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THE FUTURE OF BROADBAND TELECOMS PROVISION IN THE WESTERN ISLES AND ASSOCIATED SKILLS DEVELOPMENT REQUIREMENTS

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

A DESK BASED RESEARCH REPORT ON BROADBAND TELECOMS IN RURAL AREAS AND RURAL ICT SKILLS NEEDS (WESTERN ISLES OF SCOTLAND) MARCH 2001

WHAT IS BROADBAND?
In layman’s terms, broadband can be equated to a roadway network. The wider and better the road the more traffic it can carry efficiently. The wider and better the communications pipe for 'data' traffic between the Western Isles and the rest of the world, the less the effects of remoteness are and the increased potential for integration into the global Information Society.

TECHNOLOGY TRAFFIC

56K Modem ISDN2 ADSL/Cable Broadband (2Mbps+)

Single track road Double track road M25 around London Los Angeles 7 lane freeways

Report and Research conducted by Michael M Smith, MA MSc, Course Director, BA Rural Development Studies, UHI. Commissioned by The Western Isles ICT Advisory Service.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

TABLE OF CONTENTS
Management Summary ...................................................................................................... 7-9 Research Summary . ..................................................................................................... 10–12 Introduction ...................................................................................................................... 13-16 Part 1 Broadband Telecoms in the UK & OFTEL: An Analysis ................................................ 17-23 ADSL ................................................................................................................................ 24-45 Satellite Broadband ......................................................................................................... 46-70 Line-of-Site – NNDS / LMDS . Unlicensed / UMTS ........................................................ 71-95 Fibre to the Home .......................................................................................................... 96-104 Broadband Telecoms: Conclusions & Recommendations .................................. 105-108

Part 2 The Information Age: Trends and Opportunities ........................................................ 109-110 Teleworking & Outsourcing ......................................................................................... 111-128 E-Commerce & The Digital Economy ......................................................................... 129-138 Up-Skilling And Human Resource Development in the Information Age .......................... 139 Teaching & Learning ................................................................................................... 140-150 A Policy Overview ........................................................................................................ 151-161 Skills Development: Conclusions & Recommendations ............................................. 162-164 Appendix 1 – xDSL Technologies ...................................................................................... Appendix 2 – MVL: A Broadband DSL Technology .......................................................... Appendix 3 – UXD5 & System X Exchange Information ................................................... Appendix 4 – Additional Telephone Exchange Information .............................................. Appendix 5 – Applications for Broadband Satellite ........................................................... Appendix 6 – The Development of Teleworking ................................................................ Appendix 7 – ICT Skills Proposals ..................................................................................... 165 170 176 177 180 182 183

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Management Summary
Introduction
As evidenced by a multitude of developments, society is now rapidly progressing into a new era - the Information Age. It is becoming widely recognised that for participating in this new age a broadband telecommunications infrastructure is the essential enabling technology. For the Western Isles this provides a unique opportunity to capitalise on these advances in a way that can provide for future economic needs. This report was commissioned to facilitate early adoption of the most appropriate infrastructure investments, which will ensure that the early foothold which the Western Isles have gained in the Information Age continues and increases apace to the benefit of future generations. We need to be able to both anticipate and capitalise on ICT developments in terms of creating jobs and a higher standard of living for residents of the Western Isles.

Situation in the Western Isles today
The Western Isles are currently served by one dominant telecoms supplier, BT. Throughout the islands there are 35 telephone exchanges, of which 28 are an older technology1 with limited ability to be upgraded to meet future demands. A second supplier, Thus, has installed a fibre network to strategic points in Stornoway but this does not link to any other locations in the Western Isles. Another issue is the fact that the Western Isles are currently served by microwave links to the trunk network and no undersea fibre link exists. The study revealed that the current trend lies in optical fibres and this may therefore limit the islands’ ability to implement broadband technologies of the future, particularly if growth in the ICT sector continues at the rapid rate experienced in recent years, demanding ever higher bandwidth.

Findings and recommendations
The report looked at the currently available broadband technologies and some that are just beyond the horizon but may come to the fore soon. It concludes that early adoption of fibre technology could deliver lasting and radical social and economic change in the Western Isles. The report recommends to implement a strategy to deliver "fibre to the home" and “fibre to the business”. To achieve this goal the Western Isles should link into the main trunk services in mainland Scotland via undersea fibre links. Broadband Wireless Access was identified as being a cost effective solution with a relatively short rollout timescale. This was seen as complementary to fibre and a possible interim or transnational solution. Further research needs to be done in this field. A public-private partnership between the local stakeholders could form the basis of a phased and cost effective rollout of a broadband network into the rural areas. Main locations such as schools, health centres, etc. could form the hubs, which would enable broadband services to eventually extend to households and community focused centres (e.g. Iomairt Nis) throughout the Western Isles. The report further recommends consideration of the strategy adopted in other rural areas where any upgrading and repairs of roadworks or relaying of sewers, water services, power or gas, include the laying of suitable ducts to distribute fibre cables. The laying of ducting as a matter of course when digging up roads, pavements, new business and housing sites is recommended as a strategy to speed up connectivity of homes and offices with minimal cost implications. An opportunity exists to focus on in-demand ICT skills to plug the developing skills gap and encourage specialist teleworking and outsourcing teams to become established. Such specific ICT skills outlined within the report combined with the appropriate generic skills will potentially provide the catalyst to enable a transition in the Western Isles workforce to one compatible and indemand within the new ‘Digital’ economy. A pilot project targeted at those individuals on the ICT skills register and school leavers could be progressed.

“Fibre to client” strategy Undersea fibre links Broadband wireless access

Public-private partnership

Rollout strategy

ICT skills strategy

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Timescale
With recent changes at both regional and national levels there is a genuine willingness to stimulate radical change in the islands and to transform the economic outlook. With an immediate adoption of a broadband strategy the various stages of implementation should be carried out over the next 5 years. Recommended stages:
Immediately

Adoption of strategy
Rollout strategy (ongoing) Wireless access Undersea fibre connection to mainland

2002 2005

Fibre to the home/office 2006

The most laborious and time-consuming aspect of the proposal is the laying of underground ducting and fibre. Once fibre is in place, termination equipment can be upgraded as need commands. The study undertaken predicts that the infrastructure proposed would continue to deliver gains for 20 to 30 years.

Stakeholders and Beneficiaries
Adoption of the above recommendations would elevate the Western Isles to be recognised as a location where two of the most important advantages of the Information Age could be combined: Φ Φ "quality of life" location "high bandwidth" connection to the international community

Being a highly marketable branding for "connected communities" these factors would enable us to attract inward migration and inward investment, by removing geographic boundaries. The stakeholders and beneficiaries in this development would in the first instance be the main employers and service providers on the island, such as the Council, health board, education and local businesses. The local community will at this initial stage be a passive beneficiary, yet increased access to better and faster services will be developing. Following the successful completion of the programme the whole of the community will benefit actively from the proposed developments, with new opportunities e.g. in teleworking opening up.

Skills in the Information Age
It is equally important that the skills requirements that come with the Information Age are understood and met. Great time and expense has been devoted to giving people basic ICT skills to participate in the Information Age. However the report found that more specialised and refined skills need to be developed in potential employees of an IT-based economy. The report has identified the following core skills as being of relevance to the requirements of the emerging new marketplace. Apart from their generic application as key transferable skills, they

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

• • • • • • • •

Written & oral communication (e-communication) Team working (e.g. online collaboration) Problem solving Business awareness (e.g. Web presence of companies) Creativity & innovation (e.g. possibilities of emerging software) Inter-personal skills (e.g. online team building) Attitude & enthusiasm (e.g. overcoming technophobia) Technology skills (e.g. emerging new technology)

Within the next 3 years there is estimated to be an ICT skills gap within the EU of approximately 1.7M persons. In terms of scheduling developments, specific training on the above topics is expected to show results within a very short timescale and can run in parallel with infrastructure development. Early embedding in the education structure, however, is essential. It is not unreasonable to suggest that everyone gains from acquiring the recommended skills. Employers will find a high quality and productive workforce and potential employees will have acquired the skills which will ensure they are more marketable and have the capacity to increase their earning potential.

Monitoring & Review Policy
The fast rate of change in the technology sector means that a constant review of policy and changes to meet new requirements are an essential element of continued success. This is as much the case with telecommunications bandwidth as it is with skills requirements. It is therefore recommended that monitoring developments on an regional, national and international basis, as well as reviewing the adopted policy is conducted on an regular basis.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

The Future of Broadband Telecoms Provision in the Western Isles
A Desk Based Study Broadband Telecoms Research Summary
The following section summarises the result of deskbased research and monitoring in the Broadband sector, assessing developing technology, understanding trends and relating them back to the context of the rural Western Isles. Some key areas of research into factors such as demand for broadband were out-with the scope of the study due to limited resources. The report reviews the role of OFTEL and its policy framework in relation to the rollout of broadband provision to peripheral areas such as the Western Isles, noting the approach and policy applied in the US and comparing their approach with ours. It would appear that the US is several years ahead in its approach to recognising the need for broadband provision in their principle of Universal Service in rural areas. In the UK the current OFTEL regulations do not provide for the provision of Broadband services to rural areas.
A desk based study assessing developing technology and trends in the Broadband sector and relating them back to the context of the Western Isles. The US is several years ahead in its approach to recognising the need for broadband provision in their principle of Universal Service in rural areas.

In the UK the current OFTEL regulations do not provide for the provision of Broadband services to The report considers the key broadband technologies rural areas

potentially applicable to an Island area such as the Western Isles. In view of the costs, cable was considered to be an unrealistic option in relation to its level of service, compared to competing technologies. DSL, the new generation of broadband satellite, broadband wireless (licensed/unlicensed), 3G (Third Generation) mobile and fibre optic cable were ultimately settled upon for consideration, with the latter being the seemingly ‘dream’ solution. ISDN received only a fleeting mention, as a good example of a seemingly advanced interim technology, which never achieved full market penetration. ISDN will however, remain a useful, although limited, service option for some time. 3G mobile and broadband satellite will inevitably be rolled out in our broadband future. All-inclusive coverage remains an issue in sparsely populated areas, particularly with regard to 3G mobile services. The nature of the level of service and its applicability to our broadband future remains unanswered at present.

DSL, the new generation of broadband satellite, broadband wireless, 3G mobile and fibre optic cable were ultimately settled upon for consideration, with the latter being the seemingly ‘dream’ solution. ISDN received a fleeting mention; it was a good example of an advanced interim technology that never achieved full market penetration.

ISDN will however, remain a useful, although limited, service option for some time.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Consideration of (A)DSL raised many issues which would need to be dealt with regarding the capacity and ability of the existing exchange and copper infrastructure network in the Islands to enable its rollout. While ADSL technology was considered to be less than optimal, as it would not be able to achieve radical and lasting change in the development of the islands, innovative partnerships utilising variant xDSL technology could still provide potential. Broadband Wireless Access was identified as being a cost effective solution with a relatively short rollout timescale. Examples of successes elsewhere in both urban and rural areas across the globe were highlighted and several differing models in the licensed and unlicensed bands examined. The current licensing situation in the UK was reviewed as was the developing technology. An innovative build-out through public/private and even community partnerships was considered possible. There appeared to be some mileage as an area of further research and testing, although it was concluded that an all-inclusive service would be an interim solution in the longer term in our digital future.

ADSL was considered less than optimal, as it would not be able to achieve radical and lasting change in the development of the Islands. Innovative partnerships utilising variant xDSL technology could still provide potential.

Broadband Wireless Access - a cost effective solution with a relatively short rollout timescale.

An innovative build-out through public/private partnerships was considered possible. There appeared to be The early adoption of a fibre optic network was identified some mileage as an area as being the key to deliver lasting and radical, social and of further research and economic change in the Western Isles for the 21st testing.

century.

As the study progressed, the increasing magnitude of the economic and social development attainable by the rollout of the appropriate broadband solution for a remote rural area such as the Western Isles became increasingly apparent. In addition, the potential development gains from the early adoption of a long-term Information Society enabling infrastructure, became increasingly clear. In this respect, fibre-to-the-home/fibre-to-thebusiness was shown to be the ‘killer’ broadband solution capable of instigating lasting and radical social and economic change in the Western Isles of Scotland. With costs falling to being on par with replacement copper or ADSL rollout a key development opportunity appears to have presented itself. Other telecoms operators in the US faced with similarly ageing telecoms infrastructure not able to provide broadband services without upgrading, have instead migrated direct to replacement fibre. An opportunity for an innovative fibre-development partnership, with initial costs perhaps being borne by the public sector to key locations Islands-wide appears to have much scope.

The potential development gains from the early adoption of a long-term Information Society enabling infrastructure, became increasingly clear. In this respect, fibre-to-thehome/ fibre-to-thebusiness was shown to be the ‘killer’ broadband solution capable of social and economic change in the Western Isles. Telecoms operators in the US faced with similarly ageing telecoms infrastructure not able to provide broadband services without upgrading have instead migrated direct to replacement fibre.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
The early adoption of a fibre optic network was identified as being the key to deliver lasting and radical, social and economic change in the Additionally, the Western Isles should link into the main Western Isles for the 21st trunk services in mainland Scotland via undersea fibre century.

The early adoption of a fibre optic network was identified as being the key to deliver lasting and radical, social and economic change in the Western Isles for the 21st century.

optic cable.

At least one other local authority has already made such a policy decision relating to the laying of ducting in all new developments and upgrading/repair works undertaken throughout their Islands. As stated above, investigations into existing infrastructure and the opportunities it presents are recommended and a series of pilot projects to strategic points in the Islands presents an obvious opportunity for progress. Iomairt Nis, Garenin Village, Uig Community Centre, The National Gaelic Resource Centre in Lochs, The Harris Genealogy Centre, The FE Centre in the Uists, Barra Learning Centre and a range of other key public sector service provision sites, in addition to Stornoway could all be feasibly targeted for broadband fibre. A second phase could then enable a build out into surrounding communities and ensure equitable access to all residents and businesses in the Western Isles. Digital inclusion is a key aim of any broadband rollout.

The Western Isles should link into the main trunk services in mainland Scotland via undersea fibre optic cable.

Undersea fibre optic cable to the mainland and between the islands was considered an essential progression towards long-term connectivity requirements of future generations.

Radical and innovative approach to economic and social development via broadband provision would provide enormous marketing opportunities Undersea fibre optic cable to the mainland and between to attract inward the islands was considered an essential progression investment and stimulate towards long-term connectivity requirements of future re-population and new generations. enterprise.

There can be little doubt that such a radical and innovative approach to economic and social development via broadband provision would provide enormous marketing opportunities upon which to attract inward investment and stimulate re-population and new enterprise. Taken together with a series of opportunities that the writer termed ‘the holy grail’ of rural development, with the Islands achieving a profile in the broadband sector similar to that of Skye in the Tourism sector, would be achievable. Finally, it was noted that the timing of the report was opportune, given recent discussions and encouragement at the regional level for a radical approach to rural development to be pursued within the Western Isles.

The timing of the report is opportune with encouragement at the regional level for a radical approach to rural development to be pursued within the Western Isles.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Introduction
New work practices involving networked and convergence technologies are predicted to affect every working person in the EU over the next 5-10 years. The development of the Information Society (IS) is increasingly becoming the single biggest instigator of social and economic change not only within Europe, but also worldwide. Indeed, Information Society developments are considered to be very much part of the solution to Europe's ongoing unemployment and competitiveness problems in the next 5-10 years. In the US (our main competitor in the Information Society) it is estimated that within 2 years 50% (130M) of the population will be connected to ‘the Net’ bringing a whole host of new mass-market opportunities requiring new ways of working, changing the way both businesses operate with their customers and suppliers. Such new ways of working and operating will require new skills and competencies and an increasingly adaptable workforce. As a result, the key to enabling a competitive Europe is increasingly focusing the provision of future skills requirements and also on the technology (e.g. broadband) used to enable it. Such a Europe-wide focus is also applicable at the regional level as we move towards a way of working which will increasingly gravitate towards people rather than place, providing the appropriate ICT infrastructure is secured at the regional level. Given such background, the rationale for this study becomes immediately apparent to the reader. In terms of rural development, it is the presupposition of this report that an area such as the Western Isles can get a ‘jump’ on the regional, national and indeed international competition. There is a clear opportunity to transform the existing stagnant rural economy of the Islands into a key development zone for the developing Information Society. A concentrated focus on related IS ‘development’policies targeted at developing broadband communications and enabling associated skills development can, it is assumed, provide the basis for the Western Isles to become one of the ‘leading lights’ in rural Europe for the creation of new ICT related enterprise development and job creation. The UK has overall been slow, along with a number of other European counterparts, at adopting new broadband technologies and addressing predicted IS skills shortages. It follows that in such a context the ‘early adopters’ / ‘early market entrants’ will be able to establish a growth base, by which future development momentum can be driven. In relation to methodology this report will set the Information Society in context to establish the economic and social dimensions of the change which one might anticipate over the next 5-10 years. Developing on this context, in part 1 of this report an allimportant focus on the competing broadband technologies will be undertaken with comment on their relevance to the rural and Western Isles context. Ultimately, targeting and rolling out this provision will be the main enabler upon which skills development can be encouraged and targeted to further optimise the ‘development’ environment. Then, in part 2 a consideration of the new opportunities broadband will bring and associated new ways of working will be progressed, followed up by a discussion on the much publicised e-commerce revolution and the development of the digital economy.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ A consideration of teaching and learning opportunities will then be reviewed and a final focus of health telematics as a further practical example of where early progress can be achieved in the rural context will be discussed. To close out this part of the report an overview of developing policy for the IS will be reviewed, followed by a contextual analysis of skills development in consideration of the opportunities and findings identified in part 1 of the report. The securing of an appropriate broadband rollout, whatever form this may take, in combination with an associated human resource development strategy will arguably provide the key base infrastructure to enable a maximisation of economic and social benefit in the study area. It is the presumption of this report that a significant rise in average incomes associated with increasing economic and social opportunity, a resulting reversing of population decline and a significantly increased rate of inward investment, are all achievable through concentrated development policies in the Western Isles in advance of the developing IS, in line with the focus outlined. What is the Information Society? In the latter years of the 20th century it became obvious to many agencies, researchers and academics across the globe that the West was increasingly moving towards what was commonly termed the post-industrial society. This term was used to convey the level of structural change that was taking place in Western economies right across Europe and North America in particular. An increasing focus into the service based industries has been apparent with a significantly less reliance on heavy industry and manufacturing. The Highlands & Islands economy for example became increasingly service based as the 1990s drew to a close, an excess of 70% of activity being attributed to this sector! The generality of the term ‘post-industrial’ was used, as there has been some debate as to where such economies will focus their future activity, to enable sustainability in the longer term. In recent years the focus of this change has become increasingly apparent and very much centered on the development of the so called Information Society or as others refer to it, the Information Age. The main premise of this report is that this is a real and currently occurring change in society within which ‘early adopters’ will have a distinct advantage. For those communities and regions that recognise the future the specific development needs and requirements, one might argue that there will be significant dividends to be accrued. In the context of this report we are talking about job creation, rises in average income, population growth, inward investment, improvements in leisure & recreation and social possibilities, increased enterprise formation and opportunity growth. Overall, what one might refer to this as the achievement of significant and lasting rural development, a goal as yet not able to be achieved in the Western Isles context in living memory. What specific evidence can we refer to, to support the concept of our increasing move towards the Information Society? A number of trends quite clearly illustrate the factor which are combining to rapidly lead us towards the impending Information Society. It needs to be recognised that this change is recent, only really gathering momentum in the second half of the 1990s. In identifying this

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Society has changed in so far that during the second half of the 1990s the public began to change from being ‘passive users’ of PCs and telecommunications to become ‘active choosers’ of PC and ICT technologies. By 1999, on average, 1 in 4 of European households owned at least one PC, whilst in some of the Nordic countries this figure was closer to 1 in 2 on average. PCs by the late 1990s had, and continue to be, an everyday tool of both the home and workplace, used for business, personal home services (e.g. home banking, travel booking services...etc) entertainment, education...etc Attitudes towards technology have changed significantly during this period, with another shining example being the growth in mobile telephone use which the public has embraced to the extent that by Christmas 1999 it was estimated that 40% of the UK population possessed such technology, with approximately 500M worldwide. This phenomenal growth occurred just several years after the liberalisation of the telecommunications markets, which increased choice and reduced prices for consumers. Utilising this technology, customers are increasingly being involved in the ‘work to be done’, as more flexible access to key services become apparent. The banking sector is a good example where first the ‘hole in the wall’ increased both the involvement and access to services and now the Internet allows on-line banking enabling the customer to both monitor and manage their own accounts directly. From the business perspective: "There is now little doubt that new technologies in general, and ITs in particular, are having a deep-seated and largely beneficial effect on economic productivity, competitiveness and overall business performance." [Botterman & Johnston] No longer will small businesses need just to focus their activities locally, as global market knowledge and low costs of entry into the marketplace enable a much wider ‘net to be cast’ in searching for new customers. The Information Society is about new ways of working, with impacts on (a subject to be discussed in detail in chapter 8) employees, businesses, customers/clients, suppliers…etc, with the concept of e-commerce being of growing importance. Clearly, there are increasingly few instances where businesses and homes are not at the very least employing some new element of the developing ICT revolution. Within this context there is an increasing level of (wireless) convergence between elements of this new society, between broadband telecommunications, the internet, PCs, TVs, CD/music players, mobile communications devices, cameras, personal organisers/pocket PCs, video-cameras…etc which are all increasingly ‘talking’ to each other. The development of ‘Bluetooth’ and ‘HomeRF’ standards both steering us towards an increasingly ‘wired’ or more literally ‘wireless’ future, which requires being inclusive for all. In unison with such developments we have an increasing move towards a 24-hour society, where flexibility is a requirement and the around-the-clock provision of services a universal expectation, to fulfil work related, learning and leisure demands. As such, new concepts of time & space, work & leisure and family & community. [Botterman & Johnston 1999] will need to be addressed, issues characteristic of societal change.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ According to the DTI there are several driving forces that are integrating together which are leading us towards what they term the Information Society. Firstly the DTI identifies growing overall income levels that in turn has translated into an increasing demand for goods and services. Secondly, increased access to an advanced ICT infrastructure that is able to support and deliver a wide range of services and thirdly a strong local and regional supply of ICT services and access to electronic content. In addition, it is also noted that a community's culture and attitude will also be of note, including language, education and willingness to innovate…etc. In this sense the message is clear and the focus and rationale for the following study self-explanatory. One of BT’s policy advisors at an industry conference also highlighted the choice ahead, in this instance for Wales (which already has a more advanced infrastructure than in many other parts of the Highlands & Islands) in consideration of recent trends i.e.- European internet revenues: $1bn in 1998 to $64bn by 2001, with the US estimating over $200bn by 2001. In addition a recent MORI poll in the UK revealed 15M home PC users (of which 1/3 have purchased goods/services on-line and a further 1/3 undertaken banking transactions) and 14M mobile phone users (now in excess of 20M), with a further 17M people planning to use a new technology product for the first time in the next six months! “Such global trends promote a stark message for European nations such as Wales, who possess
sophisticated telecommunications infrastructures but have limited success in utilising them. The message is join the information society or become a peripheral player.”

The need to access broadband and develop the ICT skills based is thus clear for rural areas such as the Western Isles and it is the potential route to both we will examine in the following chapters.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

PART 1
Chapter 1
1

Broadband Telecom Services

OFTEL and the Universal Service Obligation
OFTEL can be thought of as being the regulator of the UK telecoms industry. Part of its remit also includes Broadcast services. Given this dual role, it has a key role in the development of convergence technologies in the UK. OFTEL describes itself as being a government department that is independent of ministerial control and in this respect, in many characteristics a unique entity. It is headed by the Director General of Telecommunications, who is appointed by the Secretary of State for Trade and Industry. It describes its main objective as being for: "…customers to get the best possible deal in terms of
quality, choice and value for money."

1.1

OFTEL's Universal Service Obligation (USO) is a common feature of other telecoms regulators around the world and is ultimately present to ensure social and economic inclusion within the new developing Information Society. In the past, universal access at an equitable price to the existing and developing telephone network was considered to be essential for all taxpayers so they could communicate with others in society no matter what their location, social status or age and/or disability. In addition to basic access guarantees, it has also been a common feature of OFTEL's operations to work with the telecom service provider(s), predominantly BT, to formulate 'special schemes' for particular elements of the population who for one reason or another are having difficulties remaining connected (e.g. low-user schemes) perhaps, most commonly, due to issues of affordability. In July 1999, a consultative document was issued by the Director General of Telecommunications in OFTEL entitled 'Universal Telecommunication Services'. It is this document that will be the focus of comment throughout this section, as it raises many issues for rural areas and provides an up-to-date view on current policies, or lack of them, aimed at ensuring the rollout of Broadband services to those persons living in rural areas. The results of this analysis and associated comments will determine the approach to later sections in this chapter. OFTEL, in effect, issues a license to the telecoms operators with USO (and other scheme) safeguards built-in, to ensure a 'universal' service within the UK. According to OFTEL there is a real cost in providing such safeguards (i.e. the USO) in the license and the operator (BT) must pass such costs on to the consumer. However, according to OFTEL's own forecasts in 1998/9, there was in actual fact only a minimal, if existent at all, cost to BT in the USO (refer to Box 1). Indeed as OFTEL itself states: "It could also be argued that OFTEL should be examining the
cost of universal service to an efficient operator, rather than the cost BT incurs in delivering universal service."

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

It qualifies such a statement by indicating that BT has a significant resource of 'fixed radio access' for which it has even been awarded spectrum. If introduced in the local loop, in rural areas, in situations where it was 'the least cost technology' then significant efficiency savings could be realised in servicing both 'uneconomic' areas and customers. Thus the apparent costs of the USO to BT could be reduced significantly according to OFTEL projections. BT has made only minimal use of its spectrum resources to date, perhaps indicating a commonly held underlying viewpoint i.e. that the USO is not in actual fact a burden, contrary to what OFTEL appears to state: "Although universal service provides an important safety net, it is important to remember that it comes at a price." In context, BT is quoted as making a profit of £105 every second*, offering its telecom services at a 233% mark-up.**
BOX 1 Universal Service Costs/benefits

Universal Service Costs / Benefits 1998/9 Uneconomic Areas Uneconomic Customers Uneconomic Public Call Boxes Total Costs Benefit (Life Cycle, Ubiquity, Brand Image)
Source: www.oftel.gov.uk

£Ms 5-10 38-48 10-15 53-73 61

1.2

Regardless of such issues, a number of which were clearly raised by its own staff, to qualify its analysis, OFTEL does not believe that it is necessary to re-evaluate the costs and benefits of the USO at this point in time. Yet, on the other hand, contends that if the USO were to be extended to cover broadband services, the key argument against this would be related to the escalating costs that would require cross-subsidisation from existing services, and therefore ultimately be to the wider detriment of society. The US has for some time been investigating this very issue to ensure 'digital inclusion'. There is without doubt a valid issue here related to the subsidisation of higher cost broadband services by those people who cannot afford them (i.e. standard telephony lowincome consumers) to the benefit of those with higher disposable incomes. This may even apparently require an increase in basic charges for all. With regard to cross-subsidisation within existing broadband users (e.g. of ADSL) with future revenue streams being uncertain at a time of developing and competing technologies then once again the problem of cost and subsidisation of 'uneconomic' locations becomes further complicated. This, combined with an anticipated increased need because of a higher basic subscription cost for broadband services does not easily lend itself to a clear cut solution utilising the Universal Service model to address inclusion issues. Yet on the other hand, as the development paradigm in our society moves increasingly towards sustainability, then one could argue a private company (with an effective monopoly) providing a basic (utility) service to potential members of a new Information Society should be expected to forego an element of short-term profit for the benefit of society and longer term gain.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

A long-term consideration of the business-cycle would view such potential USO obligations as an investment rather than a cost. Cross-subsidisation in such an instance would not be necessary, hence negating OFTEL's key argument against extending the USO to broadband services. On the other hand, as broadband communications develop via a range of different technologies (wireless, cable, satellite...etc) then the justification for a Universal Service on existing copper wire based solutions (i.e. ADSL) on a limited number of telecoms providers would be in itself become untenable without a wider extension to other broadband technologies. This could act as an inhibitor of new technology solutions and a 'barrier to entry' into the marketplace for new telecom operators. Although, determined not to intervene, the Labour chancellor Gordon Brown (March 2000) has also been publicly applying pressure to BT/OFTEL about the UK government's frustration regarding the lack of development in the UK telecoms (broadband) sector in general, the related lack of competition in the 'local loop', be it urban or rural and the development of a two-tier Information Society of 'haves' and have-nots'. The rolling out of copper-based solutions to even commercially attractive locations has been slow to show progress. 1.3 In summary then, the key questions that OFTEL recognise as needing to be addressed in the report relate to several key issues. Firstly, as discussed above, the cost and fairness implications on existing telecoms suppliers, and secondly the appropriateness in policy terms of extending the USO to broadband technologies in advance of future changes in society. In policy terms the report quite clearly indicates that the USO is not likely to change in advance of societal change:
"Universal service is about finding ways of meeting the needs of those remaining few whom the unregulated market might choose not to serve. It is not about predicting what will be required in the future and requiring it advance. Neither is it about prescribing what is required for future economic growth and prosperity. That would not be "universal service" as currently understood and funded."

A key issue then relates to the interpretation of the objectives of the Universal Service. In this sense the OFTEL/(BT) interpretation is without doubt valid, but hardly progressive in nature, being deliberately reactive to change. It is only in instances when certain "telecommunications services that are used by the majority" become prevalent that there will be an obligation, to ensure wider social and economic inclusion, via the USO. In other words, the USO's application and extension on BT cannot be viewed as a potential developmental opportunity for communities currently excluded from access to broadband services which are not yet used by the majority in society. In such a situation, one could argue that as a result of the interpretation of the current objectives of the Universal Service 'noncommercial' locations will always be caught in a 'catch-up' loop and hence be of little value in practice to excluded communities.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Universal access for consumers to the broadband information society is also desirable to enable the UK to expand at the forefront of technology based development and to make commercially viable an increased range of products and services to such consumers. Indeed, arguably it is the rural or traditionally excluded consumer who proportionately is going to consume such products and services at a higher level i.e. video on demand as there are few rural cinema and video hire shops. This 'critical-mass' effect as it is referred to in the report however is not one OFTEL considers relevant within the scope and remit of the USO as it stands and therefore not grounds for further intervention in the telecoms marketplace. This is a convenient interpretation once again, in the view of the writer, with negative implications for the development of an inclusive rural society in the UK, wired into future mainstream product and service provision. 1.4 Rural areas are without doubt more costly to service, populations are more spread out, the physical distance from the local exchange (3.5 – 4.5km depending on line quality is the quoted current limit of ADSL) and cost constraints associated with infrastructure development in 'wilderness' areas are high and the number of consumers low as are the subsequent revenue streams. Business usage is also limited, further affecting the revenue stream. In the 'free-market' model such uneconomic areas would be left to their own devices. But this is not an acceptable political reality in a post-industrial 21st century 'developed' UK society increasingly embracing the principles of sustainable development and consequently being committed to conserving regional distinctiveness, rural society and overall ensuring social and economic inclusion for all in the wider UK context. Market intervention to achieve such goals it can be argued, is therefore not interference to the detriment of all in the long term, but actually quite the reverse. The European Union's Regional Policy operates on just such principles, actively working towards a society where each and every citizen has an equal opportunity to participate in the economic and social life within the '21st century' society in Europe. Currently the parameters of the Universal Service on BT are unlikely to change to ensure access to new copper-based broadband services for the reasons discussed above, despite the perceived need in uneconomic (rural) areas. Access to new interactive products and services via ADSL is not a short-term reality for 'uneconomic' areas. Innovations in the provision of Video on Demand, Video e-mails, Video Conferencing, On-line Banking, Online Shopping, On-Line Gaming, On-line Education, Home-based working and interactive access to other local services related to health (Medical Imaging and Consultation), social services and local authority functions together with high speed access to the Internet and World Wide Web, will by-pass such areas who will get no input to their optimum development path due to lack of initial access and hence influence. Even if one accepts that the USO is not the most appropriate means to achieve such intervention with OFTEL's current interpretation of its objectives, this report will nevertheless argue strongly that intervention in the telecoms sector to achieve wider social and economic goals will be essential to avoid the current impasse, whereby rural telecoms infrastructure is caught in a perpetual cycle of catch-up with that in urban areas. This is not only an uncompetitive situation but also given the rapid level of change in the current sector one which is arguably not sustainable, due to the increasing timescales required just to access yesterday's technology.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ This latter fundamental issue is the basis upon which an increased level of public assisted projects must be secured. The risks associated with a continuing non-proactive stance could be significant, yet the potential gains realisable in a potentially location-independent economy for those 'included' could be a massive boost to the rural economy as traditional industries continue to decline. 1.6 In the short term, OFTEL is convinced that the main route to broadband access in the UK will be via DSL technology utilising existing copper-based telephony structure. OFTEL has also noted that as BT supplies 85% of such lines in the UK, the unbundling of the local loop to promote competition could achieve real competitive gains and therefore negate any potential bottleneck holding back the development broadband technology over the existing copper line network. At the time of writing there has been little progress with co-location space-related issues in the popular urban exchanges and high costs (approx. £30K per user based on seven sharing) in single-supplier rural exchanges. BT has also in practice ‘dragged its feet’ in the words of one potential ADSL entrant (RSL Communications) which along with several others have now pulled-out of the market altogether. BT has not responded to demand from potential entrants for exchange space in key areas, but has instead opened up, arguably, less viable exchanges first in many instances. It remains to be seen whether co-location as its terms and conditions exist at present will be the catalyst for competitive broadband provision of the nature envisaged by OFTEL.
"On Friday 10 March 2000 OFTEL began a statutory consultation on a proposed modification to BT’s licence. The purpose of the proposed modification is to require BT to allow operators to lease its local access lines, a process known as local loop unbundling. Operators would then be able to use their own DSL technology to provide broadband services to customers, including services like high-speed always-on Internet access and video-on-demand." – www.oftel.gov.uk

The development of 'affordable' broadband in the UK will be the catalyst for the growth of e-commerce and the electronic economy, to which the present government is so committed (http://www.dti.gov.uk/infoage/index.htm). In addition, "OFTEL is committed to ensuring
that UK consumers and businesses are well placed to make use of new Information Age technologies that will deliver these services." 1.7 Finally, it is interesting to note however, that the American government has been much more forward thinking in its consideration of 'Universal Service' and as far back as 1995 prioritised a new and advanced USO including provisions for the socially excluded. According to Larry

Irving, Assistant Secretary for Communications and Information, U.S. Department of Commerce (1995): "We believe the following four goals are essential to promote universal and equitable access to the National Information Infrastructure:" 1. 2. 3. 4. Preservation and advancement of the concept of universal service, Promotion of community partnerships, Continued support for universities and research institutions, and Outreach to under-served communities...We need to ensure that inner city and rural residents are informed about the opportunities that exist and the best ways of harnessing them for their communities. These communities need to know what technologies and applications are available, what existing infrastructure they have and need, and what has worked for similar communities.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The US government's report from which the above originated in 1995 began with the following key quotation and the situation it describes across the Atlantic in 1991 is reminiscent of many areas in the Highlands & Islands today : “Many of America’s rural areas show signs that raise concern for their future: loss of economic vitality, a relative decline in income, high unemployment, low workforce participation, and an exodus of talent. Advances in communication and information technologies, however, can reduce the barriers of distance and space that disadvantage rural areas" (Office of Technology Assessment, U.S. Congress, 1991). and concluded: "Government regulations and policies will also play an essential role in the development of the Rural Information Infrastructure. Different regulations and policies will likely be required in rural areas than in urban areas." Nevertheless, even with this recognition, a further report in July 1999 has concluded that rural areas in the US are contributing significantly to their 'digital divide' – "At every income
level, households in rural areas are significantly less likely - sometimes half as likely - to have home Internet access than those in urban or central city areas." One wonders if the UK is

willing to take action now to avoid this inevitable scenario being replicated this side of the Atlantic in our rural areas, some might argue it is already happening. Both the opening quotation and conclusion of the original report discuss key areas that the UK government are still reluctant to address, despite the occasional comment on social inclusion and increased access to the communications network. One might easily conclude that OFTEL requires to be much more flexible in its interpretation of its Universal Service obligations. Indeed the Countryside Agency in England has requested that OFTEL widen its USO to include broadband provision to rural areas. At the time of writing there has been no response to this request. The momentum of the so called Information Age or Society is clear and there will be many opportunities for UK business and consumers alike that will have economic and social consequences in all walks of life. The commitment is real, but the question of inclusiveness remains for 'uneconomic communities' in the UK (at least 5 years after the US government began to address such impending issues) be they in low income urban housing schemes or scattered remote communities in the Western Isles of Scotland. For this reason it is essential that we now consider the options for such areas to enable them to become wired into the impending Information Age. A similar process on a national scale has just been completed in the US with the subsequent report 'Advanced Telecommunications in Rural America: The Challenge of Bringing broadband Service to All Americans' being published in April 2000. The next chapter will begin by assessing the services available by firstly considering the competing DSL broadband technologies relevant to the rural context. This report also considers many of the issues outlined in this report.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Chapter 1 - References:
OFTEL, Access to Bandwidth: Delivering Competition for the Information Age, (November 1999) http://www.oftel.gov.uk/competition/a2b1199.htm OFTEL, Universal Telecommunication Services: A consultative document (July 1999)
http://www.oftel.gov.uk/consumer/uts799.htm

OFTEL, Access to Bandwidth Consumer Workshop (March 1999)
http://www.oftel.gov.uk/isp/a2bwshp.htm

OFTEL, Universal Telecoms Services, (1997) http://www.oftel.gov.uk/consumer/uniserv2/chap1.htm US Dept. of Commerce, Rural Areas Magnify 'Digital Divide' (July 1999)
http://www.ntia.doc.gov/ntiahome/digitaldivide/factsheets/rural.htm

US Dept. of Commerce, Survey of Rural Information Infrastructure Technologies, (1995),
http://www.its.bldrdoc.gov/pub/rural/

US Commerce Department's National Telecommunications and Information Administration / Rural Utilities Service Advanced Telecommunications in Rural America: The Challenge of Bringing broadband Service to All Americans (April 2000)
http://www.digitaldivide.gov/

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2

Competing DSL Technologies
POTS, the Plain Old Telephone System is the basis for the majority of xDSL (Digital Subscriber Line) services on the market today. xDSL refers to an increasing number of digital transmission technologies utilising POTS to provide high bandwidth information services to small businesses and increasingly consumers’ homes, as the service becomes more affordable and widespread in both Europe and particularly North America. As indicated in the last chapter, BT is only now in 2000 beginning to roll out ADSL services throughout selected sites in the UK after much delay. Refer to Appendix 1 for details on the full range of developing DSL technology worldwide. The availability of such services is not as straightforward as it might first seem and we will consider specifically in this chapter the kind of issues that need to be addressed if the most appropriate DSL service in the Western Isles context is to be achieved.

2.1

DSL: An Overview
At its most basic level a DSL can transmit and receive both data and voice signals on the same line. The element of the line concerned with data download and upload is described as being 'always on' i.e. the DSL modem used to connect to the data service is permanently connected to your local exchange. Indeed, technically, DSL refers to the modem pair (at the consumer and exchange ends) rather than the lines used. Connecting to on-line services therefore becomes that much quicker without the experience of a 'dial-up' process, engaged tones, dropped lines...etc. The local exchange is then able to switch a request for information (from your DSL modem) down the telecom suppliers 'backbone' communications infrastructure to your ISP, via its high bandwidth link 'pipe' and then on into the Internet through its own 'backbone' communications infrastructure on into the Internet to access your desired location.

PSTN – Public Switched Telephone Network

ISP Server
ATM Local Telephone Exchange with DSLAM

Voice Calls

ADSL Modem Rack

User's ADSL Modem

Existing Copper Pair Line

1.5Mbps to 7Mbps 16kbps to 640kbps

The Internet

Box 2 ADSL

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

ADSL is able to work in unison with existing telephony services due to the presence of a Digital Subscriber Line Access Multiplexer (DSLAM) at the telephone exchange that separate voice traffic to the Public Switched Telephone Network (PSTN). In some instances (e.g. with ADSL) a splitter is also required at the customer's premises to undertake a similar separation at the user end. Voice signals are sent on the basic copper pair network by analogue wave transmission for which our current telecoms system was designed in the Victorian era. A Modem (modulator/demodulator) is a good example of a technology with which the reader will be familiar. Modems demodulate analogue signals into a string of values of 0s and 1s (i.e. digital data) that can then be interpreted on a PC. On the other hand, when a PC sends data via a standard modem, the modem modulates the digital signal and sends it as an analogue signal. This latter process is considered to be a 'bandwidth bottleneck'. In the ADSL context, modulation refers to the key method of putting data into a high frequency carrier signal for transmission and receipt on the twisted copper-pair wires. With DSL: "Digital data is transmitted to your computer directly as digital data and this allows the telephone company to use a much wider bandwidth for transmitting it to you." [http://whatis.com/] The resultant high frequency signal makes possible the separating of some of that bandwidth to enable voice-band telephony to work in tandem with such digital data coding technology (see above). This is an important feature of ADSL that will be discussed further in this chapter. This can be achieved by using a splitter at the home/business user end or if adhering to G.Lite ADSL standards, can be set up from the telecom supplier's local exchange. DSL services (such as ADSL) are ultimately expected to replace slower and older ISDN technology on both cost and speed grounds. In the UK, the supply of ISDN services has proved a lucrative market for BT and in the view of many industry commentators e.g. Freeserve's Chief Executive (John Pluthero), BT has deliberately delayed the introduction of DSL technology, indeed BT even claimed that this delay was due to a lack of demand for the service in its trials: "It's a disgrace. The reason BT is deliberately slowing down the rollout of ADSL, and let's be clear, it is deliberate, is because it is protecting its Highway [ISDN] business." Gartner Group analyst Adam Daum has also commented on the loss of ISDN 'Home Highway' revenue. "BT has dropped the price of Home Highway to make it attractive to the mass market and has promoted it actively. It has created the embryo of a good market and ADSL will undermine that." The main advantage of DSL based 'always-on' will be the growth of the internet marketplace in the UK, as for a fixed price (in the future) of between £20-£50 per month UK internet users will be able to connect to the internet without worrying about their quarterly phone bill or indeed missed calls and therefore increase their overall average time on-line and hence increase significantly e-commerce based opportunities for UK business. BT will also without doubt experience a reduced demand in its 2nd line market, which home users in the UK have been purchasing at an ever growing rate to address their

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

ADSL is currently nevertheless being rolled-out by BT to over 400 exchanges (Spring 2000) throughout the UK with plans for a further 100 in a second round of up-grades. "Combined, this investment in ADSL technology will cover 35 per cent of Britain's population, enabling 8.5 million homes and businesses to join the broadband revolution." [www.theregister.co.uk] In the US the number of DSL subscribers doubled in each quarter during 1999 and by the end of 2000 it is expected that over 2 million households in the US will have active DSL accounts and that every major US city will have DSLAMs installed at their telephone exchanges. Meanwhile rural areas in the UK face an uncertain future with regard to access to (A)DSL based broadband services, as has been outlined in ch.1.

