GENECON DCMS Rural Broadband Lessons report FINAL 09.12 …randd.defra.gov.uk/Document.aspx?Document=11708_GENECONDC… · 3.0 Key lessons from working with the pilots ..... 12 4.0

GreySky

DCMS Rural Broadband – Procuring finance and business support and

strengthening of evidence base

Lessons report

April 2012

GreySky

DCMS Rural Broadband – procuring finance and business support and strengthening of evidence base

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Contents 1.0 Introduction........................................................................................................ 2

1.1 Purpose of this report............................................................................................... 2 1.2 Summary of DCMS appointment............................................................................... 2 1.3 Broadband networks .… the challenge for rural communities.................................. 3

1.4 The 5 rural Cumbrian Technical Pilots...................................................................... 4

2.0 Working with the pilot communities .................................................................... 8 2.1 Gaining trust – a critical first step............................................................................. 8 2.2 How the pilots have organised themselves ….. ........................................................ 9 2.3 Organisational structures for funding and delivery .................................................10

3.0 Key lessons from working with the pilots .......................................................... 12

4.0 RDPE funding – what to expect ......................................................................... 19

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1.0 Introduction

1.1 Purpose of this report In November 2011, the Government launched the Rural Communities Broadband Fund (RCBF) with £20m of funding drawn from ERDP funding from the Rural Development Programme for England (RDPE) and funding from the main BDUK £530m allocation. The RCBF is aimed at bringing superfast broadband to communities in what are generally referred to as the last 10% of areas, typically deep rural, that the main BDUK allocation is unlikely to reach (note, the main BDUK allocation is designed to bring superfast connectivity to 90% of households and commercial premises, and the remaining 10% a ‘Universal Service Commitment’ of at least 2Mbps).

Modern communications infrastructure promotes social inclusion, delivers public and private sector services to individuals, and provides the vital social interaction needed by communities and businesses to support future sustainability. It offers new opportunities for business to grow and diversify, and for Britain’s rural areas, the potential to catalyse enterprise and encourage the setting up of new businesses.

This report has been brought together by GENECON, Adam Wellings Consulting and GreySky Consulting as part of a set of knowledge transfer documents including Fact Sheets on legal and organisational structures, community finance sources and a template guiding the preparation of a business plan critical for an application to the RCBF. This document focuses on the lessons and experiences gained by the consultant team from a three month commission working with the five rural Cumbrian pilot communities to help them prepare their full business case applications to the RCBF at the end of January 2012. DCMS received 39 expressions of interest to the first round the RCBF at the end of January. The 5 Cumbrian communities were the first to submit full applications to the Fund.

A second round of the RCBF is being opened in May 2012.

1.2 Summary of DCMS appointment In November 2011, DCMS (BDUK) and Defra appointed a team of 3 principals from GENECON, Adam Wellings Consulting and GreySky Consulting to work directly with Cumbria’s five technical broadband pilots to support them through the application process to the RCBF.

The team worked very closely with each of the five communities over the three months from November to the end of January, helping guide each through the application process and with the preparation of their business plans and RCBF data books. All five submitted their full applications to the RCBF at the end of January (the only full applications so far to the Fund), and these are now being formally appraised by Defra.

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In addition to the work with the 5 communities, the consultant team was tasked with preparing written material in the form of:

1. A Fact Sheet on legal and organisational structures;

2. A Fact Sheet on sources of Community Finance;

3. A template for the preparation of business plans to support applications to the RCBF.

This material is now available as part of guidance for the RCBF.

1.3 Broadband networks .… the challenge for rural communities Nationally, there are currently two major UK broadband networks - BT's copper network and Virgin Media's cable network. Most UK broadband (particularly in rural areas) is delivered by ADSL over BT’s copper network. ADSL has allowed widespread deployment, but is restricted by distance from the exchange, limiting speed and availability in rural areas, and in some parts of rural Cumbria, this can vary from no coverage to very poor at between 0.5-1.5Mbps.

Generally, the move to Superfast broadband access sees the transition to greater use of optical fibre, delivering speeds significantly greater than currently available, and offering consistency and reliability with the potential for guaranteed bandwidths. BT and Virgin Media are still leading this deployment, though there are important new entrants to the market.

Optical fibres are already used to provide the backbone networks of the telecoms companies. There are currently two major options for fibre deployment:

Fibre to the home or premises (‘FttH’, ‘FttP’), with each customer having fibre direct into the home or business; or

Fibre to the cabinet (‘FttC’) - where fibre extends from exchanges to street cabinets, with the final link via existing copper infrastructure - cheaper to deploy, but with lower bandwidth than FttH, but still potentially capable of delivering speeds of between 40-80 Mbps to significant numbers of the population.

