering to

ultimately reduce energy consumptions. Similarly fleet management

applications can contribute to a reduction in fuel consumption

telemedicine – applications range from telemonitoring to

teleconsultation helping hospitals and clinics include their productivity.

One study62 highlighted that mHealth, is an area where mobile services

can bring potential cost savings in OECD and BRIC countries for

chronic diseases. Remote monitoring could cut direct healthcare

expenditure by 10 - 12% based on reduced hospitalization, nursing

care, and ER visits.

B.15 These mobile related innovations and applications have the potential to

generate substantial efficiency gains for consumers and industry alike.

B.16 Governments are63 also taking advantage of the productivity gains possible

via mobile services and applications via e-Government programmes. There

are many examples of European countries that have been implementing e-

Government programmes which not only provide productivity gains but also

address administrative costs. These can include paying fees via a mobile

device or completing simple registration tasks via SMS messages. An

example of such a programme is mParking, which exists in many Member

States and allows citizens to pay by mobile and obtain a receipt via SMS.

SMS services to find last-minute temporary workers are an example of m-

government programmes directly improving employment rates.

62

McKinsey & Company (2011), mHealth: A New Vision for Healthcare 63




B-7

There was some specific but limited research on the wider impacts of mobile not-spots

B.17 A 2011 study64 on mobile coverage in rural Scotland examined the

implications of not-spots. It noted that although the impacts would vary

according to the type of not-spot, not having (reliable) coverage could have a

significant impact on individuals, beyond being inconvenienced, missing calls

or social networking opportunities or reduced business efficiency. It may result

in problems dealing with emergencies. Also the study noted the issue of the

additional costs for individuals experiencing poor mobile phone coverage,

such as for domestic booster boxes, maintaining a landline and changing

networks to ensure coverage.

B.18 Research65 for Ofcom highlighted that depending on the area of a particular

not-spot, and whether there is coverage by any operator, the impact may

range from an inconvenience - such as a postponed or missed call, or

potential personal or business cost implications, - to potentially life affecting.

The various stakeholders interviewed during the research cited a range of

effects, and presented an overall picture where mobile coverage was seen as

an essential service, in the same a fixed telephone has been for many years.

Similarly there was limited evidence on the impacts of mobile coverage on businesses

B.19 There was limited evidence of primary research with businesses on the

impact of mobile coverage on their operations (and our consultees also found

it difficult to point to clear quantifiable examples of business impacts).

However, the available public domain research does suggest that a sizeable

proportion of businesses suffer from mobile coverage issues which negatively

impact on their business, and confidential survey data provided to us by the

Federation of Small Businesses confirms that this is perceived to be an

important issue by many small businesses in Scotland.

64

SRUC (2011), Mobile Phone Coverage in Rural Scotland, available at http://www.sruc.ac.uk/info/120485/archive/43/2011_mobile_phone_coverage_in_rural_scotland 65

PA for Ofcom (2010), Not Spots Research, available at http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/not-spots/PA_Consulting_main_report.pdf

http://www.sruc.ac.uk/info/120485/archive/43/2011_mobile_phone_coverage_in_rural_scotland

http://www.sruc.ac.uk/info/120485/archive/43/2011_mobile_phone_coverage_in_rural_scotland




B-8

Research66 carried out by the South East Local Enterprise Partnership

of more than 400 businesses in the area found that 84% were suffering

from poor mobile coverage. The survey found that businesses

frequently quoted losses of around £10,000 or more a year through lost

sales, damaged reputation and opportunities to create new jobs.

A research67 study by YouGov revealed that many businesses across

the UK are suffering from poor mobile coverage and are seeking

alternative telecommunications solutions. The study found that 39% of

managers based at firms across the UK believed that poor mobile

reception and capacity was having a negative impact on their business.

A related research study valued the emerging market opportunity for

mobile operators in providing mobility services for enterprise customers

at $100 billion – it found potential cost savings of $60 billion for

enterprise customers of managed mobility services enabled by small

cells systems – equivalent to an annual saving of 35 percent for

businesses adopting such operator-delivered managed and hosted

services.