2.2

ADSL: An Introduction
In the US and Europe the backbone of the telecoms network is now comprised of mainly optical fibre cables connecting the numerous switching centres. However, connections between these switching centres (exchanges) and consumers of telecom services are still dominated by the original twisted copper pair lines, of Victorian origin. Such lines (of which there are 600 million worldwide (Scientific American Oct. '99) were originally designed for voice-band signals in the frequency range 300Hz to 3.4KHz, a 'narrowband' service. It is also important to note that such lines are often unshielded and are of differing gauges. BOX 3 The 'twisted pair' is the ordinary copper wire that connects home computer and indeed many business computers to the telephone company. To reduce crosstalk or electromagnetic induction between pairs of wires, the two insulated copper wires are twisted around each other. Each connection on twisted pair lines requires both wires to be functional. [http://whatis.com] The information carrying capacity of such lines is ultimately limited and determined by sources of noise and interference. In a well specified and designed digital transmission system, such effects will be minimised. ADSL is one such digital technology – Asymmetric Digital Subscriber Line. ADSL is a relatively new 'broadband' technology which enables existing copper pair lines to be utilised for the transmission and receipt of broadband telecom services, in some instances at up to 7Mbps, although 1-2Mbps being more typical. Even this latter figure is a significant improvement than that of 56Kbps standard that modern day modems achieve. ADSL, in common with other DSL technologies outlined in Appendix 1, is an 'always-on' technology (unlike ISDN and analogue modems), hence for a set amount of money per month the customer can have unlimited access to the internet.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

[Source: Scientific American Oct. '99]

BOX 4 - ADSL OVERVIEW

"By employing a passband modulation method an ADSL transceiver can operate at frequencies above those of standard telephony, allowing the ADSL system to coexist with the telephony system on the same pair…ADSL can be seen as a frequency division multiplexed system in which the available bandwidth of a single copper loop is divided into three parts…" [SAS: White Paper – ADSL] The three parts of the system referred to above consist of the existing voice-band telephony service, the Upstream channel and the Downstream channel. The Asymmetric element is related to the fact that the Downstream channel in the digital system is the primary channel to which most of the bandwidth in the system is devoted (i.e. the flow of information towards the consumer), whilst the Upstream channel (from the consumer to the service) is normally allocated significantly less resources, due to reduced need (e.g. voice telephony and internet based services) and other transmission advantages related to cross-talk interference (refer to section 2.3). ADSL modem technology then, transforms existing standard analogue telephony lines into high speed digital lines, via digital coding techniques giving potentially up to 99% more capacity for internet based data transfers without affecting one’s existing telephony services. The existing voice-band service is normally separated at the customers home or office by a splitter, a device which forks the line into two branches, one which goes to the telephone and the other to the customers DSL modem. Such splitters also act as ‘low-pass’ filters separating out the frequency signals that are above a current point i.e. 0-4kHz frequencies only being transmitted towards the telephone for termination. According to the ADSL Forum, 33.6Kbps modems (which require quality lines with a high signal-to-noise-ratio) are already at the limits of capacity (35Kbps) of the twisted copper pair according to Shannon’s theorem* and although 56Kbps modems can extend this speed by utilising digital connections in the downstream direction in the communications network, they are still limited to 33.6Kbps in the upstream direction. This would seem to be the limit for analogue modems.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

ISDN technology remains expensive (e.g. BT Home Highway) in the UK and although it can increase connection speeds to 128Kbps using two standard telephone lines (costing twice as much in calls) to provide a dual channel 64kbps x2 connection, it remains slow even compared with the anticipated G.Lite 1.5Mbps ADSL standard. Current developments in the ADSL field include the adopting of an industry-wide global standard for the technology, named G.Lite. This standard if adopted will reduce the overall speed performance of ADSL (down to 1Mbps to 1.5Mbps Downstream and 0.384kbps to 0.5Mbps Upstream), but make it more able to be delivered to a wider range of locations (6.6Km – 7.5Km from the exchange) more reliably and enable a reduction in overall costs and power consumption. Furthermore, higher speed standards will require shorter line lengths and thus either less customers or higher infrastructure costs. G.Lite is thus viewed by many within the industry as being a sensible balance for the industry, although without doubt being to the detriment of some consumers who are already (or were expecting to), benefit(ing) from higher speed ADSL services. On the other hand, G.Lite ADSL does not require a filter for digital data and analogue telephony, known technically as a splitter, thus saving on the requirement of engineer visits to customer premises. It can thus be considered as a plug-and-play technology. In addition, G.Lite addresses the problems related to getting the modem of one manufacturer to talk to a DSLAM of another manufacturer and this interoperability is also one of its key advantages. However: “..high-bandwidth telephony-based services such as multimedia gaming, videoconferencing, and video-on-demand (VoD) still demand full-rate ADSL” [EDN on-line Journal] ADSL is targeted at the mass domestic market for the most part, with more synchronous services (e.g. SDSL) being more applicable to LANs, web-hosting services and remote working. “SDSL is the most popular with businesses and teleworkers. SDSL meets the requirements of these segments because symmetric bandwidths of up to 1.5Mbps mimics LAN connectivity. This enables workers to send and receive large files from corporate servers with high speed in both directions.” [www.iec.org/] This is an important difference and will determine the priority version of DSL that is appropriate to perceived needs in rural areas such as the Western Isles. The key constraint though with SDSL is its service reach of 3.0km. This would tend to significantly limit the availability of SDSL to home-based rural teleworkers in the Western Isles, a key anticipated market for demand in broadband services in the islands in the next several years. Rate Adaptive DSL (RADSL) is another form of DSL that has gained increasing ground in the US. Such technology is able to adapt its connection speed to that achievable on any given line and so operates at lower speeds over longer lines and higher speeds in instances where line conditions are more favourable i.e. when there is only a short loop between the customer and his/her exchange. From the service provider’s perspective it is also desirable as a range of different speed services can be offered and charged accordingly.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

2.3

Cross-Talk Interference and resultant Digital Coding Techniques Asymmetric data paths such as those utilised ADSL are basically a compromise technology that increases bandwidth and extends the reach of digital line technology, as in many instances one's phone line will not come directly from the telephone exchange but will be spliced at least several times during the journey. It has been estimated (by Bellcore – a US phone company) that the typical consumer line in the US goes through 22 splices prior to reaching the customer. Therefore if high-speed signals were attempted to be sent in both directions, the effects of cross-talk and line noise/interference would be significantly increased. So what is cross-talk interference? It has been described in the DSL Sourcebook as follows: "The electrical energy transmitted across the copper wire line, as a modulated signal also radiates energy onto adjacent copper wire loops which are located in the same cable bundle. This cross coupling of electromagnetic energy is called crosstalk. In the telephone network, multiple insulated copper pairs are bundled together into a cable called a cable binder. Adjacent systems within a cable binder that transmit or receive information in the same range of frequencies can create significant crosstalk interference…The result is a slightly different shaped waveform than was originally transmitted." BOX 5 Information carrying capacity in digital systems is limited by the access channel itself and external sources of noise [SAS: White Paper – ADSL]: Near-end crosstalk – arises due to signals which interfere with the input of a collocated transceiver at the same end. The transmitted signal leaks into the receiver via capacitive and inductive coupling paths. Far-end crosstalk – occurs when signals from transmitters on other pairs in the same cable leak into the input of the wrong transceiver at the other end. Radio frequency interference Impulse noise – caused by a variety of sources producing short electrical transients. Crosstalk interference (refer to box 5) will be greater in cables nearer the exchange where many cables come together and hence a high speed digital signal sent from the end user to the exchange (Upstream channel) cannot achieve the same performance as one sent from the exchange (Downstream channel). This is because as a signal sent from the exchange naturally attenuates over distance, it is more susceptible to cross-talk interference which gets less as one goes further away from the exchange, as an increasing amount of lines reach their termination destination and as any interfering signals also attenuate. In the opposite scenario, as a signal sent from the user to the exchange naturally attenuates, it comes up against increasing sources of interference the closer it gets to the exchange due to the increasing number of lines and other signals it comes into close proximity to.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Asynchronous DSL therefore has significant design advantage that is adapted towards maximum performance and service reach over existing copper local loops. The third part of the system (i.e. the normal voice-band frequency range) is not affected by the other two, as data transfers in the Upstream and Downstream channels can be transmitted at frequencies above that of the voice frequency band, hence all three are compatible, this being one of the key advantages of ADSL technology using standard twisted copper pair lines. The two main digital coding techniques used in ADSL, namely Carrierless Amplitude and Phase (CAP) modulation and Discrete MutiTone (DMT) modulation are both (as mentioned earlier) passband modulation techniques which means that they can be designed to be used over any specified range of frequencies. In essence, the main technique used by DSL technology is referred to as multiplexing, the process of amalgamating numerous signals into one, more complex signal version, which is then transmitted and separated out again at its destination. Discrete Multitone Technology (DMT), is one of the main modulation (digital coding) methods used to transmit and receive information on existing copper pairs to provide ADSL based services. "The technique divides an overall bandwidth of about 1 MHz into 256 subchannels of about 4 kHz each. In essence, it creates 256 virtual modems operating simultaneously over the same line." [Scientific American Oct. '99] In contrast to this method, Carrierless Amplitude and Phase (CAP) modulation digital coding techniques use a single carrier channel and can be considered a variant of Quadrature Amplitude Modulation (QAM) that is used in V.34 (28.8/33.6kbps) modems to optimise performance on standard twisted copper pairs. CAP: " describes a version of QAM in which incoming data modulates a single carrier that is then transmitted down a telephone line. The carrier itself is suppressed before transmission (it contains no information, and can be reconstructed at the receiver), hence the adjective "carrier-less". [www.adsl.com] Obviously then, for a technology designed (ADSL) to operate in tandem with POTS, one could argue that such specific coding techniques (assigning an additional but separate band to POTS based copper lines for upstream data and another for downstream data) were a prerequisite for success, separating frequencies using what is termed Frequency Division Multiplexing (FDM). FDM also has a further advantage in so far as it enables Downstream and Upstream channels to operate at differing frequencies (the lower frequency in the Upstream direction, for reasons already discussed) hence reducing 'near-end' interference because it transmits on a different frequency than any directly adjacent service receives, thus reducing cross-talk. With regard to the future of such technologies, they are expected to develop into 'rate adaptive' and symmetrical forms, which are expected to go some way towards extending the current ADSL service, reach from its current 3-5Km

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ A more symmetrical service (e.g. SDSL as described earlier) will also be of increasing interest to larger SMEs who foresee a future which includes extended in-house web-based services (e.g. web hosting), videoconferencing...etc A third and newer DSL technology that is synchronous in nature is also worth consideration. It provides 768Kbps connections and can be delivered out to 9Km and is called Multiple Virtual Line (MVL). This newer technology has no need for a POTS splitter and needs no configuration at the user-end. In addition, as it only emits a low power level per modem card (between 1.5 and 0.5 watts) and it can be used in the same bundles as other services without any noticeable adverse effects and can even be delivered over non-twisted pairs.
BOX 6 Demands on MVL DSL
Source: www.paradyne.com

The synchronous nature of MVL, its plug and play installation and length of reach, all indicate a product of potential significant relevance to the Western Isles context, for both business and domestic usage. Refer to Appendix 2 for further details. The current form of coding technique being rolled out in the UK to provide ADSL services is DMT. "During initialisation, DMT monitors the line conditions and works out the capacity of each sub-channel in the ADSL frequency band based on it's Signal to Noise Ratio. If one channel is experiencing noise due to say RF interference, it will not be used in favour of the other sub-channels. CAP does not have this flexibility."[Andrew Muir, Mason Communications] 2.4 ADSL Capacity Constraints The ultimate capacity of a line (excluding line quality factors) is also determined by its length, as this ultimately determines bandwidth. This is a key issue for rural areas. As a signal is passed down a line, it experiences attenuation the further it goes, and the higher frequencies (such as those used by ADSL technology upwards of 3,400Hz) are affected to

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

"One might compare the transmission of an electric signal to driving a car. The faster you go, the more energy you burn over a given distance and the sooner you have to refuel. With electrical signals transmitted over a copper wire line, the use of higher frequencies to support higher speed services also results in shorter loop reach. This is because high frequency signals transmitted over metallic loops attenuate energy faster than the lower frequency signals." [The DSL Sourcebook] The diameter of the copper wires in the loop also affects performance and an increased diameter will reduce attenuation effects as thicker wires carry more current further because they have less electrical resistance over a given length. Thicker wire is therefore better for longer distances and its occurrence will enable the radius of ADSL provision to be greater. An ADSL signal can overcome electrical resistance of approximately 1500 ohms, at levels greater than this the signal attenuates significantly. The main problem with regard to the above is that existing copper-based line systems were not designed for digital transmissions and so were provided using the thinnest copper-pair line that could support the voice-band demands of the day. Obviously the thinner the wire the less copper used and less cost per metre of line provided. The average line gauge in the US is between 0.4 and 0.5mm. Typically, 0.4mm gauge line can provide services only 2/3 of the distance of 0.5mm line. In the US the split in gauges is approximately 60% in the 0.5mm or greater range and 40% in the 0.4mm range. In the UK it is between…. The distance from the exchange is thus going to be a severe limiting factor in providing broadband ADSL services to outlying rural areas. As stated in section 3.5 at a distance of approximately 3.5km to 4.5km from the 'base station' delivery of ADSL becomes problematic for the above reasons. Although such problems may be experienced at considerably less distances depending on the quality of the lines e.g., the presence of bridged taps, loading coils, differences in line gauge...etc

2.5

Line Quality Issues and ADSL provision The pre-testing of loops is a key requirement in the development of ADSL services and can be a costly process, particularly if engineers have to be despatched to both exchanges and customer premises in advance. Current moves in the industry in North America are towards the automated testing of loops, reducing both time and associated cost implications of developing a new service. Apart from overly long local loops in rural areas which attenuate signals due to a loss of resistance on the thin copper pairs and cross-coupled (cross talk) interference issues, there are several other main issues which affect the quality and availability of ADSL and other digital services on POTS. Firstly, one has to consider the presence of loading coils, which are in effect a bottleneck in the supply of digital services over existing copper pairs. Loading coils have been a universally utilised tool by telecoms companies throughout Europe and North America and are used to minimise noise interference on traditional voice-band services on long local loops. They have been traditionally used on local loops of more than 5.5km in length

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

They act as filters and cut-off sources of interference at frequency levels of above 4kHz. However, ADSL is supplied utilising frequencies at >3.4kHz and therefore such loading coils act as a severe limitation to the provision of not only ADSL, but all other digital services (e.g. ISDN) as well. "It has also been reported that load coils impair the operation of 56kbps and 33.6kbps modems for similar reasons." [www.iec.org] However, loaded lines tend to be straightforward to diagnose by measuring 'frequency response' with the appropriate testing instrument. However, in instances where there is old plant that has been up-graded over the years, perhaps by the introduction of new exchanges…etc some old loading coils that are no longer necessary can nevertheless still be present. Secondly, the occurrence of 'bridged taps’ that are also referred to as non-terminated (open circuit) pairs, has a significant effect on the reliability of digital services such as ADSL. In an ideal situation a telephone line goes from the exchange to the user directly i.e. point-to-point. A bridged tap occurs in a situation where a new service is provided to a customer at some point along an already existing pair that perhaps previously supplied a former customer. As a result, some of the signals passing down such a line will continue along the old line and not be terminated (i.e. as there in not a telephone, modem, fax machine any longer at the old location), but instead reflected back towards the original signal. As a rule of thumb: "If the length of the tap is small, when compared to the signal wavelength, the reflected signal rejoins the original signal after a minimal phase shift and there is little attenuation of the original signal. When the bridge tap length approaches one fourth of the signal wavelength, the reflected signal rejoins with a phase difference nearing 180 degrees and causes significant attenuation." (University of Saskatchewan) Such bridged taps also often occurred during repair work, as well as when providing new services (adding some flexibility and cost savings to telecoms suppliers) and tend(ed) to have little effect on standard voice telephony services due to the long wavelength of voice band services in comparison to the length of such taps. However, with higher frequency digital services possessing a much smaller wavelength and rural areas tending to possess higher than average bridge tap lengths, digital service provision in rural areas will be very sensitive to such bridged taps. In summary, bridged taps are sections of line that are not on the direct path between a user's location and the exchange and which can consequently result in signal loss in digital systems via the reflection from the non-terminated pair of wires (refer to Box 7).

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BOX 7 A BRIDGED TAP

New Location

Working copper pair

Telephone Exchange

Non-terminated pair

Bridged Tap

Old Location

e.g. old croft house

In lower specification ADSL services up to 1.5Mbps such bridged taps will not normally have a significant effect other than restricting the bandwidth and speed of the service able to be provided, unless of course the length of tap is extremely long, a phenomena more likely in the rural context, due to the varied geography of consumers. A third possible problem with POTS is related to differing gauge sizes and the resultant different characteristic impedances present in a local loop: "..variation in wire gauge adds to the challenge of determining a particular DSL system's performance over a particular loop." (DSL Sourcebook) Other line defects and weaknesses also need to be thoroughly assessed in advance of rolling out high frequency digital services on existing local loops. These assessments might include metallic tests ("..standard tip-to-ring, tip-to-ground and ring-to-ground parameters including DC voltage and resistance, along with AC voltage, resistance and capacitance") longitudinal balance, the presence of water in cables or cable jackets, line mix-ups in a cable (split-pairs), poor contact junctions, injections of electromagnetic noise and even seasonal temperature fluctuations in the copper. It should also be noted that the performance attainable from ADSL can vary significantly depending on the presence of other digital services already been supplied in the consumer local loop (e.g. particularly T1/E1 leased lines). Other digital services can significantly degrade the ability of ADSL to perform effectively in a local loop, as interference increases significantly in loops where bundled lines are transmitting and receiving digital information at similar frequencies. In North America when ADSL is planned for an area, a range of tests are undertaken to evaluate the necessary loops. "The impact of electronic devices, load coils, bridge taps and gauge changes are all evaluated." [America's Network Dec. '98]. BT has just completed a

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2.6

ADSL Provision in the Western Isles Context The need for broadband telecoms links in the Western Isles based on such technology has already been outlined in chpt 1. According to BT's on-line information the provision of ADSL services at any given location in the UK: "… is subject to technical limitations and survey. Service availability in an area is constrained geographically and is subject to change." The full rollout of ADSL services to rural areas such as the Western Isles is as yet unannounced although is commonly thought within the industry to be a number of years distant to such non-profitable areas, even although the official BT position (see above quote) does not qualify such a view. BT it seems, continues to promote its leased line and ISDN (Home Highway) sectors (www.zdnet.co.uk) and maintains that unmetered broadband access via ADSL will 'increase the load and stretch an already creaking network'. This latter view appears to be the shared by BT engineers locally, after several recent discussions. The consensus view appears in line with the following: "Even when DSL rollout actually begins, it will only be in the more populous (and therefore profitable) areas." (Internet Magazine, May 2000). The key questions for the Western Isles must thus revolve several key fields. It appears clear that even if rollout costs could be minimised and the number of customers passed maximised e.g. by using G.Lite ADSL and issues related to line quality assessed, it nevertheless appears that at the present at least, BT does not consider such issues, unlike its rivals in the US. Its sole indicators of an area's ADSL's readiness is instead based on its demand, making ADSL as it stands at present in the UK a very much urban phenomenon. Prior to any unbundling of the local loop in the UK progress will depend on the commitment of BT to its rural customers, in the absence of any USO by OFTEL and the long-term strategic thinking of the local and regional development agencies. Certainly in the US, new forms of the DSL technology are being piloted and demonstrated specifically due to their appropriateness to the rural market e.g. MVL, the so called low power, high reach DSL alternative. It may be that if progress is to be made in the rural context, different DSL development models to that appropriate to urban areas will need to be investigated and progressed, MVL being just one in addition to RADSL and G.Lite ADSL. However, as we shall see in section 2.8, the absence of SDH (and the non-availability of DSLAMs for UXD5b exchanges) is a potential constraint that is unlikely to be addressed within this current market ethos.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ With regard to the digital exchanges present in the Western Isles there are 35 in total (refer to Appendices 3 and 4 for location and background). 6 of which are BT's System X, 26 UXD5B, 1 older UXD5 and 1 L/Conc. Of these, the System X are TXD03 Remote Concentrator Units (RCU) parented on a DCCE (Digital Cell Centre Exchange) and the UXD5B are TXD05 units. Their type and its appropriateness for (A)DSL provision is not yet clear, but with the DSLAM scalable base units (for System X exchanges) required in this instance it would appear that such infrastructure appears to be less important than it was when trying to supply ISDN services to as wide a customer base as possible in the Highlands & Islands, as there is no need to replace or up-grade existing exchange infrastructure, but instead just add to it. However, a key consideration may relate to their bandwidth connections to the Island's backbone, which if limited may constrain the uptake of broadband services in many rural areas in the Western Isles. However, recent discussions with an ICT consultant in the area, familiar with such exchanges have negated such worries, as it appears upgrading the radio links of such exchanges is a low cost and straightforward procedure. In the short term, it must be recommended that in the Western Isles context if DSL becomes a priority, a cost effective automated line-testing method should be investigated to minimise any potential initial 'market-entry' costs, as such pre-testing is a prerequisite to the development of such DSL based services. It would appear unlikely that in the rural context where market demand is going to be initially low for broadband services (due to the low number of overall consumers and their reduced exposure to similar services) in the short to medium term, that BT will undertake such testing in advance of any local loop unbundling. In rural areas there would appear to be only a marginal market for one or two telecoms suppliers and content providers, BT is unlikely to do the 'groundwork' on such local loops in advance, because this may just prime already marginal loops for low-entry-cost competition in July 2001. On the other hand, in urban markets where there is significant demand it is worth BT's while bearing such costs to establish their service(s) in advance of the unbundling of the local loop (currently scheduled for July 2001) and any associated competition that that is likely to unleash. In addition, an appropriate scaleable DSLAM solution will also require investigation from various suppliers, catering for low-demand rural areas in the first instance but having the flexibility to be scaled-up at some future date. Such a solution is likely to be quite different than that currently being rolled-out in the UK's mass-market urban locations. Indeed BT has indicated that it is not likely to develop/install DSLAM capable of servicing the small type of exchanges such as the UXD5B present in the Western Isles. Lastly, the piloting of several already proven North American (A)DSL-based technologies (in the absence of any UK based technology solution) in rural areas such as the Western Isles may be considered appropriate to assess in practice the claims of their suppliers.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Obviously, at present, this would depend on whether BT has tied itself into a supplier deal with particular manufacturers or not. ADSL G.Lite and/or MVL would appear to be front runners in this respect. In summary then, it appears that there is potential scope for innovative technology solutions based on high speed DSL broadband solutions in rural areas such as the Western Isles, although not necessarily ADSL. However, it is important to recognise that at present, this depends on the willingness of a UK-wide private telecoms supplier with a responsibility to its shareholders and one which is in the process of coming under increasing competition in many of its former core markets. In such a context, such rural market issues, although important to residents and businesses in the Highlands & Islands, will likely only be considered as a peripheral consideration for such a company. A partnership-agency approach based on an initial area of need, is thus strongly recommended with BT and any other potential market entrants, to encourage an assessment and implementation of the types of solutions most appropriate to the rural context, should DSL be a chosen priority for the Western Isles. In the absence of such an initiative it seems unlikely that any DSL-based solution for rural areas will be forthcoming for many years to come, as any future rollout in 2001 is still going to be dependent on demand in the first instance. Hence, in the absence of any change to the USO (refer to chapter 1) in the interim that appears unlikely (until such services becomes considered mainstream elsewhere in the country) a clear path to the development of such broadband technology in rural areas does not exist. Hence, the immediate need for the proactive solution suggested above to investigate cost-effective rural solutions. The development of such an innovative partnership venture will be discussed further in chapter 5. In this sense, until such a process has been instigated and completed one cannot rule out the use of the twisted copper-pair as being a potential supplier of broadband telecoms to businesses and consumers in the Highlands & Islands. 2.7 (A)DSL and the Future There can be little doubt that (A)DSL is going to be one of the key broadband technologies of the ‘Information Age’ throughout the world and as such has an important position within the overall broadband sector. Ovum, a UK based consultancy firm, has recently predicted that DSL line installations will increase from 800,000 worldwide to a staggering 45M within 5 years (by 2005), 10.5M of these being in Western Europe. As yet, rollout is being constrained by a lack of competition among existing telecoms suppliers leading to high prices and the protection of existing services such as ISDN and T1/E1 leased lines. Indeed in instances where competition in the local loop is restricted as in the UK, one can relate this to the above scenario, refer to Box 8. Even in the US, there have been numerous court cases by new market entrants experiencing a lack of co-operation and access to local loop and exchange facilities from the incumbent telecoms supplier, during DSL rollout programmes. It remains to be seen how smoothly the transition to the competitive local loop will be in the UK, after unbundling in July 2001.

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Box 8 Telecom Costs for ADSL Country US US Belgium France Germany UK Singapore Carrier Bell Atlantic US West Belgacom France Telecom Deutsche Telecom BT Sing Tel Magix Rental / Month (£) 26.36 13.17 28.50 20.87 31.58 39.99 13.44 Downstream Data Rate 640kbps 256kbps up to 1Mbps 500kbps 768kbps 512kbps 512kbps Cost per 1kbps supplied (£) 0.04 0.05 0.03 0.04 0.04 0.08 0.03

Information Source: Telecommunications On-Line It should be noted that the BT example does include a modem, VAT and no usage or ISP charges, but not the £150 installation charge. Most of the others do charge extra for a modem although their installation fee is less, but also have added usage charges.

In addition, the newest variant of DSL currently being piloted in the US, namely ‘Voice over DSL’ or VoDSL will without doubt impact on existing telecom supplier’s business accounts, by enabling, for example, the additional provision of reportedly between 16 and 24 additional voice lines being deliverable over the existing copper pairs, with obvious savings to SMEs and larger firms & industries as well. Such technology is without doubt going to shake up the existing telecoms sector as it exists in the UK today. According to many critics, BT’s delayed and speed-restricted rollout of ADSL in the UK, (as mentioned earlier), can be viewed as being protectionist towards the business-end and as a result has also been considered to be overpriced for the ‘mass’ consumer market in the UK. (A)DSL then, for both the business and consumer market would appear to have an everincreasing future roll to play in both the so-called ‘new economy’ and the new broadband home-leisure market in the UK and abroad. The key competitive factor being its ability to utilise existing communications infrastructure and increasingly on a global scale not require, what the Americans would call ‘truck-roll’, or on-site set-up (to the rest of us) visits (each engineer visit has been estimated to cost between $100 and $200), thus reducing installation bottlenecks and associated costs – e.g. plug & play G.Lite and MVL (A)DSL solutions. Indeed plug & play installation is being one of the increasingly soughtafter features of DSL based solutions in the US for time and cost reasons. In marginal markets such as the rural areas of the UK such features will without doubt even more important. Nevertheless, it is also worth noting that Bell Atlantic in North America has reportedly admitted that it may never be able to provide broadband DSL services over 40% of its existing lines due to technical and reach limitations. One suspects that the majority of these lines are located in rural/suburban localities. In our rural locality there are still further issues to be considered.

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2.8

ADSL & PDH/SDH Issues During the research associated with this section and discussion with several parties it was brought to the writer's attention that SDH transmission was not available throughout the Highlands & Islands apart from in the Inverness area. This issue has therefore been indicated as being a key constraint on the introduction of DSL services outside of the Inverness area. As a result of this, an investigation was undertaken to help understand the real issues. The growing demand for high-bandwidth services has meant that there has been an increasing need for broadband networks across the globe and this in turn has increased the demand for more stages of multiplexing in digital signalling technology and integration of technology as convergence continues apace. Initially, in recognition of early trends, Plesiochronous Digital Hierarchy (PDH) was introduced in the 1960s and this can be described as 'almost synchronous'. By means of explanation, in a digital telephone system, the term 'synchronous' means that the 'bits' of information are carried from point to point in a single transmission frame. PDH based transmission can be considered, in effect, not as efficient, as it requires more than one transmission frame to carry the 'bits' of information and suffer(s)ed from compatibility issues. In terms of basic transmission systems installed worldwide, PDH remains the most common. The 1980s saw the introduction of Synchronous Digital Hierarchy (SDH) systems making their first appearance. These had the obvious advantage of being more efficient, faster and cheaper, in so far as they needed less costly network interconnection technologies. PDH systems were often incompatible with each other and different systems from different manufacturers, in for example the US and Europe, were complicated to interconnect with each other. In so far, as SDH became an internationally recognised system of digital transmission (1990), this standard enabled the interconnectivity of high bandwidth networks across the world that is apparent today. In terms of equipment costs, SDH transmission networks also have an advantage due to the compatibility achieved in setting up gateways between different network providers using compatible systems of transmission protocol. In short, SDH allows the provision of added-value revenue earning services for telecoms suppliers, whilst PDH requires 'very expensive equipment' at each and every exchange to multiplex and demultiplex high speed lines. SDH has no such requirement for multiplexing and demultiplexing at exchanges in the network, 'an often costly and complex requirement in the PDH system'. The SDH standard has resulted in increasingly economic and highly adaptable networks, these being required in an ever changing telecoms sector where flexibility is key, in response to ever changing demands in traffic on the network (e.g. video-on-demand, distance learning, videoconferencing...etc) as opposed to the PDH systems which used proprietary (and often incompatible) technology to enable high-bandwidth links. In terms of reliability, SDH systems are also superior, incorporating automatic backup and repair mechanisms to address system faults as when they occur.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

According to Queens University, Belfast, SDH has a number of advantages over PDH:

♦ ♦ ♦ ♦ ♦

Improves on previous 'DS-3' multiplexing standard Provide a non-proprietary solution Establish a hierarchy of digital standards compatible with European and US systems Give economic access to low volume traffic Supports more sophisticated services such as broadband ATM

"SDH allows operators to build networks with the capacity and flexibility that are needed to transport the new services that users want…Operators want to be able to provide features from one end of their network to the other so that they can offer a wide range of revenue generating services, thus realising a vital competitive edge. " - Alcatel

Box 9 Digital Signal X (DS0, DS1....DS4)
Digital signal X is a term for the series of standard digital transmission rates or levels based on DS0, a transmission rate of 64 Kbps, the bandwidth normally used for one telephone voice channel. Both the North American T-carrier system and the European E-carrier systems of transmission operate using the DS series as a base multiple. The digital signal is what is carried inside the carrier system. DS0 is the base for the digital signal X series. DS1, used as the signal in the T-1 carrier, is 24 DS0 (64 Kbps) signals transmitted using pulse-code modulation (PCM) and time-division multiplexing (TDM). DS-2 is four DS1 signals multiplexed together to produce a rate of 6.312 Mbps. DS-3, the signal in the T-3 carrier, carries a multiple of 28 DS1 signals or 672 DS0s or 44.736 Mbps. Digital signal X is based on the ANSI T1.107 guidelines. The ITU guidelines differ somewhat.

Table 1 summarises the set of signals and relates them to the T-carrier and E-carrier systems. The SDH standard in Europe and its equivalent in the US, SONNET, enables the efficient translation of these differing carrier systems. Digital Signal Designator DS0 DS1 DS1C DS2 DS3 DS4/NA DS4 Data Rate DS0 Multiple T-Carrier 64 Kbps 0 1.544 Mbps 24 T-1 2.048 Mbps 32 3.152 Mbps 48 6.312 Mbps 96 T-2 8.448 Mbps 128 34.368 Mbps 512 44.736 Mbps 672 T-3 139.264 Mbps 2048 139.264 Mbps 2176 274.176 Mbps 4032 565.148 Mbps 4 E4 channels E-Carrier E1 E2 E3 E4 E5

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ In context, a leased line for an SME in the US might be described as a T-1, 1.5Mbps line, on the other hand in Europe, a similar SME in Europe may purchase a leased line from its telecoms supplier (Kilostream/Megastream lines from BT) and receive a 64kbps or an E-1, 2Mbps leased line. Different terminology and different levels of multiplexing, being the main differentials in the characteristics of the leased line. ADSL and other broadband technologies are forecast to impact on such traditionally expensive leased lines. With regard to SDH, STM-1* (Synchronous Transport Module) is a frame with a bit rate of 155Mbps and is the basic element of the SDH network. However it is also capable of transporting any PDH signal at <140Mbps. This performance is achieved by a procedure termed 'mapping' which packs PDH signals into SDH transport modules. [*STM-4 622Mbps; STM-16 2488Mbps] "Synchronous networks must be able to transmit plesiochronous signals and at the same time be capable of handling future services such as ATM…Terminal multiplexers are used to combine plesiochronous and synchronous input signals into higher bit rate STM signals…Plesiochronous and lower bit rate synchronous signals can be extracted from or inserted into high speed SDH bit streams by means of ADMs*" [*Add/Drop Multiplexers] – SDH
Pocket Guide, Wandel & Goltermann Communications

For the technically minded, the process by which the above transmission of PDH and low bit rate signals are transported in 'containers' via SDH is described in Box 10.

How are PDH and ATM signals transported by SDH?

Box 10

A special container (C-n) is provided for each PDH tributary signal. These containers are always much larger than the payload to be transported. The remaining capacity is used partly for justification (stuffing) in order to equalise out timing inaccuracies in the PDH signals. Where synchronous tributaries are mapped, fixed fill bytes are inserted instead of justification bytes. A virtual container (VC-n) is made up from the container thus formed, together with the path overhead (POH). This is transmitted unchanged over a path through the network. The next step of the formation of a complete STM n signal is the addition of a pointer indicating the start of the POH. The unit formed by the pointer and the virtual container is called an administrative unit (AU-n) or a tributary unit (TU-n). Several TUs taken together form a tributary unit group (TUG-n); these in turn are collected into a VC. One or more AUs form an administrative unit group (AUG-n). Finally, the AUG plus the section overhead (SOH) form the STM-n.
[SDH Pocket Guide, Wandel & Goltermann Communications, 1998]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ In summary then, although PDH transmission is compatible with the main SDH transmission network via the mapping and packing of STM-1 signals and although there is some loss of speed, this in practice is largely negligible on the current communications system operating in the Highlands & Islands today. So although the PDH/SDH issue has not been a factor to date in the Highlands & Islands, it needs to be recognised that PDH is not practically able to support newer digital services* such as ADSL which requires SDH infrastructure to enable its rollout. [*Jimmy Duncan, IT Consultant, Shetland & Dr Andrew Muir, Mason Communications] The real issue for the Western Isles and many other parts of the Highlands is therefore the availability of SDH in the trunk route infrastructure according to the above-named consultants that are xDSL compliant. THUS, formerly Scottish Telecom, have already provided an SDH network into the Western Isles as part of the UHI project and an 155Mbps STM-1 capable microwave radio link, has allocated approx. 40Mbps bandwidth to Lews Castle College, with other customers being Iomart, InES and the Air Traffic Control service. It has also been indicated that the provision of On-Digital broadcast services will also require an SDH architecture, hence providing possible further opportunities for investigation outside the scope of this report. This is already available in the Western Isles and will thus provide an opportunity for further research, It should be noted however, that the writer has found no evidence to suggest PDH is an absolute constraint on ADSL services, after much background research on just such this topic, and indeed on this very topic there has been conflicting viewpoints. So, in the absence evidence in the literature read, one could conclude that PDH as a transmission system is less optimal than SDH for broadband services but not necessarily prohibitive of such services, but instead particularly expensive to implement and increasingly tricky to manage as demand for new services increase. This is ultimately an upgrade problem for the incumbent. Although saying this, the replacement for SDH appears close to being approved after recent tests in Europe and the US. Dynamic Synchronous Transfer Mode (DTM) is the next generation bandwidth management technology designed to provide “everything over IP”. "For broadband services typically based on ATM*, a number of techniques exist for highquality routing over PDH networks. The characteristics of SDH, however, make it much more suitable for this application, because it offers better transmission quality, enormous routing flexibility, and support for facilities such as path self-healing" [WebPro Forum 08/08/00
- www.iec.org/] *ATM (Asynchronous transfer mode) is a transport protocol technology. Technically, it is considered as being an advancement of 'packet switching'. Similar to the packet switching used in data transmission (e.g. frame relay, TCP/IP), ATM integrates multiplexing and switching functions, and as a result is ideally suited to 'bursty' traffic in contrast to circuit switching. Unlike packet switching, ATM cells are designed for high-performance multimedia networking e.g. integrated voice, video and data functions. ATM itself is not a physical layer. The ATM layer runs always above the physical layer that can be anything like SDH, PDH, or xDSL.

Given the above background theory it is difficult to pinpoint any network specific problem in the Highlands & Islands that cannot be potentially overcome with appropriate funds, should DSL be the key recommended strategic broadband technology. As we shall consider later in this report there are other options for which, arguably, much stronger cases can be made given the present network condition and information gleaned to date.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ At the base level, PDH lacks the flexibility of more modern networks in so far as it is by no means a straightforward process to provided new high speed services to customers. The most common example used on the Internet by several commentators both academic and commercial was that of one providing a theoretical client a 2Mbps leased line service halfway between two major services centres. In practice, on a plesiochronous network this would require the 140Mbps channel to be demultiplexed down to its constituent 64 primary multiplexed signals to enable the 2Mbps channel to be identified and extracted and then the channels would need be remultiplexed back up again to reconstruct a 140Mbps signal. So where previously there might have been just a simple repeater between the two major service centres, there is now an expensive and complex mulitplexing/demultiplexing infrastructure to meet the needs of a single customer.
"Obviously this problem with the "drop and insert" of channels does not make for very

flexible connection patterns or rapid provisioning of services, while the "multiplexer mountains" required are extremely expensive." [www.businessakademie.com] In summary then, "The PDH is based on asynchronous operation, i.e. there is no master network clock. This makes it expensive to ‘drop and insert channels’. The SDH is synchronous so it is possible to extract and insert individual channels." [engineering.ittallaght.ie] and in practice this latter feature means that it is a much more straightforward task to allocate bandwidth on demand to customers requiring new digital broadband services. In terms of cost there are also significant saving also to be made. In view of the above then, the case for an SDH network in the present climate of change and increasing demand for dynamically allocated network capacity over a PDH network is clear and if the Highlands & Islands are to advance via terrestrial based broadband services then the case for such new investment is no less essential than it was in 1989 when HIE and BT invested over £20M in digitising the exchange network in the region. Although PDH equipment is still widely available it must only be a matter of time until it starts to become obsolete, making finding spares and replacements difficult as well as costly. If the unbundling of the local loop in July 2001 is to make any impact in the study region then a basic infrastructure capable of easily accommodating new broadband business and consumer services at a minimal cost to encourage competition can be considered essential, particularly in rural areas where the subscriber base is sub-optimal in the first place. (However, it may be that instead of upgrading ageing infrastructure, there may be an opportunity for a fibre-based replacement programme, this being an issue to be considered in the last chapter of this section.) "The more efficient "drop and insert" of channels offered by an SDH network, together with its powerful network management capabilities, will lead to greater ease in provisioning of high bandwidth lines for new multimedia services, as well as ubiquitous access to those services. Thus, the simplification of the network, and the new flexibility this brings, opens up the potential for the network operator to generate new revenues." [www.rad.com]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ In the interest of stimulating competition in marginal telecoms markets for new services it has been suggested to the writer (in consultations undertaken to date) that this (PDH-SDH transition) might be an issue for OFTEL to consider and action upon, to ensure the attainment of its goals related to local loop unbundling. Yet with the arrival of DTM appearing imminent it may be more appropriate to by-pass SDH network transmission architecture and aim to ‘jump a generation’ and embrace the new IP-based DTM in line with a total re-evaluation of the Western Isles’ telecommunications infrastructure regarding its suitability for broadband. This may be an issue to be picked-up again in a future chapter. Finally then, as intimated on the previous page, although xDSL as a technology provides many potential benefits, it is by no means a straightforward solution to build a broadband future upon in the Highlands & Islands in the present telecoms climate. As a fixed line solution it may be initially considered more realistic than cable/fibre in the short term because of the geography of the area, lack of competing telecoms providers and lack of present infrastructure, combined with a low and scattered subscriber base of hugely noneconomic proportions for this particular technology. However, there may even be long term options (e.g. innovative partnerships) here as well, which will be expanded upon in a later section. Nevertheless, as an overall solution providing ubiquitous access services, this must surely be more likely from the wireless services of the near future and it is them we will go on to discuss in the next section.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

2Wire Inc. - DSL: What is it?- 2000 - www.2wire.com ADSL Forum – ADSL FAQs – June '99 – www.adsl.com/ America's Network on-line Journal – Testing ADSL: The easier, the better – Dec. '98 www.americasnetwork.com Byte Magazine On-Line – Break the Bandwidth Barrier – Sept. '96 http://www.byte.com/ EDN on-line Journal - ADSL trims down with G.lite – Aug.'98 – www.ednmag.com/ Ericsson - Fast Lane Access Industry Magazine – 1998 - www.fastlane-mag.com/ International Engineering Consortium – ADSL – 1999 – www.iec.org/ International Engineering Consortium – DSL Testing – 1999 – www.iec.org/ International Engineering Consortium – DSLAM – 1999 – www.iec.org/ International Engineering Consortium – Internet Access – 1999 – www.iec.org/ Internet Magazine – Getting started with DSL – May 2000 – www.internet-magazine.com Netspeed Inc. – Introduction to Copper Access Technologies – 1998 – www.netspeed.com Paradyne Corporation – The DSL Sourcebook 2nd Edition – 1999 – http://www.paradyne.com/ SAS: White Paper – ADSL – Feb. 2000 www.sasi.com Scientific American Journal – High Speed Data Races Home – Oct. '99 www.sciam.com/ Telecommunications Magazine On-Line – Taps and Coils: The xDSL Challenge – Aug. '98 – www.telecoms-mag.com Telecommunications On Line –http://www.telecoms-mag.com/ – Rolling Along the DSL Trial – March 2000

TTC – Solving SDH/PDH Network Timing Problems – 1997 – www.ttc.com TTC – PDH Frequently Asked Questions – 1999 – www.ttc.com University of Saskatchewan – Communication Systems & Digital Systems: Bridged Taps and Bridge Lifters – 1998 - http://128.233.12.252/ Wandell & Goltermann – SDH Pocket Guide Vol. 1 – 1998 - http://www.wwgsolutions.com/ ZDNET – Enter DSL – 1998 – www.zdnet.com + Numerous WWW resources www.xdsl.com …etc

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Chapter 3
3

Wireless Broadband: Satellite

An Overview of the Technology
Wireless Broadband solutions are perhaps the most obvious form of delivery for rural areas in the Highlands & Islands currently on the market. Indeed just last year several commercial providers begun to offer consumer services to the home both in Europe and North America. A recent demonstration in Islay by BT also generated much interest in the area, as has the more recent High-Ways Ltd offering in Inverness that promises to provide an Internet via Satellite solution within the Highlands & Islands within the next several months. These services, as we shall see, are very much a first generation of internet-oversatellite services that are experiencing only low but steady growth and are not even considered by the industry as being a product/service with much growth potential. As far back as 1945 science fiction writer Arthur C Clarke in an article 'The Future of World Communications' described geostationary orbiting relay satellites on an equatorial plane, theorising their stationary appearance and noting that only three would be required to provide communications the length and breadth of the inhabited countries on earth. In this article he also forecast the broadcast of TV services via this medium, at a time when TV itself was in its infancy and when it was not even known whether radio signals could penetrate such a distance through the atmosphere. Clarke also accurately discussed downlink frequencies, antenna receivers and theorised about 'photoelectric cells' to provide the required power. Arthur C Clarke then was the first person credited with the first technical explanation of how future geostationary communication satellites would evolve. In 1964, the first geostationary satellite, Syncom 3 was launched, after being predicted by Clarke 19 years earlier. Broadband satellite receives only minor attention in its potential place as part of the 'broadband Britain' of the future, even although services do already exist and existing copper and cable networks have struggled to deal with subscriber capacity at such an early stage in the UK's transition to a broadband 'Information Age'. Certainly for rural areas and ideas related to social inclusion this is one particular technology that could address two of the main concerns raised throughout this report. Questions still remain however on the reliability and standards of service available at present and as with many new technologies there have been 'teething problems'. Nevertheless, according to the Scientific American online: "For up to one third of the population in the US and an even greater portion worldwide, satellite technology will not simply be a choice, it will be the choice." Indeed, Microsoft in the US has recently (February 2000) announced an investment of $50M in partnership with Gilat Satellite Networks to provide the first consumer broadband satellite high-speed internet access service to its MSN subscriber service. In Europe a similar service is already available via Europe Online providing both content and high speed internet access across Europe via the Astra satellite at 19.2 degrees east.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ However, this latter service is of a similar nature to the DirecPC service in the US which still relies on terrestrial copper connections for the uplink, a model which even the industry recognises is never likely to generate anything more than 'niche' demand and is not a model being replicated in the new ka-band broadband services being developed. The very characteristics of rural areas transfer specific advantages to satellite based broadband solutions. Rural areas tend to be scattered with often very low subscriber densities and as a result are not an attractive proposition to commercial communications operators, yet such areas also suffer because USOs worldwide fail to incorporate broadband as a basic requirement., as discussed in chapter 1. Such a situation will therefore make any investment in, what the Americans would call, rural information infrastructure (RII), prohibitive. All other broadband communication solutions for rural areas require not only require investment at the client end but also in the delivery infrastructure (e.g. towers and base stations for the supply of microwave and cellular options) to and from the backbone (BT) network. Satellite options however are able to supply services to both rural and urban areas at a comparable price and this is the key advantage of this technology as the price of satellite broadband internet consumer services plummet as competition across the broadband sector intensifies. Certainly, then from the providers point of view, which must include consideration of a "…balance between cost, capacity and grade of service.." the implementation of satellite-based subscription services would appear to be the most cost effective route to broadband internet access in rural areas. Indeed, according to STM Wireless Inc. there are several key applications for which broadband satellite internet access can provide effective communications (refer to Appendix 5) these being mutlicast, distance learning, corporate applications, telemedicine and even web browsing. STM Wireless itself is rolling out three separate internet broadband satellite services for SMEs, SOHO users and ISPs. So what exactly are the options for rural consumers who live further than 5km from their local exchange and are not served by a cable provider and are not able to attain 'line of site' delivery from alternative wireless services? Satellite has this unique niche in the market and furthermore appears increasingly in sync with developing broadband internet content. "Satellites have a certain unique advantage. They are unequalled for broadcast applications such as the delivery of the same information to a large group of users. A majority of the Internet applications in the future will be streaming, broad- and multicast services such as playing audio or video." [STM Wireless Inc.]

3.1

The Geostationary (GEO) Satellite
There are two main variants of this technology that are worth further examination. Firstly, there are what is called Geostationary (GEO) satellites. This variant orbits the earth approx. 36,000km above the equator and travels at the same speed as the earth's rotation. Because they travel at the same speed as the Earth's rotation they appear stationary to the naked-eye. The service footprint of these satellites is impressive, each individual being

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ A total of just 3 satellites in this orbital plane can thus serve the vast majority of the Earth's surface, making such a solution attractive to service providers. In practice, a service provider needs 8 satellites in orbit to provide a reliable service. At the same time such satellites tend to require larger and bulkier antenna and are thus more costly to manufacture and launch into orbit. They tend to have a lifespan of 10 years. However, there remains one great challenge to geostationary satellite communications networks regarding their performance with internet based applications and content and this is the latency effect, or time delay, between upload requests and download transfers of information. The delay effect between two so called 'earth stations' or communication access hubs is put at up to 250+ milliseconds on each leg of the journey. These requests for information (communication signals), for example, are sent to the satellite and then reflected back to the other station(s) and on to the client. Refer to Box 11.

Box 11

Internet-over-Satellite

To cover longer distances inter-linked systems can relay date prior to retransmission.

"Bent pipe" satellites receive the data, amplify the signal and send back to the ground.

An ISP sends a message to a satellite operator's ground station via a fibre-optic network. The message is encoded into a radio wave and beamed to satellites overhead.

A rooftop dish receives the signal and processes only data that is encoded with the correct IP address.

[Source: Scientific American]

In-home cabling then carries the signal to a PC. Return transmissions are beamed back in a similar manner.

In effect, such communication satellites can be thought of as being distant signal repeaters in the sky. For large downloads and streaming audio and video casts this is not much of a problem, but for standard TCP/IP based internet browsing or on-line gaming which require a significant amount of 'handshaking' between the client PC and remote server, then more of a problem is experienced with the time delay or latency experienced. However, as increasingly advanced signal processing has developed, this has gone some way to counter the enormous distances involved and delays encountered. There would appear to be a realistic prospect of such advances in radio signal transmission and processing leading to a much more usable service with only negligible delays in service requests. A further discussion on the technical limitations real and perceived will be discussed later in this section, with several reference documents being contained in the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
GEO Latency: Box 12

GEO round-trip latency can approach the half-second mark-about 10 times the latency of a typical New York to California fibre hop. Round-trip delay already seen terrestrially as packets are sent, received and acknowledged. This is magnified in the journey TCP packets must make to and from satellites orbiting at about 22,300 miles. This therefore limits the type of applications for which GEOs are suited. Joel Helpern, director of internetworking architecture for Newbridge Networks, says: "voice cannot live with more than a quarter-second delay and prefers under 100 milliseconds."
[Networking in the 21st Century: The Sky's The Limit]

3.2 Low-Earth Orbit (LEO) Satellites
Low-earth orbit (LEO) satellites orbit the earth at distances normally between 5001500km. Due to their closeness to the earth they must travel very fast to defy gravitationalpull and travel at 27,500km per hour (17,000 miles per hour) orbiting the earth in between 90-120 minutes. The footprint of such satellites is obviously significantly smaller than GEOs and may be in the range of only 3000 to 4000km. As a result any communications solution using such satellites requires a large number of satellite units in a range of inclined orbits. LEOs require 48+ satellites in orbit to enable the commencement of a reliable service Indeed, as they only remain visible for a period of 20 minutes before moving below the horizon, they need to be able to switch their work over to another satellite in the same or adjacent orbit. Such satellites also suffer from the effects of ‘atmospheric drag’ that acts to gradually degrade their orbit planes. They only tend to have a lifespan of 5 years. Obviously, there are advantages with data transmission due to the shorter distances involved and resultant reduced delay in service requests (approaching that of fibre), but to track and communicate with such fast moving objects, requires sophisticated antennas and consequently adds to costs. In addition, with regard to LEO constellations, it is not know for certain how well they will be able to handle 'jitter' (refer to Box 13). In a low orbit satellite constellation any given transmission will be received and then transmitted on by several satellites. However, as this transfer of the information is not a foregone conclusion with 'jitter' entering the equation, such a scenario could potentially lead to the TCP management issues outlined later in this chapter with particular reference to GEO clusters.
LEO Jitter: Box 13

One of the great unknowns about LEO constellations is how well they will be able to handle variations in delay, otherwise known as variable latency or jitter. A loworbit satellite may spend only tens of seconds over a certain geographical area, which means a given transmission may be picked up and passed on by multiple satellites. And because satellite orbits are typically maintained within a range of locations, rather than one precise location, the pieces of a single transmission can be subjected to varied delays and subsequent packet reordering. [Networking in the
21st Century: The Sky's The Limit]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

3.3

Medium Earth Orbit (MEO) Satellites
Medium Earth Orbit (MEO) satellites lie somewhere between the previous two forms and orbit at height of approx. 10,000km above the earth. MEOs literally occupy the middle ground, requiring 20 satellites, are 'in-sight' for 2-4 hours, but tend to suffer from higher amounts of radiation from the 'Van Allen belt'. They go some way to both addressing the latency problems of the GEO clusters and 'jitter' problems of the LEO clusters, staying 'insight' for several hours. There are two other factors of note with regard to orbiting satellites and this relates to their 'inclination' and 'eccentricity', the former being carefully calculated to maximised the level of coverage provided by multiple satellites and the latter designed to maximise availability over a particular region of the world. Ultimately though, the GEO network of satellite communications is the most sought after in terms of planned developments over the next several years and perhaps the main reason relates to cost and market uncertainty. Teledesic's (backed in part by Bill Gates) LEO plans for example are to cost in the region of $9bn. "Typically the GSO environment may require initial investment (and therefore market exposure) of under $200 million whereas the LEO or MEO environment involves initial exposure well in excess of $1 billion." [www.spotbeam.com]

3.4

Frequency and Spectrum
With regard to providing user access to such communication networks, there are three primary methods: 1. 2. 3. Frequency Division Multiple Access (FDMA) Time Division Multiple Access (TDMA) Code Division Multiple Access (CDMA)

FDMA divides the available spectrum among all users of the service by dedicating a particular portion of the spectrum to each user. FDMA can be used for either analogue or digital signals. TDMA on the other hand, assigns each user a particular time frame with his/her data bits stored in a buffer and burst to the satellite using all of the 'transponder bandwidth' during a repetitive time slot. TDMA is normally digital in nature. Finally, CDMA modulates the signal to be transmitted via what is termed a 'pseudo random noise' (PRN) code, which spreads the signals over the full bandwidth available, with all users effectively using the same spectrum. CDMA is sometimes referred to as 'spread spectrum'. At the receiving end 'autocorrelation' reformats the signals from all users simultaneously. CDMA offers the potential for a high capacity communications network.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

In practice, some of the existing suppliers of satellite communications such as the now defunct Iridium corporation used a combination of both FDMA and TDMA. Alternatively, others such as 'Globalstar' use an advanced combination of FDMA and CDMA. In this latter scenario the available spectrum is split into a series of 1.25MHz sub-bands. This allows all users of the services to simultaneously utilise each sub-band via CDMA. Frequency is another key consideration when considering the effectiveness and appropriateness of satellite communications systems, particularly when looking forwards to future broadband services. A list of the main licensed satellite frequencies is listed in Box 14:

BOX 14

SATELLITE COMMUNICATION SPECTRUM

L-band = 350 MHz to 1.55 GHz

S-band = 1.55 GHz to 5.2 GHz

C-band = 4.2 GHz to 6.2 GHz

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

K-band = 10.7 GHz to 36 GHz

Ku-band = 10.7 GHz to 15.7 GHz

Ka-band = 17.7 GHz to 33 GHz

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Q-band = 36 GHz to 46 GHz

V-band = 46 GHz to 56 GHz

W-band = 56 GHz to 100 GHz

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The frequency of new services are chosen on the basis of performance and increasingly, on the availability of spectrum. Many of the new broadband services in development and planning are proposing to use Ka-band and V-band frequencies. This without doubt raises issues for areas such as the Western Isles of Scotland. At high frequencies rain attenuation becomes a significant factor in the provision of reliable services. As frequency increases, the wavelength of signals decrease near to the size of actual raindrops i.e. approx. 1.5mm and this results in such signals (electromagnetic waves) becoming susceptible to the effects of scattering and absorption – attenuation of the signal results. In addition, a further effect can occur as a result of rain at the 'earth terminal' and these can provoke a further degradation of the signal of a similar magnitude. The ground antenna can experience increased 'system noise temperature' because 'the antenna see warm rain at room temperature instead of the cold sky'. Combined, these effects did not initially inspire much confidence in the reliability of such broadband services in the study region, due to the level of rainfall experienced annually. An availability rate of 98%, new broadband services may appear satisfactory but in actual fact translates to between 7.3 days (175.2 hours per annum) lost communications, which for many businesses in particular, if falling within the working day, may prove unacceptable.