FttH/P is considered by many to be the most “future proof” solution, but the costs for ubiquitous FttH/P delivery are prohibitive, particularly in remote rural areas, and this is encouraging a range of other solutions such as fibre-through-the-air (FttA), a microwave technology, and the use of ‘white space’ technology utilising gaps in the TV broadcast spectrum, the latter enabling signals to travel large distances, penetrate walls, difficult topography, in many respects potentially a good prospect for rural areas where wired services are likely to be impractical. Although the use of microwave is now well tried, white space deployment remains very much experimental, and both are currently struggling to prove their credentials as technologies capable of meeting European superfast definitions (30Mbps +), and therefore appropriate for public sector support.

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Elsewhere though, some rural communities are investigating self-deployed FttH/P networks, described in the business models defined within the RCBF guidance as ‘Design & Build’. Much work is now underway at local level and is being led from within communities themselves. In many cases, it will only be through community action that rural areas can demonstrate both the need for the service, likely demand take-up levels, access agreements with local land owners and provide a platform for negotiation with other partners. Although ‘doing nothing’ and waiting either for the market to create a solution or for the public sector to pay to link up rural areas is an option, in reality this is likely to be a long wait and communities are seeing that all the benefits that can accrue from access to superfast broadband will continue to allude them if they do not take more direct action.

In parts of Cumbria, as elsewhere, communities have responded to this challenge, appointing ‘Broadband Champions’, setting up their own websites, surveying local residents and businesses, and in some cases, have begun planning and implementing their own networks. First through the announcement of rural pilot areas, and then through the launch of the RCBF in November 2011, DCMS and Defra are encouraging community action to help solve the ‘last 10%’ problem.

1.4 The 5 rural Cumbrian Technical Pilots In October 2010, the Government announced that the four rural areas of Cumbria; North Yorkshire; the Highlands and Islands of Scotland, and the Golden Valley in Herefordshire had been selected as pilots to test and develop different ways for the Government to help support communities to extend the coverage and access to next generation, superfast broadband to deeply rural areas, beyond what is likely to be possible under the main BDUK programme. As outlined above, DCMS and Defra have encouraged work within 5 technical pilots to help shape solutions and the development of the Rural Community Broadband Fund. Through these pilots, and now through proposals for the first rounds of the RCBF, DCMS and Defra are encouraging local communities to test models such as ‘Design and Build’ and ‘Build and Benefit’, where the community designs the route and undertakes the digging of trenches to extend fibre roll-out.

Five community pilots have been encouraged by BDUK in Cumbria. Each is developing its own technical and commercial approach aimed at delivering superfast solutions deep into rural areas. A key event with all 5 pilots was held with BDUK and Cumbria County Council on the 8th July 2011 at Stoneybeck Inn, Cumbria. Each pilot submitted their Expression of Interest applications to the RCBF at the end of October 2011, and through the GENECON consultant team appointment offered further support to the communities to submit their full bid applications at the end of January 2012.

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The map below shows the approximate location of each the 5 pilot communities, and brief descriptions follow.

1. Community 1 The catchment area of Community 1 is a small, deeply rural, upland village in the Eden Valley in Cumbria with 162 premises and 300 residents. Community 1’s nearest town is Appleby-in-Westmorland, five miles away, and it is about 10 miles from the M6 motorway. It is accessed only by single-track roads; it has no commercially available broadband service nor any mobile phone reception. The lack of a commercial broadband service is due partly to the distance of the village from the nearest telephone exchange but mainly due to the existing method of delivery of telephony which is over a passive optical network (TPON). TPON does not support ADSL which is the conventional method of delivering broadband.

The Community has its own village broadband company, originally set up in 2005 and incorporated as a Community Interest Company (CIC) in 2007, to secure Broadband access to the community. As a temporary fix, the CIC adopted a lease line to the village

Community 3

Community 5

Community 1

Community 4

Community 2

Community 3

Community 5

Community 1

Community 4

Community 2

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hall of 100Mbps (currently allowed 2Mbps) and distributes its broadband service via wireless nodes around the village. Households currently achieve 1Mbps. The company has successfully applied for grants from Leader and Cumbria Community Foundation and upgraded their wireless network.

Community 1’s intention is to wind up the CIC on delivery of a commercial superfast broadband solution to its community.

2. Community 2 Community 2 represents a group of 58 properties in a remote rural valley to the south west corner of Cumbria. The valley is served by two separate exchanges with 8 properties coming from Sedbergh (7 miles away) and the other properties are served from Newbiggin–on–Lune (4 miles away). The properties in this area are very isolated with up to a mile in distance between each property,

although people living in the community know each other very well and work closely together to get things done. Much of the community is based around hill farming, but in modern day living, this now involves diversification, with many other small businesses and self employed professionals conducting their business in the area, including a photography business, graphic design and an Open University lecturer.

The community has been unable to obtain a usable broadband service via the current infrastructure, due to the distance they are from the exchange and the age and type of the current infrastructure. Community 2 is looking to install a fibre to the home project via a Build and Benefit route, covering a network of approximately 7.5miles of fibre optic cabling (illustrated by the network route map shown in blue). Other delivery solutions have been considered and discounted due to the hostile weather conditions often experienced in the valley.