66

South East Local Enterprise Partnership (2013), available at http://www.southeastlep.com/news/press-releases/273-mobile-phone-cold-spots-in-south-east-holds-back-growth 67

YouGov for SpiderCloud Wireless (2013), available at http://www.spidercloud.com/news/press-release/business-productivity-handicapped-poor-mobile-coverage-capacity-and-services

http://www.southeastlep.com/news/press-releases/273-mobile-phone-cold-spots-in-south-east-holds-back-growth

http://www.southeastlep.com/news/press-releases/273-mobile-phone-cold-spots-in-south-east-holds-back-growth

http://www.spidercloud.com/news/press-release/business-productivity-handicapped-poor-mobile-coverage-capacity-and-services

http://www.spidercloud.com/news/press-release/business-productivity-handicapped-poor-mobile-coverage-capacity-and-services


C-1

Annex C: Summary of model assumptions for coverage, speeds and costs

C.1 The service capability available depends upon the range of factors that have

been identified in Section 2 of this report. Performing a detailed analysis of the

coverage, speed and cost therefore requires consideration of the spectrum

holding, future technology capability and mix of the handsets that can support

this technology and anticipated minimum data capacity per subscriber.

Further, time allowed in this project has not permitted a detailed analysis of

the geographic distribution of users – and so we will use knowledge of high

level data, such as census Output Area (OA) and the number of premises per

Output Area to estimate the network size. Many of the parameters are not

fully known, and we will base our assumptions on previously published work

and statements on future network capability given by Mobile Operators, and

interviews with stakeholders.

High Level Network Deployment Assumptions

We have selected to model a „hypothetical network‟ dimensioned to

serve ¼ of the population. That is, the model could be one operator,

with ¼ of the market share.

The network is assumed to be deployed progressively, from the Output

Areas with the highest density of premises / OA, to the least dense.

Areas are designated as Urban, Suburban or Rural environment types.

A minimum cell range of 0.3km and a maximum cell area of 1.9km

have been assumed68.

Sites are able to cover Output Areas until either their available capacity

(which varies with spectrum availability) or coverage area are

achieved.

Site capacity is used to serve all customers within the coverage area,

and where each subscriber has the same traffic demand. 2.1 potential

subscribers are assumed to be in each premise and the network

supports ¼ of the total potential subscribers.

We have modelled the network evolution until 2023. 68

http://stakeholders.ofcom.org.uk/binaries/consultations/cfi-mobile-bb/annexes/RW_appendices.pdf




C-2

Technology uptake

In general, technologies introduced later have better characteristics for

both the operator and the subscribers (lower cost per bit, improved

coverage, higher data rate, etc). There is therefore a driver to adopt

new technologies.

These newer technologies are not supported by legacy phones – and

many subscribers are not prepared to pay any premium to an

advanced phone that can support the later technologies.

Whilst high-end users replace their phone regularly, there is a trend for

longer term contracts and it takes time for a technology to be available

to more of the subscriber base. We assumed that traffic will be

allocated to different technologies available on the network as used in

previous studies69 and as shown in the figure below.

Figure C-1: Evolution of traffic allocation to different technologies (GSM, 3G and LTE)


Traffic growth assumptions

We have assumed that two key elements will challenge the ability of

existing infrastructure to support the offered load, increased use

indoors and demand for higher data rates70.

69

http://stakeholders.ofcom.org.uk/consultations/cfi-mobile-bb/, and footnote 71. 70

Options for improving in-building mobile coverage, Report produced by Real Wireless for Ofcom, April 2013

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2010 2012 2014 2016 2018 2020 2022 2024

%T

raff

ic L

oad

GSM 3G HSPA+ LTE

http://stakeholders.ofcom.org.uk/consultations/cfi-mobile-bb/


C-3

We have assumed that demand for higher data rates will increase as

used in a previous Real Wireless study for Ofcom71 and as described in

the following figure:

Figure C-2: Assumed target busy hour downstream data rates used to dimension networks


The above figure shows the increase in target average data rates

requirements for indoor users over time72 . These service levels are

derived by considering the throughput requirements in different

combinations of service categories (i.e. interactive, background etc.)

and service environments (i.e. urban, rural etc.) in the future. Where

data rates capabilities would fall below the target data rate, we have

assumed that more spectrum would be used and/or that cells would be

split into additional sectors (up to 6) to try to serve the traffic at the

target rate.