It will "…not be possible to achieve the same availability at Ka-band and V-band as we are accustomed to achieving at C-band or even Ku-band." [www.satellitetoday.com] Box 15 Analogue Vs Digital "A sinusoidal electromagnetic wave has three properties: amplitude, frequency and phase. Any one of these parameters can be modulated to convey information. The modulation may be either analogue or digital. In analogue signals, the range of values of a modulated parameter is continuous. In terrestrial radio systems, for example, AM and FM channels represent amplitude and frequency modulation respectively. In digital signals, the modulated parameter takes on a finite number of discrete values to represent digital symbols. The advantage of digital transmission is that signals can be regenerated without any loss or distortion to the baseband information. A fundamental parameter in digital communication is the ratio of bit energy to noise density Eb/N0. This parameter depends on three characteristics: the bit error ratio (BER); the method of modulation; and the method of coding…" [www.satellitetoday.com]

The ultimate design of satellite systems varies in almost every instance to be discussed and will inevitably result in a wide variety of alternatives and tradeoffs. It may be that a particular set of choices will reflect a particular design philosophy or experience in some other field of communication e.g. Teledesic and Craig McCaw. As far back as 1993 NASA demonstrated Ka band satellite communications success at penetrating through heavy rain clouds using its Advanced Communications Technology Satellite (ACTS). This 'powerful' satellite utilised: "..on-board processing and spot beams"

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ to enable effective communications under such climatic conditions. Previously this was considered to be a significant constraint on such high frequency services. These new more powerful Ka band satellites will allow high frequency narrow radio beams to be transmitted to ever smaller customer receiving dishes (although positioning will require to be increasingly more accurate), although the LEO antennas will need to be significantly more sophisticated to be able to track these fast flying satellites, and as a result be more costly. Over the next 10 years it is estimated that over 500 dedicated broadband internet satellites will be operational in the Ka band. Fully operating Ka band systems will not be available to the broadband consumer until 2002. Until then (and possibly longer outside the US), hybrid services using a mixture of technologies will prevail. According to the Gartner Group Consultants, 7% of broadband business's bandwidth in the US will be supplied by the new breed of broadband satellite systems by 2005, approaching 15% of market share several years later. In terms of performance, it is important to remember that apart from costly fibre-to-thehome, satellite networks can provide the highest throughput speed of all its competitors.

In an age where speed is becoming increasingly important to the consumer/client, then a competitive advantage is apparent, if not now in the near future. Indeed, speed demands over the internet are widely quoted as doubling every year. To date, this demand remains for the most part unsatisfied. In the global sense, any telecommunications company looking for a universal global presence without having to rely of foreign or competitor's ground-based infrastructure to provide high speed communications bandwidth is investing in satellite solutions. Obviously this does not apply to the first generation Europeonline DVB-based (Eurosky) and DirecPC hybrid satellite internet services present today. These cannot be considered to be true broadband delivery systems and do still rely on user's terrestrial copper-wire connections for upload requests, as mentioned earlier.

Box 16: Case Study
SSI Micro is the largest ISP in the Northwest Territories in Canada and provides a frame relay satellite network. "IP over satellite is not the issue. It works…end of story. The issue is what kind of data service do you need for your application." In communities in areas such as Baffin Island more than 25% of the population are now on-line through such IP over satellite connections. The network provided uses shared outbound transmission and independent 'return paths' to the hub. Their remote 'earth stations' use 2.4M antennas with 10W transmitters and ACT frame relay equipment. SSI Micro has just invested in an extended network covering a much greater range in the Artic. This newer network is designed around multiple transmit hubs which are in the C-band. At each access site there are between 2 and 10 demodulators and these as a result make up what is known as a full mesh network capable of download speeds of up to 2Mbps.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ In any case there is a shortage of spectrum available. A UK venture EasySat Internet Service was reported as being unable to expand in December 1999, due to a shortage of spectrum available from Eutelsat's 13o East 'Hotbird' orbit. In the US, users of the Hughes Corporation's DirecPC (now available in Europe) have been reported as leaving the service due to bandwidth constraints. In short there is a clear requirement for additional Ka-band spectrum in the next several years if broadband internet services in Europe and elsewhere are going to be realised. The US, as we shall see in the next section is without doubt in the lead in this area of telecoms activity. Although, for example, in 2002 Eutelsat's next satellite (Hotbird #6) will be able to provide a combination of Ku and Ka-band spectrum: "The Ka-band payload will deliver fully interactive IP and DVB services to homes and small businesses equipped with transmit/receive antennas as small as 60 cm in diameter. When combined with SKYPLEX, broadcasting from small transmitting terminals, or "micro-broadcasting", becomes possible for the first time. This underlines EUTELSAT's strategy of addressing the multimedia market and facilitating the development of innovative interactive digital applications." [www.eutelsat.org] Similarly, in the US, such combinations are going to be used to provide the first functioning broadband services in an ever increasing competitive market:

"The $1.6 billion CyberStar program will use both Ku-band and next-generation Ka-band satellites, pushing its service date ahead of rival systems such as Teledesic LLC, Lockheed Martin’s Astrolink system, the Alcatel-led SkyBridge and Hughes Communications’ Spaceway project." [www.satellitenews.com] It appears that almost all current satellite service providers and indeed telecom suppliers are now planning new Ka-band spectrum satellites over the next 5 years, with a predicted order book of 1,300 worldwide during this time period. The recent bankruptcy however of the Iridium satellite phone network initiative which had a share price of $61 in 1998, falling to only $6 in July 1999, has without doubt set back many of the planned constellations as investors have become nervous of the large amounts involved and the potential for disaster if their target market fails to materialise. The vast majority of the new generation systems (when launched) will also include some form of on-board processing and switching (in effect a network management system) to improve and enhance current broadband data transmissions, enabling full two-way services from antenna of a comparable size to those used today for Sky TV. Such new satellite networks will also used 'pencil' spot beams: "The prime method of using the available spectrum efficiently is to use multiple "pencil" spot beams, each covering only a small area of the earth. This allows frequency re-use in much the same way as a cellular phone network re-uses spectrum." [www.spotbeam.com]. This use of multiple spot beams requires both the switching and on-board processing of data requests between the downlink and the uplink to make such high capacity data communications possible. Finally, another key advantage of the Ka-band spectrum broadband satellite network is that because of the above-mentioned technology advances, users will be able to pay per usage,

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ satellite service users had to lease permanent segments of bandwidth, making such services costly for consumers and only really viable for large businesses and broadcasters transferring regular and large amounts of information. This new high frequency spectrum is seen as the new convergence opportunity in the telecoms, computing and broadcasting industries. According to DTT Consulting (www.spotbeam.com): "The Ka-band satellites offer fundamentally different services from conventional communications
satellites. Each Ka-band satellite will carry what is, in effect, a form of telephone "switchboard-inthe-sky". This will allow the satellite to operate like a telephone network - offering point to point circuits to both business and individual users at a cost far lower than available via satellite today…However, unlike a normal telephone network, such satellites will be able to offer all end users a wide variety of services from simple narrowband through to broadband applications."

From the European perspective however, such Ka-band advancements are not apparently being embraced in the revolutionary way they are across the Atlantic and the DTT Consulting report (1999-2000) concludes: "Europe remains way behind the
United States in developing the appropriate satellite technology (on-board processing, switching, antennas) and ground stations (phased array antennas) needed for the Ka-band environment."

As we will see in the next section this has worrying implications given the extent of investment ($bns) and competition occurring in the US market where it seems inevitable that there will be a period of amalgamations and mergers in a bid to survive, as access to continuing finance becomes an increasingly important criteria in advance of infrastructure completion and service revenues commencing. It is accepted even within the US industry that by 2002 there is little realistic chance of more than 3 or 4 of the main players surviving the competition to bring global broadband satellite internet services to the masses. Finally, in terms of industry rollout, it seems clear that the developing Ka-band LEO and maybe MEO networks will have a distinct advantage in terms of the delivery of high speed internet based services, although hybrid services which also use GEO satellites and the Kuband will be initially competitive. It is interesting to note that although no one 'killer' application is foreseen at present outside of providing 'convergent' interactive services. High speed internet access to the masses is without doubt the perceived starting point. This being the case, then the implications for rural areas are of particular interest. 3.5 The Development of Satellite Broadband in Europe & North America In the European context, there are 3/4 main players all with plans for Ka-band services scheduled for between 2000 and 2002. Soci‚t‚ Europ‚ene des Satellites (SES), the operator of the Astra satellite system will from this year (Astra satellite 1H) and next year (Astra satellite 1K) have satellites in orbit with the new generation of Ka-band transponders on board. A typical GEO satellite will carry two transponders for one or two 'broad' frequency bands (29.5-30 GHz/18.3-18.8 GHz in

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ responding to signals automatically. This basic signal relay function at the core of such communications satellites is now to change as the new generation of broadband satellites will, as stated earlier perform new signal processing functions, switching and redirecting amongst a large number of spot beams in most instances. These new satellite transponders will almost certainly allow new two-way interactive broadband services via satellite.

BOX 17
• • • •

SATELLITE TRANSPONDERS

A typical transponder consists of various components that perform four basic functions: amplify the incoming broadband signal and filter out noise separate the channels contained within the broadband signal amplify each channel recombine the channels into one broadband signal for retransmission
Source: http://www.hughespace.com/uplink.html

"A typical on-board processing system will implement some or all of the functions that are performed by the ground-based transmitter and/or receiver in a transparent satellite system. These functions may include recovery of the original information on-board the satellite and processing of this information into a different carrier format for transmission to the ground. Any transponder that recreates the carrier in this way is usually referred to as a regenerative transponder.”
Source: www.eutelsat.org/

"SES has for some time operated an Astra-NET service, similar to Eutelsat’s Easynet using

a terrestrial return link, but the new service marks the introduction of genuine two-way interactivity via satellite…The new Astra Return Channel System (ARCS), set to become operational this year (2000). The system will use DVB/MPEG-2 for the forward path, while the return path uses multiple-frequency TDMA. Initially IP will be employed, but later ATM will be introduced to provide bandwidth on demand... SES is now working towards a next generation system; this will combine regional GEO satellites with a global GEO/LEO constellation." Eutelsat, - The 'Hotbird' network or constellation presently contains 5 GEO satellites which broadcast analogue and digital TV as well as radio and 'multimedia services' throughout Europe, North Africa and the Middle East. In 2002 however this is due to be complemented by a sixth satellite (Hotbird 6) which will include 4 next generation Kaband transponders with on-board processing form Eutelsat's own Skyplex technology. These new Ka-band transponders will have a Western European footprint. These Ka-band transponders will also be complemented by Ku-band transponders to address developing capacity problems of the current digital broadcasting industry on the European continent. Eutelsat has been reported as having plans to have as many as 23 Ka-band satellites in orbit in the future as demand for interactive broadband bandwidth increases. "The Ka-band service will deliver fully interactive IP and DVB services to homes and small businesses equipped with transmit/receive antennas as small as 60 cm in diameter. When combined with SKYPLEX, broadcasting from small transmitting terminals, or "micro-broadcasting", becomes possible for the first time. This underlines EUTELSAT's strategy of addressing the multimedia market and facilitating the development of innovative interactive digital applications."

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Euroskyway, is backed by Alenia Aerospazio and two dozen partners, and will eventually comprise five dedicated GEO satellites, the first of which should be launched this year (2000) – The related services from this constellation are due to be rolled-out during 2001 in Western Europe. The five key satellites will operate in the Ka-band and the transponders will incorporate next generation digital on-board processing. The Uplink and Downlink are expected to operate in the 20-30GHz frequency band and customer bandwidths are expected to be offered at 144Kbps, 512Kbps and 2Mbps on new micro-antennas in the 0.50.7M range. The completed constellation is expected to provide services to a footprint covering Africa, Eastern Europe and Asia, as well as Western Europe. "With EuroSkyWay, high-speed Internet connections, video conferencing with the office, and even shopping will be possible via simple satellite terminals using small antennas. In addition to fixed applications, the small EuroSkyWay terminals can be installed in cars and aboard aircraft. EuroSkyWay will offer "bandwidth on demand" to service providers such as telecommunications operators, TV broadcasters and Internet access providers who want to expand their infrastructure and reach new customers."

Matra Marconi Space initiative called WEST (Wideband European Satellite Telecommunications) has unveiled proposals to invest $2bn in a new generation Ka-band constellation comprising of two GEO satellites and nine MEO satellites with near global coverage. Services are anticipated to be rolled out in the first instance in Europe in 2001, being extended worldwide by 2003. Advanced bi-directional services to the home are to be provided offering a 2Mbps uplink and a 10Mbps downlink. Antenna will be in the 0.61.5M range and support 99.7% availability for consumers and businesses alike. "Matra Marconi sees WEST as a terrestrial alternative for serving areas lacking in terrestrial infrastructure as well as a way to quickly create corporate or other infrastructures. Matra Marconi envisions its GEOs as best suited for data broadcasting, electronic com merce, home shopping and its MEOs as best suited for distance learning, collaborative working, teleworking, LAN-to-LAN interconnection, and telemedicine. Online services fall somewhere between the GEO and MEO offerings." As yet only limited information exists on the finalised nature of these developing European initiatives in the Ka-band frequency and the timescale for the introduction of consumer broadband two-way multimedia convergent services, with the lack of recent press indicating some potential slippage in the timescales mentioned above. Initial services however, will not likely be the full satellite broadband product, although being in many ways comparable. Time to market has resulted in many trade-offs in the technology employed. For example most use existing (tried & tested) GEO technology with added onboard processing for Ka-band services, rather than more complex low latency LEO clusters, although plans to upgrade service on an on-going basis in response to demand are articulated. Many of the planned US systems are more ambitious in initial deployment,

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ with the possible exception of the latter example above, which plans new and innovative laser links for intersatellite communications.

On the North American front there are also 3 or 4 main initiatives aimed at bring true multimedia broadband convergent services to the high speed internet market. Teledesic, with backing from Bill Gates (Microsoft), US cellular phone pioneer Craig MacCaw, a Saudi prince and Boeing and Motorola, it is claimed that their network will be the first truly global broadband internet service delivering both voice and data services able to fully serve rural areas and developing countries. The telecoms market has a place for this product according to Teledesic in a market worth $730 billion in 1998 growing to more than $2 trillion by 2010. Certainly, one of the key advantages of the Teledesic product will be its ability to bypass local network bottlenecks in remote and rural areas where existing terrestrial suppliers have skimped on bandwidth availability due to investment considerations (i.e. return to shareholders) related to the low user ratio and related revenue streams available in relation to the cost of upgrading the network “Telemedicine, distance learning, electronic commerce and videoconferencing are just a few of the new, bandwidth-dependent applications that are changing the way businesses and individuals interact. Teledesic will facilitate these and other applications with high levels of quality, security and reliability.” Teledesic's plans include a 288 LEO-satellite system to operate in low earth orbit, using the Ka-band frequency for both uplink and downlink segments as well as for its intersatellite links. Initial plans incorporated an 840 strong network of LEO satellites, although this has since been reduced significantly. Cost estimates (as mentioned earlier) are in the range of $9 billion. Quoted data rates are given as up to 64 Mbps on the downlink and up to 2 Mbps on the uplink. Spaceway, is backed by the Hughes Space and Communications Company Corporation (current backers of the DirecPC internet satellite service in the US and Europe) and has recently secured $1.4bn form parent company General Motors. Its full operational capacity is scheduled for 2002 and it will operate in the high frequency Ka band. The satellite cluster itself will include 8 GEO satellite with an anticipated uplink speed of 6Mbps and 108Mbps on the downlink: The system will employ innovative on-board digital processors, packet switching and spot beam technology to offer point-to-point (or full-mesh) communications, which will offer direct connectivity without routing through a hub, as well as broadcast capability throughout the service area. "With Spaceway, large businesses, telecommuters, small office / home office (SOHO) users and consumers will have access to two-way, high-data-rate applications such as desktop videoconferencing, interactive distance learning and Internet services operating at speeds faster and at costs less expensive than those provided by such current land-based systems as frame relay... The satellite system will employ innovative, on-board digital processing, packet switching and spot beam technology to offer single-hop connectivity throughout the service area regardless of location. This connectivity, for example, will allow customers to communicate directly via satellite with other customers without having to go through a retransmission service or hub. It also permits direct, full broadcast capability throughout the service are." [www.hns.com/news]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

SkyBridge LP is backed by Alcatel and its partners and shareholders are: Boeing, Loral Space & Communication, Litton and EMS Technologies of the United States; COM DEV of Canada; Mitsubishi Electric, Sharp and Toshiba of Japan; THOMSON multimedia, CNES and SNECMA of France; SRIW of Belgium; Starsem of France and CIS. The SkyBridge system is a LEO satellite network that provides end users access to high data rate multimedia services. It is composed of two main subsystems: 1. The Space Segment which is owned and operated by SkyBridge LP, 2. The Terrestrial Segment composed of gateway earth stations, which will be owned and operated by the Regional Service Providers, and SkyBridge user antennae/terminals, which will be owned or leased by customers.

SkyBridge will use a constellation of 80 satellites in a "bent-pipe" architecture in the lower Ku band, orbiting at an altitude of 913 miles (1,469 km) with an inclination of 53°. The low earth orbit utilised allows the minimal latency times – possibly as low as 30 milliseconds, this being required for the provision of real-time interactive services. Approximately 200 gateway stations are planned for worldwide coverage. Each gateway will have a 234 miles radius (350 km) coverage.

The 200 'Gateway' stations planned will interface with the existing terrestrial network through an ATM switch, ensuring seamless integration into these networks. Users - either business or private individuals, companies, factories, hospitals or schools - will be equipped with low cost terminals ($700 for a residential terminal). "Seen from a user terminal, several satellites are always visible in the sky, and depending on the geographic location of the terminal one or several satellites can be used to connect the terminal with the corresponding gateway. To achieve this connection over a gateway, each satellite forms a spot beam. This spot beam covers a fixed area on the earth, which is called a "gateway cell." Astrolink The Astrolink satellite cluster will consist of up to nine GEO satellites distributed among five separate orbital positions. Astrolink will initially begin service with 4 satellites and later expand as demand increases. Operating in the Ka-band frequency (20 GHz to 30 GHz), each satellite will have a powerful telecom switch onboard with a capacity of more than 6 Gbps. Each satellite will also include 44 "spot beams," with each one capable of delivering service to a large defined area on the surface of the earth. Together, these spot beams will cover 92 percent of the world's telecommunications market. Each Astrolink satellite will also have up to 12 point-of-presence (POP) beams, which provide large-scale interconnection with terrestrial facilities. The Astrolink system will be able to provide: • data, video and voice services that support business applications; • interactive or two-way high-speed connections • point-to-point service, as well as multicasting service

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ "Using the asynchronous transfer mode (ATM) protocol, the Astrolink network will be able to accommodate multiple types of data, video or voice traffic. ATM's ability to guarantee quality-of-service levels has led to its widespread adoption by the telecommunications industry. In addition, ATM makes it possible to bill customers for their actual network usage if they so desire. By paying only for the bandwidth they use, when they use it, Astrolink customers will achieve significant cost savings."

In summary, the next generation of Ka-band broadband satellite services in both North America and Europe are advancing with investments of 10s of billions of dollars, in view of the belief that next generation satellite services will secure 10-15% of the broadband market between now and 2010. For rural areas the provision of two-way interactive satellite broadband services that negate requirements for terrestrial 'local loop' infrastructure, is anticipated to be a significant advancement. Indeed looking to the future, the bandwidth of such networks will be unsurpassed within the broadband market, with the exception of Fibre-To-The-Home solutions and there can be little doubt that future demand for bandwidth will continue to grow at exponential rates and in this respect broadband satellite will be a true future competitor.

The billions being currently invested in such systems by some of the world's largest and most successful companies is testament to this belief, as are the terms used to describe such new technology - "multimedia satellites", "ATM satellites", "broadband switched" and "broadband interactive satellites". Presently such new communication networks are on course to be available at the same time or in advance of the new 3G UMTS wireless solutions based around broadband radio 2Mbps communications which are due to become active in 2003. Competition is anticipated to be fierce to entice the rural consumer/business not served by Cable or ADSL and this will undoubtedly ensure competitively priced subscriber services.
TCP/IP Issues related to Geo Latency & Broadband Internet via Satellite

There appears to be several problems inherent within TCP/IP networks which limit the performance of high latency broadband satellite applications and numerous research task forces and forums were set up during the last decade in advance of predicted internet based satellite networks. Again, as with so much within this dynamically changing industry there are presently varying views on how successful the eventual services to be provided will be able to perform. It is clear however that several key modifications to the standard TCP protocol look likely as being adapted in advance of such services commencing. These modifications being specifically aimed in most instances at addressing high latency performance issues with TCP. For some applications (e.g. interactive gaming), it would appear that irrespective of such modifications to the TCP standard, latency issues will not be overcome and for others (e.g.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Nevertheless, many of the large scale investors in the satellite broadband networks of the future are confident that by the rollout date predicted for such new services, the majority of the technical issues will be addressed. The range of these issues and limitations “IP-oversatellite is subject to a number of adverse conditions that can have a detrimental impact on effective throughput rates and satellite network efficiency. Bit error rates, congestion, queue management, Window size and buffer status can all have a serious impact on the overall IP-over-satellite performance curve.” [www.mentat.com] are the subject of an ongoing research effort that is outlined below. In addition, companies such as Mentat Inc. have been developing alternatives to TCP/IP such as its high performance Sky X Protocol. In general terms the main problem relates to TCP interpreting noise and latency on the satellite transmission network as congestion and as a result slowing data packet transmission in instances where it is not optimal to do so, re-transmitting data packets at a slower pace. In addition, the adaptation to change in the conditions in the network by TCP is limited itself by the round trip time in the system (i.e. the latency involved in sending a packet of data and receiving back its acknowledge). Furthermore, once these problems have been overcome there is also much delay in increasing transmit rates back up to the optimal level. On low latency, low noise terrestrial fibre, coaxial and copper based networks for which the standard TCP was designed, its adaptations to congestion work fast and effectively, not so on satellite based transmission networks.

One of the main culprits within the TCP standard is an algorithm used to address congestion issues and this is called ‘slow start’. In opening a connection TCP tests the network for the optimal transmission speed available by sending an initially small amount of data through the network, which when acknowledged generates the next burst which is 50% larger than the previous. This process slowly increases the TCP ‘Window’ size as data sent is received successfully and related acknowledgements received in return. This process continues until congestion is encountered whereupon the window size (usually initially about 512 bytes) decreases by 50%. If no further congestion (i.e. packet loss) is experienced the process of window size adaptation upwards begins again to the maximum size. Obviously then if satellite networks with high bandwidth require large windows, but these windows keep reducing due to noise and latency then network bandwidth efficiency will remain low. In instances where data transfers are small or bursty on high bandwidth terrestrial networks or high latency satellite networks then it is clear that TCP will only on very rare occasions enable full bandwidth speed to be utilised. Hence, in many instances ‘slow start’ will restrict optimal traffic flows on a WAN. Any loss of packets results in the downsizing of the TCP ‘Congestion Window’ which results in less amounts of unacknowledged data being able to be handled in the network connection. This smaller TCP window then, limits the bandwidth of the data stream and initiates the re-

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Recent research has thus been aimed at increasing the initial size of the congestion window used by TCP and a new format of TCP called TCP-LW has become increasingly utilised to increase performance over satellite networks. Standard TCP operates with a maximum ‘Window’ size of 64Kb, but more normally 32Kb. Yet: “To maximise bandwidth utilisation in a satellite network TCP needs a much larger window size…on a satellite link with a round trip of 0.8 seconds and bandwidth of 1.54Mbps, the theoretical optimal window size is 154Kb…” [www.iif.hu/] A recent study has found that at SDH (OC-3) speeds of 155 Mbps it takes about 11 seconds to get up to speed on a GEO link with large windows, 4 seconds on a LEO, and 2 seconds on a LAN. In the first 11 seconds only 20Mb was found to have been transferred via the GEO satellite link, a significant initial performance loss, particularly when related to short, ‘bursty’ type data traffic. TCP-SACK has been another response to satellite latency and noise issues that are misinterpreted by standard TCP/IP networks as congestion. In higher bandwidth high latency networks, a packet loss may be followed up by further successful data transmissions.

Irrespective of this, standard TCP will timeout and all later data will also be discarded and re-transmitted through a smaller ‘window’ at a lower rate, as the timeout error will have been interpreted as congestion in the system. TCP-SACK (SACK= Selective Acknowledgement) however is more explicit in its approach and generation of acknowledgements and as a result enables the retransmission of the corrupt segment only via the network, hence helping to maintain overall system bandwidth. Other variants of TCP such as T (Transaction)/TCP, which is designed to reduce the initial latency inherent to TCP by bypassing three-way handshaking conventions and TCP ‘Slowstart’ by using cached information from previous connections on the condition of the network. This may enable a rapid initial gains in speed. TCP Vegas is a method by which the round trip time of data is monitored and as performance in the network reduces, a reduction in the congestion window is stimulated in advance. Similarly, as the round trip time decreases again the window size can be again increased in advance of the standard version protocols and algorithms. This monitoring of the network reduces packet loss significantly and as a result keeps in check the time consuming congestion adaptation processes in the standard version. Lastly, there is also a method referred to as TCP Spoofing whereby premature acknowledgements are made by higher latency networks such as GEO satellite networks in advance of the real acknowledgement from the receiver and this deceives TCP into increasing window size via the ‘Slowstart’ algorithm by making in think it is operating over a very low latency network.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ When the real acknowledgement is receive it is suppressed to avoid duplication, if it does not arrive at all, then an eventual timeout stimulates a retransmission of the missing data segment. Such research and modifications are still maturing and in February 2000 the Internet Engineering Task Force’s TCP Over Satellite Working Group reported the next generation of TCP modifications to enhance TCP/IP traffic for satellite communication networks “..to better utilise the bandwidth provided by long-delay satellite environments.” The combination of the above enhancements to TCP/IP to address high latency and high noise broadband satellite communications has also been recently complemented by modifications to the HTTP standard called HTTP 1.1 which is optimised for high latency, high bandwidth networks and reduces web page loading times to a level comparable with terrestrial broadband connection networks. Nevertheless, whether the combination of such technology advancements can be achieved to a sufficient level to enable video conferencing applications remains to be seen, although some within the industry would contend that this already possible. Nevertheless, it should be noted that many providers on the other side of the Atlantic have already staked and continued to stake billions of dollars of next generation broadband satellite solutions that widely incorporate GEO constellations. These new systems are also forecast to have reduced noise and use error correction systems, giving them further advantages over existing solutions.
BOX 18 MOTOROLA'S APPROACH TO GEO LATENCY AND TCP/IP ISSUES

Motorola…plans to provide dual-use terminals reportedly costing $750 on the low end that let the user choose whether a given application is to be sent to a LEO or GEO satellite. The traffic will be subsequently sorted at the NOC (network operations centre) using a specific algorithm for that purpose, with latencysensitive applications sent to LEOs and broadcast and multicast applications targeted to GEOs. In the air, the traffic will move from LEO to LEO or up to a GEO and back down again. Motorola is planning a hybrid system, says Barry Bertiger, corporate vice president and general manager of Motorola’s Satellite Communications Group, since GEOs tend to limit the speed at which TCP/IP can be run. “Those applications that will be Internet types of applications, or quasi real-time or real-time applications, will always run on the LEO portion of the network, where time of flight is equivalent to fibre delay,” he says. “There, we can run at 155 Mbps. GEO s will never be able to run at those rates.” On the other hand, Bertiger notes that when a business wants “one-to-many transmission for entertainment and instructional videos, LEOs don’t efficiently utilise bandwidth because they have to regenerate the signal.” He envisions a scenario in which an Internet user might order a video via LEO and have that order filled via GEO.
Source: http

://telecomindustry.about.com

3.7

An Summary of Existing Internet Via Satellite Services in the UK In the UK there are at least two Internet satellite services that are in effect just distributors and suppliers for larger EU-wide initiatives.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

This service provides a quoted high speed internet DVB (Digital Video Broadcasting) based access service capability of "2 Megabits per second" and has set-up costs of £199 for a Telemann 200 PCI DVB/MPEG plug & play card. This card connects to a satellite dish that costs in the region of £60-80. This service uses spare capacity on the Astra satellite. The average browsing speed is quoted at 300kbps with videostream capabilities of 1Mbps. Downloads of up to 2Mbps are also quoted. There are two services on offer now across the UK. Firstly, there is the 'Alternet' service for a subscription of £9.99 per month, and this provides high speed internet access via a proxy server service using one's existing ISP. A modem is required as per usual to logon and send requests for web sites that are then downloaded to one's PC via satellite. Existing call cost access to your existing ISP still apply e.g. local call charges for being on-line. Upload speed is also obviously restricted to 56Kbps with the appropriate modem. . The 'Ultranet' service provides a direct dial-in service at up to 2Mbps providing up to 5 email addresses, 10Mb of server space and FTP facilities, as well as multicast services from Europeonline. These 'multicast' services do not require an internet connection to necessary be live and are made up, for example, of these multicasts to the PC would be financial news, sports news, weather, software and games distribution, films...etc An example of the 'broadband internet' experience can be seen from the following service pages:

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

The Ultranet service was launched in October 1999 and by February only 7,000 of an anticipated 130,000 users had subscribed to the service. Partly as a response to this, the Alternet service was launched, which then meant that the one of the perceived constraints of sign-up i.e. the changing of one's ISP and e-mail address was negated. According to Phil Sabin, Eurosky's director, satellite will become the mass market alternative to ADSL and cable. "For people who do not live in an area served by DSL or cable, satellite is the only alternative…." he said (February 2000). "….I should imagine satellite will account for about a quarter of the mass market." At its launch it was indicated that should sufficient numbers of users join up then free telephone costs for modem upload requests will be on offer. The system also has another advantage in so far as once an upload direction request for a service has been made i.e. a streaming video film, then the modem can be disconnected, thus saving on on-line costs. This appears to be a service of significant potential for the Highlands & Islands. A second service has also become available in the UK and is named DirecPC (http://www.europeaninfopoint.co.uk/DirecPC.htm) and mirrors a service already available across North America. It is predominately targeted at the business sector and enables speeds of between 400kbps to 3Mbps. This service uses the Eutelsat satellite network, which although providing services and bandwidth to ISP and telecoms providers does not directly provide consumer services. DirecPC is a service supplied throughout

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

For £399-00 + VAT and delivery, DirecPC will supply the appropriate satellite dish, PCI DVB card and software to enable the set up of the service. A subscription charge of £13.50 per month then entitles the user to 30Mb of bandwidth per month, with a further charge of £0.45 per additional Mb units used. A further range of services are also available for business customers for up to 1000Mb per month of bandwidth costing up to £320-00 per month in subscription charges and £0.32 for each additional Mb used over the 1000Mb limit in this instance. Finally, it is worth briefly considering the latest addition to the options currently on offer based in Inverness and only announced in May 2000 by Hi-Ways Ltd. A locally based service distributor within the Highlands & Islands is surely the optimal wireless solution for those resident in the area and one that could generate knock-on employment opportunities in the area. In effect this business is a reseller for Eurosky with the standard subscription costs as quoted above and a range of installation options and related costs ranging from £300 to £700 for the full package of equipment and installation along with data, free satellite TV access and 'Viaccess' Decryption. For the average home user without a satellite dish at present and looking for data and satellite multicast services the cost equates to £460 with self-installation. A further range of services direct to the TV is in development.

3.8

Summary & Analysis An explicit aim of the next generation of satellite networks, predominantly in the Ka band is to service currently under-served areas i.e. rural areas and areas where local loop conditions or geography mitigate against other terrestrial based broadband services. A 1015% share of the overall market is anticipated with new services being rolled out at a competitive rate to that of DSL, cable, (3G) wireless...etc. Certainly none of the other competing broadband systems have articulated their intention to specifically serve rural customers currently under-served by early roll-outs of broadband services. Apart from' fibre-to-the-home' or 'fibre-to-the-curb’ that may remain a 'pipedream' in rural areas in the medium term (unless some forward-thinking policy decisions are made), satellite promises the highest speed and greatest bandwidth of all its competitors (3040Mbps downlink and 1-8Mbps uplink). In the long run this must surely be another very positive aspect in its favour, given current exponential demands for bandwidth year on year, which one could anticipate well into the future. Indeed, one would have to suggest that any strategy on future broadband requirements must consider such a factor as being of significant importance. Consumer ADSL is largely limited to 512kbps in the UK and 2Mbps for businesses. Theoretical maximum throughput is estimated in the 8Mbps range given optimum line conditions and a location only a short distance from the local exchange. Consumer cable services in N. America are theoretically capable of 30Mbps throughput, but in practice customers’ bandwidth is limited by the teleco and by other users on the same cable loop. In any case cable is not a robust business solution for rural areas, as confirmed by a recent survey of small scale cable suppliers in the US by the NTIS

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

The main competitor to such satellite broadband services in rural areas, which has actually been identified by the industry is the third generation mobile telecom suppliers providing UMTS (Universal Mobile Telecommunications Service) to consumers in all areas at up to 2Mbps, considerably faster than today's WAP internet phones which connect a 9.6kbps. Other line-of-sight radio and mircowave links are also an articulated potential competitor offering even higher bandwidth comparable with predicted consumer satellite services and it is the combination of these technologies that we will consider in the next chapter, some of which are available in a limited form now and others which will not mature until 2003+.

BOX 19 The by-passing of ageing terrestrial local loop infrastructure, as with those competitors mentioned above, must make the next generation of broadband satellite one of the key contenders to reduce the increasing urban-rural 'digital divide' mentioned in chapter 1. "Ka-band satellite systems will propel the IP-over-satellite market to $30billion by the year 2007." – Scott Clavenna, Senior Analyst, Pioneer Consulting, Cambridge, MA New services rolled-out in this year (2000) in North America, such as the Gilat-To-Home and a new DirecPC service negate many of the traditional problems associated with satellite services up until now, by also using satellite for the uplink as well as the downlink. Certainly up until very recently VSAT solutions (providing dedicated up and down bandwidth) for remote or mobile businesses were pricey, but with the type of recent development above, then satellite options become increasingly affordable and the new broadband services will ultimately phase out the expensive traditional VSAT market. Indeed it has been suggested that even in areas where terrestrial broadband services are on offer, price competitiveness with even this sector is anticipated in the longer term from broadband satellite solutions. “Affordable broadband satellite access to the internet is just around the corner. And not a minute too soon for people who live and work in remote and rural areas under served by land based service providers.” [www.about.com] It should also be noted that with experience to date, satellite customers tend to remain satellite customers once signed up and the new convergence of existing services with more interactive broadband multi-cast services will be an enticing prospect for many users

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ conferencing, web browsing, interactive gaming, teleworking/telecommuting, video-ondemand, interactive shopping and e-commerce, newscasts-on-demand and many other multimedia opportunities will be able to be provided to consumers and businesses alike on a truly global scale through one integrated convergent service – i.e. broadband via satellite. LEO, MEO and GEO satellites all have specific advantages i.e. GEOs providing multicast services to many users at once, whilst LEOs will enable more interactive services such as on-line gaming and perhaps MEOs being used for web browsing. As mentioned earlier many of the new constellations will include a mixture of orbits and hence will be able to provide the widest range of next generation convergence services to both customers and businesses alike in both urban and rural areas at equal cost. In short then, the key advantage of broadband satellite will not just be the high speed internet access and some other additional services, but a product that offers a full range of convergent media services within 5 years. Other wireless options simply do not promise such a package and others intend to offer similar services, but as yet require much technological development. On the other hand, the failure/bankruptcy of the Iridium satellite phone project last year (mentioned previously) combined with the recent rescue of the ICO Global Communications satellite network project from bankruptcy, by Craig McCaw of Teledeisc, has set back many of the US and indeed European planned broadband satellite networks, as investors became nervous.

Indeed, this year (2000) the Federal Aviation Administration in the US reduced its forecast of per annum commercial launches in the US from 51 to 41 between now and 2010 also stating that problems remaining with non-geo satellites have pushed back timescales. It may be then that service commencement of global broadband satellite systems will be nearer 24 months+ away, rather than the more widely anticipated 12-24 months earlier envisaged. It remains to be seen if initial European services can rollout on their anticipated timescale. Finally, one also has to consider Ka-band rain interference issues discussed earlier particularly when considering our study area, although one would have to speculate that the $bns of research and development funds have addressed this issue. Nevertheless, this remains a key unknown factor with this technology in a high precipitation climate, similar to the 'leafy tree' issues related to other line-of-sight wireless solutions. In summary, the vast sums of money being invested in the next generation satellite broadband market leads almost all analysts to agree the networks planned and anticipated will be developed, enabling the satellite market to become a main contender in the global broadband market. Views are mixed on the ability of the technology to deliver all the services anticipated e.g. high speed TCP/IP based internet access, videoconferencing, interactive gaming…etc – will jitter in the new LEO constellations affect latency to a significant degree or not? – will high latency GEO Ka-band constellations be able to be adapted for internet based TCP/IP communications? What is sure however, whatever the final mix of services and content provided by the remaining providers, we, in areas such as the Highlands & Islands of Scotland are part of their initial target market. One, where increasing competition in the broadband market as a whole will result in broadband services being delivered to rural areas which the consumer will be able to afford.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Given the above context, the writer is confident in articulating that there is likely to be a key future role for satellite broadband services in rural areas, this perhaps being a finding will that will surprise many. Particularly those with experience of the large antennae expensive existing VSAT services for business or those familiar with the first generation of internet-over-satellite services where numerous problems relating to bandwidth have been experienced and where the uplink relies on terrestrial lines via a modem. These are limited services separated by billions of dollars & euros of investment by the constellations currently being deployed with new on-board functions and abilities. The new generation will be much more than just signal repeaters in the sky. Indeed it is recommended that for assessment purposes, early entry into any trials being held by the new Ka-band interactive satellite service operators for which we will be in the European footprint will be extremely beneficial in assessing the area's eventual broadband future. Satellite has the bandwidth to be a future proof solution if it proves able to provide a reliable and cost effective service to rural areas such as ours. Indeed in convergence terms is also optimal. Such potential broadband services will most likely be those that pave the way for later competitors, aside from cable and ADSL which appear to be likely to remain urban phenomena at the time of writing.

Chapter 3 References:
Alcatel, Europe*Star System - www.alcatel.com Analysys, UK based telecoms information service -http://www.analysys.com/ Andrews Space & Technology, Space & Tech Digest, (2000) http://www.spaceandtech.com/
Brown Peter J., IP Over Satellite: A Global Solution Now (1998) www.satellitetoday.com

DTT Consulting, Internet Via Satellite 2000: Management Summary, (April 2000) http://www.spotbeam.com/index.htm DTT Consulting, Web Sites http://www.spotbeam.com/index.htm Covering Internet via Satellite, (July 2000)

European Space Agency, Broadband Communications by Satellite (1996) http://www.esa.int/esa/ Europeonline, Europeonline broadband internet satellite service homepage http://www.europeonline.com/gbr/index.htm Eurosky, UK based consumer broadband internet service - http://www.eurosky.net/ Eutelsat - Eutelsat in the Home – Internet via Satellite - http://www.eutelsat.org/ Eutelsat, Multimedia via Satellite Services in the DVB era (1998), http://www.eutelsat.org/

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Federal Aviation Administration, LEO Commercial Market Projections, (May 2000), http://ast.faa.gov/ Hudgins-Bonafield, Christy - Network Computing, Networking in the 21st Century: The Sky's The Limit (1998) http://www.techweb.com/March1998 High-Ways, Internet Via Ways_Home/IVS/ivs.html Satellite, (June 2000) http://www.high-ways.com/High-

Hot Telecommunications home page, Europe's leading provider of satellite services… http://www.hot-tele.com/html/mainmenu/_frms/index.htm Hughes Communications, European consumer orientated satellite internet to the home service via HOT Telecom - http://www.direcpceu.com/ Hughes Communications, UK SME/SoHo orientated Internet Satellite service provider http://www.europeaninfopoint.co.uk/DirecPC.htm Hughes Communications, US Internet Satellite service to the home -http://www.direcpc.com/ Hughes Research Labs, Y. Zhang, D De Lucia, B. Ryu and S.K. Dao, Satellite Communications in the Global Internet: Issues, Pitfalls and Potential (1997) www.iif.hu Intelsat, A 'wholesaler of satellite communications' - http://www.intelsat.int/ Intersat, The Global Internet Provider - http://www.intersatcom.net/ Loral - Business at the speed of thought - http://www.cyberstar.com/ Loral – Worldcast Case Study (March 2000) - http://www.cyberstar.com/ Loral – TCP/IP Performance over Satellite Links (March 2000) - http://www.cyberstar.com/ Mentat Inc. - Sky X Technology Gateway White Paper (2000) http://www.mentat.com/skyx/whitepaper.html Microcomsystems, Broadband Satellite, (2000)
http://www.microcomsystems.co.uk/satonthenet/white/bband.html

Montgomery, John, The Orbiting Internet: Fibre in the Sky (Nov. 1997) www.byte.com/ MSN and Gilat, Satellite Networks Introduce First Consumer Two-Way Satellite High-Speed Internet Access (May 2000) http://www.gilateurope.com/ MSN and Gilat, US Satellite http://www.gilat2home.com/ High Speed Internet Trial for Consumers -

Robert A Nelson, The Art of Communication Via Satellite (1998) www.satellitetoday.com Rohde, Laura, IDG News Service, (Feb. 2000) Microsoft teams on satellite broadband: Software giant teams with Gilat to push high-speed Internet access via two-way satellite this year http://www.nwfusion.com/news/2000/0218softsatellite.html

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Satnews Magazine, Glossary of Satellite Terms - www.satnews.com/GLOSSARY.HTML Scientific American Journal – Satellites: The Strategic High Ground – (Oct. '99) www.sciam.com/ Skystation International's - Stratospheric Telecommunications Service. http://www.skystation.com/ STM Wireless Inc., Satellites role in Broadband Internet Access (1999) http://www.stmi.com/ Surrey University, General website on everything to do with satellites from PhD student at Surrey University -http://www.ee.surrey.ac.uk/Personal/L.Wood/constellations/index.html Syed, A., Preeham P. and White J., Digital Satellite Systems for Internet Access (1997) http://fiddle.ee.vt.edu/ Technology Feature, Internet Fuels Satellite Growth (July 2000) http://telecomindustry.about.com/industry/telecomindustry/ Technology Feature, Two Way Satellite Delivered Internet, http://telecomindustry.about.com/industry/telecomindustry/ Teledisc, A global, broadband Internet-in-the-SkyTM network - www.teledisc.com University of Maryland, Satellite Communications General Information / Publications- www.isr.umd.edu/ Via On-Line, Satellite Internet Survey, (March 2000) http://www.satellitetoday.com/viaonline/survey/#article5

Chapter 4
4

Wireless Broadband: Line-of-site Solutions / UMTS

An Overview of the Technology and Market
In the developing world of wireless broadband solutions, the main competitor for broadband satellite in 'non-commercial' regions is that originating from radio/microwave (radio waves with a frequency >1GHz) based telecoms technology and the soon to be introduced 3G UMTS. The Gartner Group in the US have recently estimated that by 2004, outside North America, 40% of all e-commerce transactions between consumers and businesses will originate from wireless devices. In terms of definition it is important that we first clearly define the competing technologies as they exist at present. There are three basic competing/complementary technologies referred to in the literature reviewed (MMDS Unlicensed and LMDS) and a fourth, 3G mobile, which holds much promise for the future, not only for broadband mobile telecoms, but also for wider broadband wireless solutions for both home user and business (mobile) user alike.