3. Community 3

Community 3 is the largest of the 5 pilot areas, representing 7 Parishes in the northern fells area of Cumbria. The area comprises approximately 1,705 households and is highly dispersed. The group, which has a constitution but is not as yet formalised in terms of a corporate structure, has representatives from all 7 Parish Councils on its

Kirkby

Sedbergh

M6

Jct 38

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Steering Group of 14 Members. The stated objective of the group is “to secure the universal availability of next generation high-speed broadband throughout the seven Parishes …...” The group is organised with a Chairman, Vice Chairman, Project Manager, Secretary, Treasurer, Website Administrator and Members.

4. Community 4 Community 4 has incorporated itself up as a Community Interest Company (CIC) and aims to provide Broadband through FttP in two dales of East Cumbria. The company has a Steering Group and has been actively preparing a business model to support its proposition for a community owned and managed fibre network – in terms of the RCBF 5 models – a full ‘DIY’ solution.

The first dale is 10 miles in length with a population of 675 people, 376 households; the second 7 miles in length, 202 people, 87 households. Community 4 proposes to provide optic fibre to each property in both dales and a broadband service at an operational cost which matches that in commercially viable areas. Its greatest challenge is challenge is capital cost having estimated that to be fully comprehensive, it needs a network of more than 60km in length.

5. Community 5

Community 5 organised itself as a Community Interest Company (CIC) in May 2011 and developed from an earlier local interest group covering more than 880 homes and businesses situated within two of East Cumbria’s valleys and covering approximately 2,500 people living across 9 parishes situated to the west of Appleby-in-Westmorland.

Community 5 has been looking at a variety of technologies to bring a choice of affordable superfast broadband services across its area through demand registration and partnership with telecom suppliers.

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2.0 Working with the pilot communities

2.1 Gaining trust – a critical first step All five rural pilots were already in place and many had been working on their projects for some considerable time before the GENECON team first approached them in November 2011. Most had already conducted some form of community research in terms of want/need, had engaged with their local authorities, DEFRA/BDUK and their MP and commenced discussions with various telecoms providers (large and small). All are led by individuals passionate about ensuring that their communities do not miss out on the opportunities that fast, reliable superfast broadband access can offer. In fact they see next generation access as critical to the long term sustainability of their communities.

Given that through their efforts and activities, they had successfully secured pilot status for their communities and by the end of October 2011, they had also drafted and submitted their Expressions of Interest applications to the RCBF, they considered themselves well down the RCBF application process. By the time the GENECON team was appointed by DCMS in early November to assist them with the next stage – completion of their full business cases, it would be fair to say that all were to some extent, a little sceptical of how the consultant team would be able to help.

The team endeavoured however to develop a professional working relationship with them to help guide, shape and steer the preparation of each community’s business case working towards the goal of ensuring that each was ready for submission of a full RDPE funding application by the end of December 2011 (this was subsequently extended to the end of January 2012). The diagram below outlines GENECON’s intended approach, although the reality was that given timescales and progress already made, the communities did not see the benefit of a joint workshop, and so effort was focussed on one-to-one sessions, and a series of face-to-face meetings, culminating in a very intense period of assistance towards the end of January helping the communities bring their business plans and full applications together.

Figure 2.1: GENECON’s approach to the consultancy

Appointment Introductory Communications

workshop

Individual workshops with

each pilot

One to one sessions

Business Plan preparation stage and Knowledge

Transfer

Completion of RDPE applications

Half daywork shop

WithEast CumbriaCommunity Broadband

Forum

Preparation of FactSheets, Business PlanTemplates, Knowledge

Transfer material

Detailed and on-goingdialogue, meetings

Telephoneconversations, email,

Business Plan editing,drafting of discrete

Sections, and ensuringfit with RDPE requirements

RDPEfunding

applications

Great AsbyBroadband

Fell EndBroadband

NorthernFells

Broadband

FibreGarden

Eden ValleyDigital

Great AsbyBroadband

Fell EndBroadband

NorthernFells

Broadband

FibreGarden

Eden ValleyDigital

GENECONTeam

instructed

OBJECTIVE Introductions, Opportunity to hear where each community is, GENECON to outline approach

Detailed workshop with each community to prioritise actions and agree approach (potentially open to wider community)

Detailed one to one sessions with Pilot leaders to agree focus of assistance

Development of fluid and flexible working relationship with each Pilot team, helping shape, guide and edit business plan preparation

Assistance to each pilot team to ensure comprehensive submissions by the deadline date (end of December)

Appointment Introductory Communications

workshop

Individual workshops with

each pilot

One to one sessions

Business Plan preparation stage and Knowledge

Transfer

Completion of RDPE applications

Half daywork shop

WithEast CumbriaCommunity Broadband

Forum

Preparation of FactSheets, Business PlanTemplates, Knowledge

Transfer material

Detailed and on-goingdialogue, meetings

Telephoneconversations, email,

Business Plan editing,drafting of discrete

Sections, and ensuringfit with RDPE requirements

RDPEfunding

applications

Great AsbyBroadband

Fell EndBroadband

NorthernFells

Broadband

FibreGarden

Eden ValleyDigital

Great AsbyBroadband

Fell EndBroadband

NorthernFells

Broadband

FibreGarden

Eden ValleyDigital

GENECONTeam

instructed

OBJECTIVE Introductions, Opportunity to hear where each community is, GENECON to outline approach