Spectrum efficiency improvement by technology

Current technologies are able to transmit more data per MHz of

spectrum occupied than legacy technologies. Improvements in

http://www.ofcom.org.uk/static/uhf/real-wireless-report.pdf 71

Real Wireless report for Ofcom on 4G Capacity Gains. January 2011. http://stakeholders.ofcom.org.uk/binaries/research/technology-research/2011/4g/4GCapacityGainsFinalReport.pdf 72

See http://stakeholders.ofcom.org.uk/binaries/consultations/cfi-mobile-bb/annexes/RW_report.pdf

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2010 2012 2014 2016 2018 2020 2022 2024

Tar

get

Dat

a R

ate

(Mb

ps)

Year

http://www.ofcom.org.uk/static/uhf/real-wireless-report.pdf

http://stakeholders.ofcom.org.uk/binaries/research/technology-research/2011/4g/4GCapacityGainsFinalReport.pdf

http://stakeholders.ofcom.org.uk/binaries/research/technology-research/2011/4g/4GCapacityGainsFinalReport.pdf

http://stakeholders.ofcom.org.uk/binaries/consultations/cfi-mobile-bb/annexes/RW_report.pdf

http://stakeholders.ofcom.org.uk/binaries/consultations/cfi-mobile-bb/annexes/RW_report.pdf


C-4

technology (standards) and multiple antenna techniques are likely to

allow improvement for some time73.

Figure C-3: Assumed spectrum efficiency values as technology evolves


Spectrum availability and use by different technologies

Different operators have different spectrum holdings. We have

assumed that there will be no new entrants in the market, and that

anticipated future spectrum releases will be allocated roughly evenly

between the four existing operators.

Consistent with Ofcom policy, we have assumed that any available

spectrum will be capable to be used by any technology that an operator

would choose to use, and that operators would choose to use different

spectrum for different technology versus time, as described below:

73

See footnote 71

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Spec

tru

m E

ffic

ien

cy (

bp

s/H

z)

Year

GSM 3G HSPA+ LTE (only) LTE-A (only) LTE (overall)


C-5

Figure C-4: Evolution of spectrum deployment by technology showing the gradual refarming of „legacy‟ technology to increased use of LTE (and LTE advanced). This graph shows only the bandwidth of “downlink” spectrum (with an equivalent amount used in the “uplink”).


We have assumed that GSM spectrum will begin to be re-farmed from

2017, and 3G from 2019. LTE will be deployed initially in 10MHz

channels, moving to 20MHz from 2015. 700MHz spectrum will be

made released in 2018, but not available for use until 2019.

Coverage assumptions

Coverage per network across the UK today is at a level of

approximately 96-97% outdoor74, which translates to approximately 89-

92% for indoor coverage across the UK. This corresponds to about

85% indoor population coverage in Scotland.

As part of the 4G licence award, Telefónica has a coverage obligation

to provide75 “a mobile broadband service for indoor reception to at least

98% of the UK population (expected to cover at least 99% when

outdoors) and at least 95% of the population of each of the UK nations

– England, Northern Ireland, Scotland and Wales – by the end of 2017

at the latest.”

74

Based on interviews/discussions with UK operators. 75

http://media.ofcom.org.uk/2013/02/20/ofcom-announces-winners-of-the-4g-mobile-auction/

0

5

10

15

20

25

30

35

40

45

50

2010 2012 2014 2016 2018 2020 2022 2024

Spec

tru

m (

MH

z)

GSM 3G HSPA+ LTE-Deployment_5

http://media.ofcom.org.uk/2013/02/20/ofcom-announces-winners-of-the-4g-mobile-auction/


C-6

Ofcom have reported on network rollout across the UK76 and we

anticipate that all operators will deploy combined 2G/3G and 4G

technologies at all macro sites, and that all operators will seek to

deploy to provide 95% (coverage by population) by the end of 2015

(ahead of the coverage obligation criterion).

Operators have expressed their intent to upgrade cells to support LTE.

Since this has improved coverage, and all operators will have access

to sub 1GHz spectrum, coverage overall will improve. All cells will

support all technologies until GSM is refarmed.

Beyond 2017, we anticipate an increased focus on LTE since it will

support voice without relying on 3G or 2G for voice service. Operators

have stated that they intend to deploy LTE at all macro sites. LTE has

an improved range compared to 3G technology and so will improve the

coverage across the country.

Ofcom anticipates77 that the licence awarded to Telefónica (O2) will

deliver outdoor coverage of 98-99% of the premises within each nation.