4.1

Multichannel Multipoint Distribution Services (MMDS)
Firstly, we need to consider radio-frequency technology, known as Multichannel Multipoint Distribution Services (MMDS) which is an already existing technology that has been used to provide analogue TV programming during the past several decades. It has recently been adapted to enable two-way (synchronous) internet connections, mostly in the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

This technology is being held in some areas of activity as being the key enabler of the mix of services related to audio, broadband data and video services to the masses. Sprint and MCI WorldCom are two examples of fixed wireless operators in the US implementing this 'last-mile' bypassing technology. In recent years, particularly with the success of cellular telephony, much more confidence has also been placed in radio as a broadband access technology, as technical limitations have increasingly been overcome: "…digital technology
has greatly improved the signal quality of broadband wireless systems, and permits operators to greatly increase the amount of data that can be sent across a particular amount of spectrum." [http://www.insight-corp.com/]

MMDS is already a commercial reality in the broadband market in the US. For example in Phoenix, Arizona the Sprint Broadband Direct service [http://www.sprintbroadband.com/] (refer to diagram on left) offers synchronous 10Mb/s internet connections to both homes and businesses within a 50km radius.

It incorporates a 'low cost' transmission tower at the supplier end and a 13.5" x 13.5" digital transceiver and wireless broadband modem at the user end. Indeed the company has specifically mentioned its ability to bypass the existing 'duopoly's' last mile infrastructure in its region and enter the broadband user market at a much reduced entry cost, in a recent article in PC Magazine on-line. Sprint has recently announced a deal with Lucent 's ORiNOCO wireless networking system for use in the home and small business interface -environment. This is a product which will be considered in a latter section. This type of product would without doubt have much relevance to the Western Isles and Highlands & Islands context, given its 'last-mile' bypassing ability, potentially enabling a fast-track route to rural broadband service provision, irrespective of the condition of the existing local loop infrastructure. Indeed in the US during 1999, MMDS frequencies became sought after commodities in targeting the demand for internet broadband bandwidth along with digital TV direct to the growing home market. MCI and Sprint spent close to $2 billion in 1999 buying up MMDS spectrum licenses in the US. On the other hand, LMDS spectrum based systems have largely targeted the urban business market in the US with specific line of sight requirements and a reach of only 4 to 5km. MMDS channels have been traditionally transmitted from both omni-directional and directional antenna to provide extensive line of sight in all directions. MMDS has also been recognised for its simplicity and low cost rollout. It involves

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ small receiving antenna at the customer end, plus wireless modem. It also has an approximate quoted range for service delivery of 45-50km and is therefore a very interesting technology for the rural context. For example, the US company WinStar Communications Inc, quoted as being the world's largest spectrum holder, has been investing in rural Venezuelan state of Merida in a government supported partnership scheme in the 2.5Ghz spectrum at the above quoted distances with a reported synchronous connectivity of 10Mb/s in both directions. In terms of hardware, Spike Technologies installed their wireless local loop solution in this region – see box 20.

Box 20 - A Broadband Wireless Solution Spike's core product and technology is called the PRIZM Broadband Delivery Service (BDS). Essentially, this service consists of a PRIZM base station with a proprietary narrow-beam, compactsectored antenna that communicates with wireless subscriber units that are in line of sight contact with the base station antenna. A single base station can cover up to 2,800 square miles and can be configured to give each user a 10 Mbps upstream and downstream connection while handling a potential of up to 33,000 users (assuming the frequencies are available).
http://www.spiketechnologies.com/index2.html

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Such examples of MMDS technology potentially enable the realisation of a vast range of broadband services in rural areas. Indeed, Spike Technologies specifically refer to their technology's ability to address and overcome the issue of 'digital haves and have nots in the new information society in both rural areas with a low population density and urban areas with older telecoms infrastructure or that outwith the range of Cable/DSL services. The Spike HighPoint TM family enables high speed local loop connectivity to the internet in both the MMDS 2.1-2.7 GHz and 3.1-3.7 GHz frequencies. For example, their 'Rural-PoP' product offers a cut-down and scalable version of their standard 'Super-Cell' architecture. Each 'Rural Cell' uses one 'base station' with a quoted service-reach radius of 8 to 48 kilometres. However, in terms of practical implementation in the real world, MMDS has not lived up to its quoted potential, although is still a worthy technology nevertheless. It does need to be taken into account that in any area within a given 50km radius of the high power MMDS transmitter, potential service connection is by no means guaranteed. Both geographical obstruction ' service shadows' and building shadows combined with the natural curvature of the earth have meant that often in practice a reliable service radius of nearer 20-30km is achievable. Thus a single basic array implementation of MMDS is likely to yield a lower return than perhaps initially anticipated by service providers. In an ideal situation the terrain needs to be both flat and gently sloping up towards the transmitter which will be located on a hilltop, with supporting infrastructure already in place e.g. the Eitshal transmitter location in Achmore in Lewis? – however this may not be an electromagnetically 'quiet' area – often another prerequisite with digital wireless . "Experience has demonstrated, unless the transmitter is located in a site meeting most of the ideal conditions, it is practically impossible to achieve a reasonable percentage of LOS homes beyond a 30 kilometre-radius service area (in many cases 20 kilometres). Once an MMDS design is implemented, it is not economically feasible to make changes due to the disruption and cost of re-orienting the antennas for thousands of subscribers." [http://www.cableaml.com/50Kmyth.html] Box 21 MMDS 'Shadow'

Source: http://www.cableaml.com/50Kmyth.html

The illustration above highlights the service 'shadow' cast by a tall building or natural feature of topography which affect the transmitter's LOS efficiency. It is essential that any 'shadow' areas do not incorporate any of the initial main commercial service concentrations.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ It is clear then that to maximise MMDS performance not only does a thorough geographical survey require to be undertaken but also a wide ranging market survey, to enable initial coverage to at least target the largest commercial markets in its rollout – e.g. atop the War Memorial in the Stornoway area may provide such a site in our local area. Areas in the 'shadow' of the service (refer to Box 21) can carefully be incorporated by low power signal repeaters, although the risk here is that some of the periphery areas of the 'shadow' area may incur interference from the residue of the main service-signal resulting in distortion and overall signal degradation.

4.2

MMDS: Implementation & Requirements
The lesson quoted from the '50Km Myth' authors is that a well designed small service cell may in fact prove to be more financially viable than a blanket coverage option on a larger scale. Initial planning is therefore of the utmost importance, with the minimisation of 'shadow' non-customers being the key and in this sense the 'small cell' approach is often the most viable solution for the potential service provider (refer to Box 22). "Broadband MMDS transmitters and repeaters make it possible to implement a "cellular" or
"distributed power" approach. Such cellular topology allows operators to accomplish several important goals: The elimination of the outrageously large and expensive towers and infrastructure

required by most centralised transmitter systems. The reduction in number and size of shadowed areas with significant improvements in LOS coverage increasing the revenues per square kilometre of coverage.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

A significant rationalisation in the operator's initial investment: an MMDS operator can implement a system design in consecutive phases, making it possible to concentrate first in the most profitable markets for a faster return on investment and a more manageable impact on cash flow." [http://www.cableaml.com/50Kmyth.html] BOX 22 MMDS System
Broadband MMDS Repeater Broadband MMDS Repeater

MMDS Signal

MMDS Signal

Fibre or Microwave link

Base Station Broadband MMDS Transmitter & System 'Headend'

MMDS Signal

Broadband MMDS Transmitter

Broadband MMDS Repeater
Radius of service areas: Typically 10-30 kms

An effective multi-cell architecture with a limited number of broadband transmitters and supporting high-powered (e.g. 'linearized on-frequency') repeaters is one suggested design that potentially is able to service initially key areas and latterly (depending on the quality of initial planning), with the introduction of repeaters, other 'shadow' areas. 'Linearization techniques' have been suggested* as being able to increase the power output to be utilised in repeaters (and transmitters) to increase their service range efficiency and this in turn enables the network infrastructure costs to be minimised. "With systems available now up

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ to 2 kilowatts in linear-equivalent power output, it is possible to capitalise on the advantages of a distributed MMDS topology at a fraction of the cost of a centralised architecture using channelized transmitters." [http://www.cableaml.com/50Kmyth.html] However, for rural areas with a low populations density, such as much of the Western Isles, the large cell architecture may have benefits, being the most cost effective situation, although obviously the small, multi-cell architecture provides higher capacity and higher coverage benefits, but is more costly to rollout. Other architectures on the market such as Cable AML's 'BWA-2000' range, are designed to operate within the standard MMDS 'channelisation scheme'. In this instance the available bandwidth is divided into 31 channels of 6MHz of spectrum, giving a quoted 30Mbps downstream and 2.56Mbps upstream. The architecture of this solution is outlined in Box 23.

BOX 23 : Outline Architecture of MMDS Broadband System
Source: http://www.cableaml.com/bwa2000.html

The several key elements of the MMDS system of which some may be physically separate or part of the same array - The Headend and Base Station, the Transceiver & Repeater elements and the Customer Premises Equipment (CPE), are shown above. The pace of development in the wireless broadband sector is growing at a exponential rate and new more efficient equipment is coming to market each quarter with increasingly more sophisticated functions and user orientated interfaces. The NextNet plug-and-play CPE shown in the photo below is typical of such developments.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

"NextNet's unique customer premise equipment integrates the data transceiver and antenna into a single compact unit that is completely customer-installable" - http://www.nextnetworks.com/products_prod_bottom.html

The unit above allows SOHO users, via an Ethernet connection, single or multiple user access through a single subscriber connection. Such flexibility will also be of direct interest to the home of the future where internet access will be a family affair and multiple connection nodes within the home will be a distinct advantage. There can be little doubt that MMDS technology is maturing to the point where it is going to become a significant component of the US broadband market. In the UK, the situation is not so clear as the recent focus of license auctions has been in the 3G frequency of spectrum. Most recently during September / October 2000 recent license activities have been focused in the LMDS band at 28GHz, with a latter auction specified in the higher frequency 40GHz band. However, it has also been indicated that that spectrum formerly employed by Ionica in the 3.4GHz band is also likely to be up for auction before the end of 2000. But, it is not yet clear whether such spectrum is to be offered on a national or regional basis. It is also interesting to note that BT has had an allocation in the 2GHz spectrum for some years for "serving primarily remote areas of the UK with FWA services" [www.radio.gov.uk], but have decided not to implement any pilot rollout projects. This spectrum may be reallocated in the near future. The focus in the higher band frequency spectrum is understandable given developments in LMDS elsewhere, however this spectrum is likely to be focused in the mass market urban locations, due to its similar reach restrictions to that of ADSL. There are however other options in the unlicensed bands at 2.4GHz in particular and certainly in the US, where a number of manufacturers have developed broadband wireless technology in line with the ISM (Industrial, Scientific & Medical) restrictions of this band. A recent report in the UK: "Compatibility between Radiocommunication & ISM systems in the 2.4 GHz frequency band" by the Radiocommunications Agency investigated quality of service issues involving operations in this band and these will be further discussed in a later section. In short, in rural areas, where interference is likely to be significantly less than that from urban areas, then there would appear to be some potential here worth further investigation with reach, in the absence of such interference, being quoted in the 30km range. Atlantic Telecom is one of the few operators with experience in the 2.4GHz band, currently providing 'wideband' FHSS (up to 2Mbps) wireless telephony/internet access

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ quoted as being due to the power level limits in the ISM 2.4GHz band which has been quoted as being a key determinant in access provision. This is an area that will be further considered in section 6.4. Clearly, the provision of MMDS wireless architectures are of significant relevance to this study. However, at the same time, spectrum availability is of key importance in the overall equation and recent focus in the UK has not prioritised the longer reach broadband 2.1GHz – 3.7GHz spectrum. Nevertheless, the next six months may change this situation significantly and in any case some alternative potential based on similar technology does exist in the unlicensed bands.

4.3

Local Multipoint Distribution Services (LMDS)
"LMDS is a broadband wireless point-to-multipoint communication system operating above 20Ghz (depending on the country of licensing) that can be used to provide digital two-way voice, data, Internet and video services." [www.wcai.com] The service coverage of a single cell LMDS network is quoted as being within 5-8km from the base station in direct line of sight. A wider area based rollout will require many (repeater) antennas due to the limited reach of the high frequency microwave cells. This has resultant cost implications and also raises potential planning related issues in both the urban and rural context, as the public grows increasingly intolerant of such structures and their unknown long term effects on human health. The service itself incorporates a broadcast like down channel: point to multipoint, with the up channel (from the service subscriber to the base station) being a point-to-point communications link. LMDS supports both ATM and IP transport methodologies within its network interface, the key elements required to build a broadband internet access network around. A typical downstream data rate for LMDS is 38Mbps and this can be configured to be symmetrical in design. A 'base station' in such a network (refer to Box 24) will normally comprise several key components including obviously the microwave transmission and reception equipment, but also modulation and demodulation functions and the 'network interface for fibre termination', whilst also in some instances including a local switching element. The advantage of this latter element means that service subscribers can communicate with each other without actually entering the fibre network at all. This has potential advantages (i.e. cost savings) for both subscriber and service provider alike. On the initial cost side, the Customer Premises Equipment (CPE) (refer to Box 25) adds up to a quoted investment of anywhere between £85-£450 per household [http://nwest.nist.gov/lmds.html], with a total cost of nearer £700 per subscriber.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

BOX 24a: The Madrid LMDS System Architecture

Source: http://www.cableaml.com/madridtrialsystem.html

Box 24b: Background System
The system's single Base Station is located in Faro de Moncloa (Madrid). It is connected to the Headend by a two-way point-to-point microwave link. The downstream carriers from the Headend are translated to the 28.25 - 28.75 GHz band, amplified, and transmitted through two 180° antennas, for a complete 360° coverage at a power level of 5 Watts/carrier. The upstream signals from the subscribers in the 30.85 - 31.15 GHz band are received through the same sector antennas, processed, and transmitted to the Headend through the upstream point-to-point microwave link. A redundancy Unit provides automatic back-up of both the transmit and receive Base Station functions. The System's Headend, located at Madrid's Polytechnic University Campus, houses all the Network Access infrastructure as well as the Network Management Center. The Headend includes all the Network Access equipment, the receiving and processing equipment for multimedia services, the equipment required to package data in a format compatible with the Access Systems, and the equipment required for inter-connections between subscribers. Also included is the carrier modulation and de-modulation equipment (at IF frequencies) and the RF up and down conversion equipment for both the downstream & upstream carriers.

BOX 25: The Customer Premises Equipment Configuration

Costs of setting up an initial 5-8km LMDS cell are quoted in the US as ranging from £350K to £1.4M, with latter repeater-based cells being significantly reduced in price. According to HP the key entry price for CPE needs to be in the £100 per subscriber range, which to date has not been achieved across the Atlantic, although as such services grow this magic figure becomes more realistic. However, any model would require to be business-based in the first instance to enable a commercial service to become established.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Its high capacity and range of resultant tiered service may mean that LMDS certainly becomes a major contender in the top end of the market, providing spectrum costs do not inflate to the levels of the recently auction 3G spectrum in the UK. In terms of rollout, urban centres are the ideal locations for LMDS spectrum services with their high rooftops and dense subscriber market. However, provision to residential locations remains problematic due to problems related to foliage and hills in particular, along with the lack of high enough sites in which to place repeaters. In addition, many residential neighbourhoods are not keen to be in the vicinity of microwave propagation technologies, due to concerns over health. This will without doubt increase costs of rollout and add to uncertainty regarding the level of service penetration achievable. LMDS has the ultimate cost advantage though, in a world of increasing bandwidth demands and that is an unsurpassed value of service, given the bandwidth available – in competition terms there will be many opportunities to charge much lower monthly costs for comparable bandwidth being accessed from elsewhere e.g. ADSL However, although LMDS provides high bandwidth services, in comparison to the lower frequency MMDS spectrum, there is a significant service range and resultant cost penalty related to the additional unit cost of infrastructure per subscriber. LMDS transmissions in the millimetre wave band are highly susceptible to rain fading (as well as foliage and terrain) and this is obviously an important consideration in the current study region. "At a 30 mm/Hr. rainfall rate (about one inch per hour, which is not uncommon) LMDS frequencies are attenuated by 4.5 dB/km, so that a small cell of 3 km radius suffers a 13.5 dB fade at its outer edge. In contrast, MMDS frequencies are affected negligibly; about 0.01 dB/km for the same rainfall rate." [http://www.wirelessdesignmag.com/] Rain-fade will therefore tend to reduce the range and reliability of the LMDS service in high precipitation environments, hence presumably giving fixed terrestrial infrastructure the edge in such instances. In practice then LMDS appears less appropriate to the rural Western Isles situation than the MMDS solutions considered previously. In addition, in the US context one of the main constraints has been the lack of standards within this industry. For example, some providers base their architecture around 'Time Division Duplexing' (TDD) whilst others prefer and promote 'Frequency Division Duplexing' (FDD) as being the most optimal method of dividing and sharing frequency amongst subscribers. Various differences in each approaches characteristics will make one more appropriate than the other depending on issues such as the location of the main customer base and the 'burstiness' of the communications which prevail over time. However, this variance in approach in the industry to date has affected both interoperability and costs.

Two years on, after the issuing the LMDS spectrum licenses in the US, there has only been a limited penetration in a select number of urban locations. "Less than 5% of U.S. businesses are covered by LMDS systems and by 2003 LMDS network coverage will be close to 20% of businesses, according to the Strategis Group Inc., of Washington DC." [www.totaltele.com/]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Yet the original US rollout scenario promised license holders being able to offer: "…. local exchange telephone service, internet access, and other broadband services. It is expected that this assortment of services will benefit not only residential and business consumers but can also assist in fulfilling the telecommunications and information technology needs of schools, libraries, health care providers, and rural communities" [http://nwest.nist.gov/lmds.html]. Nevertheless, again one has to recognise the level of investment spent on the licenses purchased, this being justified by expectations of LMDS service revenues estimated in the $1billion range in the coming decade, as the technology and operators mature as an industry sector. On the other hand, one has to question the relevance and practicality of this particular technology for rural locations, even although the latest rounds of spectrum bidding and activity in Europe have been in this particular area – refer to section 6.2 for details in the UK. Nonetheless, it is the promise of 155Mbps connectivity 'through the air' that is the main attraction to service providers and according to industry commentators and promoters, LMDS has several key advantages over other broadband technologies: • • • • • Lower entry and deployment costs Ease and speed of deployment (systems can be deployed rapidly with minimal disruption to the community and the environment) Fast realisation of revenue (as a result of rapid deployment) Demand-based build-out (scalable architecture employing open industry standards ensuring services and coverage areas can be easily expanded as customer demand warrants) Cost shift from fixed to variable components (with traditional wireline systems, most of the capital investment is in the infrastructure, while with LMDS a greater percentage of the investment is shifted to customer-premise equipment [CPE], which means an operator spends dollars only when a revenue paying customer signs on) No stranded capital when customers churn Cost-effective network maintenance, management, and operating costs.

• •

[Source: www.wcai.com]

Two of the first key services for LMDS anticipated according to 'whatis.com' include 1. High-speed data transmission for businesses and, 2. Interactive television and streaming multimedia from Web sites. In recognition of this potential, the first wave of broadband wireless access network activity in the UK has been in this area of spectrum, as there appears much competitive potential to other developing technologies. A diversified and competitive access market is a key aim of the UK government and such a focus will lead one step closer to this reality. The initial 28GHz band spectrum will be focused primarily at business use according to the RA, as will the soon to be auctioned 40GHz spectrum which are in many respects competition to traditional fibre solutions at the top end of the access market for large businesses. Alcatel, in Europe, is an example of one of the global-level suppliers of such products and claims to have over 100 LMDS customers installed with over 3000 base stations in service throughout Europe and beyond. In Spain, for example, Retevision, Spain's second-largest fixed-line operator, is currently deploying Alcatel's LMDS solution in Barcelona and Palma de Mallorca, with further extensions planned in Valencia and Zaragoza later this year. The target market of such solutions are small to medium-sized urban-based

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ European country to develop LMDS pilot projects in this telecoms area (refer to Boxes 24 & 25), as far back as March 1998 and by December of that year applications for a commercial service in the Madrid region had been lodged. It is no coincidence that this initial service was also in an urban area where it was to: "…provide Private Networks and User Multimedia Services to institutional customers, large businesses, and Small Office / Home Office Users (SOHO's) located in high population density areas ." A clear business focus, but also a clear urban focus too, for the LMDS services. The service itself is reported as having symmetric data rates, of initially 2Mbps and 10Mbps with QPSK and 16-QAM modulation. Further increases in data speeds are apparently a straightforward process with higher forms of modulation e.g. 64-QAM.
QPSK: Quaternary Phase Shift Keying – An efficiency increasing spectrum modulation technique. The term quaternary (or 4-angle modulation) alludes to the fact that the phase is shifted in 90° increments. The theoretical limit of QPSK is to provide 2-bits for every Hertz of frequency. The throughput in QPSK systems is thus twice the baud, where the baud can be considered to be the basic measure for the data transmission speed. 'One baud is one electronic state change per second', but, as this can now involve the transmission of more than one bit of data, as increasingly more advanced modulation techniques have been introduced, transmission speeds are now increasingly measure by bits per second rather than baud. 16-QAM: 16-Point Quadrature Amplitude Modulation, is a more advanced again, spectrum efficiency technique, which transmits 4-bits for every Hertz of frequency. In this instance the measured transmission rate in bits per second will be 4 times the basic baud rate of the signal.

However, it could be argued that LMDS broadband wireless systems have limited requirements for increasingly higher order modulation techniques which are both more expensive and complex to implement, "As the modulation formats become more complex, including multiple amplitude and phase states such as QAM, then the amplifier must exhibit a more linear gain and phase response in order to preserve the integrity of the modulating signals and minimise spectral pollution caused by intermodulation products" [http://www.avren.com/main_frame.htm] as there is arguably sufficiently large availability of bandwidth within the LMDS architecture already. It is commonly stated (e.g. WebPro Forum) that LMDS will be constrained on distance (and the propagation environment) rather than capacity. It is also worth noting that the introduction of more complex modulation techniques results in a lower customer service area, with 64-QAM solutions limited perhaps only to 2.5km, due to the increased signal strength required for its effective implementation. In addition, quality of service issues regarding the availability of the service will further restrict the range of the product. This is of particular note in the UK, where the RA's consultation paper on 28GHz spectrum has indicated that it is unlikely to feed consumer demand services, but rather that of specific business locations such as industrial and business parks. As stated earlier range for a 99.99% availability service is likely only to be up to 5km at maximum, in an average propagation environment. It is hoped within the industry that the development of the so-called third generation of wireless telecoms will pave the way for the adopting of industry standards in the LMDS sector, enabling a resultant increased competitive route to broadband provision. However, it needs to be recognised that LMDS is not a competitor to 3G technology, due in part to its higher cost and indeed larger size of transceiver, ruling out its present mobile potential. In

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ due to its higher frequency and wider bandwidth, with perhaps the trade-off being its lack of mobility, because of the increased complexity of signalling. There can be little doubt that investors in LMDS spectrum licenses (28GHz) will do so in the hope that in the long run they will be able to provide digital two-way voice, data, Internet, interactive-gaming, videoconferencing and video services, similar to the Madrid example. In the US, 'Touch America' provide a portfolio of 'last mile' telecoms in which LMDS plays a significant role and is providing the range of added-value services outlined above. Another examples from the US gives a possible indication of a potential route to add LMDS broadband services to a Highlands & Islands portfolio. Virginia Tech.: "Believing many regions of Southwest Virginia would be left behind by this technology, Virginia Tech chose to take an active role in helping to ensure that LMDS technology is made available, regardless of geography." Virginia Tech specifically targeted LMDS due to the very fact that it has been viewed as an urban based technology and that it would be able to bid for spectrum in its own and surrounding rural areas without competition. With a 3 month rollout, implemented by WavTrace, this technology has been provided to rural communities and businesses at a very early stage in this technology's development, to traditionally non-commercial areas. By forming a 'research consortium' to progress its vision, distance learning, telemedicine and videoconferencing have become widely available in its cell coverage areas. This appears to be a very interesting model aimed at levering in new telecoms technology to rural non-commercial areas and hence potentially applicable to the Highlands & Islands. There certainly does seem to be many instances in other countries where the traditionally thought-of public sector has been instrumental in levering in new technology which have been poorly served by incumbents with little vision or impetus towards serving up broadband to the non-commercial sector. Without such initiative then, LMDS or other high frequency microwave services will not be an economic proposition within the Highlands & Islands in the near future, due to the limited range of LMDS and low subscriber density present. That is not to say that such an initiative could not be implemented, with the right combination of partnership resources, targeting multiple outcomes incorporating the wider community both residential and business alike.

4.4

Unlicensed Broadband Wireless
This area of the spectrum in the UK has much potential in enabling the speedy rollout of microwave broadband radio services in rural areas. As we shall see, there are particular problems in urban areas related to the 'noisy' environment present, which do not exist in many rural areas. Obviously, although there is no need for the purchase of specific

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ overcome. Of most potential appears to be the 2.4GHz ISM (Industrial, Scientific and Medical) referred to in section 4.2, this being a common standard at this frequency range in many parts of the world. There are many examples of the utilisation of this band for broadband communications in both this country and further afield, sometimes to supplement existing broadband services in rural areas and sometimes, with the aid of a burgeoning supplier industry, aimed at providing a cost effective broadband alternative service to that offered by the incumbent telecoms supplier. Comment will also be made on the viability of the higher 5GHz unlicensed band. "For those areas of a given geographic region that do not meet the minimum number of potential subscribers to justify the expense of an MMDS base station, using license exempt solutions in the ISM bands offers an attractive solution to the coverage problem." [ADC
Telecommunications]

In numerous instances in the US, the unlicensed bands have been used to complement MMDS core networks, by extending reach to shadow and other non-economic areas, without increasing initial deployment costs significantly. Wireless routers operating outdoors in the ISM bands are a mature technology and as such, a relatively reliable solution and most importantly a cost-effective solution as well. Indeed many suppliers of the ISM equipment also manufacture core MMDS technology in conjunction with RLAN products. Indeed, there are at least a _ dozen competing manufacturers in this field who are currently in intense competition in this rapidly developing 11Mbps interconnect market. Some of the companies and their unlicensed band products include: Cisco Systems 'Aironet 340' http://www.cisco.com/ Breezecom 'Breezenet' or 'BreezeACCESS 2.4' http://www.breezecom.com/ Lucent Technologies 'ORiNOCO' http://www.wavelan.com Proxim 'RangeLAN' http://www.proxim.com RadioLAN 'Bridgelink' http://www.radiolan.com Western Multiplex 'Tsunami' or 'Lynx' http://www.wmux.com/ Wireless, Inc. 'WaveNet' http://www.wire-less-inc.com/ The range of unlicensed band wireless products varies depending often on the manufacturer. Recently completed tests* showed that the Breezecom products showed strongly in the range of service achievable, easily attaining services out to 24km in testing. On the other hand, real-world throughput tests, as for most of the products reviewed, were disappointing at only 4-6Mbps, (on average) as opposed to the 11Mbps advertised. [*Network Computing Online] The international standard IEEE 802.11b has been the key which has encouraged compatibility and competition in this sector. This is not the full story however, as radio systems in the ISM unlicensed bands must comply with particular specifications. "In the UK, RFA systems using the 2.4 GHz frequency band must comply with ETS 300 328 and CEPT Recommendation 70-03, which stipulates a maximum EIRP of -10 dBW." [RA & Aegis
Systems Ltd]

So what does this mean in practice and how limiting are operations in the 2.4GHz unlicensed band as a result? The main interference which limits operations in this band come from several main sources according to the Radiocommunications Agency (RA) in the UK. Included in this list are

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ and the increasing growth of Radio (wireless) LANs. Indeed looking to the near future, new 'Bluetooth' and 'HomeRF' wireless standards being developed for the integration and inter-operability of PCs, mobile phones and numerous peripherals (e.g. stereo systems, digital cameras, TVs...etc) will without doubt have a further impact on service reliability in the ISM unlicensed band. Certainly in the US, and one would parallel the UK situation, wireless radio access in the unlicensed bands has been much more feasible and indeed successful in the low density and resultant low noise rural areas. The concentration of interference sources will be significantly less for service operations in the ISM bands outside of urban areas and quotations of service- reach of 32km+ are not uncommon for broadband equivalent radio based services. For example Western Multiplex's 2.4GHz ISM product quotes service provision out to 60km+. There are certainly good examples in the UK where various organisations have taken the initiative and supported the wireless broadband route. Perhaps of most note in our study context is the occurrence of Local Authorities and Universities in England, who have invested in such wireless technology. Lancaster University Schools Network has networked sites up to 24km apart using a mix of both 2.4GHz and 13GHz spectrum, providing capacity of up to 11Mbps in the unlicensed bands, using several supplier's equipment, including 3 of the main manufacturers mentioned on the previous page. In the Local Authority sector Stevenage Borough Council has networked LANs in 9 separate offices over a 25km2 radius via rooftop- mounted 'wireless bridges'. Their network also includes 3 repeater stations to overcome specific topographical difficulties. Operational since 1998, the network connections have enabled 3Mbps sustained transfer rates between sites and over 20Mbps in aggregate throughput. The antennas used have been either directional (18 or 24dBi) or Omni-directional (10dBi), with the core infrastructure being supplied by Breezecom. Cost savings in both instances would appear substantial, where previously leased lines dominated communications. In the private sector there has also been much interest in high capacity wireless networks in the UK, with Littlewoods recently having 130 of its UK stores inter-connected via Lucent's WaveLAN product. Their decision to go wireless was related to both cost and a simplified rollout/installation of the network. In addition, configuration flexibility and interface with existing stock control systems were also considered as being factors of importance. It is clear then that limited service availability due to other interference sources in the same ISM frequency band must largely have been overcome. Spread Spectrum techniques have been the key method employed to overcome interference problems (real or potential) in broadband radio solutions. There are actually two separate techniques employed – Direct Sequence Spread Spectrum (DSSS) and Frequency Hopping Spread Spectrum (FHSS).

"Conceptually the technique is relatively straightforward, involving the multiplication of the wanted information signal by another wide band signal called a spreading code…The coded signal typically has a bandwidth many times that of the original information signal (the actual ratio is referred to as the coding gain and provides an indication of the resilience of the signal to other co-channel interference). Decoding of the transmitted signal is achieved by applying a replica of the spreading code at the receiver." [RA & Aegis

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Of the two types of Spread Spectrum technology being applied, DSSS is considered to achieve the highest levels of data throughput. On the other hand FHSS is generally considered to provide a lower BER (Bit Error Rate) thus giving more protection against interference. The only downside of Spread Spectrum technology is the high signal processing overhead which makes it difficult to attain a high level service solution within the ISM band whilst staying within the standards and guidelines for operations set by the ETSI standard (ETS 300 328) and the IEEE interoperability standard (802.11b) for RLANS. Atlantic Telecom operating its fixed wireless access FHSS services in Glasgow, Dundee, Aberdeen, Glasgow and now Manchester in the 2.4GHz ISM band provides access speeds at up to 2Mbps for under £50 per month including all UK-based voice calls and a free second line, to residential and small business users. However, to do this it is quoted as operating at the very limits of the EIRP (Effective Isotropically Radiated Power from the network base station) –10dBW, in these 'noisy' urban environments, electromagnetically speaking. "Generally, FHSS is considered better at supporting a dense population in a small area, because it has more independent RF channels, whilst DSSS Provides greater operating range and coverage area (because it can operate with a lower carrier to noise ratio) and enables greater data throughput…" [RA & Aegis Systems Ltd]

BOX 26 A Broadband Wireless and combined RLAN Solution from Western Multiplex

In short then, there would appear to be some real potential in rolling out some form of broadband wireless access systems in rural areas across the Highlands & Islands, given the maturation of the technology (in response at least in part to industry standards) the low cost rollout (without the need to enter an expensive purchasing of frequency) and the relatively quite electromagnetic background, providing existing line of sight knowledge can be built upon and used to minimise associated infrastructure costs. There is clear scope for the education and public sectors to become the catalysts for rollout into rural communities, as

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

An ideal system in the Highlands & Islands could have a licensed MMDS (regional allocation) spectrum core system, with the use of the unlicensed bands to incorporate 'shadow' areas, similar to what has been implemented by ADC Telecommunications in several instances in the US. But what about the current state of spectrum allocations and auctioning in the UK? As stated in section 4.2, recent focus in the UK has been on 28GHz and 40GHz spectrum, with only limited focus on lower GHz bands with higher reach of service. These bands will only be of limited interest, as stated earlier, to rural areas due to their limited reach. 2GHz spectrum, on the other hand, which is currently geographically limited in its coverage (i.e. it is not a national license) looks likely to be released soon by BT, as it has never been utilised in rural areas in the UK and may provide a commercial opportunity if released on a regional rather than national basis. In the 2.4GHz ISM range Atlantic Telecom (as mentioned above) dominate, along with Kingston Communications who have also secured a regional license which was offered, due to Atlantic's success at operating a low power spread spectrum wireless service. Ionica's former 3.4GHz and 10GHz spectrum also looks set to enter a process termed 'comparative selection' before the end of 2000, according to the Radiocommunications Agency. Again, if offered on a regional basis, such spectrum may also present a commercial opportunity to bring broadband to the Highlands & Islands of Scotland, although some innovative venture to become 'selected' may be required in the shorter term. In the 3.6GHz to 4.2GHz band Tele2 are in the process of establishing and developing wireless data and telephony services in the Thames Valley region initially, with expectations of rollout to as much as 60% coverage of the UK by 2003. Synchronous data rates of between 256Kbps and 1Mbps are offered as part of the Tele2 service, which is now increasingly available throughout many of the regions in England. There has also been recent interest in the 5.8GHz ISM band and the 5GHz band in general and a recent consultation process by the RA (January 2000) has been completed. "Current plans for these bands are based on the assumption that all services deployed will be private systems operating on the same or a similar basis to fixed local area network facilities. Hence a regime of licence exemption has been proposed. No assumption has been made of the presence in these bands of any type of third party or public access services. With this consultation document the Agency is seeking to verify whether this is still an accurate reflection of the potential uses to which this part of the radio spectrum may be put…"
"RLAN technology will certainly support access to and interconnection with the internet either on the basis of distribution throughout a private network or as third party distribution for public access. While a private system providing internet access would be permissible under current policy, local area provision to third parties would be forbidden. The Agency is aware that at present there is no spectrum provision for local area public access to the internet. This consultation seeks to establish whether it would be advisable and desirable to permit public access to this service in these bands."

Certainly the proposed extension of license exemptions in the 5.0-5.8GHz bands and its resultant opening up for 'local area public access' could have positive benefits to rural areas in proximity to a main node of high speed entry into the internet. For example a company such as Iomart based in Stornoway could provide wireless bridge broadband access to communities up to 25 miles away at connections between 45Mbps and 100Mbps. Western Multiplex's Tsunami 5.8GHz 100BaseT has a tested throughput of 38Mbps under 'real' conditions, whilst Proxim's Stratum 100 has a tested throughput of 98Mbps under 'real'

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ link, with the former costing a more manageable £7K per link in April this year. Both operate in the currently proposed unlicensed 5.0-5.8GHz bands. Certainly, these network extension products designed to operate in the ISM and US designated U-NII bands provide much potential for rural areas, should a decision from the Radiocommunications Agency in the UK allow 'local area public access' via the 5.05.8GHz unlicensed bands. At present however within the existing ISM 5.725-5.875 GHz band "Recommendation 70-03 permits it to be used for non-specific short range communications at EIRPs up to 25 mW". Thus at present: "It is not envisaged that this band is suitable for anything other than private, self-provided, low power systems". Within the 5.8 GHz ISM band the relevant equipment specification relates to conforming to I-ETS 300 440. It should be noted that current proposals envisage the extension of the unlicensed elements within this band to the 5.150 to 5.350 GHz, 5.470 to 5.725 GHz HIPERLAN bands. The responses to the RA consultation are available for viewing (March 2000) although no final decision has been made for the future potential of this band as yet. Although, again as outlined above there is mature technologies available to exploit originating from the US, which could potentially exploit the rolling out of broadband internet to rural communities. For example the Proxim Stratum 100 for example has recently been approved for operation within the newly established 5GHz public bands in Canada, with proven operations already out initially to 11km, which have been shown to be impervious to snow, rain and fog, unlike some other higher frequency broadband wireless solutions. Performance has been quoted as being comparable to fibre optic based networks, being suitable for internet backhaul services. In summary, unlicensed band services would appear to provide much potential to extend core broadband services to rural customers and further investigations outwith the scope of this study would seem warranted on the practicability and cost of such provision.

4.5

Universal Mobile Telecommunications System (UMTS) – 3G
UMTS is the term used to describe the third generation of mobile telecommunications which will be available to consumers and businesses alike in 2002/3. The first generation of GSM mobile phones have been a true revolution in the European and UK context with over 34 million estimated users in the UK alone, signing up / connecting mostly over the last two years. An indication of future use can also be guessed at when realising that 70% of teenagers in the UK now possess a mobile phone.

Ericsson fully expects the majority of internet use to be via mobile devices by 2003 and is itself expecting to be servicing 1 billion internet subscribers worldwide at this time. In this sense, 3G, when it comes, may provide a significant internet access revolution, which traditional telecom service suppliers must compete with. [Statistics from BBC Online] Within the generation of mobile telephony products, we are currently (autumn 2000) at
1

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ mobile phones. However, the first 'internet' generation of mobile telephones, referred to as WAP (Wireless Application Protocol) phones are available in the market. However, the market for this generation of phones has been slow to take-off in Europe with reportedly few companies making any money from this 1st generation of internet mobile phones. It is generally considered that the UK consumer is awaiting the next generation technology before discarding their newly purchased standard mobile phones. WAP enabled WWW sites are not widespread, the connection speed of 9.6kbps only allows a very basic version of any site to be uploaded and the Japanese experience has shown this 1st generation to be non-user friendly in terms of browsing. The phones themselves have been also been reported to suffer from the small screen size, a short battery life and limited memory and processing capabilities. Nevertheless, it will apparently be difficult to purchase a non-WAP enabled phone during 2001, with 420million existing mobile users worldwide by December 2000. [http://www.theregister.co.uk/content/archive/13307.html]. Basically the WAP enabled phones have failed to catch the public's imagination, not offering sufficient valueadded to entice existing user to ditch their current generation of phones. The second generation of mobile phone technology is eagerly awaited with possible speeds for internet browsing between 115kbps and 171kbps. It is called GPRS (General Packet Radio Service). As its name implies, GPRS is a packet-based technology, which uses bandwidth more efficiently by breaking up voice and data traffic into small chunks and only then sending them on across the GPRS enabled network. This clearly will make the 'internet' mobile phone an enticing piece of equipment for the vast majority of UK internet users today who are used to 56kbps connections to the internet, which in reality average between 45-52kbps. However, recent industry (Nokia, BT, Motorolla…etc) revisions in performance now indicate a more likely connection speed for GPRS as being in the 27-43kbps range, this being quite a revision downwards by the industry. It is now anticipated that it will not be at least until 2003 that consumers access high data rate connections to the internet via 3G. And if considering the Highlands & Islands consumer, then most likely even later than this, maybe 2004. BT Cellnet's stated strategy for GPRS is to deploy it in the first instance to businesses in the South of England and subsequently a phased rollout to the rest of the country. Consumer products will come later in the build-out programme. Lastly, along the evolutionary highway of interim 3G technology is EDGE (Enhanced Data GSM Environment) based GSM technology which can deliver 384kbps and with Ericsson stating recently that its base- station infrastructure can be software upgraded to enable EDGE services, then this technology would appear to be realisable in the Highlands & Islands area in the not too distant future. It is though the so-called third generation product UMTS (Universal Mobile Telecommunications System) that is of real interest within the realms of this study. Although it is obvious that the developing 'interim' technology (WAP and GPRS) is of higher profile at present. However, 3G is the universal broadband packet based communication system which is likely to be the main competitor to any and all of the broadband solutions assessed to date, enabling a 2Mbps (in stationary mode / 384kbps on the move) direct connection into the internet, which in itself will open up a whole host of market opportunities related to broadband connections, but with the additional mobility

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ component. With 3G, high speed voice, data and multimedia traffic become a reality and the obvious merging of them to make videoconferencing a key application appears likely. The universality of the service, based on the 'Global System of Mobile Communication' (agreed by manufacturers, service providers and standards organisations worldwide) will mean that mobile users of laptop PCs and phones will be able to connect to a roaming service wherever they are in the world and access a consistency of broadband service access. This will be a true revolution in global access to internet content, with users connecting-in via a combination of terrestrial wireless and satellite links. In line with the International Telecommunications Union's IMT-2000 vision, UMTS will utilise spectrum in the frequency range 1980-2010 MHz with a 2170-2200 MHz portion
reserved for the satellite element of the UMTS systems.
Source: BBC On Line

The process of licensing 3G spectrum is in the process of being progressed worldwide through a process of auctions and 'beauty contests'. The UK government chose the auction route for licensing the 3G spectrum and anticipated a windfall of £1bn for the exchequer. In their bidding for, in effect, on-line real estate the demand for such spectrum amongst the bidders surpassed even the most optimistic estimates. A total of £22.5bn was raised in the UK auction, highlighting the future predicted dominance of 3G technology. The table below outlines the bidders, the money spent and the resulting blocks of spectrum bought. UK 3G (UMTS)MOBILE SPECTRUM AUCTION
TIW Vodafone/ Airtouch BT One2One Orange Licence A – 2x15MHz paired spectrum + 5MHz unpaired spectrum Licence B – 2x15MHz paired Licence C – 2x10MHz paired + 5MHz unpaired Licence D – 2x10MHz paired + 5MHz unpaired Licence E – 2x10MHz paired + 5MHz unpaired £4.3847bn £5.964bn £4.03bn £4.003bn £4.095bn

The one area of concern from the rural perspective from this 3G auction/purchase is that the 'minimum coverage requirement' for the 3G licenses at auction was 80% of the population by 31 December 2007. Considering past experience in the Highlands & Islands, particularly the Western Isles, there appears to be very little in the way of a guarantee that our area will not be in the 20% excluded from the mainstream due to the 'uneconomic' conditions present in the area. There are still consumers in the rural areas of the Highlands

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ & Islands that are not yet connected to a digital telephone exchange, some 10 years after the main upgrading programme. Perhaps at the very best we may achieve broadband 3G services towards the end of the anticipated 2002-2007 build-out. In short, there would appear to be no guarantee (as with the case with ADSL) of an impending rollout programme, without once again significant public sector incentives, to either speed up the 3G broadband rollout to our area or to entice it here at all. If we are looking up to 7 years 'down the road' as it were for 3G in our area then it is clear we should be focusing our efforts elsewhere, as no doubt a 2Mbps link in 2007 will be the equivalent to a 56kbps connection today – i.e. far from the optimum solution. On the positive side: "..users can have multi-mode devices that switch to the currently available technology (such as GSM 900 and 1800) where UMTS is not yet available." [whatis.com] Hence, at least an interim service which will automatically upgrade the service available, via network roaming, to 3G should be available in the next several years. Examining the existing GSM services in detail from the various suppliers such as One2One, Vodaphone, BT Cellnet and Orange, shows that in the Western Isles context the basic service is far from universal. One2One has a largely nonexistent service, whilst the other 3 main providers have significant service shadows apparent throughout the Islands, in North Lewis Harris and the Southern Isles in particular. Refer to Box 28. A main concern then, particularly given the context of this study must be the coverage of UMTS broadband services in the rural and remote areas outside the main towns and centres of population in the Highlands & Islands. As things stand at present it seems unlikely that the core and peripheral areas already targeted for GSM services will be extended further, thus making UMTS services in current 'shadow' communities unlikely.

BOX 28 Orange GSM 1800 Service
http://www.gsmcoverage.co.uk/gsm_coverage_maps.html

UMTS will thus only likely become part of any solution for rural areas in the Highlands & Islands. Even so the variance in service currently experienced should certainly be improved upon, due to the ability of users to link up to any available interim service from any operator as the convergence towards 3G continues.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ There can be little doubt that enhanced GSM services (2.5G) such EDGE originally due for commercial rollout in Europe in 2001 (although now apparently delayed until 2002 due to equipment and testing delays) will enable enhanced 384kbps internet connections over that which is currently available in many rural areas. However, concerns have been expressed within the industry on the true real time speeds that will be achievable. Non-shadow GSM areas that currently do not have access to ADSL or Cable will benefit and a new host of services will be possible. However, there is uncertainty in the market and service providers in Europe in particular are already considering skipping EDGE to move directly to another standard called W-CDMA, this being the final upgrade path to 3G for GSM carriers, whilst also offering comparable connections speeds. However, even here some commentators are predicting that 3G may never actually be implemented in its current envisaged form due to the time to market and the inevitable changes likely to take place. So what are the services that have enticed £24.5bn being spent on the 'big five' licenses in the UK? "By 2003, it is forecast that there will be nearly 1 billion mobile devices in use throughout the world. As a result of this penetration , more people will access the Internet via mobile devices than through a PC within four to five years…The stakes are high – enduser spending on mobile commerce is expected to reach $200 billion by 2005 and the demand for infrastructure to support and manage new wireless applications is forecast to reach $25 billion within 5 years". [www.commonwealthassociates.com] If we look East to the Japanese experience then some indication of the potential becomes apparent. In Japan in early 1999 there was a lack of cheap high speed internet access (i.e. dial-up internet access was billed by the minute), so when DoCoMo Net launched its new mobile 28.8kbps wireless service 'Imode' in February 1999, within 12 months it had 4 million registered users and now has 8 million subscribers, making it the fastest growing internet service provider in the world. As well as web browsing the mobile service portfolio includes e-mail, interactive gaming, multimedia content and instant messaging. However, perhaps the most interesting statistic is that 90% of the I-mode service subscribers are first time internet users, thus the I-mode interface being the only one with which they are familiar. Looking West to the US, it has not been so much the consumer that has been driving the technology but rather the business sector, where there has been a marked growth in the remote and mobile elements of the workforce. Infometrics Research in the US has predicted an increase of this component of the workforce by 30% between now and 2003, with each user costing an average of $10,000 to service. The US consumer market appears to be quite different however with a Forester Research survey showing that 75% of households did not value services such as receiving news, sports and weather on their mobile phones.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ In the US as in the UK, it is the under 25 market that will most likely lead the mobile internet revolution. Indeed a recent survey in the UK has shown that young people are increasingly giving up cigarettes to run instead the ultimate fashion and communications accessory – the mobile phone. This market will be without doubt be a key area for the industry to convert, by offering cheap high speed internet access, inter-active gaming...etc Hence, one could foresee a 'Japanesque' revolution in this sector in the UK by the young adults of tomorrow who already have a grounding in mobile communication devices. In this context the major investment by UK providers in 3G frequency spectrum becomes somewhat more justifiable, although not without risk.