Detailed workshop with each community to prioritise actions and agree approach (potentially open to wider community)

Detailed one to one sessions with Pilot leaders to agree focus of assistance

Development of fluid and flexible working relationship with each Pilot team, helping shape, guide and edit business plan preparation

Assistance to each pilot team to ensure comprehensive submissions by the deadline date (end of December)

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Overall, it proved a fascinating experience working with the pilot teams, requiring from the consultant team a combination of diplomacy; focus; encouragement, and some direct assistance with their submissions to help get them across the January submission deadline. A significant win of the process was the encouragement of two of the pilots to come together in order to scale up their bids (ultimately more appealing to a telecom supplier), and also to maximise the application for available RCBF funding.

Lessons from how the Cumbrian pilots have organised themselves, both in terms of management and work focus as well as legal structuring are presented in the sections which follow.

2.2 How the pilots have organised themselves ….. Community organisation; the sharing out of roles and responsibilities amongst individuals and effective co-ordination are critical to the development of a strong application to the RCBF in an efficient and effective manner. In addition, the type and scale of the community’s chosen area, in terms of geography, population, settlements and travel conditions had a marked effect on the community structure, the number of volunteers required and the time and commitment from the individuals involved.

The Cumbrian pilots demonstrated very different approaches to how they were organised; how responsibilities were divided up between individuals and groups and how decisions were made.

At the smallest end of the scale, ‘Community 2’, representing 58 properties was managed and driven largely by a single individual with the support of the community and the benefit of being able to ‘piggy-back’ on a local established social enterprise as the accountable body and RCBF applicant. The importance of opening a dialogue with BDUK at an early about the community’s bid was also apparent.

In contrast, at the other end of the scale, Community 3 representing over 1,700 premises, covering over 100 square miles across 7 Parishes and two local district council authority areas and including deeply remote areas as well as large and small villages and hamlets. This pilot has a structured Steering Group with fourteen members including official representation from each Parish; a further parish champion to represent the group within their community and a number of sub-groups charged with taking forward key work tasks such as preferred technical solutions; business plan preparation; legal structure; and demand/survey work required for completion of the RCBF databook (critical for demonstrating demand interest to potential suppliers – 60% is the level usually insisted upon as the benchmark).

The role of the parish champions, and the work that they can achieve at parish level within their community cannot be understated. At parish level, individual / personal relationships within a community appear to at their most valuable, helping simplify issues ranging from the data collection demands of the RCBF databook, to helping negotiate

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access rights across land for fibre routes, and in terms of generating support for the project.

2.3 Organisational structures for funding and delivery As outlined in the introduction, a Fact Sheet has been prepared covering options for organisational structures, reviewing the pros and cons of a range of different legal structures open to a community looking to deliver rural Superfast broadband. Some form of legal entity is needed in order to receive funding and to procure contracts. Current versions of the RCBF application form refer to the need for the community to have a ‘legal personality’. Principally, the options available are Limited Company (limited by shares or guarantee); Community Interest Company (CIC), Community Benefit Society (aka Industrial & Provident Society or ‘BenCom’), and setting up a Charitable Incorporated Organisation (though new and with legislation still to pass through Parliament).

The Fact Sheet aims to help community groups decide how best to organise themselves as a legally recognised and constituted body. It sets out the different types of organisational structure, what it is and its suitability for community broadband projects. The Fact Sheet is structured to help a community select the most appropriate form to help deliver its objectives by asking a series of key questions. Perhaps the key lesson taken from the work with the Cumbrian pilot communities is not to act in haste (and certainly not before you are clear what you want to deliver), and to begin with, try and keep the legal structure as simple as possible.

The Fact Sheet prompts a series of questions around two principal steps:

Step 1: Decide what you want your Community Broadband Organisation to do; and

Step 2: Compare and contrast the relative merits of each organisational structure to meet the objectives you have for your Community Broadband Organisation.

Step 1 is the key starting point. A community must ask itself whether it is looking for its community broadband organisation to be involved in more than just infrastructure delivery – i.e. whether its purpose just to be to be about infrastructure delivery – i.e. the community does not want ownership of any assets, and is simply facilitating getting the network in place and then someone else will run it. This links almost hand in glove with a decision around which of the 5 RCBF business models best describe what a community is setting out to do, and this is a key question which will then determine which is the most appropriate legal structure (Demand Registration, Build & Benefit, Partnership, Concession and DIY).

However, this is not as simple as it may sound. A key lesson from our work with the Cumbrian pilots is that it is often difficult for a community to know what corporate structure would serve it best whilst it is still unclear exactly what their project is going to involve, or be delivered. Indeed it is perfectly possible that a community’s objectives will

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change as its project progresses, and particularly as clarity emerges around the main county BDUK procurement.