This translate to ~96-98% of indoor coverage. Real Wireless believes

this will be achieved few years after achieving the coverage obligation

in 2015. Beyond 2015, further coverage enhancements are expected to

be achieved at a slower rate ~0.5% per year up to 2020, achieving a

maximum of 98% indoor coverage (in each nation) by 2023.

Capacity and coverage per site

Capacity of a site depends on the technology deployed and the amount

of spectrum deployed78. For instance, since the spectrum efficiency

increases with the technology, LTE is capable of providing higher data

rates compared to HSPA+ technology.

Coverage of a site depends on the environment i.e. rural, urban. Due to

the lower demand in rural environment, a site in rural area can

expected to cover a larger area compared to a site in an urban area.

This is because in urban areas site runs out of capacity due to the high

demand. Therefore, although the site can cover a larger area from

76

Ofcom Report: The availability of communications services in the UK, Ofcom report published in 16 May 2013 77

See footnote 76. 78

Real Wireless report for Ofcom on 4G Capacity Gains. January 2011.


C-7

coverage point of view, due to the capacity limitation coverage area of

the site in urban area is much smaller compared to a site in rural area.

The cost of network sites

Network infrastructure costs are dominated by the cost of providing the

radio access network. Operators will tend to deploy large capacity sites

(macro sites) where there is sufficient density of users to serve. The

cost of providing the civil engineering infrastructure and cost of

installing utilities and backhaul links can be spread across a large

number of users. When the number of users to be served reduces,

operators will tend to deploy smaller sites with reduced capacity and

coverage (community sites), located close to the communities to be

served. A recent innovation is to deploy small cells either to achieve

coverage and capacity in rural environments and also within buildings

or traffic hot spots where they can serve local traffic needs.

Capital costs: Particularly for rural deployment the cost of the civil

works can be highly variable as it depends upon the effort to build

structures and provide utilities at remote sites. This may require

extensive and expensive ground works, and use of associated labour

and equipment. The cost of the communications equipment is less

variable since each site has relatively standard equipment, which can

be installed quickly once the basic civil infrastructure is in place.

However, each site also requires the availability of backhaul and

planning, and land lease negotiation. These items are also highly

variable depending upon the availability of suitable communication

links back to the operator‟s core network, and the competition for

suitable sites respectively.

The assumed capital and operating costs per cell site are set out in

section 3 of the report.


D-1

Annex D: Glossary

1G First generation mobile – which used analogue technology. No longer in use.

2G Second generation mobile – which, in Europe, uses digital GSM technology (see below). Still in use, especially for mobile voice service. Limited data capabilities.

3G Third generation mobile – which, in Europe, uses UMTS technology (see below) to provide higher speed data services. Now widely available across the UK.

4G Fourth generation mobile – currently being rolled out across the UK, using LTE technology (see below), to provide still higher data rates and improved capacity.

Community cell

Can be thought of as a reduced capacity (and range) macro cell – see below.

Femtocell Small low power mobile base station, typically for use in a home or a small business in order to improve indoor mobile coverage, using the consumer‟s own fixed broadband connectivity as backhaul.

GSM Global System for Mobile Communications – the technical standard adopted throughout Europe (and much of the rest of the world) for the introduction of digital mobile communication services (2G).

LTE Long Term Evolution – the technical standard for increasing mobile communication capacity and speeds, for „4G‟ services

Macro cell These cells use high capacity transceivers to support a large number of mobile users, with a cell range of about 0.3km to 7km.

Mbps Megabits per second – a measure of data transfer speeds available to users (1Mbps = 1,000kbps = 0.001Gbps).

MHz Megahertz – one million cycles per second – refers in this report to the part of the electromagnetic spectrum used for mobile communications (e.g. at 800MHz, 900MHz, 1,800MHz).

MNO Mobile Network Operator – e.g. EE, Telefónica O2, Vodafone, Three

Picocell Small mobile base station providing coverage of a small area (but larger than femtocell) – e.g. for a shopping mall, large office building, train station


D-2

Roaming An arrangement in which customers of one MNO can use the network of another MNO, when necessary, in order to make/receive calls and use data services.

Small cell A generic term referring to various types of cells (including femtocells and picocells) serving a smaller area (and fewer users) than a community cell. Small cells can be deployed on lampposts, traffic lights, sides of buildings and indoors.

UMTS Universal Mobile Telecommunications System – the standard used in Europe for third generation (3G) mobile services.

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