4.6

Summary & Analysis
MMDS is as yet an area of untapped potential in the UK, described on the RA's website as: "an analogue service similar to MVDS operating in lower frequency bands around 2GHz chiefly for the distribution of broadcast material." As a BWA technology it has begun to be exploited for the delivery of commercial broadband services in the US and other parts of the rural Americas and beyond. In this sense it has become a maturing technology with much apparent potential, although the question of accessing appropriate regional spectrum still remains. LMDS as a separate technology is where most spectrum licensing activity is in the UK at present in the BWA sector. However, due to its reach capabilities it is of limited potential to non-built up areas such as the Western Isles and Highlands & Islands in general, although again appears to be an under-exploited robust technology. Of complementary and/or alternative interest to MMDS spectrum is the unlicensed band 2.4GHz and 5.8GHz products and solutions, which have the obvious advantage of not requiring investment in operating licenses and can therefore be piloted quite easily and in a short time frame, although having to operate within specific levels to avoid interference within and with other spectrum. In addition, there may also be restrictions on third party services or the provision of public access services. With regard to mobile wireless access via ultimately UMTS services or their equivalent, there is without doubt a massive potential subscriber base, as yet probably untapped. Broadband 3G and the interim technologies have been delayed however, and may still be some years away (2003 at the earliest) for rural areas such as the Highlands & Islands, with an expensive overhaul of GSM equipment ultimately required to provide full mobile 3G services. Indeed, the upgrade requirements will, it has been stated, lead to a more streamlined route to the mobile broadband goal envisaged, whatever 3G form this will eventually take. Investors in the UK 3G licenses have however expressed some concern in recent months regarding the technology’s ability to live up its hype in view of recent experiences by I-mode in Japan. It appear the technology’s performance will not now be able to handle true broadband services such as video on demand, but rather more conservative 10-15 second video clips and this has obvious repercussions for anticipated revenue streams and its eventual worth as a broadband alternative for rural areas. With regard to the potential of wireless terrestrial and mobile to provide a broadband solution in line with the Western Isles' needs there are several areas which need to be progressed and researched further.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Firstly, with regard to mobile wireless broadband which will it appears be at least a contributory component in our broadband future it will be important that the infrastructure in the area is at least enabled to provide blanket GSM mobile coverage even in the most remote communities, to ensure that the Islands are part of the mobile (upgrade) broadband revolution which is without doubt on its way when considering the advancements in countries such as Finland and Japan. Significant investment has been made in the spectrum and we need to ensure that the service operators are committed to 100% coverage rather than just the 80% of the population to which they are obliged under their current 3G licenses. Government funding to avoid any digital divide developing in the next generation would not seem unreasonable given policies for social inclusion and the acceptance elsewhere, in the Americas for example, for intervention in the market to assist rural telecoms infrastructure provision. There is not shortage of evidence worldwide to support this opinion. Given the state of flux in the mobile wireless broadband marketplace there may also be mileage in entering into a research and development partnership at the Highlands & Islands level with one or more of the current 3G license holders to pilot cutting edge mobile broadband and ascertain its true performance abilities. Likewise, in the Broadband Wireless Access sector, a model of establishing public-private partnerships to lever advanced broadband infrastructure into rural communities has already been tried and test in the rural United States. The provision of BWA links for local authority, health sector, economic development or education services/purposes may provide opportunities for innovative 'piggy-back' community broadband wireless networks, with the key base station infrastructure being funded for initially core public sector functions, but with spare capacity. An obvious private sector partner would be Cisco systems given their presence already on the Islands. Again, these are technology solutions that have been used by other large businesses and local authorities, educational establishments and health boards in other parts of the country. Even if the Unlicensed spectrum is not to be made available for ‘public’ access, there may still be opportunities for community organisation based access to homes. In the short-term such initiative could bring real broadband opportunities for local communities in the Western Isles now, in a short space of time, targeting key communities such as Ness, Lochs, Tarbert, Balivanich and Barra, where a range of multi-functions are provided already by the public sector. The development of a wireless Western Isles OnLine broadband community, must surely be a key economic and social development goal. In summary, BWA is a specific area in which an innovative local approach to telecoms development can be envisaged, to provide a broadband solution for key communities, with mobile solutions addressing and indeed targeting any 'shadow' communities at a latter stage.

Chapter 4 References:

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

ADC Telecommunications & Wireless, Inc Use of License Exempt Bands to Enhance Broadband Services in an MMDS Network (2000) http://www.wire-less-inc.com/solutions/license-exempt.html Bateman, A., An Introduction to Transmitter and Receiver Architectures (1999) Archive Library http://www.avren.com/main_frame.htm

Donegan, Michelle, LMDS Lessons for Europe, (August 2000) http://www.totaltele.com/ Ericsson, UMTS and 3G ,(Sept. 1999)
http://www.ericsson.se/wireless/products/mobsys/gsm/subpages/umts_and_3g/umts_and_3g.shtml

Greiper, Scott L. & Ellingsworth, Craighton D. @ Commonwealth Associates, The Wireless Internet and Mobile E-Commerce (October 2000) http://www.commonwealthassociates.com Hadar Rami - Ensemble Communications Inc. Broadband Wireless Access , (Apr 2000)
http://www.wirelessdesignmag.com/

Kalia, Manu @ Commonwealth Associates Wireless Infrastructure: In the Eye of the Storm (1999) http://www.commonwealthassociates.com Kelly, Frank - ADC Telecommunications Transitioning to Two-Way Data (Feb. 2000),
http://www.wirelessdesignmag.com/

Kreig, Andrew, Broadband Wireless: It's Already "Fixed" (May 2000)
http://www.nab.org/conventions/nab2000/daily/wca1.asp

Martínez, Jorge Peréz (English Translation), [Reprinted from BIT No. 115 May-June 1999] The Madrid Multi-Access LMDS (28-31 GHz) Trial System , ( June 1999),http://www.cableaml.com/madridtrialsystem.html Moghe, Sanjay & Roman, Vincent - ADC Telecommunications Sumi, David & Gee, Len Wireless, Inc. - Wireless, Inc. Use of License Exempt Bands to Enhance Broadband Services in an MMDS Network (2000) http://www.wire-less-inc.com/solutions/license-exempt.html New York University, Anon. LMDS, Cable Modems, and xDSL: A Comparative Study (November 1997) http://fargo.itp.tsoa.nyu.edu/~rosner/LastMile.html Perelman, Robert - Times Microwave Systems The Wireless Internet Connection ,(April 2000)
http://www.wirelessdesignmag.com/

Phone.com, White Paper:Enabling the Wireless Internet, (February 2000) http://www.phone.com Radiocommunications Agency, Compatibility between radiocommunication & ISM systems in the 2.4 GHz frequency band (June 1999) http://www.radio.gov.uk/rahome.htm Radiocommunications Agency, Consultation on 3.4 GHz Fixed Wireless Access Spectrum (November 1999) http://www.radio.gov.uk/rahome.htm Radiocommunications Agency, Wireless in the Information Age Delivering Interactive Multimedia to Workplace and Home (July 1999) http://www.radio.gov.uk/rahome.htm Restrepo, Jorge E. & Woods, Norman F. [Reprinted from Wireless Pay-TV International] The 50 Kilometer Myth: Realising Practical System Coverage ,(July 1997)

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Scourias, John Overview of the Global System for Mobile Communications (October 1997)
http://ccnga.uwaterloo.ca/~jscouria/GSM/gsmreport.html#6

Skoro, John LMDS: Broadband Wireless Access (Oct. 1999) Scientific American:
http://www.sciam.com/1999/1099issue/1099skoro.html

Smith, Brad, Welcome to the Wireless Internet (January 2000), http://www.wcai.com UK Government (2000) http://www.spectrumauctions.gov.uk/3gindex.htm
US Department of Commerce, What is LMDS? (1999) http://nwest.nist.gov/lmds.html

Utell, Michael J. & Irshad, Asad, Wireless Bridges Span the Divide, (May 2000)
http://www.networkcomputing.com

Virginia Tech. WWW Pages LMDS at Virginia Tech. (November 1999) http://www.lmds.vt.edu/ WebPro Forum Tutorial, Local Multipoint Distribution System (LMDS) Tutorial (August 2000)
http://www.iec.org/tutorials/lmds/index.html

Chapter 5

Fibre To The Home (FTTH) / Fibre To The Curb (FTTC)

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

5

An Overview of the Potential
FTTH and FTTC are the 'holy grail' of broadband communications and, particularly the former, the main high bandwidth level of service to which foreseeable broadband networks will aspire and compare themselves to. FTTH is the surest way to future proof any broadband telecoms network today in the year 2000. It may be, that communities such as the Western Isles of Scotland where investment in broadband interim solutions has been largely non-existent, that a direct investment path to Fibre provides the best value for money option in the long term, particularly if innovative rollout solutions can be identified. The cost of optical fibre technology has also reduced significantly:
"Fibre on the backbone, copper to the desktop. For years, that’s been the book on premises wiring management. That book has now been rewritten due to the dramatic cut in cost of installing fibre to the desktop. The continued price reductions for fibre cabling and components have brought the overall cost of fibre installation close to that of Category 5 unshielded twisted pair (UTP) copper wiring…No longer should fibre optics be considered an alternative to copper used only for applications with special requirements. Fibre optic technology is clearly superior in performance and is now competitive in price with the high-end twisted-pair cable required for today’s high-speed networks." [www.networkcomputing.com]

In addition, new methods to provide FTTH avoiding the main costs associated with digging up the road and pavement, are being discussed. One example is the provision of fibre to homes via the existing sewage duct infrastructure. Given this background then, one needs to carefully consider this 'ultimate solution' in the context of the broadband discussion to date. The long term argument for fibre via passive optical networking (PON) technology or via Gigabyte Ethernet technology is unequivocal, when one regards the near unlimited speed achievable and the bandwidth attainable. It truly appears to be the 'holy grail' particularly for currently under-developed rural regions. Bandwidth will not be determined by the constraints of the technology, but rather the consumer's needs. Refer to Boxes 29 and 30. If our past experience and continuing knowledge of demand for bandwidth tells us anything, it is that future demands will continue to increase at a pace faster than the rollout of the interim broadband technologies, currently promising/offering between 1-10Mbps, can address. Any 5-10 year rollout of such technologies may not prove cost effective due to their limited operational life as cutting edge telecoms technology. Just 10 years ago major investment in bringing ISDN capabilities to rural areas in our region was seen as a major infrastructure provision of lasting effect. However, such technology has now been overtaken before even significant market penetration has been realised and we are assessing where our next key investment should be focused. Unlike other broadband solutions such as Cable and ADSL which often tend to exclude rural and even suburban locations, in the US some of the best early examples of FTTH have been in just such areas on an initial small scale. For example Bell South in state of Georgia installed its first FTTH network to 400 homes in the Atlanta suburbs, and as we shall discuss in the next section there are also other examples of early rollout in the US which pertain to even more rural areas.

5.1

An Outline of the Competing Fibre Technologies
Even although the Passive Optical Networking systems appear to be getting much support

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ AC power, hence the designation as being 'passive'), they do contain constraints which make them less ideal than the new Gigabit Ethernet based fibre systems. in terms of service provision they are limited in the true bandwidth available to customer, typically being 10Mbps and are also more complex to roll-out, given recent experiences in the US. In this respect they also tended to be significantly more costly with regard to the network equipment required. On the other hand, Ethernet is a proven technology with a much simplified interface which saves on cost, enables higher throughput (in comparison to PON) and allows greater flexibility of service. in seconds rather than perhaps days or weeks. In addition, in so far as an Ethernet based infrastructure can enable multi-service provision down the 'pipe' consumer choice is expanded and the overall quality of service which can be achieved, arguably higher.
" Ethernet's performance, scalability, acceptance and support, together with advances in hardware, make it a very viable community networking technology. Concerns about cost, interoperability, scalability, and ease of management simply aren't warranted in the Etherneteverywhere scenario."

In summary, and without going into the technology in any depth, there are concerns that the PON FTTH networks currently being rolled-out 'en-masse' in the US may not be as future proof as the newer Gigabit Ethernet infrastructures, although from the limited information available it is difficult to make an informed decision. The latter have the apparent advantage of low cost installation and maintenance, widespread availability, scalability, speed of response and basic simplicity. PON systems on the other hand, as can be seen in Box 29, are less straightforward and contain several key elements.

♦ ♦ ♦ ♦

OLT Optical Line Terminal A passive splitter that direct wavelengths at the network interface point. ONUs Optical Network Units NID Network Interface Device

The OLT or 'headend' may be located in the service provider's nearest office or at the head node of the overall system. ONUs may be located on street locations or in the users premises and NIDs, when necessary, will be located on user premises. The termination point of the overall system will also determine whether we have a FTTC or FTTH system. Fibre optics would not even be considered if it did not offer distinct advantages over traditional copper media. These advantages translate into the following: • Information-carrying capacity. • Low loss. • Electromagnetic immunity. • Light weight. • Smaller size. • Safety. • Security. In response to such positive attributes fibre has traditionally considered to be fragile, difficult to work with, expensive and of little relevance to all but the most large scale

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ businesses. In actual fact optical fibre has a greater tensile value than copper or steel fibres of the same diameter, advances in the technology has made installation significantly more straightforward, its cost is now on a par (maybe even less) with that of 'category 5' copper and its high capacity and bandwidth make it the essential future-proofing technology.

5.2

An Overview of the Technology & Developing Market
A single optical fibre cable can provide a quoted 100Mbps link to individual service subscribers. Clearly, the 'interim' technology outlined to date (for all its potential) is equivalent to no more than the 2400bps connection of 1992 in comparison to the 2Mbps DSL connection of today, in terms of quality of service. In the 90s for example there has been a commonly quoted 20 times growth in bandwidth demand, with no let up predicted.
"Transmission speeds in commercial fibre systems had increased by more than a factor of 50 by the early 1990s, but the fundamental architecture remained the same. Fibres ran from one electronic box to another. A laser transmitter pumped pulses down fibres made of exquisitely pure glass. On the other end, a receiver converted the light signals back into electrical form, and electronics processed or amplified the signals. Electronics do the combining, called multiplexing, in a series of steps. For standard telephone service, they digitise voice signals from 24 phone lines and merge them into one signal at 1.55 million bits per second. Typically, the next step interleaves 28 of these 1.55-megabit signals to make a 45-megabit signal. Further steps make faster signals and send them through fibres. At the fibre output, other electronics process each signal. They typically demultiplex it, breaking it into component parts for redirection, and often combine these parts with pieces of other signals and send them through another fibre. Sometimes they amplify and regenerate the signal, allowing it to pass essentially unchanged through another length of fibre." [www.techreview.com]

It is interesting to note however that fibre optical cable in the communications network is still a relatively new provision, only being introduced nationally to the backbone when deregulation opened up competition in the long-distance phone network in the 1980s. Indeed in 1984 British Telecom achieved an important first by laying the first submarine fibre optic cable to meet the telecoms needs of the Isle of Wight. Then later in 1986 the first fibre optic cable across the English Channel came into service. Two years later in 1988, the first submarine fibre cables became operational across the Atlantic and then a year later across the Pacific between North America and Asia. Only an average 15-25% increase in costs in laying fibre as opposed to copper is often quoted within the telecoms industry, so given future bandwidth requirements, one could easily anticipate the revenue benefits associated with the plethora of new broadband services to outweigh costs significantly, in the long term business cycle. FTTH trials over the last several decades have generally not proved a success due to a lack of any 'killer' service applications able to utilise the technology. This situation is quite different today in broadband world in which we are beginning to enter, with the convergence of the internet and other consumer devices, being increasingly integrated via 'bluetooth' wireless standards. On the business front, a fibre enabled region becomes a significant potential inward investment site, and a potential major growth centre for existing businesses migrating to the e-commerce, on-line revolution. As outlined in Section 1, new ways of working are already beginning to shape our economic future and

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ continues to 'lag behind' for the foreseeable future, or instead turns itself around and becomes one of the most significant growth centres in rural Europe. Telecom suppliers can already make a cost effective case for supplying fibre to areas with just 100s or even just 10s of homes, but full FTTH has remained expensive until recently due to the terminal equipment required. However recent announcements relating to new equipment coming to market (e.g. Marconi) price the installation of FTTH on a par with DSL. The implementation of standards across the board will also help. Full Service Access Network (FSAN) is currently a fibre standard approved by the ITU and subscribed to by many of the major telecoms suppliers worldwide such as British Telecom, Bell South, France Telecom, Nippon Telegraph & Telephone...etc. Such standardisation of fibre access technology to homes and businesses will surely only serve to drive down prices further of (e.g. terminal equipment) installation and supply to businesses and homes alike.

Verizon Communications (October 2000) have identified that the key components to enable FTTH i.e. 'aerial fusion splicing', 'self-supporting fibre cable and fibre drops', the price of fibre itself and one-fibre 'PON architecture', have all combined to make the price of installing fibre on a par with that of copper. In some instances a quoted price of $1200 (£850) per home. Coming back to reality, one might argue, it is just now that the US telecom industry is beginning to focus on FTTH in new build situations, with FTTC being the norm in upgrade situations to date. However, of major interest is that one of the key initial customers for optical fibre suppliers in the US (e.g. Optical Solutions Inc.) has been small local telecoms suppliers using fibre to supply broadband services to rural homes outwith the reach of ADSL and Cable e.g. Rye Telephone of Colorado City is installing fibre "to 500 homes in a sprawling 80-square-kilometer community called Hatchet Ranch." British Telecom's current focus on fibre rollout in the UK is focused on supplying fibre to the main commercial centres in the UK, supplying a branch rollout between buildings, similar to the branched rollout among homes as seen in the US in a number of high profile instances. It is worth noting however, that the focus of fibre rollout in the US has predominantly been in regions experiencing economic and population growth, where new build opportunities have presented themselves, rather than in regions where fibre has been supplied as a direct replacement for existing copper networks. In addition, FTTH, FTTC and FTTB (Fibre To The Building) are in many instances in the US being rolled-out to residential customers in the first instance. "While most optical access bandwidth providers
pedal the benefits of fibre-optic technology to business centre customers, En-Touch Systems Inc. (Houston) is targeting the emerging market of the residential consumer. …delivering bundled services to customers being overlooked by most of today's business-oriented providers."

The general trend has been that fibre is coming closer and closer to the customer and in the US this has, as we have seen, even included rural customers. This initiative has been

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ the existing copper infrastructure of such telecoms suppliers is not easily written-off. In realisation of the potential lead being taken by competitors, to the incumbents, in supplying fully fibre solutions to customers, venture capitalists have literally been falling over themselves to invest in this next generation broadband technology.

5.3

The Case for Fibre Infrastructure
Incumbent suppliers such as BT in the UK appear to cling to the idea that fibre remains a costly alternative, yet on the other hand continue to roll out ADSL, to utilise existing copper infrastructure. Yet there can be little doubt of the interim nature of such investment, as an ever emerging array of broadband services continues to bring ever increasing bandwidth-demand requirements onto such networks. As Joe Dooley of Optical Solutions Inc. puts it: "…those who still believe FTTH is too expensive on a per-subscriber basis are either ill-informed or operating from dated information." Certainly for the 60-70% of households that can get ADSL in 'enabled' areas it is a major advance on a 56Kbps modem connection. Its rollout in the UK remains constrained, held back by BT's resistance to giving open access to its full local exchange infrastructure.

Even then the exchange infrastructure is proving costly for competitors at approx. £150K per site, in addition to on-going line rental and equipment and line testing costs with only a limited number of customers available due to the high pricing required of in excess of £40 per month for the basic 512Kbps service. Recent research for the Gartner Group suggests consumers are not willing to pay more than £25 per month for such a service. However there is not even a commitment to supplying this interim technology in rural areas such as the Western Isles, though as indicated earlier, this may present an opportunity to jump a generation in the development of broadband infrastructure in areas such as the Western Isles. One of the main criticisms that might be directed at such interim technology is that although it appears to provide value for money for suppliers in conventional terms, they fail to take into account residual values. In considering FTTH one can confidently make the case that its value will actually appreciate over time, as more broadband services emerge to utilise the potential bandwidth available. One would expect a high level of customer loyalty in the long term, as when new bandwidth demands become apparent, the fibre customer's pipe can simply be opened a bit further to enable any new bandwidth-hungry services. Subscribers to DSL, cable, wireless, satellite…etc in this future will likely need to change supplier and technology to meet their needs. This loss of potential revenue for alternative suppliers in year X is not likely to be shown in conventional accounting assessments, and as new higher value services come on line (with their associated revenues) the opportunity cost foregone is likely to be even higher. "For those with a vision of offering all of the services subscribers want today and the services they will want tomorrow, an FTTH infrastructure is really a business necessity. It is the only infrastructure that has the bandwidth and flexibility to address the large, growing, and ever changing bandwidth demands of residential subscribers." [Optical Solutions

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

In short, what investment decisions in other technology over FTTH will miss is the opportunity cost of lost customers and the loss of revenue from as yet unrealised future broadband services. To counter this potential loss, interim technology will have to be upgrade at further cost to ? – FTTH! Hence, there must even be a case for incumbents like BT, to, instead of maintaining an ageing copper infrastructure (in rural areas such as the Western Isles), upgrade direct to fibre at an earlier rather than later stage in the business cycle. Due to the additional revenue which can be attained by upgrading now, instead of inevitably at some later stage 'down the line', after more costs have been incurred to maintain a decreasingly reliable infrastructure and satisfy some interim broadband needs in the short term to stave off criticism from OFTEL and others. Replacement fibre is already as cheap as replacement copper, with costs of fibre solutions set to fall even further. Alternatively, as has been the case in the US, there may be opportunities for new entrants into the local loop interested in building-out a long-term appreciating infrastructure, rather than a depreciating alternative. With such a long-term perspective there can be little doubt that fibre is the first choice investment for today, for an area such as the Western Isles. "For carriers and their customers, it’s a no-brainer: Those that get FTTH first win."
[Optical Solutions Inc]

If one subscribes to this view, then a clear development path for the advancement of broadband in the Western Isles becomes clear, providing some innovative solutions to address initial rollout costs can be identified. There are without doubt issues relating to robustness which have to be considered and related maintenance (management) issues, which are not always immediately able to be addressed and in some instances may even be weather dependent. In Denmark such concerns have not hindered investment. The Danish government’s ‘Info Society 2000’ programme has already stated its intention to lay down in the first instance a country-wide optical fibre network to all the nation’s municipalities. In Ireland a similar broadband initiative is now underway utilising fibre optics in the first instance between key sites in the country’s network not presently ‘future-proofed’ with fibre, but which is committed to bring broadband to the whole country. The technology is improving rapidly however to address such remaining issues/concerns and some estimates predict FTTH being available universally throughout the United States within 10 years, on the basis of present trends. The Rye Telephone Co in Colorado provides an example how forward–thinking telecoms carriers are already addressing fibre issues. Posing the question of whether to reinvest in their ageing copper infrastructure, much of which was requiring constant upgrades, repair and extensions, a clear economic justification for the replacement of the old copper with new fibre was apparent. This will become an increasingly imminent decision faced by (a) carrier(s) in the UK and there would appear to be one clear answer – now rather than later!

5.4

Summary, Analysis & Comment
Many still view FTTH as overkill since immediate needs are being increasingly catered for by DSL, Cable, Wireless...etc It should be noted however that initial ducting cables lain by the main telecom suppliers in the US in the last 10 years contained 'dark' fibres, spare capacity for future demand. However, the onset of internet based demand was not foreseen on such a wide scale and a study in 1999 showed that some carriers such as Sprint in the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ US for example have already lit up to 85% of its reserve and AT&T 50%. The demand for bandwidth is unrelenting, with internet traffic said to be doubling every six months, hence the extension of fibre networks worldwide is inevitable and the surest way to build in future-proofing to any technology investment. "These days, telecommunications companies
can be categorised into 2 groups - the quick and the dead. The 'dead' may kick themselves for not embracing FTTH when they had a chance. " [www.about.com]

Certainly in business terms there are huge revenue rewards to be achieved for those businesses or indeed areas arriving first in a market with an existing and a futuristic range of products and services able to be developed. An ever growing customer base and an appreciating infrastructure are two clear economic reasons for FTTH. Given that ADSL costs £40 per month for a very limited broadband service on top of existing voice calls, then one could easily foresee FTTH being able to provide a range of added value services for carriers of over £100 per month (Forrester Research–Beyond Broadband). In terms of opportunity for rural residents such services would really be the much talked about 'distance shrinking' technology. Capturing an opportunity such as that presented by fibre to the home requires a determination of will and vision to invest heavily today in infrastructure which will appreciate and pay dividends for communities at some time in the future. The spending of tens of millions of pounds to provide key infrastructure for remote communities in the Western Isles is not a radically new concept, but it is rather the nature of the development that is different this time around. And, although perhaps more costly, one could argue its impact will be significantly more than any bridge, road or causeway has ever managed to achieve to date. Community based broadband projects, similar to those by tenants associations in Sweden, one of the leaders (in Europe), in broadband rollout, might be a way to secure new infrastructure or perhaps on the back of public sector upgrades, as suggested in sections 6 for Wireless or in partnerships with private sector telecoms/content providers. Either way, in development terms the impact of FTTH or FTTB for that matter, on the future economy of the Islands, would be unlikely to be surpassed by any other single development commitment and investment. The jumping of a generation from narrowband to the 'holy grail' of broadband can actually be considered to make economic sense for carriers, consumers, service providers and businesses alike. It is potentially a 'win-win' situation if recognised. Ideally, an undersea fibre link to the mainland would be the ultimate solution, but the extension of current microwave backbone links could without doubt be achieved cost effectively to support an FTTH rollout in the Western Isles. In this respect it may be worth investigating if any of the Utilities possess any spare undersea ducting from the mainland to the Islands. Certainly Scottish Hydro Electric possess undersea cables for the national grid infrastructure, and although no new undersea cabling is anticipated within the next 10 year timeframe, future investment may be brought forward to achieve economies, should another proposal targeted at laying an undersea link be tabled. This aside, one must consider the economic development potential of entering such an advance broadband market so early. Inward Investment and new business opportunities would be significant, as would the ability to provide add values social (development)

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ internet/e-mail videoconferencing, HDTV, teleworking, education & health services, online gaming, banking, video-on-demand would be easily incorporated down the same 'pipe' as well as a host of as yet unknown services, perhaps Virtual Reality, or Holographic TV/Video, because of the almost unlimited capacity available. As one Californian community working with their local council on a pilot FTTH project stated – the new infrastructure will provide an invaluable asset for our children and our community and provide a lasting legacy. In 5-10 years as the lifespan of other broadband technologies comes to an end after being superseded by bandwidth demands, FTTH networks installed now will continue to be appreciating in value, rather than coming to the end of their lifecycle. Although, give the time lag in rural areas will still be only in the middle of their lifespan in areas such as the Western Isles. In such a fast moving industry of increasing importance it would be folly to invest heavily in a rural area in anything other than the most future-proof technology on the market. hence, we have the main case and justification for investment in fibre optic infrastructure.

Chapter 5 References:

Bates, Devon, Marketing & Comm.s Manager, KMI Corporation, Fibre-To-The-Home Approaches: Cost Parity with Copper (October 2000) http://www.kmicorp.com/ Communications Industry Researchers: http://www.cir-inc.com/reports/default.htm Dooley, Joe, FTTH: How much does it cost? vs. How much is it worth? (September, 2000)
http://lw.pennwellnet.com/home/home.cfm

Fibre Optics On-Line Web Resources: http://www.eoenabled.com/fibreopticsonline/default.asp Gall, Don & Shapiro, Mitch, The Trouble with Fibre-To-The-Home (September, 2000)
http://lw.pennwellnet.com/home/home.cfm

Hecht, Jeff, Fibre Optics to the Home (May 2000) http://www.techreview.com/articles/ma00/hecht.htm Hecht, Jeff, New Pipelines Promise Unprecedented Speed (August 2000) http://www.upside.com/Ebiz/ McDonald, Mark, VP of Access Network Marketing, Marconi Communications (Irving, TX) Creating an Ideal Infrastructure for 'Futuristic' Services and Applications (September, 2000) http://lw.pennwellnet.com/home/home.cfm Morales, Octavio & Setty, Chris, World Wide Packets, Sky's the Limit with Ethernet over Fibre (November 2000) http://lw.pennwellnet.com/home/home.cfm Oakes, Chris, New Push for Fibre To The Home (June 1998) http://www.wired.com/ O'Mara, George & McCreary, Scott, Scott Sumitomo Electric Lightwave, FTTH Architectures face Interconnect Issues inside the Final Mile (October 2000) http://lw.pennwellnet.com/home/home.cfm

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
Optical Solutions Inc. http://www.opticalsolutions.com/index1.htm Ovum Research, There's more to local Access than DSL (September, 2000) http://www.ovum.com/ Pease, Robert, Rural Areas Present Better Business Case for Fibre-To-The-Home (June 2000)
http://lw.pennwellnet.com/home/home.cfm

Wolinsky, Howard, Optical Boom Spurs Visions of Grandeur (August 2000) http://www.upside.com/Ebiz/ ZDNet, Broadband Access Guide (April 2000) http://www.zdnet.co.uk/news/specials/2000/04/broadband/

Chapter 6 Broadband Telecoms: Conclusions
To many at this time, the importance of establishing this vision might not be clear. However, what is clear from the research, which has cumulated in the formulation of this report, is the immense development potential looming just over the horizon in both economic and social/community terms. Continued economic stagnation and population decline are issues which the author discusses everyday with people from all differing backgrounds throughout the Highlands & Islands. In doing so the writer is aware of, arguably, the current development paradigm of conservatism and consolidation and the conventional wisdom of diversification. It requires a strong vision and a belief in the future to bring about change, both social and economic. Development is about long term quality of life gains and sustainability rather than short term materialistic gain and it is the former that a realisable broadband future for the Western Isles could without doubt bring, although this may not be immediately obvious to many. Children from an earlier age are becoming part of the digital information society, often before their parents. What will retain children in years to come in remote Islands like ours? – not just the quality of life, but also the opportunity to earn income in line with their aspirations and attain services from this future broadband society in their home area. A key policy decision now could reverse youthful out-migration within 5 years, lead to re-population and attract significant publicity, awareness and
It requires a strong vision and a belief in the future to bring about change, both social and economic. Development is about long-term quality of life gains and sustainability.

Children from an earlier age are becoming part of the digital information society, often before their parents. Our children will need the opportunity to earn income in line with their aspirations and attain services from this future broadband society in their

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ also been shown to raise average incomes significantly, as new A decision now could opportunities are realised
reverse out-migration, Broadband will be the new enabling communications lead to re-population and infrastructure for economic development in rural areas, just as attract publicity, awareness and inward roads, bridges, ferry and air services were in the last century. investment.

Upon this realisation, the significance of our route to our inevitable broadband future becomes realised. In market terms the Western Isles are always going to be at a competitive disadvantage in our current development paradigm. If we can break free from this harness, and combine the potential new opportunities realisable from broadband with the unique quality of Island life on offer, then we could conceivably become a high technology rural development zone.

Broadband will be the new enabling communications infrastructure for economic development in rural areas, just as roads, bridges, ferry and air services were in the last The increasing pace of development is unrelenting in the century…. we could become a high technology and communications field, meaning that any interim technology rural investments made will never become available mass market, development zone.

before being abandoned - e.g. ISDN. Such a cycle of catch-up may even prove to be depressingly unrelenting in the years to come and do nothing to address economic stagnation, as new adopter sites increasingly take a higher share of the spoils. As the soon to be published Ovum ‘Broadband Network Infrastructure in the Highlands & Islands’ report states: “In the long-term (10 years+) fibre to the building will become the main access technology. This change will take longest in rural areas where the distances and hence cost of laying new fibre will be the greatest.” No doubt the ‘change’ will take even longer in remote island communities off the North Coast of Scotland if we do not grasp the current opportunity now.

The increasing pace of development is unrelenting in the technology and communications field.

The Ovum ‘Broadband Network Infrastructure’ report states: “In the long-term (10yrs+) fibre to the building will The conclusions from such analysis are surprisingly clear and become the main access were certainly not anticipated. A synthesis of the information technology. This change gathered to date, points directly at fibre optic cable as being the will take longest in rural areas where the distances key enabling technology. of laying new fibre will be It is paramount for the Western Isles to future-proof any the greatest”

investment undertaken. Investment in leading edge technology now will give us an economic advantage for the first time in decades. We need to jump a generation, just like many of the WAP-3G telecoms suppliers are already doing, cutting out the cost of interim solutions, which will never prove economic or reach mass-market status, because of the next generation arriving so quickly.

A synthesis of the information gathered to date, points directly at fibre optic cable as being the key enabling technology for a number of reasons.

Contrary to popular belief, it is rural customers (because of the We need to jump a ageing infrastructure faced by telcos and its need to be generation. upgraded) in the US that have been named as being the driving force behind many fibre deployments by telecom suppliers.

It is rural customers in the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Evidence from case studies suggests that one could make the case that fibre is the most cost effective solution in the long term. Not only because it has come down in price to the cost of copper installations, but because of the added social and economic value which could be realised. Conversely, any of the other solutions would need to account from the opportunity cost of not providing cutting-edge fibre services. It would be very easy to conclude, that a 'diversified' range of the interim broadband solutions will be the best, most suitable and most likely for the Islands. To achieve this in a reasonable timeframe, one could envisage the need for numerous public sector incentives for various suppliers and operators of varying descriptions. In such a scenario, the chance of realising a radical and lasting shift in the Islands fortunes will be gone.
The conclusions and vision outlined above however, are unambiguous. Accepting the analysis provided then, begs the question how do we get where we want to be going? as being the driving force behind many fibre deployments by telecom suppliers. One could make the case that fibre is the most cost effective solution in the long term.

A 'diversified' range of the interim broadband solutions will not be ideal for the Islands. In such a scenario, the chance of realising a radical and lasting shift in the islands fortunes will be gone.

Broadband Telecoms Recommendations
• There needs to be a subscription to the principle of the vision outlined above by the development agencies at the local level, right up to the national level. The recommendation is that any further works related to digging up roads, pavements, new builds…etc in communities around the Western Isles, will incorporate the laying of ducting cable as a matter of procedure. This level of commitment from the development agencies will be an early way in which any future vision can be worked towards. Assessments of existing opportunities (e.g. via the sewage pipe infrastructure) and potential for cost effective rollout would also need to be examined. • A full cost/benefit analysis would need to be commissioned to provide the basis on which to build the vision for a ‘connected community’ strategy, this in effect, being the catalyst for the ensuing development process. • There needs to be a multi-agency development partnership set up at the highest level, including local, regional and national and perhaps even international interests from both the private and public sectors. A commitment from the public sector to upgrade its links throughout the Islands may be the necessary catalyst for the private sector to build-out broadband into adjoining communities e.g. CnES making a policy decision to link its offices throughout the Islands by broadband fibre, or
This will mean that any further works related to digging up roads, pavements, new builds… etc in communities around the Western Isles, will incorporate the laying of ducting cable as a matter of procedure.

A full cost/benefit analysis would need to be commissioned to build the vision and identify clearly the goals achievable.

There needs to be a multiagency development partnership set up at the highest level - local, regional and national and even international interests from both the private and public sectors.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
undersea fibre link also requires consideration.

• The opportunities of an undersea fibre link requires consideration. • A wide ranging financial assessment would need to be undertaken to assess the level of incentive required, and consequently assess the timeframe under which development could take place.

Wide ranging financial assessment would need to be undertaken to assess the level of incentive required, and assess the timeframe under which development could take place.

• Broadband wireless could without doubt be rolled-out on a much shorter timescale and is the most 'suitable' interim Broadband wireless could technology and appears to be an additional area worthy of without doubt be rolledout on a much shorter additional consideration.
timescale and is the most 'suitable' interim technology.

A Final Overview
There now appears to be a genuine willingness at regional and national levels to stimulate long-term sustainable economic development in the Western Isles. As one Californian community put it, ‘broadband fibre will provide a lasting legacy for our children’. Sustainability requires that we consider not just this generation, but also the next. If one accepts that the ICT revolution currently happening is on a par with the agricultural and industrial ones of our past then we must, with this single key opportunity, invest in the correct network infrastructure which will not only look after our present needs, but also that of the next generation. Time and community concepts also become a factor and if we are to build out a broadband infrastructure now it must also serve the needs of the future - 20-30 years from now. Fibre-based infrastructure is thus the clear choice. It is surely time that a long imagined visualisation of a ‘connected community' in the Western Isles was established, benefiting the whole community, having long lasting significant economic and social impacts, thus achieving and indeed going beyond the present government's aim of rural social and economic inclusion in the digital broadband information age. In development terms there is surely no competing opportunity awaiting to be exploited. The current internet revolution and associated convergence technology and the resulting effect on society is surely of a magnitude never again to be experienced by our current generation.

It is time that a long imagined visualisation of a 'connected community' in the Western Isles was established benefiting the whole community, and having long lasting significant economic and social impacts.

The current internet revolution and associated convergence technology and the resulting effect on society is surely of a magnitude never again to be experienced by our current generation.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
providers to offer a mix of "Arriving first to market with an assortment of current and video, voice, and data futuristic multitechnology services is a business strategy that offers services to an everwhopping revenue potential. The attraction for service providers to growing customer base is offer a mix of video, voice, and data services to an ever-growing that they can double or customer base is that they can double or triple their revenues within a triple their revenues very short period of time…To be poised for the future and sustain within a very short period success, the reality is that service providers may need to upgrade of time… the reality is that their networks sooner rather than later. Deploying a powerful, highly service providers may scalable technology platform capable of supporting unlimited amounts need to upgrade their of bandwidth will give those willing to make the investment to meet networks sooner rather demand, a rich selection of next-generation services and applications. than later.

states:

Whether it's fibre-to-the-curb (FTTC), fibre-to-the-home (FTTH), or fibre-to-the-office, this long-awaited technology is clearly built for the needs of the 21st century. A fibre-based solution enables service providers to deliver in-demand, bandwidth-intensive communications services and add these services to a growing list of offerings at breakneck speed."

Whether it's fibre-to-thecurb, fibre-to-the-home, or fibre-to-the-office, this long-awaited technology is clearly built for the needs of the 21st century.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

PART 2
Chapter 7
7

The Information Society/Age: Trends & Opportunities

The Development of the Information Society: An Introduction
The identified need for broadband communications, as identified in Part 1 of this report was based clearly on the notion that our society is going through a rapid and lasting change which will present new opportunities for rural areas such as the Western Isles of Scotland. The first part of this report concentrated on the ‘hard’ infrastructure required to enable future-proof access to the Information Society for residents and businesses in the Western Isles. Such access being considered of immediate need, to enable access to the new ‘development cycle’ associated with the formation of the Information Society. However it is not difficult to argue that such infrastructure alone, will not necessarily maximise opportunity, unless there is an associated concentration on the ‘soft’ infrastructure. In this instance we are talking about the ‘people’ factor. The targeted development of the capacity and competencies of the local resident and business population, one can argue, will be as important a focus as the provision of the ‘hard’ infrastructure, if value for money from such major investment is to be achieved. Such a viewpoint provides the rationale for this part of the document which will show that such a complementary initiative on skills development will be essential from the rural development perspective. An overview of several key and relevant aspects of the developing Information Society will be considered to help target and focus resources in the most value-added areas/sectors. Consideration will be given to both the current and developing jobs market in the ICT sector, identifying areas of opportunity for out-sourced work from the Islands, as well areas of potential where new business start-ups could conceivably be progressed (to target developing opportunities), given an appropriately skilled workforce. Case studies and overviews from other experiences in Europe and beyond will also be considered. It is interesting to note the complementary nature of such a given initiative in view of the developing skills shortages in this sector across Europe. Figures gleaned from studies undertaken by Datamonitor, IDC and Goldman Sachs point to a shortfall of 1.7M workers in the ICT sector across Europe between now and 2003. The associated loss to the EU economy as a result will be in the region of £37bn if such shortages remain. Although if addressed, it has been estimated that productivity gains from this sector alone could increase GDP by 1.5%. IDC estimate that employment demand from the ICT sector by 2003 will be above 13m, with current supply only contributing 11.3m trained persons. Being clearly in line with developing EU policy, a specific ICT skills development initiative in the Western Isles has the potential to ‘pay dividends’ in terms of employment creation and GDP gains given the current market outlook. Indeed, the UK has recently begun to relax its immigration laws for non-EU residents with ICT skills to plug the anticipated gap. In this context an under-utilised workforce in the Western Isles is less than an acceptable position to be in. Furthermore, a recent EU summit on Technology, Innovation and Skills Training (March 2000) concluded that with average wages in the ICT sector averaging £29,341 and rising

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ such staff their proportional effects on increasing GDP were significant. In the Western Isles context this makes a strategy aimed at concentrating on ICT skills development all the more attractive. Again, what is to be considered in this part of the report was proposed at this summit as being the possible solution to such developing problems – i.e. the development of public/private training partnerships and a reform of the education system in member states, along with various tax incentives. If this supply-side friction can be negated then (b2b – business to business) e-commerce alone has the potential to increase EU GDP by 5% over two decades. EU Development Programmes such as the Highlands & Islands Special Programme must therefore be highly focused on such targets, in view of such context. According to Forrester Research (http://www.forrester.com) an increasing number of companies in Europe are focusing on external assistance via out-sourcing to address the skills gap. “Two-thirds of the companies Forrester interviewed experience project delays or problems as a result of staffing struggles, 27% of which are experiencing delays lasting a year or more. Precious time and money are spent recruiting, and even then significant numbers of vacancies remain unfilled.” As a result of ad-hoc out-sourcing contracts much productivity is being lost and Forrester predicts and recommends a much more retention orientated out-sourcing environment developing. In the Western Isles context this market situation must present a huge opportunity, given experience to date in developing and managing such out-sourced contracts. Existing out-sourcing concerns have always related to the reliability of the work, but now it seems that if more centrally located businesses find an outsourced solution that meets their quality standards and targets, they will be very much interested in retaining an on-going relationship, due to growing skills shortages. Therefore one can argue that if the Islands can develop a value-added ICT workforce, in conjunction with the appropriate telecoms infrastructure, the development potential would appear to be only constrained by the number of people available for work within the Islands. Such projections may at first appear grandiose, until one realises that numerous companies in the EU already have been offering £1000 bonuses to staff who recommend a potential employee who is then taken on by the company. In other instances internet technology companies (e.g. Ridgeway based in Reading, England - http://www.ridgeway-sys.com/) have offered a ‘£1000 bounty’ for any member of the public who recommends a potential employee who is later employed. The internet itself is also providing direct opportunities for freelance and distance contracting work spanning the globe. A recent survey by the international recruitment consultants Robert Walters (http://www.robertwalters.com) found that even junior web designers are able to earn between £20-£35 per hour rising to £50-£70 per hour for senior Java programmers. New websites have been targeted directly at this sector – http://www.elance.com and http://www.freelanceinformer.co.uk being just two recent examples. In summary, given the current market conditions and development of the appropriate ‘hard’ and ‘soft’ infrastructure within the Islands, there is clearly a major rural development opportunity awaiting to be potentially exploited. This section of the report will now go on to look in more detail at the developing market opportunities, examining case studies and relating them to the Western Isles’ development context.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

7.1

Teleworking & Outsourcing: An Overview of New Ways of Working
Teleworking and Outsourcing (T&O) are now seen as one of the leading examples of innovative new ways of working. T&O is typical of the new work perspective of those EU citizens included in the new Information Society. E-commerce, knowledge management, globalisation of trade and markets, virtual learning and skills development, smart organisations, organisational teams...etc are all concepts with which such persons are familiar with, if not active within. The changing roles of the worker in the Information Age are already becoming well understood: doing work/managing work/selling work/buying work….etc For a further insight into the development of teleworking refer to Appendix 6. Whole new approaches to improving and indeed re-engineering the way work is done are being pursued. New questions related to: Do particular aspects of work necessarily need to be done in-house?, or can they be out-sourced to specialists? are being asked, whilst just several years ago the very concept of out-sourcing work was one to instil universal nervousness at the management level in particular. A changing market where demand for labour has outstripped supply in the ICT sector has now made the asking of such questions a necessity rather than being questions for the large corporate, only being acted upon to achieve some profile raising PR. The potential for such activity has also increased, as the customer or client in the Information Society requires reducing levels of direct face-to-face contact e.g. bank tellers, travel agents, bookshop staff...etc, as they take on an increasing role themselves, enabled by flexible technologies. In this context the potential for location-independent out-sourcing development and teleworking increases further, providing the key infrastructure is present. In this case where the potential opportunities for the key infrastructure recommended are already identifiable, the opportunity cost in economic terms of not proceeding are calculable and likely to be high. This is a far removed scenario when ISDN-enabled exchange infrastructure was rolled-out across the Highlands & Islands, where minimal thought, arguably, was given as to how we might use it. The question: How can we use the new broadband technology and skills to improve the way we work and create new opportunity? is already being asked and considered within this document and by several other initiatives within the wider Highlands & Islands context. Technological developments (e.g. broadband communications) opens up new opportunities for work in 3 main ways according to Botterman & Johnston, 1999: 1. Technology enables existing activities to be done more quickly, more consistently and at a lower cost this means we can achieve more for the same expenditure in time, effort and cost, or we can achieve the same result for lower effort and cost. Technology enables activities to be undertaken at a distance, which previously had to be performed in a particular place. Technology enables new activities to be undertaken, which previously were impractical because of either cost or the effort required.

2. 3.

New ways of working can be made possible from any combination of the above effects, expanding business opportunities due to perhaps: increasing the viability of additional

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ transaction efficiency / business response time to customers and by providing access to specialist skills on a flexible basis. In short, one can make a direct correlation to the arrival of the Information Society and the availability of the appropriate technology, combined with the availability of the principal skills and knowledge required. The former can be utilised by applying the latter to enable enterprise and opportunity to generate the activity required to stimulate the changes, characteristic of the original term.

7.2

Teleworking & Outsourcing in Europe’s New Economy
It is important to distinguish in the first instance one’s definition of teleworking, in so far as the term is used in several differing contexts. Teleworking in the context of this report will be taken to mean a new way of working for people in rural areas which is line with the first definition given below, with maybe some commonalties with definitions 3 and 4.

1.

The remotely based teleworker who will normally be self-employed and possess specific skills which are utilised by distant businesses on a contract basis. This is the type of new opportunity for remotely based rural populations which has been secured in the Western Isles of Scotland in recent years and which will be discussed further in the focus on the Western Isles experience during the last three years. The telecommuter who remains employed by a centrally located employer, but who may work from home several days per week. This is perhaps the most commonly perceived idea of how to define a teleworker. It is this concept which generates most enthusiasm among urban-based decision-makers wishing to reduce urban congestion and environmental (air) pollution. The term encompassing people who work from of a non-central (i.e. rural) telecentre or telecottage, who perhaps previously needed to commute and are largely involved in work for urban businesses. This form of teleworking received much publicity in the UK during the rail strikes of the early 1990s when commuters had repeated problems travelling to London from the large rural commuter belt of South East England and began to turn to their locally based telecottages which previously had been largely non-commercial community based entities. The term used to describe the relocation of work (both 'front' and 'back' office functions) and employees to cheaper locations , usually on a contract basis. Accounting, Sales, Customer Support and Data Processing are characteristic of services provided from a distance, increasingly via Call Centres in the UK. One such example in Forres in the Highlands of Scotland employs several hundred people largely for the processing of parking fines in the London Metropolitan area of South East England. BT, the major telecoms provider in the UK has also sited a UK national helpdesk facility employing similar numbers in the remote town of Thurso in the Highlands of Scotland. There can be little doubt that as teleworking expands across Europe in response to skills shortages, such work will only find its way to ‘location independent’ rural areas if the right infrastructure is complemented by the appropriate skills base. This is without doubt the challenge for the Western Isles in the next phase of the Information Society development cycle. So what are the opportunities in the ‘new economy’ for teleworking & outsourcing?

2.

3.