In the case of the Cumbrian pilots, 2 of the 5 opted very early on to set up Community Interest Company structures, possibly before they were clear exactly what it was they were trying to deliver, or without necessarily a full understanding of what this entails and the constraints that this may then impose around the Asset Lock should the community ultimately want to transfer on any network assets procured directly through its project.

Perhaps the most important lesson on this subject from the discussions held with communities who have not yet opted for a legal structure is that it may be best to keep the structure as simple as possible to begin with (for example Company Limited by Guarantee) keeping options open to evolve the incorporated structure at a later date as the project moves through procurement by which time the project will be much better defined and scoped. Lessons emerging elsewhere within the RCBF also point to a legal structure able to offer share capital as a mechanism for attracting in finance from individuals within the community who themselves are perhaps more familiar with structures such as Venture Capital Trusts as riskier forms of investment (although this was not seen with the Cumbrian pilot examples). However, for clarity, a decision on the type of legal structure is not needed under the RCBF until the Full Application/Business Plan stage.

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3.0 Key lessons from working with the pilots The main lessons from the GENECON team’s close working with the Cumbrian pilots has been structured under the following topics:

1. Definition of the community;

2. Getting organised and management of resources available;

3. Understand what the RCBF is asking for; and

4. Fundamentals for a robust RCBF application.

1. Defining the community

What is the ‘community’ represented? Having a clear idea before any engagement work commences of the likely community, in terms of geography and population, is really important and how this correlates to the Governmental and telecoms boundaries that already exist. The key factors at play appear to be:

Geography (even topography);

Existing telecoms infrastructure landscape (difficult to enthuse people if their area already has good service);

Democratic landscape; and

Statistical landscape – use of data available at lower super output area level.

Is there an appropriate scale for a broadband ‘community’? There would appear to be no ‘right’ answer to this question, although from the experience of working with the Cumbrian pilots, it would seem that a community of around 1,000 properties is a good, workable size although it is known that some larger applications to the RCBF have also been made). One of the significant wins from the work with the pilots was encouraging Communities 1 and 5 to come together for a joint application to the RCBF. Combined, this took the joint application over 1,000 properties, maximising the application to RCBF, but also combining forces in terms of management resources from the two teams.

In principle, for a community of around 1,000 properties, at this level, the community should be sufficiently large to be able to:

Build a strong team with appropriate skills for the management team (accountancy, business planning, community engagement and research, lobbying, telecoms, economics) to be able to structure a bid;

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Source financial contributions from the community (although significant donations were not generally seen from the Cumbrian pilots, a number have accepted that short term loan finance from within the community may be necessary in order to get around the issues of cashflow and RCBF draw-down against defrayed expenditure). One of the pilots did build in the principle of a £150 one-off connection charge within its cashflow projections);

Look for scale in the funding application to the RCBF to make it worthwhile drawing down the funding (e.g. 1,000 properties x £300 per connectable property = £300,000);

Attract interest from the telecom suppliers; and

Not too large to enable issues such as management of cashflow and defrayed expenditure to be so risky that the proposal looks very risky for delivery; and yet

Not too large still to be manageable with a good, well organised team.

Who is there to help? Developing an RCBF bid is time consuming, requires a range of skills and strong links to the community as well as the ability to engage with different levels of Government and telecoms providers. Drawing together a balanced team of volunteers that are willing to undertake the considerable work required and that can stick with the project through periods of challenge and difficulty is essential.

2. Getting organised – managing resources

Formal ‘management’ structure and team of helpers works best With the benefit of hindsight looking back on the business planning and bid process, amongst the five Cumbrian pilots, the ones which co-ordinated the business planning and bid preparation process the most efficiently, were those with formal structure and a division of responsibility and authority between individuals and / or sub-groups that reflected the tasks that had to be completed (for example, data book, ‘writing’ group, technology, and finance).

The need for a strong Chair

This is a pivotal role. Any group pursuing an RCBF bid requires a strong chair that can rally the community resources to hand and make sure that the very best case is made for support as well as the matched commercial investment and community finance required. Timing and communication are also areas that need a firm grip, to make sure that applications are made on time and are not rushed and that negotiation with telecoms companies is effective.

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Clearly, the role varies depending upon the number of volunteers available. With a larger group, the role can focus more on management and co-ordination of inputs by others, providing the Chair with more time for advocacy perhaps with the local authority and telecoms companies. For the smaller groups, the role will undoubtedly need to be more hands-on, showing the way with the communication effort with the local community through survey work and evening meetings.

3. Understand what the RCBF is asking for

Thorough research at community level is the foundation for a strong bid

A thorough understanding of the local community is essential, especially in the context of broadband demand and uptake – not only for populating the RCBF Databook registering interest across the community for superfast broadband, but also for understanding the make up of the community and therefore its particular needs – and these will range across social, commercial, and in some cases environmental needs.

To bring their applications to the RCBF alive and to highlight the problems of very poor broadband access in their communities, the Cumbrian pilots included anecdotes and descriptions of a variety of social and health care needs within their communities – from the distances involved in accessing basic services such as GPs to supermarket shopping; in addition to the more commercial needs that businesses within the communities struggle with. Interestingly a number described high aspirations for the use of emerging technology solutions providing direct links to health care professionals. Community 2’s project manager described the problem of young adults away at university reluctant to return home during the vacation periods, perhaps to help work on the family farm, given inability to access their University’s Intranet resources. These anecdotes only emerge from detailed research undertaken bottom-up from within the community.

Another area where the value of bottom-up research comes through is building a very detailed picture of the number of businesses within the community. As an example, Community 3’s research uncovered a total of 672 businesses operating across their area supporting more than 1,000 jobs; Community 1 found 46 businesses amongst their 162 properties, supporting 142 jobs (nearly 50% of the population). Many of these businesses operate at levels that mean they are not picked up within the official Government statistics, and yet these are critical to the vitality and sustainability of these communities. Without the community level survey work, this sort of data simply is not available to help underpin the economic case.

Although funding from RCBF supports implementation, it is limited, so convincing arguments need to be made that will leverage investment from telecoms companies as well as community finance sources to bridge the gap. The driver for research is the RCBF databook, which has to be completed for a successful bid, but this data will also

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provide the information required to convince telecoms providers in particular that there is sufficient need/demand to justify their commercial investment.

Eligibility

Being able to prove that the community’s proposals fall within a last 10% area and outside of the Local Broadband Plan roll-out for superfast services is a fundamental for a successful RCBF application. This however is not an easy task ahead of clarity of where the main (predominantly) county roll-out is happening (procurements still underway). The lesson from working with the pilots is that it is critical for the community to develop a good relationship with the officers in the county authorities responsible for the main procurements and to seek clarity from them that their communities fall outside.

Failing this, it is possible to fall back on a risk model developed by Analysys Mason on behalf of CLG and Defra in 2010 which predicts a red, amber, green risk profile at lower super output area level for different scales of superfast roll-out. Checking that your community falls within an amber or red classification at the 90% roll-out level, although not certainty that your area will lie within the last 10% is a good start.

http://www.communities.gov.uk/publications/communities/assessmentngafinalreport

Understanding of the technology / technical solutions

An understanding of the existing telecoms landscape in the area is important including the location of infrastructure such as exchanges, roadside cabinets, existing fibre, backhaul, suppliers and ownership etc. In addition, a grounding in broadband provision and the current and emerging technical solutions that can provide it, both via fibre / cable and ‘wireless’ is useful, although enough knowledge can be acquired quite quickly without the need to be a telecoms expert.

A key lesson from working with the pilots is that telecoms knowledge and prominence within the RCBF application should always be an issue secondary to clarity around what the community is trying to achieve (RCBF model); and thorough research to prove the demand and need case (numbers of premises indicating a willingness to take-up (and pay for) superfast services if provided).

4. Fundamentals for a robust RCBF application

Application / Business Plan Writing

The RCBF has fairly stringent demands in terms of how the application is presented and the written word is the most powerful exponent of the community’s wish to achieve superfast broadband. Guidance now exists in terms of how the application and

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supporting business plan needs to be structured and written and successful groups tackled this by dividing tasks into manageable portions.

Perhaps the most important output from the GENECON team’s work was the preparation of the business plan template which really did serve to focus, galvanise and structure the communities’ effort in completing their business plans. The team received letters of thanks from a number of the communities, but in particular the Chair of Community 5 described the value of the template in helping organise their community’s work.

The Business Plan template, whilst only produced as a guide has been structured to tie very closely to the requirements of the full RCBF application form, and as such is viewed as a critical starting point for communities looking to build their case for RCBF, and has been logically structured to include sections on:

Project Summary

Background (incl. need & demand case)

Our project proposal

Alternative RCBF models

Project impact

Project budget

Funding plan

Value for money analysis

Clarity of objectives

Clarity in what the community’s objectives are key to the development of a strong bid. The starting point for this has to be clarity in what the community is trying to achieve, and therefore in RCBF terms, which of the 5 RCBF models (or combinations) the community is aiming for. Guidance notes to the RCBF cover each of the 5 models in greater depth and this is an important resource for communities embarking upon an application and business case. Each of the Cumbrian pilots were clear on their objectives, which summarise as follows:

Community 1 - Demand registration and partnership

Community 2 - Demand Registration and Build benefit

Community 3 - DIY

Community 4 - DIY

Community 5 - Demand registration and partnership

Demonstrate that the bid really does represent the local community

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Showing that your application represents the community ‘in-depth’ provides legitimacy for a community bid. This is a fundamental, and emerging lessons from the weakest bids into the first round of the RCBF are understood to be those which failed clearly to demonstrate that the bid is truly representative of the community.

The most straightforward route for this is action at a variety of levels within a community but fundamentally requiring the ability to show that thorough grass-roots and in-depth survey work has been undertaken confirming demand for superfast broadband; and that the application has the support of local networks/bodies such as parish/town and district councils or the local Rural Community Council.