4.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ There are numerous case studies of teleworking development across Europe which we can examine and analyse in the context of the Western Isles. One can consider some of the key elements and projects originating from each country which is or has aided the development of this sector. The Ötztal Telecentre, in Umhausen (Tyrol - Austria), is a good example of a rural ICT initiative originated in 1996 which was aimed at up-skilling the rural population (mostly the farming sector originally – ‘IT for farmers’) to encourage new teleworking opportunities by providing a core of broadly skilled ICT residents. By 1999, 100 farmers had completed the courses developed. The success of this project led to it being available throughout Austria by 1999 and a further 250 people throughout the country were undertaking the course in that year. The project was a success in that it took the skills training to the rural dweller via investment in telecentres and included a wide range of basic application training. Since the project started a core of 10 teleworkers gained employment on an e-commerce initiative being progressed by a large Austrian record dealer. Other notable contributions from the Austrian experience include the development of ‘model contracts’ for teleworking/outsourcing, a factor which in some instances has helped to ease the traditional concerns of business/industry relating to security, confidentiality, quality, deadlines…etc Such traditional concerns still remain in the UK and it may be that there is a promotional effort required here in the Western Isles instance given the unique experience to date. Making available on-line, examples of past successful contract agreements/specifications or alternatively entering into the consultancy market in this area, are but two opportunities of relevance from the Austrian experience, which may address traditional industry’s concerns in teleworking. Of additional note in the development of the future skills resource required by a successful economy in the Information Age, Austria was one of the first countries to offer free internet access for all schools in the country. The next generation will truly be the ‘net’ generation. An examination of the progress being made in Belgium also points us to some interesting examples of projects with applicability to the Western Isles situation. EVO-Soft (http://www.evosoft.be/) is an example of a ‘virtual’ company which pulls together groups of skilled teleworkers in particular areas of expertise i.e. C++, Java, Delphi, SQL, Visual Basic, HTML, DHTML, Cobol, Assembler, WAP…etc and does business with distant clients. Such a model appears clearly focused on addressing and exploiting the current opportunities opening up in the EU ICT market, where shortages of skills are leading to outsourcing to by core urban businesses to external companies, be they ‘virtual’ teleworkers or otherwise. Such a model is of enormous relevance to the Western Isles and provides the potential business development model for highly skilled groups of teleworkers, operating in a future island context where broadband is available. Like Austria, Belgium has been doing much to lay the foundations for the next generation of the ICT literate and aware population. By 1999 95% of the population had access to 2Mbps+ broadband internet connections, predominantly via Cable. Such high specification core infrastructure allows a potential level of internet literacy much higher than many of Belgium’s rivals and will generate new broadband-based services in advance of other EU

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

In Denmark there have also been notable contributions to the development of locationindependent working. For example - Excel Data (http://www.exceldata.dk/) an information systems and e-commerce consultancy has recently been involved in a successful satellite office initiative. Such initiative is very much in line with the innovative presence the business wishes to portray to its customers. It is such pilot initiatives by high profile ICT sector businesses in the UK that the Western Isles must be in a position to exploit. As ‘new ways of working’ projects (e.g. teleworking) are increasingly ‘fashionable’ image building events for innovative ICT companies and consultancies. Denmark as a whole is often described as being one of the best placed EU countries to exploit the developing information society. As such, its Ministry of IT & Research recently produced the document ‘Realigning to a Network Society’ which states: “Denmark has commenced its conversion to the society which is going to take over from the industrial society: the network society. In all aspects of life - work, training and education, leisure time, culture and trade and commerce - this will offer a large number of new technologies and possibilities…The challenge will be to exploit the future possibilities by realignment in all areas of our economy and society. In short, the challenge is to make Denmark a leading IT nation, while still preserving the best values of our welfare society.” As such the Danish government has identified a priority list of 37 key areas of potential for the year (2000) and interestingly its number 1 priorities is the development of a countrywide broadband Fixed Wireless Access network to enable competition with the existing incumbent. The second priority also relates to broadband, in the form of the development of UMTS networks. The promotion of broadband provider-based competition on a nation wide basis including Denmark’s many rural areas and island communities to include all its citizens is an area in which the UK would do well to emulate. The Danes were also one of the first countries to adopt ECDL, having developed several earlier version on a similar theme. Most recently the Danish Ministry of Education have developed the ‘Educational Computer Driving License’ an initiative of much relevance to the UK context. A recent survey by the EU has found that Finland is the leading Teleworking country in Europe with 16.8% of its workforce being involved, with Sweden, The Netherlands and Denmark being not far behind. Not surprisingly Finland has been one of the key countries in the EU which is keen to address flexible and teleworking via the use of ICT. Indeed the use of ICT has been quoted as being the driving force behind the transformation in traditional work practices in Finland. The Finnish ‘Telework Theme Group’ (http://www.uta.fi/telework/english/), a multi-agency initiative aimed at progressing a national ‘telework development programme’ is also targeted at aiding the establishment of ‘practical action’. At the regional level in the UK www.work-global.com is undertaking a similar role in the Western Isles of Scotland. Finland itself is considered to be several years ahead of the rest of Europe in the ICT sector with, for example, very high rates of mobile telecom connections – 70.4% of the population compared to just 31.8% of the population in the US and 46.4% of the population in the UK (http://www.cnn.com/SPECIALS/2000/e.europe/). Such synergy in development focus is encouraging from the Western Isles perspective.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ With regard to preparing for the Information Society, Finns have had free access to the Internet via their public libraries for some time now. Such initiative could be considered desirable in the Western Isles regional context via both centrally located facilities and mobile facilities for rural areas. Such integration of public services with ICT services could be considered as part of the preparation for an island context in which teleworking based on out-sourced employment contracts across broadband networks to/from the islands has been realised. What is particularly interesting in the Finnish example is that: “…the typical teleworker in Finland is male, is well paid and is working in a professional or a managerial capacity. His pay and conditions of work are acceptable and teleworking has not been forced upon him.” [http://www.sak.fi/]. Right across Europe much progress is being made in the teleworking field. In France for example, the French Telework Association has been in extended talks with France Telecom regarding future opportunities. In Germany the Ministry for Education and Science has teamed up with three of the country's trade unions to develop an ‘employee orientated telework consultancy’ service (http://www.onforte.de/English/english.htm). Amongst other things the site and associated service give advice and legal guidance for teleworkers, provide examples of best practice and give access to examples of previous contract agreements which have been undertaken successfully. Furthermore, an indicator of momentum relates to the number of major German ICT consultancy firms increasingly list teleworking as one of their ‘specialisms’ e.g. TA Telearbeit (http://www.ta-telearbeit.de/tahtml/we_english/indexengl.html). Such initiatives have
relevance to the UK.

Ireland has a population of 3.8 million and over the last several years has been referred to as the ‘Celtic Tiger’ because of its booming economy. The Call Centre industry has played an important part in its growth. Skills shortages have already become apparent in this sector, with great demand for persons able to speak a second European language.

Previous issues of poor working conditions and 'burnout' among staff have improved as skills shortages have led to an improvements in conditions with starting salaries now being in the region of £IR10-14K. Ireland has already demonstrated that the Call Centre industry can be a valuable contributor to employment geared around out-sourced activities. This is of special note within this study context as the Call Centre industry is the fastest growing sector in the Highlands & Islands of Scotland employing over 2500 at the end of 2000. It is interesting to note the demand for language skills in this industry as such centres expand to the European level. A second language appears to be an increasingly in-demand skill which will complement the core ICT skills of persons in this sector and expand the European level portfolio of opportunities for ICT employment based initiatives. Teleworking as a specific opportunity has also been promoted at several levels in Ireland. A national free phone helpdesk for teleworking enquiries (an opportunity for the Western Isles?) has also been recently been complemented by the organising of business breakfasts for corporates related to the opportunities in teleworking in Ireland. In addition, on the infrastructure side the rollout of broadband nationally has become an increasing focus, with the recent addition of £18M of EU structural funds to aid such universal connectivity.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Finally, Ireland has also taken a major step forward for such members of the workforce by signing up and ratifying (only second country to do so) the International Labour Organisation's (ILO) Convention on Homeworking. This gives such workers the same rights as other workers – maternity leave, sick leave, holiday pay, minimum notice…etc Of the other EU countries that have been particularly innovative in the teleworking /outsourcing / ‘new ways of working’ sector, the Netherlands (14.5% of the working population involved in teleworking) and Sweden (15.2% % of the working population involved in teleworking) are also worth mentioning, in so far as they have spawned several projects worth noting in the context of this study. In the Netherlands in recent years one of the most impressive examples of new ways of working is related to the idea surrounding the functional office, designing office space to be more compatible with the home environment. Oracle, in attempting to boost company productivity, loyalty, morale...etc has been one of the leading lights providing cafes, brightly coloured ‘jazzy’ work spaces in a network of 700 small-scale decentralised data centres, all achieved in a period of seven months. With estimates of approximately 80,000 to replace a member of staff in an ever increasingly competitive ICT market, Oracle accrued significant annual savings and measurable increases in staff productivity. This particular project won the Dutch Telework award in 1998. Indeed the Dutch are being increasingly proactive in the teleworking / telecommuting field. A recent feasibility study for a 4 year pilot project costing 200M and funded over 50% from government sources, is aimed at encouraging teleworking among between 10,000-25,000 persons living in the Hague-Amsterdam-Utrecht triangle during its lifespan. This state and private sector sponsored move towards flexible working at a reduced scale, if proved successful could have longer lasting implications for rural areas, as a paradigm shift in big businesses’ obsession with scale towards a more humanistic workplace of smaller scale (with a sense of community, company loyalty…etc) units /centres will have obvious benefits for outsourcing initiatives to rural areas such as the Western Isles. In this instance one must hope that this socio-economic experiment by the Dutch proves as worthy as several others piloted by the Dutch years before being introduced in the rest of Europe. As the ICT based jobs market becomes increasingly competitive from the employer perspective, models of working based on employee retention and productivity must surely gain ground, hence potentially providing increased opportunity in areas such as the Western Isles According to the Netherlands Telewerk Forum:
“Teleworking has become part of the culture in certain companies, and advertisements with teleworking as a secondary term of employment are also appearing. It is also in line with steadily increasing educational levels, independence and personal responsibility. For the companies themselves, the argument that teleworking needs to be introduced not only in order to keep good people, but also to attract new personnel if certain expertise is becoming scarce in the immediate vicinity is becoming stronger.”

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An anticipated replication of such a scenario and thought processes across Europe also shows promise for key areas which can provide key skills from a distance. In Sweden the link between the need for broadband and the future demand for teleworking in the internet economy has been made. For example Bredbandsbolaget (http://www.bredbandsbolaget.com/eng/node85.asp) has articulated the importance of broadband to enabling increased teleworking in Sweden and has also set out to wire every household in Sweden with at least a 10Mbps Ethernet fibre broadband link. Telia, the main telecoms player in Sweden is also keen to extol the virtues of broadband and the opportunities in provides for teleworking and videoconferencing. Sweden as a whole has committed itself to high-speed broadband internet access for everyone in the country and this has been backed up by government legislation and a resulting public-private partnership to implement ‘the world’s best information technology infrastructure’. The government sponsored report which initiated this drive, further stated that such infrastructure would lead to significant growth everywhere in the country, whilst increasing global competitiveness significantly and therefore resultant employment growth. In the Western Isles context this report is in effect making a similar case on the micro scale in the absence of any similar national scheme in the UK. It is clear that broadband and new opportunities related to new ways of working in the new economy are inter-related and some areas will grow and flourish and others will continue to lag behind at perhaps an ever increasing rate. The Western Isles in effect must find the commitment that the Swedes have shown on a national scale, to reposition their economy in advance of future changes in society. By doing this they will be perfectly placed to exploit new opportunities in the new global digital economy of the 21st century. In short, it appears that Sweden as a nation is already undertaking many of the proposed preparatory works required to ensure that it will be a major 21st century economic power and the quality of life of all of its citizens in the Information Society will be secured. The concept of living in an Information Society without having access is not only an economic issue, but a major issue which will face policy makers in many uneconomic areas (e.g. the Western Isles) unless early adoption of the appropriate development strategies are implemented in advance. So what about the UK then? It has been estimated by the EITO that by 2004, 10% of the UK’s total workforce will be involved in teleworking. This situation places us far behind the more technology progressive European countries whose early adoption of new ways of working may very well give them a competitive edge. Nevertheless, there is a growing commitment in the UK to the concept of teleworking, particularly in recent times form government sources, as witnessed by this selection of reports recently published:
Teleworking and Local Government: Assessing the costs and benefits – Ursula Huws Working Anywhere - DTI Managers Guide to Teleworking - Dept. of Employment Moving into the Information Age – an International benchmarking study - DTI The British and Technology – Motorola Report Teleworking Britain – MITEL Report Pay and Conditions in Call Centres – Incomes Data Services

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In short, there is a cultural change taking place in the UK, albeit at a slower pace than many of our European counterparts where more progressive workplace legislation and government policies are making an impact . Teleworking, Outsourcing and ‘new ways of working’ are being given increasing status by both government and business alike. Areas and organisations with past experience and a work history in the sector must surely be increasingly strongly placed, providing infrastructure develops in such areas at an equivalent pace. It should be remembered that the rate of adoption of new technologies e.g. PC, broadband, mobile phone…etc penetration, has often been in the past correlated with the rate of the development of teleworking. In some instances even the size of the average house in a particular country has been shown to be correlated with teleworking penetration at the national and regional levels. In summary, an increased commitment to the Information Age at national and regional levels in even a generic sense will, one could confidently speculate, lead to an increase in new ways of working and doing business over the next decade. At present some watershed developments have happened in the UK over the last 12 months in particular. Specifically, the type of projects required for out-sourced teleworking to become a reality in a location independent industry. The development of new e-lance and free-lance sites on the internet have developed, at least in part by necessity to address increasing skills shortages throughout Europe. Such developments were going to be predicted by this report and their related opportunities highlighted. However, 12 months is a long time in the Information Age! Nevertheless, the development of such specific sites looking to contract out work to highly qualified, highly paid, skilled teleworkers in the ICT industry, be they located in Lewis & Harris or London, does surely a major opportunity. This sector is still in its infancy, and may well grow significantly to be the way that the European ICT skills gap is addressed over the next decade. Indeed, some of the jobs still advertise potential candidates to be based in certain areas of the country, but it is not difficult to predict a much more geographically flexible scenario, particularly with broadband video conference communications just around the corner. In this sense the development of a highly skilled workforce in the Western Isles will not necessarily lead to out-migration, as has been the case in the past, providing we focus our future efforts on the areas of most opportunity. It is such specifics we will address in the next section on e-commerce and the digital economy.

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Indeed, other sites such as www.elance.com and http://www.robertwalters.com/which are predominantly US based, in most instances have no geographical preconceptions and

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Such sites have complemented the already booming recruitment sites spring up all over Europe and North America. Such employment opportunity information and active recruitment drives will help any strategist focus on areas of skills need. Given the demand, it is not inconceivable that any particular rural area could build up a self-reinforcing track record in the provision of skilled employees in the first instance, giving such individuals the industry experience required to return and develop new business ventures be they virtual or ‘bricks and mortar’ targeted at the new information society. As Marya Zamindar, Finnish Ministry of Labour stated: "In one sense, telework is dependent on post-industrialism. A greater need today for geographically-dispersed specialists, for example, makes telework more desirable for businesses now than in the past. Telework in turn, forwards the evolution of postindustrialism by facilitating decentralised production, integration of geographically dispersed companies and labour flexibility." So what are we saying with relevance to this study? The post-industrial society in the UK (late 1980's onwards) and the associated structural changes in the labour force during the 1990's to increase the flexibility of employment (to reduce supply-side friction) and increasingly focus on project orientated (time-limited) tasks often involving team-based approaches would appear to have created a labour market situation which should be ready to embrace out-sourced teleworking on a significant scale. To date, such outsourcing has not been a common phenomena to teleworking initiatives, although as indicated above this is beginning to change. A clear opportunity is thus apparent for an area such as the Western isles which already possess a track record in teleworking. In this sense it is also worth mentioning outsourcing to Call Centres – now one of the fastest growing employment sectors in the Scottish economy. In so far as these Call Centres can be location-independent they are also of interest within the context of this study. Indeed in the Highlands & Islands of Scotland, as stated earlier, there are now over 2,500 people reliant on this industry, one of the fastest growing in recent memory. Added value opportunities will bring their own demands in the Call Centre industry, many more related to inter-personal and communications (written & oral) in both English and another EU language rather than just technical. Productivity gains (40-60%), cost savings (reduced staff turnover), available technology (broadband), appropriate processes (for monitoring and control), set-up costs, issues related to distance and its potential impairment to teamwork are all of consequence when considering new ways of working. On the wider level we must also consider market competition, instability and societal change. In this sense teleworking/outsourcing can be thought of as not only a technological innovation but also a sociological evolution of the linkages between managers and employees resulting in new organisational structures and new and innovative business processes both between businesses (b2b) and between businesses and the end consumer of their goods and services.

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7.3 Teleworking & Outsourcing, Europe’s New Economy & the Western Isles
Given the preceding discussion and overview, what are the key opportunities related to teleworking, outsourcing and new ways of working developing in Europe and the UK of relevance to the Western Isles? It is essential that we understand the areas of developing opportunity within the EU economy (in the first instance) which can be exploited using ICT, in order to be able to identify the types of skills that are going to be in high demand several years from now. In summary, drawing on the European experience to date we can immediately identify several areas of opportunity of relevance to the Western Isles:

The development of virtual teams of skilled teleworkers, with a web presence and a track record appears to be a clear opportunity for The parallel development of on-line course and module development. delivery (via UHI) in the core skills demanded, has been shown to be of significant benefit to other rural areas. eg European Computer Driving License (ECDL)

The development of virtual teams of skilled teleworkers, with a web presence and a track record appears to be a clear opportunity for development. The local public sector could be utilised to help establish credible and relevant track records for such teams.





The provision and availability of past contracts specifications/agreements for scrutiny by potential business providers needs to be progressed, to convince and satisfy middle-management that such out-sourcing contracts have been shown to work successfully in the past. The availability of real examples which can be quoted and from which testimonies can be secured is also of key importance. The provision of a commercial consultancy service to aid structural change in urban areas, with set targets for the securing of outsourced contracts to rural areas (i.e. the Western Isles) would also appear to have some potential to assist teleworking development. Opportunity for a parallel service to provide national free phone advisory service for teleworking enquiries for both business and teleworkers and website. Also initiative based on business breakfast for key businesses has already been piloted successfully elsewhere. Promotional campaign to highlight the ‘cool’ of rural satellite offices within new economy sector – A statement of progress – ‘we have the technology know-how to even run an integrated office from the Outer Hebrides of Scotland’ . Opportunity for

The availability of real examples which can be quoted and from which testimonies can be secured is also of key importance.







Promotional campaign to highlight the ‘cool’ of rural satellite offices within new economy sector.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
unique team building events in rural context from beach barbecues to orienteering events. New ways of working pilot Parallel campaign to projects, projection of positive image to customers…etc promote Islands as a Parallel campaign to promote Islands as a perfect location for perfect location for rere-locating teleworkers, to bring new skills into the area along locating teleworkers, to bring new skills into the with new contacts and possibly employment. area along with new Highlight Swedish & Danish examples to The Scottish contacts and possibly Parliament - of forward thinking in action which is as committed employment. to broadband in rural areas as in urban centres. Opportunities for skills development to mature in-line with growth in outsourced customer service centres (call centres) to provide new level of communication, inter-personal and foreign language skills, in addition to key ICT skills. Teleworking initiatives in areas such as the Western Isles require to capitalise on both public sector and market momentum to lever in both investment and jobs. In the view of the author, it may take a proactive decision by the public sector in the Western Isles in the first instance to give new teleworking initiatives a track record and therefore a competitive foothold in a burgeoning growth sector.
Opportunities for skills to mature in line with growth in outsourced customer service centres to provide new level of communication, interpersonal and language skills, in addition to key ICT skills.









As already stated, it is going to take a proactive public/private partnership to be the catalyst for the types of development discussed to date. An idea of possible funding priorities in this sector was provided in 1998 when the EU allocated funding to ‘Telework Conversion Projects’ throughout Europe, with the following funding breakdown: 50% of funding for equipment and infrastructure 30% to business process re-engineering and 20% to education.

In conclusion, it is very much the view of the writer, given the above case studies and their relevance to development in the Western Isles teleworking context that a real opportunity exists in this sector. In the new economy, outsourcing - be it to call centres or individual teleworkers or indeed teleworker teams will generate significant new activities in non-traditional nonurban locations for business and commerce. The rural Western Isles may have an opportunity to secure such business, given the appropriate skills base and key infrastructure discussed in Section 1. The specific skills demanded are already becoming apparent as one browses the emergent number of freelance and e-lance websites being rapidly developed.

It is going to take a proactive public/private partnership to be the catalyst for the types of development discussed to date.

A real opportunity exists in outsourcing, - be it to call centres or individual teleworkers or indeed teleworker teams - will generate significant new activities in nontraditional non-urban locations for business It is no surprise that the most heavily subscribed FE and HE and commerce.

courses in the Western Isles are in the computing field. The change is taking place in education, as demanded by the public, but there is a worrying lack of realisation of how we will begin to meet the economic development needs of future, now.

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7.4

Outsourcing: A Consideration of Customer Service Centres (CSCs)
In the 1980s and early 1990s the corporate philosophy was related to doing everything 'inhouse'. During the late 1990s this philosophy changed to concentrating in-house on the business's core competencies and out-sourcing non-core functions, such as customer support, to specialist companies under contract. Early successes in teleworking in the Western Isles in the late 1990s benefited from this ethos e.g. the Scottish Law Times multimedia processing contract. Now in the year 2000, a new hybrid sector has become established – Call Centres or CSCs as they are now increasingly being called. The fastest growing industry in living memory? – What exactly is the relevance of the CSC to this study? Well, as mentioned previously this is a key growth sector with specific opportunities for development to enable an increasingly competitive future for rural locations. As we identified in the Irish example, as the industry grew so did the demand for bi-lingual staff to service European-wide demands. In context, this is no surprise. Most of this demand was said to have been fulfilled by immigrant workers. It is thus clear that in the Scottish/UK context there is a clear opportunity to plug such a gap and gain a competitive locational advantage in advance. If one subscribes to the idea of an ever closer integration of the UK and Europe, then an increasing amount of opportunities will present themselves. As the personal computer has penetrated widely into both homes (over 50% in several of the Scandinavian countries) and offices during the last decade it has increasingly changed the way business is done and transactions completed (e.g. online purchasing). The knock-on effects have been that business, (particularly ICT companies) has also had to modify how it operates. For example home PC users (and more recently internet TV users) are increasingly requiring both telephone and e-mail feedback and assistance 24/7. Why? – because they are utilising an increasing range of on-line services and have increasingly high expectations of e-commerce demanding instant service and solutions. As Europe increasingly integrates then the advantage will increasingly go to areas that can provide either bi-lingual or multi-lingual staff able to service the wider European market where similar customer demands are present. Indeed, one could foresee a situation where the SME sector in the UK is going to increasingly require cost effective multi-lingual customer services, as they increasingly embrace business opportunities, e-commerce-led or otherwise with their European neighbours. In terms of skills development this would appear to an area of significant future potential. Recruiting bi- or multi-lingual staff with the appropriate experience and skills is not an easy task for the UK SME sector. “There has been a particular increase in demand for multilingual staff. Multilingual candidates are hard to attract and as a result they can command premium salaries.” [Robert Walters Salary Survey, August 2000] Currently the University of Paisley has identified these very future needs and has developed a specific qualification integrating both ICT and EU language skills. This would appear to be an area UHI could also legitimately develop and integrate perhaps right through its new degrees. Such graduates one might argue would be very much sought after commodities in the new economy.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Already in the ICT sector, according to Locate in Scotland: "Throughout Europe, customers expect a technical help line to be answered quickly by an IT expert, who can resolve their problem in their native tongue." Other location factors mentioned by LiS in Call Centre location relate to the presence of a vibrant community, with an excellent choice of affordable housing and a safe environment for young families. The Western Isles could thus be expected to compete strongly in this sector for these reasons and a host of others already well documented – available workforce, low staff turnover, increased productivity, low costs of development (assisted area status)…etc. The development of broadband and appropriate skills development would surely lead to a highly competitive situation for inward investment, as mentioned in the introduction to this document. It is not entirely inconceivable that the potential to provide everything from pre-sales enquiries to aftersales support across Europe, for specific SME ‘niche’ products/services being sold increasingly on the web to our EU neighbours, could be provided from a valueadded centre in a rural area such as the Western Isles.

The proviso being the appropriate skills base being present. In terms of future opportunity in the new economy such added-value CSC functions are real and early entrants will be able to establish a track-record in advance of the limited competition. An area such the Western Isles with a bi-lingual culture already would appear ideal for such an initiative. A similar type model to the above, but concentrating on UK business functions with the potential to be outsourced is that of Cap Gemini. Cap Gemini is the largest European provider of consulting and information technology services. Its Business Process Management has been developed to address the needs of businesses considering the outsourcing of some of their non-core current functions. As such this appears to be a development model with some potential on a smaller more focused scale. Cap Gemini has concentrated on generic 'back-office' functions such as payroll, recruitment, accounting procedures, IT, order processing, customer care…etc Early clients included GRC outsourcing the processing of 20,000 council tax and housing benefit applications. Three London burghs also outsourced the annual processing and payment collection of 300,000 parking tickets. Scottish Hydro-Electric outsourced call centre services to cover enquiries, emergency and complaint calls. The Cap Gemini Call Centre is referred to by the company as a business process management facility. Interestingly the company initially sought the following attributes in its location decision: • • • • • a pool of educated, committed and enthusiastic people people with a combination of customer care, computer, keyboard and telephone skills a flexible workforce availability of skills training to sustain growth excellent communication links with clients throughout the UK

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ • a relaxed environment with a high quality of life

Cap Gemini specifically located to Forres for the following reasons: • • • • • • • positive findings from skills audit by GRC Scottish education system – quality of qualified staff in North of Scotland Quality of life aspirations for company executives and staff met BT's availability of ISDN Close proximity to Inverness airport Property costs...etc are low Flexibility and quality of staff available

In summary, the above example along with Iomart’s outsourced Net Centre in Stornoway, which located to a specific advance ‘office’ location in a technology-designated business park, for many of the same reasons as those quoted above demonstrate the growth potential of this sector in the rural Highlands & Islands context. Appropriate focus on skills development and the associated infrastructure required in the Western Isles can lead one to confidently predict future success in this sector, if targeted.

Such facilities can also provide invaluable ‘first’ job experience for school leavers and thus help retain an increasing number of our youth. For example such facilities could provide an invaluable opportunity for school leavers to earn some money prior to entering higher education, whilst also giving them key transferable skills. Sponsored employee programmes could also be on offer for top performers, to enable the retention of links with the company and islands. In short the CSC sector is an area of outsourcing which can potentially provide new opportunities in an otherwise stagnant Islands economy. It utilises the opportunities developing in the new economy and has the potential to establish a wide range of positions pertaining to a range of jobs of differing skills and pay levels. It is the type of 24/7 service orientated industry demanded by 21st century consumers and purchasers of key services. Moreover the market is estimated to be growing at 40% per annum

7.5

E-Commerce & the Digital Economy: Opportunities & Threats
Finally, and in advance of addressing the real focus of this section of the report, one must consider the true buzz-words and their meaning and relevance to development in the Western Isles. In many respects they are fundamental to future economic and indeed social development. In this sense they are more than just buzzwords. They are the driving force behind all the recommendations and analysis provided in this report. Exploiting them effectively is arguably, to be the measure of success of any area within the EU within at least the first half of this new century. With telecommunications going digital and even wireless, an expectation of high speed broadband internet access being universally available anywhere, anytime is becoming persistent – the very nature of the market place is therefore changing, for better or worse. On-line commerce still accounts for only a fraction of our annual outgoings, but annual expansion of such spend continues growing at a phenomenal rate. Only 5 years ago the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ internet was a cult communications technology used by ‘geeks’ or ‘nerds’. Now in the UK it is available in close to 50% of all households. Deregulation of telecoms markets has resulted in the increasing globalisation and horizontal and vertical integration within the industry, stock market flotations…etc National boundaries and associated laws are becoming increasingly blurred as technological convergence occurs and barriers to trade are reduced. The sheer volume of international trade occurring has increasingly made the collection of import taxes and duties more difficult for nation states within this global system. Although one might consider the growth of the ICT industry to be one of the main driving forces behind globalisation of the market place it is increasingly becoming the enabler for many industries as they recognise that both their competition and customer base is becoming increasingly global, and therefore need to act appropriately and expand/diversify their operations to compete. ICT is hence certainly central to such development. The globalisation of markets, e-commerce and the development of an inclusive information society has the potential to increasingly shift the current global economic system to that of one approaching perfect competition. Full access to product and service information will become increasingly the norm and comparisons on cost, quality and added-value will all be available at the touch of a button. Already web sites such as www.cheapflights.co.uk are providing such a service for the booking of air tickets. In other instances generic price comparison sites have developed http://uk.pricerunner.com/ which enable consumers to get the best prices in the UK or indeed abroad on a wide range of ‘white’ goods in particular. In such a global market place there must still be a premium for local products and services which possess particular value-added attributes. Indeed, on the type of price-listing websites referred to above ‘value-added’ sections in the product categories are already developing in response to the near perfect competition on price increasingly being experienced. In this sense the unique distinctiveness of the ‘Hebridean’ product will provide many potential opportunities in the global market. Although it needs to be recognised that we need to be part of it to benefit from it. This is actually one of the threats that one can foresee to rural areas in particular which do not enter the global market at an early enough stage. It is imperative that the Western Isles becomes a central player in the move towards the new economy, for if it is not, the threat of further marginalisation within the Scottish/UK economy, nevermind the global economy, appears to be a real prospect. There can be little doubt that our better connected urban counterparts will compete directly for ‘scraps’ in the digital economy, as location independent work becomes available. The Western Isles cannot afford to become a peripheral player, as further losses to the economy will ensue, as well as much potential new activity being foregone. A standard economic cost-benefit analysis will demonstrate the need for investment in this sector now. However it is worth noting the other side of the argument with regard to advance provision enabling participation in the digital economy. There is a particular school of thought that will argue that unless demand-side activity can justify investment in broadband and skills

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ ISDN provision supplied to the Highlands & Islands economy is an obvious example, where the supply-side investment was by many considered to be a failure, because of a lack of demand for the added-value services which could be provided by such technology. In response, one could point to the pricing of the product and its related services, a lack of promotion by BT and a lack of development impetus on the side of the agencies to encourage and foster new business opportunities utilising the technology. In addition, access to venture capital has been a key driving force in the development of the ICT SME sector in technology hot-spots around the world – one method of stimulating the demandside in rural areas which we do not have to. It can be argued though that in this instance there is a clear justification for putting the horse before the cart. We are talking about requiring the key infrastructure to enable participation in a major economic and social opportunity, where nobody really knows what the end use of such broadband technology will be. Increasingly innovative methods will be employed requiring an ever changing set of optimum skills. Hence, awaiting demand to lead to the supply of infrastructure will in this instance be self-defeating approach, as innovation effectively develops where the conditions are right.

Whilst one can argue that the availability of optical fibre and maybe even wireless broadband telecoms is likely to be a prerequisite for attracting inward investment, it should be remembered that such strategies by development agencies will only lead to limited local multiplier effects in themselves. The key to the regional development of the information society must concentrate on the developing of indigenous SMEs and related entrepreneurial activity, whilst enabling social inclusion. In this context there can be little doubt that in areas of current 'market failure' such the sparsely populated (low demand) areas of the Scottish Highlands & Islands, the absence of the appropriate ICT broadband/mobile infrastructure and associated convergent economic activity & skills development, is likely to prove a future inhibitor of investment and economic growth. Yet, on the other hand, such areas in the new location-independent information society potentially have the greatest attraction to the new breed of ICT business with their high quality of life perception. However, without early recognition of these opportunities exclusion will be an inevitable consequence. The UK government and its telecoms watchdog OFTEL have articulated their aim for the UK to become a centre for e-commerce, but unlike Sweden and Denmark and several other EU countries, there is no apparent commitment for all its citizens to be central players in the new e-commerce revolution. The problem seems clear within the current policy context, which we will discuss further in the next chapter. A widening gap with regard to digital infrastructure provision is a real concern as demand for information society addedvalues goods and services remains low. The high price of initial rollout broadband products in combination with their limited bandwidth (e.g. ADSL, Cable) and initial apparent reliability problems does not augur well for future rural rollout timescales. "Given that the market for broadband is in its infancy, current data usage will become increasingly critical as patterns of demand determine the roll out of future technologies. " [Owen Evans, Policy

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A resulting lack of revenue streams from the urban environment (a by no means unexpected phenomena) will lead to further reduced revenue estimates from rural areas. New investment will inevitably slip until at some point in the distant future urban revenue streams pick up as demand increases and prices drop through increased competition. An immediate need for rural areas to embrace the information age and bypass this current situation would seem to be an overbearing priority. Access to the Digital Economy and ECommerce opportunities is not guaranteed at an early enough stage for rural areas such as the Western Isles. So what exactly are these opportunities?

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7.6

E-Commerce & the Digital Economy: A Definition of the Opportunity
"Companies and countries which fail to adapt to the new exigencies of the digital economy will be marginalised from it. To paraphrase the wisdom of the experts 'in five years time there won’t be any Internet companies because they will all be Internet companies or the won’t be companies at all’" [John P Kelly, Department of Enterprise, Trade and Employment, Dublin, Ireland - 1999 ]

Arguably, over the last 9 months with the shake-out within the dot.com industry, this quotation increasingly rings true. The ‘bandwagon jumpers’ without any solid business acumen have been found out and cast aside ruthlessly by the market, hence the well publicised demise of the dot.coms. Nevertheless, in business circles there was little surprise at the failure rate which is often as high as 90% in the ‘old economy’. E-commerce or e-business and more recently m-business come in two distinct flavours business to consumer (b2c) and business to business (b2b). The economics are simple. For example in the banking sector costs can be reduced significantly:

BOX 31 THE COSTS OF BANKING
1.2
Cost Per Transaction ($) 1.07

1 Internet PC Banking ATM Telephone Branch

0.8 0.6 0.4 0.2 0
0.01
Internet

0.52

0.27 0.015
PC Banking ATM Telephone Branch

(Source: Booz-Allen & Hamilton)

The introduction of the Euro, will herald a new transparency in pricing among European countries and may very well prove to be a stimulus for the growth of EU e-commerce. Goods and services across national boundaries will be able to be directly compared for both the consumers and potential e-businesses alike. Furthermore, for the banking sector the potential of attracting a pan-European customer based will become a reality. One wonders about the potential financial sector developments still to be realised in relation to

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It may be that the UK's reluctance, to date, to embrace the Euro may give future competitive advantages to continental banks in the new networked Europe. “Support for the euro among leading UK executives was confirmed today with the release of a B2B ebusiness survey showing more than 50% back entry to the single currency to aid UK participation in pan-European electronic trading exchanges.” [Microsoft UK Press Centre –
Nov. 2000]

The barriers to growth of e-commerce to date and which in some cases remain for the present include technical (encryption/security), legal (regulations), economic (short-term capital costs), user-friendliness (ease of access through PC, TV, mobile phone), cultural (mistrust of technology), and quality (of products & services available)…etc Many such issues are being actively addressed by government and industry. However, getting back to the economics, for the first several years of 21st century business to business commerce is predicted to be the driving before behind the development of ecommerce. The result should be lower business/production costs as cheaper and more reliable suppliers are found. This will inevitably lead to intense competition and ultimately a significantly better deal potentially for SMEs. With regard to rural locations this will mean an enlargement of market opportunities combined with more competitive input costs. The increasing focus on b2b from b2c by recent high profile examples such as Urban Fetch and LetsBuyIt are characteristic of such a movement. Nevertheless, there is a core of goods and services that are already commonly traded between consumers and suppliers on-line e.g. books, CDs, PC games, holidays and an increasing range of ‘white’ goods and consumer electronics. This range is continuing to experience a dramatic increase in quantity, choice and diversity. The successful internet entrepreneurs of the last several years and without doubt the next several years will be those individuals who can recognise the on-line commercial opportunities in advance of the masses, for particular goods and services and have access to the appropriate skills and technology to exploit them. Location independence is once again a feature. At the most fundamental level: "For the commercial exchange of goods to take place there are a number of prerequisites well-known in economic theory. Specialised infrastructures for the organisation of commercial transactions are obviously needed as they have existed since the Middle Ages, such as market places or trade fairs, particular trade sub-areas in towns (one may think of Shinjuku in Tokyo with respect to electronics), and more recently malls of various sorts in suburbs of cities…..Another essential cost feature associated with commercial transactions is of course the information search cost preceding a possible transaction. In transaction theory these are called the ex ante transaction costs…. On both accounts, information highways are likely to significantly reduce costs. The emergence of virtual malls is likely to replace the physical infrastructure; the information search costs are similarly likely to

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ become significantly reduced due to the ease of electronic access and the available databases on products and suppliers. " [Luc Soete, Maastricht Economic Research Institute 1999]. Again, this highlights the economic fundamentals which will drive the digital economy. So lets be very clear in recognising this current move towards the digital economy. It is not a passing fad, it is a global economic revolution, a new way of doing business, which is as potentially relevant to the Western Isles as it is to London. However, the process is more complex than it appears on the surface. A significant element of this commerce seems likely to be derived not from the simple substitution of physical/traditional commerce with e-commerce or indeed m-commerce, but instead centred around new forms and methods of trade and exchange. In the UK for example PC/Internet banking has been a new, increasingly widespread and innovative development in the banking sector which has even spawned new businesses (and competition) in a sector where traditional barriers to entry have been high. Such services are now even becoming increasingly available through consumer television sets. Other new and innovative forms of exchange related to on-line auction sites (www.qxl.com or www.ebay.com ) and even on-line swapping sites demonstrating at the basic level the new ways people are finding to trade on-line. A recent high profile example of this method relates to the recent energy crisis which led to blackouts in California. In response the state announced it was going to hold an Internet auction to secure long-term, low-cost electricity contracts. “I expect these bids on long-term energy contracts should stabilise the market and drive the price of electricity down…This is a key step in our efforts keep the lights on in California at a reasonable price." [California State Governor] " Others such as Napster ( www.napster.com) are fundamentally changing traditional business models related to the distribution of music, despite vast commercial interests in the traditional model. In other instances price comparison sites such as http://www.toobo.co.uk/ and http://uk.pricerunner.com/ are redefining the art of sales and marketing by providing no-nonsense bottom-line information to consumers on price alone, from a vast range of competing sources. New forms of ‘adding value’ to more expensive products are thus being pursued by suppliers in an increasingly dynamic and growing marketplace. A whole host of new financial services related to on-line share dealing, betting, mortgage applications, insurance comparison and arrangement sites, investment opportunity sites…etc are all challenging the traditional way that businesses interact with their customers and each other. Business information portals for UK SMEs http://www.is4profit.com/business_directory.asp and www.b2byellowpages.com are also already widely established. Other b2b innovations include specific company and business research tools downloadable to the desktop such as that available from http://www.1jump.com/ .
“Microsoft questioned key executives from 400 major UK organisations on the progress and future impact of B2B e-business initiatives in the UK….B2B e-business is a priority issue for these UK organisations with almost two-thirds having an e-business director, 74% having B2B e-business on the board agenda and 42% having a company-wide

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Forrester research estimated in December 1999 that b2b e-commerce was set to grow in the US from $108 billion in 1999 to $1.3 trillion by 2003, a level approximately ten times that of b2c. Indeed, it was estimated that during the year 2000 more than 50% of US businesses begun selling goods and services on-line. Theoretically, there is no aspect of a business’s activities that fall outwith the e-commerce b2b sector. From the purchasing of raw materials for the production process, to office supplies & electronic banking services, travel bookings, staff development..etc are all possible via on-line b2b. “The extent to which B2B E-commerce represents the largest productivity tool for the economy over the coming 5-10 years cannot be underestimated.” [Sands Brothers & Co Ltd, Investment Bankers ] Again, from the US a research study on purchasing staff in US companies found that 25% purchased on-line during 1999, rising to a predicted 90% by 2002. Such figures need no explanation, a revolution is happening. B2B is not limited by the number of consumers with PCs and the number of them that are on-line, the number that are on-line with unmetered access, the bandwidth of their connection and then the number of them that feel confident enough to purchase over the internet. B2B’s growth in comparison to b2c growth is thus going to be significantly higher. The following diagram highlights this situation in the US context:

B BOX 32

The digital economy is thus a well acknowledged business trend, so much so that it would be accurate to describe it as a structural change in business and commerce. With a sometimes quoted 1-2 year lead-in time for e-commerce enabled businesses, there is a danger that traditional economy businesses which have been slow to invest may see their market share disappear, by the time they get geared-up for the new economy. Referring back to the very first quotation in the opening lines of this section, it thus seems clear that the areas that are both most appropriately geared-up and switched-on to the new digital economy will be the ones that reap the benefits in the long run. The business case for the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Western Isles to invest heavily now to become part of this evolution to business revolution is hence self explanatory. For example: "Electronic exchange is likely to lead to a substantial reorganisation of markets with the value chain shifting across business. The phenomenon of outsourcing is typical of such reorganisation. As witnessed in the rapid growth of business services, activities that are not part of the core manufacturing or service production of the firm can now be carried out more efficiently outside of the firm, in specialised companies." [Luc Soete, Maastricht
Economic Research Institute 1999

The Western Isles’ economy must be able to up-skill and up-grade its communications network to be in the right position at the right time to exploit such opportunities. A radical and focused approach to future development initiatives is therefore recommended, squarely centred on the structural and cultural change necessary to attain success for the present and more importantly for the future generation. One does not have to look far for an example of such forward thinking. The ‘Celtic Tiger’ i.e. Ireland, has just announced funding of 98M from government and EU sources, matched by 220M from private sources to promote increased internet penetration for both social and commercial use and also to overcome particular region’s ‘communication deficit’. The project includes funding for a nationwide broadband telecoms network proposed by the Electricity Supply Board (ESB), numerous e-commerce projects and initiatives, and also the deployment of innovative broadband solutions such as WLL and DSL in many rural areas with an inherently poor communications infrastructure. Interestingly, the ESB’s choice for its new network is 2.5Gbits/sec fibre which is apparently already being rolled out on the ESB’s electricity infrastructure between Dublin and Limerick. A strong emphasis has been placed on public-private partnerships, as has been recommended within this study and initially 13 such projects were approved. There is little doubt in Europe’s fastest growing economy, where their future opportunities reside. Scotland, the Highlands & Islands and the Western Isles need to make equally bold moves if we are to compete and succeed in the Information Age. There would appear to be a unique opportunity for Europe's periphery to become more economically and indeed socially integrated into the new EU internal market and beyond. The expanding EU internal market would appear to be an ideal breeding ground for inclusive e-commerce development, particularly when combined with a common European currency. Many of the traditional barriers to entry into the wider market (i.e. costs of entry, the gaining of market knowledge, distribution costs/export licenses, information on competitors…etc) will be negated and the opportunities for the periphery-based SME will be significantly increased. According to Romano Prodi, president of the European Commission, e-commerce and ebusiness are: “…the most significant changes since the Industrial revolution, are farreaching and global. They are not just about technology. They will affect everyone, everywhere. Managing this transformation represents one of the central economic and social challenges facing Europe today... "

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The eEurope Initiative (to be discussed further in chapter 8) currently being promoted by the European Commission’s Information Society Directorate is thus aimed at:

∫ Bringing every citizen, home, school, business and administration on-line

∫ Creating a digitally literate and entrepreneurial Europe

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

∫ Ensuring a socially inclusive Information Society As a microcosm of Europe the Western Isles could do a lot worse than subscribing fully to such themes which will bring about not only a population integrated into the Information Age, but also one which will be well placed to exploit new business and social opportunities. Sweden and Ireland are two examples in which such themes and targets are being embraced. Scotland, the Highlands & Islands and the Western Isles all appear to be unclear in their future direction, yet the clear indicator are there for all to see. Again referring back to the opening paragraph of this section, it is clear that the sceptics who question the demise of the dot.coms as being anything other than a blip are the ones who will lose their competitive advantage as we move incessantly towards the digital economy. Some good examples of the growth of e-business can be reviewed via the following portals which focus on growing SMEs online:
http://www.isss-awareness.cenorm.be/Home/ecommerce_awareness.htm http://www.ecommercetimes.com/ http://www.eubusiness.com/ http://www.e-centre.org.uk/ http://www.better-business.co.uk/ http://www.bizmove.com/ http://www.isi.gov.uk/ http://www.interforum.org/ http://www.quicken.com/small_business/ http://www.toolkit.cch.com/

As we shall ascertain in the next chapter, it is within the SME sector that UK efforts in the e-business/e-commerce are currently focused. SMEs are going to need assistance to restructure their operations and realign themselves within the new economy. New ways of working will have to be adopted, as key Information Age skills are not necessarily going to be present and therefore they must be able to adapt to survive.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The Spectrum Business and Consumer Surveys (1997) in support of the ISI ‘Moving into the Information Society’ publication showed that there was a large gap between the usage of ICT between large and small companies. It was identified that SMEs in the UK in particular should be a key target sector – "These companies need to be the focus of government, trade association and large company efforts to stimulate UK development towards the Information Society…As SMEs are so pivotal to the UK economy, it may be that the route to achieving the Information Society will be through winning the hearts and minds of SME management." As a result of this analysis the ISI has been squarely focused on the SME sector in the UK and this is an area we will also consider in the following and final chapter of this report. The adoption of new ways of working by both the SME and large business sector in not just the UK, but Europe also, will provide a range of potential key opportunities for the Western Isles economy. In summary then, e-commerce is not being progressed for any other reason than economics, as indicated at the start of this section. The incentives related to gaining a competitive advantage by reducing operational costs, streamlining business processes and improving communications with customers has led to the current e-commerce revolution. E-commerce: “…cuts across geographic boundaries and time zones to save time and costs, to open up new market opportunities and enable even the smallest of companies to compete on a globally. Electronic commerce spans established processes such as bar code scanning and electronic data interchange (EDI) as well as newer arrivals, like e-mail, the Internet, the World Wide Web and mobile electronic commerce.” [http://www.ecentre.org.uk/]

In short, the outlined e-commerce revolution and move towards a digital economy has the potential to offer key opportunities which will be location independent. Given the anticipated and indeed required move towards new ways of working in the new economy, new business practices adopted by both SMEs and large business will both present outsourcing opportunities and enable new business models and entrepreneurial start-ups to operate as effectively, in many instances, from a Western Isles location as from a London location. Availability of the appropriate broadband technology has already been discussed as being one of the key pre-requisites. An appropriate skills base along with the supporting policy environment are also of key importance. So, now that we have established the magnitude of demand and opportunities related to the digital economy we now need to more clearly focus on such issues to help aid the anticipated development process. This is what the final chapter of this report will focus upon.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Chapter 7 References:
ANDERSON CONSULTING, (2000), European eCommerce, for DG Information Society. BINMORE, Ken, ESRC Centre for Economic Learning and Social Evolution (ELSE) University College London, New Rules of the Digital Economy - Who are the Winners? IST Conference Helsinki 1999. BIRCH, Dave, © Hyperion Systems Limited http://www.hyperion.co.uk, The Generation Game: 3rd Generation Mobile is Coming: Time to Think About the 4th, IST Conference Helsinki 1999. BOTTERMAN, MAARTEN & JOHNSTON, Peter., (August 1999), Status Report on European Telework – New Methods of Work 1999, Office for Official Publications of the European Communities, Luxembourg, ISBN 92-828-7960-7 CALTA, Carol A., Arthur Andersen SA, Amoreiras Torre 1, 15º, 1070-101 Lisboa, Portugal, The Internet Revolution: Telemedicine and Co-operative Environments, IST Conference Helsinki 1999. CLARKE, Les, Director, BT UK, Business Services, Think Activity, Not Place - Flexible Working in Practice, IST Conference Helsinki 1999. DEPARTMENT FOR EDUCATION & EMPLOYMENT, (January 2000), Skills for the Information Age, UK Information Technology, Communications and Electronics Skills Strategy Group EURO – MED NET 98 Conference, (March 1998), Role of Internet and the World Wide Web in Developing the Euro-Mediterranean Information Society, Summary Proceedings. EU Publication, DG Information Society, IST 2000, Office for Official Publications of the European Communities, Luxembourg, ISBN 92-894-0042-0 EVANS, Owen, Policy Officer, BT Parkgate, Cardiff, Wales, Building the Welsh Economy on Global Digital Infrastructures ,IST Conference Helsinki 1999. FOLIAS, Christos, MEP, Trade and Technology as Global Drivers of Local Economies, IST Conference Helsinki 1999. GATTI, Barbara, CEN/ISSS, 36, Rue de Stassart 1050 Brussels, Belgium, How to Reap the Benefits of ECommerce ,IST Conference Helsinki 1999. HAMBRECHT, W.R. & Co (2000), eNetwork Infrastructure: Enabler of the Networked Economy, Equity Research. HEIKKILÄ ,Pauli, Managing Director, Digita Oy, Value and Value Creation in the Digital Economy, IST

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HIE, (June 2000), Call Centres in the HIE Area, On-Line Network Economic Information. HMSO, DTI, (August 2000), Working Anywhere: Exploring Telework for Individuals and Organisations, UK OnLine for Business, 2nd Edition. INFORMATION SOCIETY INITIATIVE, (1997), Moving into the Information Society, DTI Publication. KELLY, John P, Department of Enterprise, Trade and Employment, Dublin, Ireland , Change of Mindsets towards flexibility and entrepreneurship in the Information Society, Presentation of the Irish Initiative, IST Conference Helsinki 1999. LOCATE IN SCOTLAND, (1998), Call Centres in Scotland – Where the Accent is on Success, Scottish Enterprise Publication. MARSHALL, Ian W. and ROADKNIGHT, Chris, BT Labs, Adastral Park, Martlesham Heath Ipswich IP5 3RE, A New Approach to Active Network Management, IST Conference Helsinki 1999. MORGAN, JP. (Sept. 2000), Online Finance Europe: Invasion of the Customer Snatchers, Equity Research POKKA, Hannele, Governor , Global versus local, IST Conference Helsinki 1999. SACHS, GOLDMAN, (May 2000), B2B – Just How Big is the Opportunity?, Technology:Internet Commerce Report SHAPIRO, Hanne, Danish Technological Institute, Centre for Competence and IT, 29 Kongsvang Allé, 8000 Aarhus C, Denmark, The Floating Islands Revisited - Living and Learning in the Digital Archipelago, IST Conference Helsinki 1999. SOETE, Luc, MERIT Maastricht Economic Research Institute on Innovation and Technology, University of Maastricht Website: http://meritbbs.unimaas.nl/soete Towards the Digital Economy: Scenarios for Business IST Conference Helsinki 1999. TRISTRAM, Clive CHKS Ltd., 1 Arden Court, Arden Road, Alcester, B49 6HN, England Ethical Issues in Healthcare Telematics, IST Conference Helsinki 1999. US DEPT. OF COMMERCE, (Oct. 2000) Falling Through the Net: Towards Digital Inclusion, Economics and Statistics Administration. WAGGONER, James & Mlinar, Gavin (January 2000), The Vertical B2B Sector, Sands Brothers Investment Research. WALTERS, ROBERT www.robertwalters.com (Aug. 2000), Salary Survey: UK and Ireland, On-Line Report:

YLÄ-JÄÄSKI, Juha, Nokia Research Center, P.O. Box 407, 00045 NOKIA GROUP, Finland, Towards a Mobile Information Society, IST Conference Helsinki 1999. ZALE, David & Waggoner, James., (July 2000), The Business-To-Consumer E-Commerce Sector, Sand Brothers & Co Ltd, Investment Bankers. ZAMINDAR, Marya, (1995), Telework in Finland – Factors Behind Telework Use as Seen From an Employer Perspective, Ministry of Labour, ISSN 0787-9393

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

INTERNET SITES ACCESSED FOR RESEARCH PURPOSES:
http://www.e-centre.org.uk/ http://www.isss-awareness.cenorm.be/Home/ecommerce_awareness.htm http://www.ecommercetimes.com/ http://www.eubusiness.com/ http://www.e-centre.org.uk/ http://www.better-business.co.uk/ http://www.bizmove.com/ http://www.isi.gov.uk/ http://www.interforum.org/ http://www.quicken.com/small_business/ http://www.toolkit.cch.com/ www.b2byellowpages.com http://www.is4profit.com/business_directory.asp http://www.1jump.com/ www.elance.com http://www.robertwalters.com/ http://www.freelancers.net http://www.freelanceinformer.co.uk/ http://www.bredbandsbolaget.com/eng/node85.asp http://www.forrester.com http://www.ridgeway-sys.com/ http://www.uta.fi/telework/english/ http://www.cnn.com/SPECIALS/2000/e.europe/ http://www.sak.fi/ http://www.onforte.de/English/english.htm). http://www.ta-telearbeit.de/tahtml/we_english/indexengl.html http://www.work-global.com http://www.evosoft.be/en/frames.html http://www.eto.org.uk/index.htm http://www.teleport-brussels.be/en/index.html http://www.ispo.cec.be/ecommerce/Welcome.html http://www.isi.gov.uk/isi/ http://www.bta.be/index.html http://www.fsk.dk/fsk/div/hearing/draft.html http://europa.eu.int/comm/dg13/index.htm http://www.sitra.fi/tietoyhteiskunta/english/st5/eng01.htm http://www.tkk.utu.fi/telework/kirjall.html http://www.av-edge.com/ http://www.e-skillsnto.org.uk/ http://www.researcha.com/ http://www.ilrt.bris.ac.uk/mirrors/scout/ http://virtualsociety.sbs.ox.ac.uk/

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
http://www.gs.com/hightech/research.html http://firstmonday.org/

Chapter 8
8

Skills Development / HRD in the Information Age

Skills Development: An Introduction
"Creativity combined with understanding the possibilities of ICTs and the ability to dream the unimaginable in new forms of partnerships, seem to be the sacred blessing when we look at qualifications and types of employees in demand." [Hanne Shapiro, Danish Technological Institute - 1999]

The above quotation summarises the extent of the problem when one tries to identify with any authority the key skills and human resource requirements of the digital economy. What is clear is that there is going to be a deficit of 1.7 million of employees across Europe by 2003, as mentioned earlier in this report, which if not addressed will seriously undermine the EU economy. This deficit is already apparent. As such this deficit presents a key opportunity for rural areas in so far that it is this deficit that will force key businesses throughout the UK and Europe to investigate and adopt ‘new ways of working’ to address such problems. Areas such as the Western Isles must be ready with the appropriate ‘hard’ and ‘soft’ infrastructure required to meet such future needs. It is therefore the aim of this section to focus-in on the types of key skills that are being demanded. Again, it needs to be reiterated that unless such skills and human resource development is undertaken across the board, the rollout of broadband will neither make sense nor be justified, unless such supporting development is secured and widely available to be accessed by the Western Isle’s population. If one gives the population first class communication links in the information age, coupled with the skills to utilise it to generate new activity and wealth, then in development terms the area could ask for little more. The presumption made in this chapter will be that an all-encompassing vision of the Island’s future place in the Information Society will be shared throughout the community and that there is at some time in the not too distant future a clear commitment made to realigning our economy and associated resources e.g. people. In this context one can begin to identify the types of opportunity and the specific skills required by such an area as the Western Isles. One is also then able to begin to identify how we might achieve the desired outcomes thought to be fundamental to survival and integration into the new economy. Again, co-operation at all levels in the local area will be required to ensure access on the ‘learning ladder’ at the various points suited to our population. As the importance of this parallel initiative is recognised then key targets and milestones will need to be set across all sectors of the community, if we are to ensure that universal social and economic inclusion is achieved. In theory, the new technology aspects of the Information Age will often be as relevant to the pre-school child as to the OAP. It may be the move towards

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ already developing opportunities for persons with the right skills in the new economy, even if they are located at the other side of the Atlantic from their paymasters.

8.1

Sector Specific ICT Up-Skilling Opportunities: A Discussion
There are several key sectors that have continued to experience solid growth, even through last year’s downturn in confidence in the ICT sector as a whole. Although some share prices may have fallen, this has had little to do with performance and more to do with an initial over-valuation of stocks and subsequent adjustment. Recruitment demand is still high as intimated above and forecast to significantly outstrip supply. Although many efforts are being made in a number of areas to address such issues, a local response to the opportunities identified is essential if the area is to develop along the appropriate development path.
"…although the flow of people from the education system with IT qualifications is rising, this will not in itself be enough to ensure that employers are able to recruit people with the combination of skills and aptitudes which they seek…Some skills mismatch is inevitable given the rapidity of technical change particularly in IT." [DfEE (January 2000), Skills for the Information Age]

The ICT & Electronics sector represents one of the most dynamic components of the UK economy and hence is a good place to start. Unlike many other UK industries a significant number of businesses in this sector have been, and continue to, experience double figure growth rates on an annual basis:

BOX 33 GDP AND SOFTWARE & SERVICES COMPARED

% Growth
18 16 14 12 10 8 6 4 2 0 -2

Software & Services GDP

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

Source: Office for National Statistics (1998 Est. for S&S sector)

1998

Year

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ This sector has been characterised by market expansion, increasing global competition, technological development and innovation. People are the key to the current and future prosperity of this sector. During the 1990s in the UK, the supply of such skilled personnel failed to keep pace with strong jobs growth in this sector and the result was high turnover, vacancies and a resultant pressure on salaries. Although this supply issue has now evened out, the overall trend in demand remains upwards. One of the key points highlighted by the DfEE’s ‘Skills for the Information Age’ report was that: "…many roles in IT services are suitable for people without deep technical skills at the
point of recruitment, with many employers often most interested in transferable, interpersonal skills on the basis that technical skills will be developed in employment."

This is a similar experience to what has been found in practice as the Western Isles ICT Advisory Service has sought out new teleworking jobs. Likewise, at the Iomart Internet Service Centre in Stornoway it has been found that employees need not have a wideranging IT&Telecoms knowledge, in many instances, prior to employment. There would appear to be an opportunity to develop an IT Services+ qualification to address such issues. But a solid range of 'other life' skills has also proved important (i.e. inter-personal skills) as has attitude and enthusiasm. With regard to the latter, the school leaver market would appear to be a largely untapped market in that particular instance. If the area is to progress, then a more proactive approach to enticing school leavers through time into the local ICT sector would be desirable. A collaborative approach by the public/private sector to employ this target market whilst sponsoring them to gain official qualifications could be a win-win situation. In theory, one could ‘snag’ school leavers by the enticement of earning money to go towards the ever increasing cost of studying on the mainland, then offer an alternative day-release route through UHI or other provider and/or sponsor the most able after a two year period, tying them in to return to the Island or company for a certain amount of time after graduation. Ultimately, the future of the Island’s development capability depends on achieving success in retaining potential youthful out-migrators and their associated ICT skills. Future entrepreneurial activity and ICT business start-ups are essential in the new economy. The associated development of a new business start-up venture capital fund by the public authorities may also help drive such development. However, as outlined above, excluding the software and systems development (and management) functions, it would appear that the ideal employee in the high growth software & services sector in the 21st century will need quite a different range of skills that what one might first have imagined. In the IT Services sector _ of employees are likely to be managerial, professional and technician-level employees, many being accepted from other occupational groups. In the telecoms and electronic manufacturing sectors a significantly smaller number of employees fit into the above categories, being replaced by electrical and electronic engineers and production operator and assembly staff. It is the former sector that is likely to be of most relevance to development in the Western Isle's context. The Information Technology, Communications and Electronics Skills Strategy Group (ITCESSG) findings show that

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ recruitment problems in the ICT sector in the UK with associated salary inflation. This would appear to be a ripe market for teleworked outsourcing, particularly given that the supply of appropriately qualified staff is going to be in increasingly short supply in urban areas in particular.

The ITCESSG's findings also state that there is a specific demand for: "…people who

combine up-to-date technical knowledge and problem solving ability with good communication skills and the capacity to 'understand other people's businesses'. " Such a finding is entirely

consistent with the more widespread convergence of numerous business sectors in the Information Society. Capacity building in the technical field is still an opportunity nevertheless, as recent research by IBM Global Services has estimated (taking into account Y2K demand, the possible entry of the UK into the Single European Currency and growth in the wider economy) that future employment growth rates in outsourcing and internet-related activity by/to IT technical specialists is likely to increase by over 40% (348,000) between 19982006. Similar exercises by the Institute of Employment Research (IER - Warwick University) and Cambridge Econometrics predict similar demand. A further report by the International Data Corporation (IDC) in 1998 on a Europe-wide basis calculated that there was a 3.5% (320,000) shortfall in supply of IT specialists and further calculated that if current (1998) levels of training investment remained static then this shortfall in supply Europe-wide would rise to 12% of total demand by 2002. Again this confirms previously quoted statistics and as a result there would appear to be a clear opportunity here for outsourcing to a highly skilled Western Isles labour force. Recent estimates by the Labour Force Survey (LFS) still conclude that: "…insufficient
numbers of students with the skills and knowledge required to work in the ITCE industries are emerging."

Other findings from the ITCESSG study are also of note. IT businesses gravitate towards graduates, even with non-technical specific degrees, due to their perceived analytical and conceptual skills. On the other hand although the electronic sector is much more discerning on the technical content of the degree, it has been concerned about the problem-solving, team-working, communication and management abilities of its graduates. Again it would appear that there is an opportunity to develop an ICT+ qualification to address such issues. In summary then, on the supply-side the ITCESSG state that they "…do not expect the
numbers of people with technical skills coming through the higher and further education routes to increase sufficiently over the next few years to meet the growth in demand, unless more able young people – and particularly women – can be encouraged to take up ITCE courses."

There appears to be a perception that ICT industry jobs are too technical, insular and impersonal and this does not appeal to either many young people or women. Such an assertion is illustrated by the low numbers of each entering the industry. As a consequence

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ if up-skilling is to be achieved within these two key groups then a parallel campaign of awareness-raising and education about the sector needs to take place. A parallel and on-going effort to attract more people into the industry via skills development may be necessary to add-value to a parallel development of broadband over a minimum of 5 years. Perhaps initially targeted at those persons available on the skills register. A complementary campaign to encourage business outsourcing to the Islands skills base of teleworkers could then be a logical next step. The DfEE’s ‘Skills for the Information Age’ also recommended the on-going importance related to the gathering and forecasting of demand and supply within the ICT industry, although this being clearly a national initiative. The report also recognises the need for a to National Information Systems Skills Framework – which describes the skills and key competencies required for different IT jobs, the ladder for career progression and the qualifications and training required this forming the basis of their second recommendation. In compiling the report six main skills were mentioned by the ICT sector as being critical: 1. 2. 3. 4. 5. 6. Oral Communication Problem Solving Team-Working Improving your own Learning Business Awareness Creativity & Innovation

There would appear to be a clear opportunity to link UHI degrees into such key competencies and a range of new tailor-made courses designed specifically for the ICT sector. A recently developed website http://www.career-space.com/ demonstrates how seriously the industry is addressing the projected skills shortage. Sponsors apart from the European Commission include IBM Europe, Nokia Telecommunications, Philips Semiconductors, Thomson CSF, Siemens AG, Microsoft Europe, and British Telecommunications Plc. The on-line presence itself is aimed at a: “…project is to put in
place a clear framework for students, education and training institutions and Governments, that describes the skills and competencies required by the ICT industry in Europe.”

A range of generic job profiles have been developed to both attract potential students and to: “..provide higher education ICT curriculum designers with clear up-to-date and easily

accessible information on the skills needed by the industry, and assist Governments in developing policies to foster the growth of ICT skills in Europe.” As such, this initiative in addition to the

above report, provides important pointers as to where investment in skills develop should be focused at the Western Isles level to specifically address the looming skills crisis. The main competencies mentioned in this instance are as follows: 1. 2. 3. 4. 5. People who are Creative and artistic People who are excited by technology People who have a liking for science and mathematics People who good communications skills People who like dealing with people

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

To date there have been 13 generic job profiles in various sub-sectors with a full range of supporting information provided, aimed squarely at filling the skills gap. A comprehensive set of recommendations has been formulated which require careful consideration if key opportunities are to be exploited. These recommendations are included in Appendix 7.

This new strategy

therefore for immediate, effective and concerted action by the European Commission, the Member States, industry and the educational institutions to address the skills shortage and to establish: A New Partnership to Close Europe's Information and Communications Technology Skills Gap.”

“…requires quick cost-effective responses. The 'ICT Consortium' calls

A recent amalgamation of the ‘e-business’ National Training Organisation (NTO) with the ‘Information Technology’ NTO to make the ‘e-skills’ NTO demonstrates the increased convergence related to doing business and being integrated into the ICT sector. NTOs are accredited by government as being the ‘voice’ of the industries for which they represent. Prior to amalgamation, the e-business NTO undertook an initiative called Project Gemini that brought Higher Education and industry together to consider and promote career opportunities in the ‘IT Services’ industry. The project was completed in March 2000 and is of direct relevance to this study. Project Gemini had the following aims:
• • • Improve the availability of graduates to the IT Services and related industries To bridge the gap between the skills needs of industry and undergraduate skills development Improve linkages between employers and educationalists

At the time of writing, the report identified a skills gap of 40,000 persons within the UK alone and targeted its initiative at not only attracting more students and young people into the industry, but also targeting graduates with non-IT specific skills into the sector, recognising many of the transferable skills available. Much of the project was based on looking at employability skills now and in the future and involving employers, educators and students to help the changing of perceptions on all sides with regard to what each other was/is doing. This lack of communications/understanding is arguably, apparent in the Highlands & Islands context and again arguably, at the local Western Isles level. There does not appear to be an overall visionary strategy that each ‘segment’ of the market has enthusiastically signed up to. Interestingly, the study found that businesses in the ICT sector identified problem-solving, oral communications and business awareness as being the keys skills they were looking for in graduates, rather then just IT skills. Indeed, the significant majority of respondents from the SME and large business sector stated that they are quite happy to recruit non-IT graduates, as they did not necessarily require ICT skills at the point of entry. Both students and employers identified skills awareness and work experience as being two of the most valuable activities that could be undertaken. The project itself and resulting advisory booklet: “Have you got what IT takes?” won the top prize in the category ‘Best Higher Education Careers Literature’ and as such is also a credible piece of work, The six key skills required by any graduate were identified by the three main interest groups involved in producing the report:

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ • • • • • Teamworking Problem Solving Improved Learning Business Awareness Creativity and innovation

BOX 34

As Box 34 demonstrates, the awareness-raising effect among groups of students from the ‘arts & humanities’ faculties broadens their employability significantly. Where previously the IT Services sector was considered to be a career path closed to such students for a range of reasons which were largely misconceptions, once recognised, it is a legitimate aspiration from a whole range of disciplines. As can be quite clearly explicated from the three separate skills development initiatives discussed above, there are core skills that must be developed to support the development of e-commerce and ICT related industries. A common misconception among students and educators is that such industries are looking to employ ‘techies’ but this is not necessarily the case as there other more important skills of the nature mentioned in the above discussions. One would have to look to UHI in such a context to increasingly work and consult with the IT sector within and beyond the Highlands & Islands to build and integrate such core competencies into its new degree programmes. Other key areas identified in this research relate to the importance of work experience and a second EU language, if we are clear about looking to and addressing the future skills requirements of industry in the Highlands & Islands and beyond. Ultimately, UHI degrees need to offer something more to employers in the Highland’s and UK’s fastest growing industry (which is suffering from an increasing skills shortage), than standard degrees from traditional Universities. Such degrees need to be ‘21st century’ enabled and address key developing market requirements. UHI arguably, therefore needs to work closely with the IT sector along the lines of the Gemini project in South East England and market itself and build its reputation upon producing such graduates. It is after all marketing itself as being a technically innovative educational delivery establishment and has an opportunity to produce graduates that will be sought after by an industry that has been involved in agreeing and approving the key competency strands

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ problem solving, team working, work experience…etc. The UHI initiative at introducing PPCs linked to degree programmes is very much compatible with such thinking, but needs to be developed further via on-going consultations with industry.

8.2

ICT Skills Development Opportunities
In addition to addressing core generic competencies there are also key technical skills areas that are relatively straightforward to identify by considering industry trends and more specifically developing industry demand. There is a clear parallel opportunity here to build up key technical skills within the community of the Western Isles for example which will provide opportunities for new business start-ups to address developing market skills shortages in the UK and Europe, given the location independence of much of this work. As outlined in the introduction to section 6, by 2003 there is going to be an anticipated 1 million e-business related positions shortfall [Internet Magazine, Dec. 2000]. One could anticipate that this unsatisfied demand will lend itself, particularly in the technical skills context, to an increased level of outsourcing – refer to sections 6.3 and 6.4. Existing structures in the Western Isles such as the Lasair teleworking model may directly benefit or such workflows may also target the call centre model at varying scales. Could there be an opportunity to complement the Highlands & Islands Learning Grid proposal with broadband telecoms being delivered to rural ‘outreach’ centres to that of one providing key advanced rural ICT workspace infrastructure to address future potential demand? Obviously such an initiative would include a certain amount of risk, as all advance infrastructure does. On the other hand such key infrastructure may open up a multitude of opportunities to plug at least a small part of Europe’s developing skills gap. Such advance e-business centres integrated with UHI outreach centres may be totally complementary and potentially an innovative added-value development model. It may also be the catalyst to ‘kickstart’ the proposed H&I’s Learning Grid. In rural development theory ‘best practice’ relates to the integration of skills development with that of developing industry opportunities in rural areas. Returning to the key areas of developing demand for technical skills there are several areas of obvious demand. Richard Bowery, MD of internet recruitment site CareerPlus has identified one of the key opportunities in his experience: “The demand for web skills has never been higher and there’s simply not enough trained technical staff to go around…the message is clear – get a smattering of Internet knowledge under your belt, and you’ll become a very valuable commodity over the next few years.” [Dec. 2000] Again, within UHI and its degree delivery there is an additional opportunity here to ensure that even students on non-ICT degrees have (and this is already happening to some extent, although not marketed) core internet skills of the nature demand by industry. On actual ICT degrees evidence of work experience in the web development field is considered essential by many within the industry. “For web developers…for the commercial side, experience matters more than qualifications, so evidence of work placements is highly regarded.” [Richard Jones, AS Manager, Sourcethatjob.com, Dec. 2000]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Overall, and somewhat surprisingly, skilled ‘web developers’ are said to be one of the rarest commodities in the market, presently commanding major salaries and bonuses across UK industry. An outsourcing business opportunity must surely reside here and therefore a potential drive towards plugging such a skills gap via new skills training has the potential to create new employment in an area such as the Western Isles.

However, even such a clearly technically focused area of skills development (web-based) requires an added value element too. According to Adam Gunnell, founder of recruitment site Boldly-go.com: “The single most valuable skill a techie could learn to augment their value in the market place would be customer-facing skills and commercial acumen. These are the skills that will outlive any development tool of the day. A lack of these interpersonal skills is the most common reason for companies not proceeding to offer.” As with the generic skills mentioned in section 7.1, there is even a need for similar skills on the technical skills development course. This is an important point and one that if acted upon appropriately could give ICT-sector graduates from the UHI a competitive advantage in the IT-services supply market. This sector is also an increasing focus of the UK government as well as the European Commission, as mentioned earlier. Employment Minister Tessa Jowell has recently stated that the UK government will be increasingly focusing on improving IT skills, The UK government’s Skills Task Force estimates that at least half a million further IT workers will be needed over the next ten years. In this sense it will be imperative to raise the profile of outsourcing to rural areas as a key policy not only in practical terms but also in regional development terms. Given the focus, a clearly targeted strategy should be able to attract substantial development funding, in light of the wide range of indicators which identify the clear needs with the developing e-business sector. So where might an IT skills development focus concentrate? When we are talking about web development / programming skills we are talking about Java and C++ the object orientated programming languages, these two in particular being considered to be ‘the most sought after’ according to the Robert Walters Salary Survey report in August 2000. In addition, the need for ‘good’ database skills was also stated as being an increasing requirement within the industry. Additional key skills requirements, according to the same survey, for web development include Flash, Dreamweaver, Javascript, Cold Fusion and Active Server Pages in particular. The outlook for such skills is considered to be strong as competition in the e-business market across the UK and Europe intensifies. On the networking side the recent CISCO academy based at the LCC UHI campus should be a key opportunity to increase the level of Information Age networking skills in the area. Demand within the e-business sector for individuals with ‘security’ skills is anticipated to be increasingly strong as is that for individuals able to support ‘routers, gateways and hubs. Other key skills in demand from a survey of the ‘e-lance’ and other recruitment sites include Photoshop, SQL Server Programming skills, Perl Programmers, HTML and Oracle. According to the most recent labour force survey by NTC Research: “.. Java,

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ designers are still in short supply. Permanent skills most advertised for included Java and C++ programmers, software design engineers and telecoms engineers.”

In summary, there is a clearly identifiable range of skills demanded in UK industry and commerce in particular aspects of IT and Communications. Perhaps the most significant challenge is in identifying the key areas of future demand. There is always the concern that by the time any strategy up-skills potential employees in the industry, that the industry will have moved-on to the next generation of products, requiring new specific skills. However, in this particular area, one can be relatively confident that such a skills base built up will lead to the type of employees who in their particular industry will have to continually update their skills in any case, as skills in programming languages make the transition to other a relatively painless experience. Some UK firms for example have been employing C++ programmers instead of Java programmers, on the basis that for such persons, learning Java should only take several weeks, given that Java programmers are so difficult to employ at present. There is clearly a bottleneck within the supply of the UK and European IT & Telecoms workforce which is predicted to continue and thus presents, as mentioned in section 6.4 and 7, a real opportunity for rural economies to integrate into the Information Society by providing out-sourcing services to the fastest growing sector in the UK economy. “The IT skills shortage is at its highest ever level and shows no sign of abating despite the recent staff cuts at tech firms, according to research out today. The news comes from UK bank LloydsTSB, who has been conducting a survey into staffing levels for the last eight years. The findings show 56 per cent of firms have difficulty recruiting skilled business and IT services staff. This compares to just one in five companies reporting recruitment difficulties in the early nineties.” [http://www.computerpeople.co.uk/]

BOX 35

Source: UK Employers Skills Survey / Skills Taskforce Publication, DfEE 2000

As Box 35 clearly shows, previous research has demonstrated the negative consequences for the economy should skills constraints remain. Decreasing output and resulting

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ addressed, with periods of boom and bust as continual readjustments are made in response to supply-side friction – i.e. skills related issues.

8.3

Western Isles Skills Development in the Information Age: Summary
What has been discussed in both chapters 6 and 7 of this report has been the move towards what is termed the Information Age, the opportunities this presents and areas of demand for specific teaching and learning strategies. As indicated in the introduction to chapter 7 the achievement of broadband will require a complementary and indeed advance up-skilling of the Western Isles skills base. If achieved and the clear opportunities for employment and income targeted, then the development and integration of the area’s economy into the Information Age will be secured. To achieve this it seems clear that there is a need for at least two separate up-skilling initiatives, one focused on generic ‘graduate’ skills of relevance to the IT industry and the other focused on the appropriate mix of IT skills for industry. It will need to be accepted that this later initiative will require to be on-going and adaptive to the needs of the sector. There is clearly a yet largely unrealised remit for the University of the Highlands & Islands in particular. At the same time there needs to be an increasing involvement by industry and commerce in the up-skilling process, both advisory and financial. The latter in recognition of the new key role in the development process that the teaching & learning sector can address in the future – i.e. the supply of appropriately skilled staff. If not realised, then industry will ultimately be the one that suffer the consequences as chronic skills shortages occur. According to ‘Skills in the Information Age’ – DfEE, there are too few examples of Higher Education and industry colluding within the UK, although there are numerous examples in the US where such practice has developed and shown to be very much mutually beneficial. The University of East London and its collaboration with a local company, Logica, was highlighted as an example of best practice in the UK where response times to the needs of the company are short via the delivery of innovative ‘just in time’ course run on demand. In addition, the University of Sheffield and its usage of students to address real ‘businessneed’ projects have benefited both students and local industry alike. There are elements of both of the above that could be transferable to the rural Scotland situation. "Some businesses pointed out that the willingness of education institutions to work with them varied enormously. It was reported that the newer universities and colleges were likely to be more receptive." [Skills in the Information Age’ – DfEE, 2000] Such collaborations are of significant importance for both industry and education sectors – the students get the insight and the employers get students that are 'work-ready' – The

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Dearing report "Higher Education in the Learning Society" strongly supports such developments in its recommendations:

• • • •

Integrated Internet/Video on Demand – Education Opportunities. Higher Education Reach Out to Business and Communities Fund. Business involvement in Course Content. Increased collaboration between IT suppliers and HE institutions sought to enable access to equipment and practices.

For the ‘development’ agencies, similar to industry and commerce, there needs to be a clear recognition of the role in our economy’s structural change of the teaching, learning and training efforts by both UHI and other existing or potential private sector market entrants. A teaching & learning sector in the Western Isles that is adaptive to the dynamism of the ICT sector and able to supply the skills demands of industry will need on-going development assistance both advisory and financial. In effect, if such a partnership can be formed with all the stakeholders i.e. education/training sector, the business sector and the public agencies, on-board, the development need required to progress the skills initiatives outlined can be achieved. As in the Broadband section, there is no escaping the need to pull the area’s resources by forming an inclusive partnership with local, regional and even national interests represented. If not achieved a key opportunity will be lost. The private sector by its very nature is not able to invest heavily in taking staff on without the key skills and training them, for fear of losing them to competitors after investing much. The education sector does not receive development funding per say, but rather consolidatory funding to maintain what it has, whilst public sector agencies with a development remit have only limited funds to make a difference. So, if a responsive and continually developing skills sector is to be achieved in the Western Isles, then clearly some new innovative partnership initiative is going to be required to aid the area’s transition into the Information Age. The dual goals of both hard (broadband) and soft (skills development) infrastructure development in the Western Isles context are achievable, but will take a ‘leap of faith’ by some and perhaps never sit comfortably with others. Innovation, a paradigm shift, new ways of thinking, new concepts of the workplace and organisational structures are all potentially achievements requiring to happen in a very short space of time, if the Western Isles area is to take its chance and be an early entrant into the new digital economy. The evidence for the magnitude of change in society and the economy brought about by the ICT revolution is comparable to anything experienced since the beginning of the 20th century. As such, it requires bold steps and new sense of purpose to turn around the fortunes of the Islands, as this current opportunity presents itself. Failure

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ with lasting implications for economic and social inclusion in the new information society of the 21st century for both the current and future generation. “The combination of digital information with communications technology will be as powerful a
force of transformation in our society as the invention of the wheel or the industrial revolution in their time…At this time, there is a need for Scotland to embrace with enthusiasm the opportunities and possibilities that arise from the digital communications technologies. ” [Extract from minister’s
speech on Digital Scotland, Scottish Parliament]

8.4

ICT Skills Development: A Policy Overview
The policy context for the type of developments identified throughout this report has a solid foundation in existing UK national, regional and local strategies. In this respect there is a multi-level strategic framework being developed working towards the development goal of integrating Scotland and the Highlands & Islands (and the Western Isles) fully into the Information Society. How such policies will eventually manifest themselves in the Western Isles context is not yet clear, hence the rationale for this particular study. Rather than sitting back and seeing what happens, there is a clear feeling that we, as a remote area on the periphery of Europe develop a sense of purpose with key development goals. One must be clear though that what is being suggested is not the imposition of a ‘top-down’ approach, but rather that of an enabling approach so as to allow and encourage innovation and enterprise to flourish by priming the key infrastructural conditions necessary for bottom-up private sector development to become established – i.e. the optimisation of skills and telecommunications at the local level. As we will see in the following section contemporary development policy is totally attuned to the finding and recommendations expressed in this report, validating, in effect its findings.

8.4.1 EU Policy for the Information Society
Firstly, then, it is worth considering EU policy on development issues related to the information age. It was the ‘Bangemann’ report of 1994 that really provided the catalyst for the modern day European policy context. This report identified the challenges presented by the impending ‘European ICT revolution’ [Smith, 1997], whilst also elaborating on the potential opportunities and consequentially recommended, for the first time, specific EU policy measures for ICT and the Information Society. In the current European context the European Commission has been driving the policies of the new Europe, particularly through the recently formed Information Society Directorate General (DG). More recently at the highest level, the Council of Ministers, comprised of the heads of state from the member countries, in Lisbon in March 2000 formulated a more focused policy direction. It is also a stated aim of Sweden in its Presidency role in the first half of 2001 to drive the policies aimed at IS convergence throughout the Community. Under the IS DG’s eEurope initiative the focus of the move towards the Information Society is clear: “These changes, the most significant since the Industrial revolution, are far-reaching and global. They are not just about technology. They will affect everyone, everywhere. Managing this transformation represents one of the central economic and social challenges facing Europe today...” [Romano Prodi, President of the European Commission]

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The initiative itself is said to be of major importance to aid the decision-makers and policy makers of the early 21st century rise to the challenges they must face and seize the opportunities presented. A view very much shared by the writer in considering the Western Isles context. Within the eEurope initiative there are stated to be three guiding objectives:
• • • Bringing every citizen, home, school, business and administration on-line Creating a digitally literate and entrepreneurial Europe Ensuring a socially inclusive Information Society

Clearly the adoption of such objectives has far reaching consequences for remote rural areas such as the Western Isles. It must be remembered that our baseline is that much lower than many other communities in Scotland and indeed Europe and therefore a disproportionate level of investment is likely to be required. Yet, if the opportunity is to be seized there can be no shying away from the high profile initiative required.
Within the context of teaching and learning, the focus of this particular section of the report the above strategy prioritises education and skills development: “Education is vital for the economic and social progress and for guaranteeing equal opportunities in our society. In the digital age, it is key to ensure life-long learning for new generations of creators, researchers and entrepreneurs. All citizens must be able to play an active role in the Information Society.” The

message here is as clear for the Western Isles as it is for elsewhere. A new, on-going and inclusive IS skills development is required for all members of society whatever their age, circumstance or location. It needs to include potential entry at all ‘rungs’ on the ladder, in many ways being compatible with the recent University for Industry’s ‘learndirect’ initiative in the UK context. This generic level strategy has also been converted into clear actions via the Council of Europe at the Lisbon Summit. The term eLearning specifically came into being and referred directly to actions aimed at intensifying and mobilising the education and industry sectors in Europe, adding to that being formulated throughout the member states. The actions themselves specified that all schools in Europe must have an internet connection by the end of 2001 and by the end of 2002 to have gone a stage further and provided ‘fast’ internet connections and multi-media enabled classrooms at pre-specified user to PC ratios. Going further, such actions also incorporate higher education and research, vocational training organisations, learning centres, public libraries…etc. To achieve such veritable goals and actions Member states have been directly encouraged to utilise EU Structural Funds, Community Programmes and even collaborate closely with the European Investment Bank where necessary. eLearning then, is the term used for the Council of Ministers’ strategic directions and associated actions. It presents a major opportunity for the Western Isles to access the resources required by it, to thrive and prosper in the Information Society. In summary, it is about:
• • • • Substantially increasing investment per capita in human resources Providing each and every member of society with the skills necessary to work and live in the Information Society Training teachers and educators in the use of the internet society and its associated tools Decentralising training in key areas of knowledge, languages and technical skills

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________
• Providing school leavers ‘broad digital literacy’ by the end of 2003

The adoption of such guiding principles and objectives requires the level of infrastructural changes discussed throughout this report. Moreover, the EU’s Fifth Framework Programme (FP5) has identified complementary priorities for the European Union's research, technological development and demonstration (RTD) activities for the period 1998-2002 to aid the transition into the Information Society.

The Information Society Technologies (IST) Programme is part of this research and development programme and the recent reports ( available from: http://istevent.cec.eu.int/en/) from Helsinki and Nice have been invaluable reading in convincing oneself of the major efforts being undertaken at the European level to guide and mobilise our society’s transition by addressing such key issues as broadband and e-skills or eLearning. In summary, there can be no doubting the level of commitment within EU policy and funding to support initiatives of the types mentioned briefly within this report. We have already looked at examples of best practice from the Member States and case studies such as that recently invested in by the European Commission and European industry at www.career-space.com. One cannot help be concerned about the lack of strategic direction at the Islands’ level given the strength, legitimacy and all-encompassing nature of the policy and action context outlined above.

8.4.2 UK National Policy for the Information Society
So what particular initiatives can we point to at the UK level to justify a Western Isles initiative aimed at both broadband and e-skills? Similar to the European level context the UK national policy context is both supportive from the highest levels of government and quite specific with its message. As a nation, the UK must move quickly to enable its citizens, businesses and education sector to become part of the ‘on-line’ Information Society. A particular focus has been given to the promotion of e-commerce and assistance to the SME sector, in recognition of both the opportunities available and the costs associated with being a ‘follower’ rather than a ‘leader’. At the micro-scale (i.e. the Western Isles) similar arguments apply and require to be voiced equally loud. From the Government’s ‘Our Information Age’ policy statement on its vision for future development, to the DTI’s ‘Competitiveness in the Knowledge Driven Economy’ to its ‘Approaching Convergence in the Information Age’ policy paper on the changing regulatory framework, to its ‘A New Future for Communications’, to its ‘Communications White Paper’ which outlines its intention to:
• • •
make the UK home to the most dynamic and competitive communications and media market in the world. ensure universal access to a choice of diverse services of the highest quality. ensure that citizens and consumers are safeguarded.

…this latter paper even, encouragingly, includes an objective aiming to promote “…the availability of widespread access to higher bandwidth services and bring together public and private sector stakeholders to develop a practical broadband strategy” thus being of direct relevance to the earlier chapters in this report…the policy framework and

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Other equally important policy and strategy related initiatives relate to the ‘UK On-Line’ initiative funded and driven by government in recognition of the vast changes taking place in the way that work, communicate and lead our lives. The related e-Envoy website specifically addresses the need for skills development in its ‘Confident People’ policy context outlining 5 key priorities and principles for adoption in the UK:
• • • • • Access for Everyone (£35M) – 6000 UK On-Line Centres, Community ICT Learning Centres, Libraries, Internet Learning Access Points Developing People’s Skills to Exploit new Technologies (£700M for infrastructure + £230M for improving ICT Skills Levels – CLCs, NGfL, Ufi’s Learndirect, Life Long Learning and Individual Learning Accounts) Reducing Barriers to Use – Consumer/Security Issues, Safety/Standards Issues Driving Up the Quality of Social Content – Local Content Successful Business - ‘UK On-Line for Business’ initiative, ‘Technology Means Business’ scheme, ‘Supply Chain’ promotional initiative, Free Publications on-line for SMEs, on-line ‘eCommerce Resource Centre’ and a ‘Showcasing Programme’.

This level and range of actions demonstrates a clear commitment at the national level to see through expensive transitional strategies for the Information Age, right through society in the UK. All in all, in browsing the above content, one gets the clear message originating from the highest levels of government – i.e. join and converge or wait and become peripheral. Already referred to in several instances throughout the report is the Department for Education and Employment’s ‘Skills for Information Age’ report by the ITCE Skills Strategy Group which quite provides a framework upon which to base ‘new economy’ skills strategy, although recognising the pace of changing requirements within the sector. The report recognising the immediacy of skills needs is about how to “…translate words into action and quickly.” The report itself addresses how to meet current and future ICT skills needs, it considers how to attract more people into the industry (including electronics) and retain the more able in face of EU-wide skills shortages, it considers how to expand and develop industry and education liaisons regarding current and future skills issues and it also finally attempts to strengthen the sectoral skills/training bodies such as the NTOs in the up-skilling process. Again, the consistent themes running through this report have been recognised and are clearly in line with the strategies and policies outlined in this report with regard to the Western Isles context e.g. partnership initiatives between education, other agency and private sector aimed at both ‘generic’ skills demanded within industry and specific ICT areas of demand. Yet another element of specific policy interest is the NGfL. In 1998 the UK government committed itself to providing a National Grid for Learning (NGfL), now incorporated within its ‘UK On-Line’ initiative. This particular element of policy is itself consistent with the EU proposals mentioned earlier on eLearning strategies. The strategy is based around the provision of a national learning resource available universally on the internet. It is aimed at schools, further education, higher education and targets the access of ‘life long learning’ and ‘career development’ via on-line content. The NGfL is also targeted at providers from community organisations and libraries, right through the spectrum of providers to the private sector.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Approved centres are to be set-up and connected via ‘high-speed’ internet access to this national grid and substantial funding is available to meet the requirements of accessing the grid from infrastructure to teaching and learning development projects and initiatives. “The NGfL includes extra funding for hardware, software and networks, as well as for training in the use of information and communications technology (ICT) in the educational context. “ [http://www.ngfl.gov.uk/about/detail.html#ngfl] The ‘Grid’ itself will integrate the public library network and the UfI’s ‘learndirect’ needs and requirements.

In the planning of the provision of ‘Grid’ access to schools there is recognition of extended needs of community, access, social inclusion and sustainability and the need to control costs for contributors to the ‘Grid’. One can therefore conclude that not only is the NGfL an important national initiative for the rural as well as urban context, but that it also may provide an opportunity for the added-value skills provision outlined as being of immediate strategic need for the Western Isles in this report, whilst also being a contributor to the funding of targeted ‘broadband’ infrastructure for both schools and communities in rural areas such as the Western Isles. The recent Highlands & Islands Learning Grid proposals, to be discussed below, are an example of such ‘opportunistic’ and integrated strategy formulation. Finally, in the national policy context with regard to skills development in the Information Age one can look at the policy of the National Training Organisations. Of recent and notable interest was the recent amalgamation of the e-business-NTO with the IT-NTO, demonstrating the firm belief that future skills training for business in ICT will be firmly routed in e-commerce and related activities, as business processes and the internet become increasingly integrated and possibly indistinguishable. The national e-skills NTO, referred to earlier in the text, have been the result and as we have already seen much of its policy findings/proposals are of relevance to the future policies of ICT skills development in the Western Isles. The three main area’s of the eskills NTO remit are as follows:
• • •
to represent the IT industry sector to address cross-sectoral IT professionals skills needs to improve the general IT user skills of the entire workforce.

The NTO is recognised by government “..as the voice of employers with regards to education, training, qualifications and competitiveness issues for IT users and professionals….” and is currently in the process of producing a national strategy for eskills development in the UK. This strategy and its rationale is entirely consistent with the skills development projects and strategies outlined for the Western Isles in this report: “The UK’s prosperity depends as never before on IT skills. Constraint in the growth of the UK’s IT industry is almost entirely due to professional skills shortages. The winners and losers in e-business will be determined by access to skills… IT literacy is rapidly becoming as fundamental to employability as reading and writing. For the UK to remain a world power in the information age, pervasive, structural change is essential in the supply of ITrelated skills.” To conclude this section on National policies, one must also recognise the complementary

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ to respond to broadband demand by releasing broadband fixed wireless spectrum and auctioning 3G spectrum. On the other hand, as indicated at the start of this report, one has to be less than enthusiastic by the level of response from OFTEL in response to government, business sand consumer demands and aspirations.

Furthermore the National Inventory Project (http://www.information-society.org.uk/) run by the Government’s ‘Cabinet Office’ and the Central Computer and Telecommunications Agency (CCTA) in the UK provides an on-line database of projects and initiatives related to how the UK is responding to the Information Society and as such aims to provide a quality information resource for knowledge, information and learning with regard to aiding the UK’s efforts in areas such as teaching and learning and the provision of broadband.