Gaining support (and even representation) via parish/town/district councillors is also important, although these individuals and the bodies they represent may not become too active in terms of developing the actual bid per se, they can however help unlock a route into a community and help galvanise the community’s effort.

In addition, the bid team is encouraged to seek out individual supporters that can make in-roads into the community concerned in the widest sense, not just individual residences, but the voluntary sector, the business population and the public sector including schools, health and social services, police etc.

Finance

Although the financial calculations are summarised in the application form and business plan, underlying these need to be a set of robust projections, just like those required for any business plan and these will cover areas such as capital investment, income, expenditure, start-up costs and show the financial route to exit or long-term sustainability.

The ability to set out the finances required for the project in a logical form is necessary and help from a qualified accountant (hopefully a volunteer from within the community) will be really beneficial, although the latest annex forms and tables provided with the full RCBF application form do help provide clarity on what is required in terms of cashflow, cashflow cover and that the costings budget has been thoroughly thought through.

Other issues of importance include:

Demonstrating value for money through leverage of private and other sources of community finance.

It is becoming clearer that the strongest bids to the RCBF will be those that are able to demonstrate 2, 3, 4 times multiples of private sector and community finance for every £1 of RCBF requested. The GENECON team has prepared a Fact Sheet on Community Finance sources which reviews the range of national funders supporting social enterprise, voluntary and community sector groups, not-for-profit groups – including loan and grant giving organisations, Foundations, Trusts, Social Enterprise Banks, and although some of these (from discussions held) are likely to support some

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community broadband projects, they are likely to do so on a first-come-first-served basis and will similarly look for the same level of case making as the RCBF;

‘Cash is king’ covering issues such as demonstrating the mechanism for cashflowing grant claims against defrayed expenditure, to demonstrating cash position at point of set up and exit is critically important to be able to demonstrate sustainability. Clearly however, the complexity is likely to depend on which RCBF model is the community’s objective.

RCBF includes RDPE funding and as such is subject to EU procurement rules and match funding restrictions which includes other public sector funding – which does not qualify as match funding. This issue did cause a couple of the pilots quite a level of difficulty in sources for their match funding (for example, Eden District Council Infrastructure Fund and funding from the National Parks Authority was ineligible).

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4.0 RDPE funding – what to expect The RCBF draws on European ERDP funding as well as funding direct from the UK Government via the main BDUK allocation. This means that in preparing an application to the RCBF, a community has to be aware that there are rules around European funding, and in particular, that their application will need to present:

1) A clear business case and supporting business plan for the communities proposals;

2) An emphasis on demonstrating both demand and need for superfast broadband. These require quite different approaches – ‘demand’ captured and demonstrated through survey work recording whether people would be prepared to sign up to a service if available; and ‘need’ demonstrated through a variety of techniques including demonstration of current access speeds (best compiled from a combination of local knowledge and the SamKnows website (http://www.samknows.com/ broadband/broadband_checker), but also through demonstration (with the help of local case studies) of the impact of poor broadband access through the range of social and economic impacts locally, and the best also referencing the case made within reports such as The Commission for Rural Communities High ground, high potential – a future for England’s upland communities;

3) Articulation of the range of benefits that superfast broadband will bring to the local community including social, economic and environmental benefits;

4) That communities need to show clear evidence of market failure (i.e. demonstration that the community is in a last 10% area (check Lower Super Output Area against the NGA risk classifications for England & Wales LSOAs, Northern Ireland SOAs and Scotland Datazones, 2010 published by CLG and Defra. The LSOA needs to be wholly Red in the traffic light classification meaning that it is least likely to be served by Next Generation Access broadband in any market-led roll-out even if the latter reaches 95% of the population);

5) That cost proposals presented are ‘appraisal ready’, i.e. that there is a clear basis for the costings presented and that these are evidence-based. In particular, this means:

an evidenced position for how costs are to be met from the combination of private sector contribution, RDPE and community funding;

how project payments are to be cash-flowed to enable RDPE claims to be made against defrayed expenditure.

6) That there are procurement and State aid rules to comply with. Applicants need to be aware that if their bids are approved, then they will need to satisfy EU

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procurement regulations and select a supplier competitively by putting out a technology neutral specification (this can be difficult for communities to get to grips with conceptually when they have expended significant energy and time trying to work out the best technology solution for their community).

There was certainly a tendency for the Cumbrian pilots to fall into one of two camps – to be some way down the process of discussions with a single supplier ahead of the Council’s Connecting Cumbria procurement; or alternatively essentially wanting to use public funding to help set up a local broadband wholesale organisation which would effectively operate in competition with BT. Communities need to understand that there are State aid regulations that have to be complied with.