8.4.3 Scottish and Regional Policy for Information Society
Firstly, at the Scottish level, there are several main initiatives of high profile that provide one with much of the information relevant to Scotland’s response to the Information Society. Of most importance, arguably, is the ‘Digital Scotland’ Task Force report and related policy recommendations. Again this strategy’s framework is consistent with the aims and objectives of the actions outlined in this paper, with key themes being amongst others being collaboration and speed. The report displays very clearly the belief in the coming of the ‘Digital Age’ and Scotland’s immediate need to be included at all levels and in all locations. The current ‘revolution’ in our society and economy is said to be comparable with the agricultural and industrial revolutions that have proceeded it. This, being in line with the view taken within this current report. Specifically, the report highlights the need for SMEs to the potential economic advantage of the opportunities presented by ICT. Secondly it highlights the need for new strategies for teaching and learning and new modes of delivery to ensure that Scotland is not constrained by skills shortages in its transition and integration into being a key player in the ‘Digital Age’ within Europe. Encouragingly, the report also highlights the need for such technology to enable social and economic inclusion, the implication being that there will not be a ‘fast-track’ for urban Scotland to the disadvantage of rural Scotland, but rather a single and all-encompassing ‘Digital-Age’ development effort, irrespective of location or circumstance. Action at both the Scottish and local level is identified as being an essential pre-requisite for Scotland as a nation. With regard to the vision identified there is once more an unequivocal belief that ICT development needs to become a much more significant element of the traditional development process within Scotland: “Our vision is for a prosperous, inclusive, open and modern Scotland where full employment is achieved. A Scotland which achieves economic growth rates ahead of the

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ which are at home in the e-economy; and a well-educated, well-trained, highly-skilled workforce…A vision also of a Scotland where many people choose to work in rural areas where they can combine an excellent physical environment with opportunities for knowledge work. A Scotland where no-one is excluded from education and training opportunities or from access to public services because of where they live, or their social or ethical backgrounds.” At the micro-level such policy and vision is of the nature of that already outlined within this report and indeed was behind the rationale of the commissioning of this report in December 1999. Again the policy context at the Scottish level can be seen to be entirely consistent with the findings and actions outlined within this report and indeed supportive given already defined commitments on providing the ‘right skills’ and a ‘world-class telecommunications infrastructure’ with ‘pervasive and affordable access for all to the web and other digital technologies.’ This surely translates into a combined regional broadband and ICT skills development initiative in the Western Isles. As mentioned at the national policy level, Scottish regional versions of the University for Industry (SufI) and Learndirect, Scotland are also complementary and of direct relevance and other discussions and debate (‘Skills for Scotland’) in the Scottish Parliament e.g. via the Enterprise & Lifelong Learning Committee are also of consequence. If we examine development policy for the Highlands & Islands specifically one can also identify numerous policies that actively encourage and support the range of actions outlined within this report. Firstly, in examining the Highlands & Islands Special Programme across all three ‘Priorities’ and within the related ‘Measures’ and their objectives and scope, there appears to be widespread synergy with the related actions and vision outlined within this report. Broadband provision to the Information Society (a fundamental requirement) and related skills development are aimed at maximising rather than just improving regional competitiveness, whilst also dealing directly with social & economic inclusion issues on Europe and Scotland’s periphery. Essentially, any development strategy or initiative which will not just stem population decline but most likely reverse it must surely maximise the priority for the funding available, as no other such strategy in recent memory has achieved the outcomes achievable by the implementation of the policies and actions in this report. Secondly, from the Highlands & Islands Enterprise (and WIE) perspective a focus on broadband telecoms and ICT skills development are already clearly articulated goals. Recent initiatives have seen the contracting of a major UK ICT consultancy firm to examine the demand for broadband in the Highlands & Islands. This report should prove complementary to this report, providing it takes a long-term perspective on the development process to achieve sustainability. HIE and it's LECs are committed to the development of e-commerce and now have a dedicated website http://www.hiecommerce.com/ which is targeted at the development of SMEs throughout the region. Fundamentally, it is recognised that there is an enormous potential opportunity for the use of ICT to open up new market and opportunities for existing businesses in the Highlands & Islands and this will require both ‘soft’ and ‘hard’ infrastructure. It is recognised though,

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ in the region as alternative suppliers to those already within the region become as easy, and, indeed perhaps via 24/7 availability, indeed perhaps more convenient to deal with. The achievement of social & economic inclusion is again a clearly stated priority and key business strategies aimed at improving competitiveness (businesses and localities), encouraging new-starts and attracting inward investment are all central to the aims of the strategy and actions outlined in this report. In addition, the recently published HIE Skills Strategy states: “Special focus will be given to developing ICT and management and leadership skills thus enabling individuals and businesses of the Highlands and Islands to gain a competitive advantage.” This focus being aimed at targeting opportunities related to inward investment, e-commerce and networking and programming amongst others. Thirdly, from the UHI perspective there is an on-going commitment to the area to provide and develop out-reaching distance learning centres via broadband telecoms (e.g. Highlands & Islands Learning Grid proposals) for VC delivery. Ultimately, the UHI project has the aim of being the key facilitator of Higher education opportunities for communities right across the region of a nature and level appropriate to that demanded by the private, public and voluntary sectors. It has already spent £22m on technology to overcome the distance barriers within the region, with a further rollout/upgrade of outreach centres off the main learning grid being increasingly prioritised, given higher than expected demands. For example at the LCC campus the dual VC suites have increasingly been booked up for VC teaching from 9am-5pm every day of the week, with demand particularly high from small outreach centres throughout the region. Unfortunately such centres have only 128kbps bandwidth, making then less than ideal for VC teaching. “The amount of bandwidth required for video conferencing will depend on the quality required as well as the number of streams. The workable minimum for around 128Kbps, moving up to the 384Kbps to 512Kbps range will deliver good quality video in window, while for near TV quality, full screen video suitable for large room based video systems bandwidth up to 1.5Mbps is required. For example three people engaged in a good quality video conference with each able to see each other would require each user to be able to send at ~400Kbps and receive at ~800Kbps.” [NGfL –
Broadband Networking, Cisco Systems 2000]

UHI describes itself as an organisation “founded by the community for the community” and as such is committed to expanding its reach. Clearly for teaching purposes in response to demand for bandwidth, next generation IP/VC systems which reduce costs and offer improved quality will require 2Mbps and upwards for the near TV quality systems required for VC teaching. In short, UHI development is likely to be totally supportive of broadband networking in remote areas such as the Western Isles and will via the LCC campus, play a key role in ICT skills development within the area, if the goal of broadband can be achieved. Finally, at the Western Isles level in examination of the Western Isles Transitional Strategy 2000-2006 stated policy areas relate to increasing business competitiveness, creating employment and increasing incomes, creating the conditions for regional competitiveness and developing human resources, whilst achieving rural development. In short, such priorities are the potential outcomes of focusing on a broadband telecommunications upgrade, combined with a complementary skills development strategy. At the local level there are also initiatives such as Iomairt aig an Oir which may be an avenue for channelling

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ additional resources to achieve ICCT-based rural development in some of the Island’s most outlying areas. From the local authority perspective between 1999-2002, the Western Isles council has articulated the ICT industries upon which it is to prioritise resources to achieve rural development. Amongst other such priorities there is the on-going commitment to develop an enterprise culture and to create an even spread of opportunities throughout the Islands, whilst encouraging inward investment. Such policies are tied-in with key actions outlined within this report. At the Local Enterprise Company level there are the following clearly articulated policies for the ICT sector: • •

Encourage exploitation of latent skills Develop appropriate skills training and expertise Encourage inward investment Develop appropriate infrastructure



Such key objectives are without doubt totally integrated to the development impetus being suggested by this report. In summary, in consideration of the EU, national and regional level policy and strategic level framework for the Information Age, one must conclude that the focus of this report is both timely and completely relevant to the required incorporation of the Western Isles into the Information Society at an early stage. The policy context is uniquely placed to enable the area to seize the types of opportunities brought to the fore in this report, to focus efforts to realise our place in the ‘new economy’ creating not only digitally connected but also a digitally aware proliferation of rural communities where enterprise and opportunity are primed and populations have stabilised as incomes rise in response to the exploitation of new ways of working.

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Chapter 8 References:
CISCO SYSTEMS, (March 2000), NGfL – Broadband Networking, On-Line Publication DEPARTMENT FOR EDUCATION & EMPLOYMENT, (January 2000), Skills for the Information Age, UK Information Technology, Communications and Electronics Skills Strategy Group DEPARTMENT FOR EDUCATION & EMPLOYMENT & E-BUSINESS NTO, (2000), Have You Got What It Takes?, Project Gemini DIGITAL DENMARK, (February 2000), Digital Denmark: Conversion to the Network Society, On-Line Publication DIGITAL SCOTLAND TASK FORCE, (May 2000), Digital Scotland Task Force Report, On-Line Publication. EU Publication, (June 2000), eEurope Action Plan, Brussels, 14-06-00 EU Publication, DG Information Society, IST 2000, Office for Official Publications of the European Communities, Luxembourg, ISBN 92-894-0042-0 HIE, (June 2000), Realising Potential: A Strategic Plan for Developing Sectoral Skills in the Highlands Islands, On-Line Publication HMSO, (Dec. 1998), Our Competitive Future: Building the Knowledge Driven Economy, On-Line Publication HMSO, (Jan. 1999), Competitive Advantage in the Digital Economy, On-Line Publication HMSO, (Dec. 2000), A New Future for Communications, DTI, On Line Publication NATIONAL SKILLS TASK FORCE, (1998), Towards A National Skills Agenda, First Report SCOTTISH EXECUTIVE, (Sept. 2000), Digital Scotland: The Scottish Executive’s Response, On-Line Publication SCOTTISH EXECUTIVE, (1999), Skills for Scotland: A Skills Strategy for A Competitive Scotland, ISBN 0 7480 7289 6 UK ONLINE, (September 2000), Annual Report, On-Line Government Publication WESTERN ISLES TRANSITIONAL STRATEGY GROUP, (2000), Western Isles Transitional

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INTERNET SITES ACCESSED FOR RESEARCH PURPOSES:
http://www.learndirectscotland.com/ http://www.career-space.com/ http://www.ngfl.gov.uk/regional/scotland.html http://www.tft.co.uk/ http://www.e-skillsnto.org.uk/ http://www.e-envoy.gov.uk/ http://www.isi.gov.uk/ http://www.scotland.gov.uk/digitalscotland/ http://www.scottish.parliament.uk/ http://www.skillsbase.dfee.gov.uk/Reference/Reference.asp?sect=5 http://www.wie.co.uk/priorities/priorities.htm#knowledge http://www.uhi.ac.uk/ http://www.information-society.org.uk/ http://europa.eu.int/comm/dgs/information_society/index_en.htm http://www.cordis.lu/fp5/home.html http://europa.eu.int/ISPO/promotion/i_promise.html http://www.w-isles.gov.uk

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Chapter 9 The Information Society & ICT Skill Requirements
Summary, Conclusions & Recommendations
It is clear that as the EU ICT skills gap develops, outsourcing is increasingly becoming a necessity for many firms and industries in the UK and beyond. Recruitment is becoming difficult and staff turnover and wages high as firms compete for key members of staff, with many posts remaining unfilled for many months. As suggested by EU policy makers the development of public/private training partnerships to target resources at key areas of current and advance need would appear to be key requirement for ‘best practice’ initiatives. Public sector investment can be maximised and SME opportunities realised as ICT-related staffing constraints are negated and new distance learning opportunities become deliverable via broadband to rural Island communities. More fibre-connected people-centred workspaces (customer service centres) need to be created as new ways of working are adopted to meet the needs of all flexible workers in the new economy for which our Islands need to be renowned. Futuristic thinking which our European counterparts are already adopting. What is termed functional offices with a different feel from that of the conventional workplace need to be developed to cater for all e.g. including crèches, cafes, jazzy colour schemes, casual dress codes…etc to attract (young) employees and increase productivity. Experience in Ireland points to the need for multi-lingual employees as being a major selling point in itself and an area of increasing demand. It needs to be recognised that only 10% of UK workforce is involved in telework at present, whilst this number is close to 20% in Finland. There is much anticipated scope for development in this sector, as witnessed by the recent development of e-lance websites with literally 1000s of jobs for teleworkers with the right mix of skills. The Western Isles already has a recognised track record in this area and needs to exploit it, providing we can get this skill mix correct. Initially the local public sector may assist giving newly trained workers the all-important track record. With the Customer Service Centre market growing at 40% per annum, there needs to be an increasing recruitment drive targeted at school leavers offering desirable working conditions and incentives to earn money and advance their education via sponsored employee schemes for example. With regard to the Island’s move toward the new economy, it
As the EU ICT skills gap develops, outsourcing is increasingly becoming a necessity for many firms and industries in the UK. Recruitment is becoming difficult and staff turnover and wages high with many posts remaining unfilled for many months.

More fibre-connected people-centred workspaces need to be created.

Experience in Ireland points to the need for multi-lingual employees as being a major selling point. It needs to be recognised that only 10% of UK workforce is involved in telework at present, this number is close to 20% in Finland.

It will not be acceptable to wait for demand-led initiatives to trigger investment … those most appropriately geared-up will attract most of the demand-side activity and investment at the expense of the areas that opt to ‘wait

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ trigger investment. The more progressive areas in Europe have already considered the folly of this in the new Information Age, where it has been recognised that those most appropriately geared-up will attract most of the demand-side activity and investment at the expense of the areas which opt to ‘wait and see’. As no one can confidently predict where this new revolution is going, the postponement of investment until the market settles is not a legitimate development policy. One must be part of the revolution if one is to gain the advantage and opportunity associated with it. As Business to Business (b2b) competition increases via ecommerce enabled transactions that will be distance independent and reduce supply cost significantly for ecommerce enabled SMEs in the Islands there are both threats and opportunities. Non-e-commerce SMEs in the region will find their products and services being replaced by those that are, by an efficiency-seeking commercial market. Yet for those that take the leap of faith, an increasingly global marketplace (b2b and b2c – Business to Consumer) will be on their doorstep and new opportunities abundant. Obviously ICT skills and appropriate telecoms will require to be developed throughout the Islands area, to enable this transformation. In the view of the writer this is therefore not an option but rather an immediate necessity.

Specific skills necessary – a number of sources With regard to the specific skills necessary in the Information have been quoted within Age, a number of sources have been quoted within the text the text which largely which largely agree on the generic content required: agree on the generic content required:

• • • • • • • •

Written & oral communications Team working Problem solving Business awareness Creativity & Innovation Inter-personal skills Attitude & Enthusiasm Technology skills

The relatively low priority given to technology skills should be noted, which in many instances were viewed as being less important to the ICT sector. There appears to be a pervasive view within the sector that if the key generic skills can be attained then the ICT skills can be developed in-house. In all but the most technical of posts, such feedback appeared to be commonplace.

Low priority given to technology skills – viewed as being less important to the ICT sector than business and customer service skills.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Language, Science and mathematics along with specific ICT skills were viewed as being important, although the range of the above generic skills was still sought after. In almost all instances previous work experience was a stated preference and again there may be a role for the local public sector to aid this transition initially. Appreciation of such findings need to Islands-wide Information Age Skills incorporating an awareness-raising graduates and employees within the project Gemini in South-East England.
Language, science & mathematics along with specific ICT skills were viewed as being important.

be incorporated into an Development strategy, initiative for non-ICT Findings need to be area, similar to that of incorporated into an
Islands-wide Information Age Skills Development strategy.

An opportunity to deliver core skills online via outreach centres combined with added-value SME integrated workspace would appear a real prospect with linkages to other national initiatives such as the NGfL and SufI’s ‘Learndirect’ initiative. An opportunity exists to focus on in-demand ICT skills to plug the developing skills gap and encourage specialist teleworking and outsourcing teams to become established. Such specific ICT skills outlined within the report combined with the appropriate generic skills will potentially provide the catalyst to enable a transition in the Western Isles workforce to one compatible and in-demand within the new ‘Digital’ economy. A pilot project targeted at those individuals on the ICT skills register and school leavers could be progressed. Again, it is here that an ICT skills/training partnership between the education sector, industry and the public sector will identify clearly the needs, opportunities and delivery options to integrate the Island’s population into the Information Age and respond dynamically to future trends. Such initiative has already been shown to be profitable in the examples outlined within the main text. There is a clear policy framework in which to develop the Western Isles’ skills development response to the Information Age. This policy is integral to the advancement of the broadband telecommunications recommendations made earlier. There is an obvious synergy between the two key areas considered in this report. The commitment at the EU, national and regional policy levels which focus on ‘skills for the information age’ recognise some of the infrastructural requirements for delivery and have associated funding for such development. A dual development approach can therefore achieve cost savings by combining the financial allocations for both skills and broadband rollout by encouraging the facilitation of an all-encompassing partnership approach at the local level

Focus on in-demand ICT skills to plug the developing skills gap and encourage specialist teleworking and outsourcing teams to become established.

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APPENDIX 1: xDSL TECHNOLOGY
Technology Speed Distance Limitation (24-gauge wire) None 28.8 or 33.6 Kbps upstream 18,000 feet (additional equipment can extend the distance) 30 miles over coaxial (additional equipment can extend the distance to 200 miles) 18,000 feet Applications

56 Kbps analog modems ISDN

56 Kbps downstream Up to 128 Kbps (uncompressed) Full duplex

Cable modem

10–30 Mbps downstream 128 Kbps–10 Mbps upstream (shared, not dedicated, bandwidth) Up to 1 Mbps downstream Up to 512 Kbps upstream 1.5–8 Mbps downstream Up to 1.544 Mbps upstream Up to 144 Kbps full duplex

E-mail, remote LAN access, Internet/intranet access Video conferencing, disaster recovery, leased line backup, transaction processing, call centre services, Internet/intranet access Internet access

ADSL Lite

ADSL/R-ADSL

18,000 feet (12,000 feet for fastest speeds) 18,000 feet (additional equipment can extend the distance) 12,000–15,000 feet

IDSL

Internet/intranet access, Web browsing, IP telephony, video telephony Internet/intranet access, video-ondemand, remote LAN access, VPNs, VoIP Internet/intranet access, Web browsing, IP telephony, video telephony Local, repeatered T1/E1 trunk replacement, PBX interconnection, Frame Relay traffic aggregator, LAN interconnect Local, repeatered T1/E1 trunk replacement, collaborative computing, LAN interconnect Multimedia Internet access, high-definition television program delivery

HDSL

1.544 Mbps full duplex (T1) 2.048 Mbps full duplex (E1) (uses 2–3 wire pairs)

SDSL

1.544 Mbps full duplex (T1) 2.048 Mbps full duplex (E1) (uses 1 wire pair)

10,000 feet

VDSL

13–52 Mbps downstream 1.5–2.3 Mbps upstream (up to 34 Mbps if symmetric)

1,000–4,500 feet (depending on speed)

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Asymmetric Digital Subscriber Line (ADSL) ADSL technology is asymmetric. It allows more bandwidth downstream—from an NSP’s central office to the customer site—than upstream from the subscriber to the central office. This asymmetry, combined with “always on” access (which eliminates call setup), makes ADSL ideal for Internet/intranet surfing, video-on-demand, and remote local area network (LAN) access. Users of these applications typically download much more information than they send. Downstream, ADSL supports speeds between 1.5 and 8 Mbps; upstream, the rate is between 640 Kbps and 1.54 Mbps. ADSL can provide 1.54 Mbps transmission rates at distances of up to 18,000 feet over one wire pair. Optimal speeds of 6 to 8 Mbps can be achieved at distances of 10,000 to 12,000 feet using standard 24-gauge wire. Rate-Adaptive Digital Subscriber Line (R-ADSL) R-ADSL operates within the same transmission rates as ADSL, but adjusts dynamically to varying lengths and qualities of twisted-pair local access lines. With R-ADSL, it is possible to connect over different lines at varying speeds. Connection speed can be selected when the line synchs up, during a connection, or as the result of a signal from the central office. ADSL Lite ADSL Lite is a lower-speed version of ADSL that will eliminate the need for the telco to install and maintain a premises-based POTS splitter. Elimination of the POTS splitter is intended to simplify DSL installation and reduce the costs of DSL for NSPs. ADSL Lite is also supposed to work over longer distances than full-rate ADSL, making it more widely available to mass market consumers. It will support both data and voice and provide an evolution path to full-rate ADSL. The effort to introduce ADSL Lite has been spearheaded by the Universal ADSL Working Group, an industry group that worked to develop a worldwide G.Lite standard within the International Telecommunications Union (ITU) Study Group 15. An ITU standard (G.992.2) was approved in October, 1998. Additional standards work can be expected in ANSI TIE1.4, the ATM Forum, and the ADSL Forum to address issues such as compatibility with home wiring and network interfaces. 3Com is an active participant in these standards bodies working on the development of ADSL Lite. ISDN Digital Subscriber Line (IDSL) IDSL provides full duplex throughput at speeds up to 144 Kbps. Unlike ADSL, IDSL is restricted to carrying data only. While IDSL uses the same 2B1Q modulation code as ISDN to deliver service without special line conditioning, it differs from ISDN in a number of ways. Unlike ISDN, IDSL is a non-switched service, so it does not cause switch congestion at the service provider’s CO. ISDN also requires call setup, while IDSL does not (DSL is an “always on” service).

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High Bit-Rate Digital Subscriber Line (HDSL) HDSL technology is symmetric, providing the same amount of bandwidth upstream as downstream. HDSL is the most mature of the xDSL technologies, and has already been implemented in telco feeder plants (lines that extend from central offices to remote nodes) and also in campus environments. Due to its speed—1.544 Mbps over two copper pairs and 2.048 Mbps over three pairs—telcos commonly deploy HDSL as an alternative to repeatered T1/E1. (T1 lines, used in North America, have a data rate of 1.544 Mbps; E1 lines, used in Europe, have a data rate of 2.048 Mbps.) Although HDSL’s 12,000 to 15,000-foot operating distance is shorter than ADSL’s, phone companies can install signal repeaters to cost-effectively extend its useful range. HDSL’s reliance on two and three twisted-pair wires makes it ideal for connecting PBX systems, digital local loops, IEC points of presence (POPs), Internet servers, and campus-based networks. HDSL II is pro-posed as the nextgeneration HDSL within ANSI and ETSI. It will offer the same performance as HDSL, but over a single pair. Single-Line Digital Subscriber Line (SDSL) Like HDSL, SDSL supports symmetrical TI/E1 transmissions, but SDSL differs from HDSL in two important ways: it uses a single copper-pair wire, and it has a maximum operating range of 10,000 feet. Within its distance limitation, SDSL is capable of accommodating applications that require identical downstream and upstream speeds, such as video conferencing or collaborative computing. SDSL is a precursor to HDSL II. Very High Bit-Rate Digital Subscriber Line (VDSL) VDSL technology is the fastest xDSL technology, supporting a downstream rate of 13 to 52 Mbps and an upstream rate of 1.5 to 2.3 Mbps over a single copper-pair wire. VDSL can be viewed as a cost-effective alternative to fibre to the home. However, the maximum operating distance for this asymmetric technology is only 1,000 to 4,500 feet from the central office; this distance can be extended by running fibre optic cable from the CO to an optical network unit and copper from that point to the user location up to 4,500 feet away. In addition to supporting the same applications as ADSL, VDSL’s additional bandwidth could potentially enable NSPs to deliver high-definition television (HDTV), video-on-demand, and switched digital video, as well as legacy LAN extension symmetrical services. VDSL is in the requirements and standards definition stage.
Source:

http://www.3com.com/technology/tech_net/white_papers/500624.html

A More Recent Attempt at Definitions:
ADSL Asymmetric Digital Subscriber Line (ADSL) is the most popular form of xDSL technology. The key to ADSL is that the upstream and downstream bandwidth is asymmetric, or uneven. In practice, the bandwidth from the provider to the user (downstream) will be the higher speed path. This is in part due to the limitation of the telephone cabling system and the desire to accommodate the typical Internet usage pattern where the majority of data is being sent to the user (programs, graphics, sounds and video) with minimal upload capacity required (keystrokes and mouse clicks). Downstream speeds typically range from 768 Kb/s to 9 Mb/s Upstream speeds typically range from 64Kb/s to 1.5Mb/s.

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ADSL Lite (see G.lite) CDSL Consumer Digital Subscriber Line (CDSL) is a proprietary technology trademarked by Rockwell International. CiDSL Globespan's proprietary, splitterless Consumer-installable Digital Subscriber Line (CiDSL). EtherLoop EtherLoop is currently a proprietary technology from Nortel, short for Ethernet Local Loop. EtherLoop uses the advanced signal modulation techniques of DSL and combines them with the half-duplex "burst" packet nature of Ethernet. EtherLoop modems will only generate hi-frequency signals when there is something to send. The rest of the time, they will use only a low-frequency (ISDN-speed) management signal. EtherLoop can measure the ambient noise between packets. This will allow the ability to avoid interference on a packet-by-packet basis by shifting frequencies as necessary. Since EtherLoop will be half-duplex, it is capable of generating the same bandwidth rate in either the upstream or downstream direction, but not simultaneously. Nortel is initially planning for speeds ranging between 1.5Mb/s and 10Mb/s depending on line quality and distance limitations. G.lite A lower data rate version of Asymmetric Digital Subscriber Line (ADSL) was been proposed as an extension to ANSI standard T1.413 by the UAWG (Universal ADSL Working Group) led by Microsoft, Intel, and Compaq. This is known as G.992.2 in the ITU standards committee. It uses the same modulation scheme as ADSL (DMT), but eliminates the POTS splitter at the customer premises. As a result, the ADSL signal is carried over all of the house wiring which results in lower available bandwidth due to greater noise impairments. Often a misnomer, this technology is not splitterless per se. Instead of requiring a splitter at customer premises, the splitting of the signal is done at the local CO. G.shdsl G.shdsl is a ITU standard which offers a rich set of features (e.g. rate adaptive) and offers greater reach than many current standards. G.shdsl also allows for the negotiation of a number of framing protocols including ATM, T1, E1, ISDN and IP. G.shdsl is touted as being able to replace T1, E1, HDSL, SDSL HDSL2, ISDN and IDSL technologies. HDSL High Bit-rate Digital Subscriber Line (HDSL) is generally used as a substitute for T1/E1. HDSL is becoming popular as a way to provide full-duplex symmetric data communication at rates up to 1.544 Mb/s (2.048 Mb/s in Europe) over moderate distances via conventional telephone twisted-pair wires. Traditional T1 (E1 in Europe) requires repeaters every 6000 ft. to boost the signal strength. HDSL has a longer range than T1/E1 without the use of repeaters to allow transmission over distances up to 12,000 feet. It uses pulse amplitude modulation (PAM) on a 4-wire loop. HDSL2 High Bit-rate Digital Subscriber Line 2 was designed to transport T1 signalling at 1.544 Mb/s over a single copper pair. HDSL2 uses overlapped phase Trellis-code interlocked spectrum (OPTIS). IDSL ISDN based DSL developed originally by Ascend Communications. IDSL uses 2B1Q line coding and typically supports data transfer rates of 128 Kb/s. Many end users have had to suffice with IDSL service when full speed ADSL was not available in their area. This technology is similar to ISDN, but uses the full bandwidth of two 64 Kb/s bearer channels plus one 16 Kb/s delta channel. MDSL Usually this stands for multi-rate Digital Subscriber Line (MDSL). It depends on the context of the acronym as to its meaning. It is either a proprietary scheme for SDSL or

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see the acronym MSDSL. There is also another proprietary scheme which stands for medium-bit-rate DSL. Confused yet? RADSL Rate Adaptive Digital Subscriber Line (RADSL) is any rate adaptive xDSL modem, but may specifically refer to a proprietary modulation standard designed by Globespan Semiconductor. It uses carrierless amplitude and phase modulation (CAP). T1.413 standard DMT modems are also technically RADSL, but generally not referred to as such. The uplink rate depends on the downlink rate, which is a function of line conditions and signal to noise ratio (SNR). SDSL Symmetric Digital Subscriber Line (SDSL) is a 2-wire implementation of HDSL. Supports T1/E1 on a single pair to a distance of 11,000 ft. The name has become more generic over time to refer to symmetric service at a variety of rates over a single loop. UDSL Universal DSL. See G.lite. VDSL Very High Bit-rate Digital Subscriber Line (VDSL) is proposed for shorter local loops, perhaps up to 3000 ft. Data rates exceed 10 Mb/s. Source: http://homepage.interaccess.com/~jkristof/xdsl-faq.txt

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

APPENDIX 2: MVL: A BROADBAND SUBSCRIBER LINE TECHNOLOGY
Features of MVL [http://www.paradyne.com/]: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ First DSL Modem to be FCC Part 68 approved and registered as "safe to deploy in the public switched telephone network" Complements the deployment of standards-based ADSL (DMT/G.lite) and SDSL services Integral part of Paradyne's "Never Say No DSL" Hotwire GranDSLAM advantage Offers superior spectral compatibility: Operates within globally accepted spectral requirement of T1.601 Basic Rate ISDN T1.413 spectral requirement Operates at under 100 kHz Superior loop reach in excess of 30,000 feet in real-world deployments, greater than CSA/RRD specification Splitterless Design; No service technician truck roll required at the customer premises 768 Kbps speed downstream and upstream High density 12-port line card delivers 216 IP MVL ports per Hotwire GranDSLAM chassis Flexible Ethernet or ATM output to the service provider's network Low power dissipation of 1.12 milliwatts per port allows greater port density and lower costs Industry-defining MVL technology with products designed and optimised for residential, branch office and SOHO markets Supports from one to four Hotwire IP MVL modems on a single telephone wire Impervious to bridged taps Offers superior functionality for simultaneous data and voice services, and enables Services on Demand: Simultaneous POTS and data Hotwire HomeLink feature enables peer-to-peer print and file sharing between IP MVL modems connected to the same WAN link Dynamic bandwidth allocation supports multiple applications simultaneously Plug and play installation; no end-user configuration required Operates over existing twisted or untwisted wire and plugs into existing telephone jacks Each IP MVL modem supports up to 250 IP devices connected to the ethernet port OpenLaneTM Network Management Solution delivers end-to-end NMS monitoring, control and diagnostics PARADYNE CORPORATION ON-LINE MVL FEATURES PAGES:

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The award-winning Hotwire Multiple Virtual Lines (MVL®) System is an industrydefining family of solutions designed and optimised for the residential, small office/home office (SOHO), and branch office environments. Based on Paradyne's patented MVL technology, the Hotwire IP MVL System fundamentally changes the way data and voice services are delivered to the mass market. The Hotwire IP MVL System extends the Hotwire product line into the residential, SOHO and branch office market space with unprecedented functionality, performance and cost. Hotwire IP MVL is deployed from the very same Hotwire GranDSLAM that supports the provisioning of Paradyne's complete family of multiservices line cards, consisting of today's commercial-grade ADSL (DMT/G.Lite), IP RADSL, IP SDSL, TDM SDSL, ATM SDSL and IDSL services. Paradyne delivers the only DSLAM in the industry able to support this broad range of services from a single platform, with this centralised power forming the core of Paradyne's "Never Say No DSL" deployment strategy. The Hotwire GranDSLAM allows service providers to deploy standards-compliant ADSL (DMT/G.Lite) and SDSL, deploy IDSL for customers residing behind a digital loop carrier (DLC), and IP MVL to provision DSL services over extended loop lengths. "Never Say No DSL" to your customer again -- the Paradyne advantage. Hotwire MVL System Overview Hotwire IP MVL Systems offer both flexibility and investment protection. The Hotwire IP MVL solution is comprised of a Hotwire IP MVL Line Card installed in the Hotwire GranDSLAM chassis, which communicates with a Hotwire IP MVL Endpoint Modem at the customer premises. The 12-port, high-density Hotwire IP MVL Line Card is available in two flexible configurations supporting either an Ethernet or ATM networking model. Ethernet Networking Line Card The Hotwire 8312 IP MVL Line Card accepts 12 subscriber lines coming in from a Telco connector at the rear of the Hotwire GranDSLAM and efficiently aggregates them onto a single 10Base-T full-duplex Ethernet connection for backhaul onto the service provider's network. When coupled with the Hotwire IPC, the Hotwire IP MVL solution can further aggregate 10Base-T connections and offers internetworking to frame relay or ATM networks. ATM Networking Line Card The Hotwire 8314 IP MVL Line Card accepts 12 subscriber lines coming in from a Telco connector at the rear of the Hotwire GranDSLAM. The data on these lines is quickly encapsulated and directed onto the powerful ATM backplane. The data from each of the Hotwire 8314 IP MVL Line Cards installed in the Hotwire GranDSLAM is efficiently aggregated onto a single high-speed ATM connection for backhaul onto the service provider's network.

The Hotwire IP MVL 6310 customer premises modem delivers up to 768 Kbps of

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ customer. Hotwire MVL has the unique and powerful multi-drop feature, which allows up to four Hotwire IP MVL modems to be connected to the same telephone line and share a common WAN access. This multi-drop support is available through the Hotwire IP MVL Line Cards and IP MVL Endpoint Modems (6310-A2 or greater). The Hotwire HomeLink feature enables peer-to-peer print and file sharing capabilities among the four Hotwire IP MVL Modems within the home or small office environment. Hotwire IP MVL Modems are customer installable, plugging into any existing RJ-11 telephone jack, and transparently operate over existing in-home wiring (twisted or untwisted) for total customer convenience and satisfaction. Industry-Leading Performance The Hotwire IP MVL System has achieved distances in excess of 30,000 feet in real-world deployment. This industry-leading performance is obtained mainly due to the Hotwire IP MVL System operating at frequencies below 100 kHz. This results in an unimpaired performance even in the presence of T1/E1 disturbers. Hotwire IP MVL is unique in that it will maintain the highest possible speed and longest possible reach in the presence of common real-world disturbers. Superior Spectral Compatibility Solving mass market deployment issues relating to spectral interference and crosstalk, the Hotwire IP MVL System operates within the same globally accepted spectral limits of ANSI/ETSI Basic Rate ISDN (T1.601). This self-imposed design rule ensures compatibility with existing services. Hotwire IP MVL Systems will be no more of a disturber to other services than ISDN, which is globally deployed today. In addition, Hotwire IP MVL Systems are also spectrally compatible with the T1.413 standard and use less than 10 percent of the signal processing power required for other full-rate DSL implementations. High Density and Low Power Consumption The Hotwire IP MVL System delivers performance advantages allowing it to achieve high densities within the central office, multi-dwelling unit (MDU), multi-tenant unit (MTU) and Hospitality environments. The 864 ports that are supported in a seven-foot cabinet, when using the Hotwire 8810 DSLAM chassis, have a power dissipation of less than 1.12 milliwatts per port. The Hotwire IP MVL System is designed and built for industrystandard NEBS compliance. Services on Demand The ground-breaking innovation of MVL technology is its ability to transform a single copper wire loop into multiple virtual lines which support multiple services simultaneously; Hotwire IP MVL leverages this capability to deliver unique functionality, referred to as Services on Demand, which enables:

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ ♦ ♦ ♦ ♦ Multiple virtual line provisioning for high- or low-speed services, allowing from one to four devices to share a single line at the same time. Simultaneous access of multiple devices sharing a common WAN interface. Dynamic bandwidth allocation for multiple and independent applications simultaneously. Hotwire HomeLink (in-home LAN) peer-to-peer print and file sharing within the same environment using Windows 95/98 file and printer sharing application.

Dynamic Bandwidth Allocation The Hotwire IP MVL System dynamically and instantaneously allocates bandwidth for multiple, independent applications. While one user might be downloading files from the Internet, another user within the same environment can concurrently upload files back to a home office and yet another can listen to the newest audio streaming clips from another Web page. Hotwire HomeLink The Hotwire HomeLink LAN feature enables multiple Hotwire IP MVL Modems, sharing the same WAN link, to communicate in a peer-to-peer networking fashion. Hotwire HomeLink provides this LAN communication for end users connected to up to four different Hotwire IP MVL Modems at the customer premises, sharing the same WAN link. Hotwire HomeLink peer-to-peer communication allows Hotwire IP MVL connected users to utilize the available resources of each computer, such as common files, popular programs, backup devices and colour printers (used with Windows 95/98 file and printer sharing application).

Network Management Solution The Hotwire IP MVL solution offers service providers extensive management capabilities. The entire Hotwire family is managed using Paradyne's OpenLane Service Level Management Solution, an advanced Web-based management application that provides configuration control, health and status checking, diagnostic troubleshooting tools, realtime and history performance monitoring displays, as well as service level results reporting. OpenLane inter-operates with standard management platforms such as HP OpenView and Tivoli NetView in NT and/or UNIX (Sun) environments. On-site maintenance cost and customer interruptions are reduced through the ease and

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ Technical Support Programs You can easily ensure your investment protection for years to come. Paradyne offers three key technical support services in a single package: Software Maintenance, Technical Assistance and Communication/Documentation. MVL Specifications Hotwire IP MVL Line Card • 12-port line card which is installed in the Hotwire GranDSLAM Hotwire IP MVL Endpoint Modems • Model 6310-A2: Ethernet standalone modem with a 10Base-T interface. MAC learning bridge. • Model 6310-A3: Integrated POTS filter and supports the pass-through for a second phone line. Ethernet standalone modem with a 10Base-T interface. MAC learning bridge. Transmission Speeds • 8312/8314: Eleven speeds are available at 128K, 192K, 256K, 320K, 384K, 448K, 512K, 576K, 640K, 704K and 768K • 6310: Automatically matches the speed of MVL Line Card DSL Interface • 8312/8314: 50-pin Telco connector on the back of the Hotwire GranDSLAM chassis • 6310: RJ11C connector Digital Interface • 8312: Full-duplex 10Base-T • 8314: ATM • 6310: 8-Pin Mod 10Base-T Ethernet port Status Indicators • 8312/8314: Normal, Alarm, Test Ethernet Link Activity, MVL Port 1-12 Link-Up • 6310: Power, Alarm, Test, DSL Link, Ethernet Link(s) Management • 8312/8314: Integrated SNMP agent • 6310: SNMP management by proxy Dimensions • 8312/8314 Line Cards: 11.15 in. (28.32 cm) high x 10.4 in. (26.42 cm) deep x 0.8 in. (2.03 cm) wide • 6310 Endpoint Modems: 6 in. (15.24 cm) wide x 8.75 in. (22.23 cm) deep x 1.25 in. (3.18 cm) high

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ • • 8312/8314: Draws power from the DSLAM chassis 6310: 90V AC to 259V AC, 47 to 64 Hz, 120V AC, 60 Hz

Physical Environment • 8312/8314: • Operating Temperature: 32° F to 140° F (0° C to 60° C) • Storage Temperature: -40° F to 158° F (-40° C to 70° C) • Humidity: 5% to 95% relative, non-condensing Certifications • FCC Part 68, UL1950 3rd Ed., CSA C22.2 No. 950-95, EN60950, NEBS Level 1, FCC Part 15 Class A 3rd Ed., EN55022 (CISPR22), VCCI

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Port of Ness (Sys-X) 0 40Km

M s
Carloway (UXD5B)

Borve (UXD5B)

Barvas (UXD5B) Shawbost (UXD5B) North Tolsta (UXD5B)

Callanish (UXD5B) Great Bernera (UXD5B) Timsgarry (UXD5B)

Back (Sys-X)

Garrabost (Sys-X)

Stornoway (Sys-X)
Crossbost (UXD5B) Scarp (UXD5B) Balallan (UXD5B)

APPENDIX 3: UXD5 AND SYSTEM-X

Gravir (UXD5B)

Scarista (UX5DB) Sclapay (UXD5B) Leverburgh (UXD5B)

Harris (Tarbert) (Sys-X)
Drinnishadder (L/Conc.)

Berneray (UXD5B)

Manish (UXD5B)

Sollas (UXD5B)

Bayhead (UXD5)

Lochmaddy (UXD5B) Locheport (UXD5B)

Benbecula (Sys-X)

Carnan (UXD5B)

Grogarry (UXD5B)

Bornish (UXD5B)

Lochboisdale (Sys-X)

Eriskay (UXD5B) Northbay (UXD5B) Castlebay (UXD5B)

DIGITAL EXCHANGES IN THE WESTERN ISLES

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

APPENDIX 4: BACKGROUND INFORMATION ON TELEPHONE EXCHANGES
TXD or Digital exchanges are software controlled using both digital signalling and transmission to connect the calls. The first fully digital exchange to be brought into service in the UK was a UXD5A (Unit eXchange Digital), a modified Monarch 300 line PBX at Glenkindie, Aberdeenshire in 1979. And from 1983, an updated version UXD5B was installed in further rural locations. However, on 15th February 1968 an exchange, using TDM and PCM (Pulse Code Modulation) was demonstrated at the Post Office Research Station at Dollis Hill. This digital tandem exchange was moved into Empress, West Kensington, London in April 1968 to switch calls from Acorn, Ealing and Shepherd's Bush. It was the first exchange to switch PCM signals from one group of lines to another in digital form. The UXD5, a public-exchange variant of the Monarch digital PABX and remains only in the Highlands of Scotland and rural Wales. System X was the original specification developed by the British Post Office (B.P.O), Standard Telephone & Cables (S.T.C), General Electric Company (G.E.C.) and Plessey. The first production System X exchange, a junction tandem exchange TXD14, began working in Baynard House in July 1980. System X designations are: TXD01 Multiplexor TXD02 Very Small Local Exchange TXD03 Remote Concentrator Unit (RCU) parented on a DCCE (Digital Cell Centre Exchange). MXD03 mobile version. TXD04 Small Local Exchange TXD05 as per UXD5 TXD06 Medium Local Exchange TXD07 Large Local Exchange TXD08 Digital Principle Local Exchange based on MLE above. TXD09 Digital Principle Local Exchange based on LLE above. TXD10 Medium Combined Trunk/ Local Exchange TXD12 Medium Trunk Exchange TXD13 Large Trunk Exchange TXD14 Junction Tandem Exchange

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ System Y is the AXE10 version bought ' off the shelf ' from Thorn Ericsson and produced at factories in Brighton and Scunthorpe. TXD20 an AXE10 exchange opened in Keybridge House, International Switching Centre, Vauxhall, London in 1984. And the first local AXE10, in Sevenoaks, Kent was brought into service just two years later. System Y designations are: TXD53 RCU parented on a central processor. TXD57 Large Local Exchange Five designs of digital exchange are/have been installed in the UK. System X, AXE 10, UXD 5, 5ESS PRX and DMS100. System X is an all-British family of digital exchanges manufactured by GEC Plessey Telecommunications (GPT); AXE 10 is a Swedish design and manufactured in the UK by Ericsson Telecommunications Ltd; UXD 5 is a small system specifically developed by BT for rural areas, and 5ESS PRX is the European version of a system developed by the American company AT&T and widely used in North America. The DMS100, designed and built by Northern Telecom (NT) is being used for Featurenet services. The last analogue switch was removed from the trunk network in June 1990. All traffic on the trunk network is now handled by 59 fully interconnected Digital Main Switching Units (DMSUs) and four partially connected Digital Switching Units (DSUs) which help handle high call volumes from between London and the Home Counties. International traffic is handled by 4 dedicated exchanges. At the local level, around 97% of customers are connected to digital or modern electronic exchanges. At 30th September 1993, BT operated 7,537 local exchanges in the UK, comprising 5,532 digital, 1,301 electronic, 38 crossbar and 666 Strowger (electromechanical). By March 1996 all customers will be served by modern electronic exchanges.

What is the difference between a System X and System Y exchange ? System X was a co-operative development by Post Office Telephones, GEC, Plessey and STC. There was a big bust-up in which STC were removed (and given exclusive rights to supply TXE4) and GEC and Plessey were given all the rights and obligations to develop System X as a commercial system which BT would then buy by competitive tender. It was decided that there should be at least TWO suppliers to the PO/BT, and there was a large international tender to decide on a second, competitive system. Ericsson made the AXE10 which offered practically the same flexibility in a smaller box (mainly because System X was designed by committee: (it was already dated before the first release model became available).

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ The AXE10 was chosen and was then (and still is) bought by BT in competition with System X. The AXE10 became BT's 'System Y' just to keep things 'simple'. If anything the AXE10 is more full-featured than the 'X' but BT only took the basic software package on each, so both offer practically the same. Incidentally, Cellnet tried to use System X as their mobile switch but dumped it as it was very old tech. Vodafone tried Ericsson, and that is why Vodafone runs totally on AXE10s.
Sources: UK Telecoms Newsgroup FAQs + associated links.

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

APPENDIX 5: Applications for Broadband Satellite Internet Access
Web Browsing The most common use is, obviously, WWW browsing, FTP access, and also electronic mail. High end users, Telecommuters and Small Office/Home Office users desire high bandwidth access, which cannot be satisfied by common technologies. Browsing as an interactive application and greatly depends on the performance of the satellite protocol. Other factors are the hit ratio of the cache server and the Internet gateway performance. Information dissemination and broad-/mulitcast Satellite networks are better media to deliver bulk data, anywhere and anytime. Some illustrative examples include maps and situation awareness data, stock market and financial numbers, battlefield information, and medical data. Data broadcast, such as Webcasting, network news, and TV programs can be very expensive for point-to-point networks, but is ideally suited to broadcast satellites. Therefore, GEO satellites are far more suitable for these applications than is the traditional terrestrial network. Videoconferencing Video conferencing applications use data compression to allow two-way multi-user video conferencing connections to work over limited bandwidth channels. The PSTN infrastructure of today limits the video conferencing to one-on one, point-to-point sessions. Networks with downstream bandwidth rates as the Satellite based networks can provide the required capabilities for multi user simultaneous sessions where the downstream data combines several sites participating in the conference. Corporate Applications A major application for businesses is the extension of their Intranet or corporate network to all of their subsidiaries. With satellite, all subsidiaries in the spot beam of the satellite have instant access to the database at their headquarters. Some typical examples are: • • • • • • • • News agencies for distribution of high resolution images, Travel agent information with up-to-date availability of rooms hotels or other facilities, Real estate agencies- with up-to-date information including video clips, Remote shopping- services including high definition images and video clips of the offered goods, Digital distribution of CDs and video to agencies for immediate launch, promotion campaigns and production Administration Data Base - Schools, universities, hospitals, ... Banks – access to the customer financial data Hotels – hotels in remote locations offering internet access in their hotel rooms

Distance Learning Access to remote site containing educational oriented data as electronic library, lectures etc. can be achieved by students anywhere in the Satellite coverage area. The content can be transmitted via the high-speed satellite channel either individually to

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Internet Service Providers ISP’s are companies that provide a range of IP based services including Internet access and related connectivity, web hosting, data warehousing and targeted information services. ISP’s can effectively use satellite communication to provide fast Internet access to subscribers or businesses, which are out of reach of DSL or cable modem providers. One of the services taking advantage of the satellites broadcast nature is Webcasting, where Video or Audio signals such as news, interviews, or reports are broadcast over the Internet. Local caching or mirroring is a means of improving the response times for Internet using when accessing the web. The most commonly accessed Internet pages are locally stored in huge servers. VSAT technology can be used to feed and update these local servers with the current web contents and thus improve the performance of the ISP. Source: http://www.stmi.com/whitepaper.html

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

APPENDIX 6: teleworking

The First Age: telework is out in the cold
The 1980s: European teleworkers measured in thousands rising to 1 million by the late 1980s

Telework was a topic for discussion amongst some researchers and policy makers and practised only by a handful of gurus and by the technological elite

The Second Age: telework is in the kitchen
Early to mid 1990s: 1 to 2 million European teleworkers In this age, vanguard economic groups took over, especially those individuals with the resources and authority to be able to determine their own ways of working without recourse to higher decision-makers.

The Third Age: telework is by the fire
1997-98: between 2 and 4.5 million European teleworkers (though this is probably an underestimate) This age marked the take-off of telework during which a meeting of minds and objectives started to form between large numbers of decision-makers (who began to see the economic benefits of teleworking), and large numbers of workers (who began to understand and demand the benefits telework could bring to both their working and private lives)

The Fourth Age: telework is in the frying pan
From 1999: over 9 million European teleworkers Telework is now in flux; it is starting to exhibit a wide range of characteristics and forms, entering a large number of different sectors and situations, and using manifold techniques and methods, all of which, however, arise from the core characteristic of being enabled by the new network technologies. In this context, telework is indeed becoming the new form of work.

Source: Botterman, Maarten & Johnston, Peter., (August 1999), Status Report on European Telework – New Methods of Work 1999,
Office for Official Publications of the European Communities, Luxembourg, ISBN 92-828-7960-7

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Appendix 7: ICT SKILLS PROPOSALS
The 'ICT Consortium' recommends action on a number of fronts to address both the immediate shortage and long-term availability of skilled people. • Proposals to increase long-term availability of Skilled workers The 'ICT Consortium' recommends:
• The establishment of a Task Force comprising of industry, educational institutions, the European Commission and the Member States to examine how the educational infrastructure can meet the ICT needs of European industry and to implement appropriate actions. That is, to put in place a clear framework that describes the skills and competencies required, the ladder for career progression, the qualifications and training required and to identify where such qualifications can be obtained. The ICT Consortium initiative known as the 'Generic Skills Pilot Project' should form the basis for work in this area. The appointment of a dedicated team within the European Commission under the direct responsibility of a Commissioner to co-ordinate all Community action in this area. Encouraging Electrical Engineering and Computer Science University departments to combine in order to recognise communications convergence and remove both duplication and historic differences in approach and culture. That IT literacy should be treated as a core part of school curricula in the same way as reading and writing and to be taught not as an option, but as a set of key skills and the key to ongoing learning. That educators at all levels, but especially those with career guidance responsibilities must actively work to attract students, especially girls into science, engineering and ICT relevant courses and positively present the opportunities available within the ICT sector. That all teachers, lecturers and education officials should be IT literate and actively encourage the use of ICT across curricula and non-curricula activities. That all investment, individual or business, in ICT learning and education should be tax-exempt. This should include the provision of free services and of ICT kit to staff. That professional institutions responsible for curricula development and accreditation should be much more flexible on course and entry criteria to meet the needs of the

• •





• • •

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________ rapidly changing ICT industry. ICT professionals and companies are less concerned with professional membership than abilities, approach and motivation. • • Access and format of ICT tertiary education should be much more open and flexible to encourage the entry of people who did not follow traditional routes. Governments and the private sector should work together to provide ICT training through public / private partnership programmes. A number of programmes of this kind have been undertaken with impressive results and these should be carefully evaluated as possible models for more general application. Consideration should be given to opening-up higher level engineering education in Europe to the private sector. Increased capital investment in learning centres and networks as well as investment in materials is needed. Just-in-time cross training is needed to give new skills to already experienced professionals. Promoting ICT/technical studies by reducing the tuition fees or providing other financial incentives for these studies.

• • • •

Acknowledgements

Rural Broadband Telecoms & Skills Research March 2001 _____________________________________________________________________________________

Thanks also to the following people consulted and who took time out to talk or reply via e-mail to requests for information : Jimmy Duncan, Consultant, Shetland Andrew Muir, Mason Communications Neil Finlayson, iomart Ltd Michael Jones, Paradyne Co Ken Kriz, Paradyne Co David McGovern, BT Bernard Steinebrunner, STM Inc. Stan Schneider, Gilat, Europe Maurice at DirecPC, UK Donnie Morrison, www.work-global.com Angela Macleod, www.work-global.com Dr Wolfgang Greller, Scottish Centre for Information Research Stuart Robertson, KIT, Highlands & Islands Enterprise

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