Pragmatically, there is the potential for significant benefit in bringing together the RCBF and mainstream County or Unitary Authority led BDUK projects at procurement. Acting together, there is the potential for better outcomes, with funding from the RCBF being used to provide additional resources to add onto mainstream BDUK projects. Add onto this the strength of the community engagement and demand registration process driven by the RCBF, then it is likely that a significant part of the last 10% can be served with a professional and commercially sustainable solution. Equally is makes sense to align budgets from the main BDUK allocations which will be spent delivering the Universal Service Commitment which can perhaps be better aligned with RCBF delivery (both Cornwall and Lancashire experience is demonstrating that quite significant budget needs to spent); and

7) That the issues / question of State aid is not forgotten, and that there is an understanding demonstrated within a community’s application that the European Commission (EC) requires that public subsidy in NGA only targets areas where they can demonstrate there is no current, or planned (i.e. within the next three years) deployment of either standard or superfast broadband by the private sector – what are otherwise known as ‘white areas’;

8) That applications need to demonstrate value for money. Value for money in terms of allocation of RCBF funding is typically measured utilising metrics such as cost per job created or safe-guarded, cost per household connectable; and cost per businesses connected. Attempts were made to assist the Cumbrian pilots project economic impact with 2 and 5 year targets for the number of businesses and jobs supported in each community, utilising growth projection assumptions drawn from the EU's 2008 MICUS report, showing base case 0.71% growth per annum attributable to broadband (2006-2015). As part of the demand registration survey work, the pilots were encouraged to categorise businesses into simple classifications (such as farming, construction, tourism, other) and to capture number of jobs supported. Differential GVA per job metrics were then used to project local GVA supported; and

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9) That Value for money may also mean demonstrating that a bid represents efficient and best use of public resources available. This will be analysed not only using the cost per premise connectable (maximum grant of £300 / premise) but also in terms of multiples of private sector and community finance for every £1 of RCBF spent.

10) Suggested RCBF checklist

The GENECON team has prepared the following checklist to assist communities with the preparation of their RCBF application, and as a summary of the work areas covered with the Cumbrian pilots:

Community Assessment

Overall scale Lessons still emerging, needs to be large enough but manageable

Geography Does this make sense in terms of community cohesion?

Democratic landscape How well does it match existing boundaries?

Statistical landscape How does it overlay with Lower Super Output Areas?

Features NP, AONB, SSSI etc

Community Engagement Demonstration of level and depth of engagement with both residents and businesses

Confirmation in last 10% Refer to http://www.communities.gov.uk/publications/communities/assessmentngafinalreport

Local Broadband Plan How does the project fit with this; will the plan authors support an RCBF application?

Existing activity Does the project build on existing work or is it starting from scratch?

Resources Does a team exist; can you obtain help from existing organisations; do you have the skills?

Research This is required in several areas:

Community Research

Evidenced by quantitative & qualitative research to demonstrate in-depth engagement with and support from the residential and business communities; premises passed and premises connected by project; commitment to connect at estimated connection and monthly fees. Feed critical questions into data book and collate full results. Any other useful evidence to support the business case – letters of support etc.

Technical ResearchPremises passed and forecast premises connected (by end 2015); average download & upload speeds; explanation of why community will not receive NGA in local roll-out; network specification including core infrastructure, sub-networks and backhaul, qualification as NGA (>30Mbps), open access (ISP’s) - link to technical appendix (currently in draft)

Market Research Demonstrate demand for a Superfast/NGA service (not just faster); demonstrate financial viability; link to data book, business plan, financial appendices and projected P&L, Balance Sheet and Cash Flow.

Business Plan These are the critical areas per Application Form:

RCBF model Which model (or hybrid) best describes your project?

Business proposal Summary

Legal status & personality Corporate type, objects, constitution, M&A, direction of profit/surplus

Research See notes above

Project funding & finance Summary of assumptions; private match; cash flow; equity capital

Management arrangements Governance; financial/quality controls; day to day management; key personnel etc.

Exit strategy Demonstrate sustainable service; RDPE 5 year economic life; disposal of assets at any stage

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Procurement

Procurement must comply with EU/UK guidelines for procurement AND UK guidelines for telecommunications industry – link to RCBF Handbook; explanation of how project complies; procurement must be technology neutral (the market has defined the most appropriate solutions for project needs)

State Aid

Project must be covered by a separate notification (usually the local authority) or BDUK umbrella notification or below De Minimis aid (200k ECU over last 3 financial years including RCBF request) – link to RCBF Handbook; how will project comply with principles of EU competition law.

Technological Solution

Demonstrate that the project will deliver a Superfast/NGA solution sufficient to provide RCBF with confidence; set out the network specification; ensure that solution uses eligible NGA technology; confirm open access - link to technical appendix (currently in draft).

Measure 321 RDPE Measure – basic services for the rural population

Summarise how the project delivers this measure and all costs are eligible; how will the project maintain and evidence records (5+ years)

A breakdown of project key milestones

Project Milestones

Documents

GENECON DCMS Rural Broadband Lessons report FINAL 09.12 …randd.defra.gov.uk/Document.aspx?Document=11708_GENECONDC… · 3.0 Key lessons from working with the pilots ..... 12 4.0