Page 1 ITT for The UK’s National Broadband Scheme – Evaluation of the UK’s State aid measure Supplier day 14 O CTOBER 2014

Page 2 Agenda 1.The National Broadband Scheme 2.The National Broadband Scheme – Progress and future commitments 3.The Independent ex-post evaluation 4.Evaluation outputs 5.Re-notification – Overall timeline and dependencies 6.ITT evaluation criteria – outline 7.Question and answers

Page 3 1. The National Broadband Scheme The context The UK performs well against its European peers on key parameters: price, speeds, coverage and take- up Nevertheless, the UK, like its European counterparts, is now investing in superfast broadband capability. Importantly, these investments are: -driven by commercial investments; and -supplemented by public funding where the commercial case fails. The business case for public sector investment is clear. For every £1 of public funds invested the UK receives a net return of up to £20, these projects are anticipated to deliver 20,000 new or safeguarded jobs. DCMS, through Broadband Delivery UK (BDUK), is supporting broadband and mobile programmes. The National Broadband Scheme is the largest element of the programme with £1.2bn+ being invested. There are two primary objectives: To provide access to NGA infrastructure capable of delivering superfast broadband speeds to as many homes and businesses as possible in each local authority area in the UK To ensure that everyone in the remaining areas of the UK has access to minimum broadband speeds of at least 2 Mbps (the universal service commitment).

Page 4 Progress to date The UK has made substantial progress in delivering on its objectives. Specifically: Superfast Broadband Programme Phase 1 has resulted in contracts for 46 county-wide projects as well as community led schemes that are in deployment in white NGA areas. 1 million+ UK premises are now able to obtain superfast broadband than in the absence of the scheme, growing by over 40,000 premises per week; and 4 million+ additional UK premises will be able to access superfast broadband by early 2016 (90% UK superfast coverage). Future commitments The UK has strengthened its commitment to the shared targets set by the Digital Agenda for Europe (DAE). Specifically: Superfast Broadband Programme Phase 2 (95% coverage by end 2017). These contracts are intended to be in place before June 2015, and will be delivered in 2016/17. Superfast Broadband Programme Phase 3 (i.e. looking at solutions that could deliver near universal superfast coverage). To achieve the Phase 3 target the UK needs to successfully re-notify the NBS to address the hardest to reach areas of the UK. 2. The National Broadband Scheme - Progress and future commitments

Page 5 Operation of the National Broadband Scheme Given State aid interventions carry competition and trade risks the UK has been careful to minimise this so as not to undermine either competition or investment outcomes. The National Broadband Scheme (NBS) is an ‘umbrella’ scheme that enables BDUK to award State aid to compliant local broadband interventions in ‘white’ final third areas of the UK. BDUK’s scheme design contains several 'best practice' elements aimed at ensuring more effective; better targeted; and less distortive public interventions. In particular the scheme: -focuses on NGA interventions and uses passive wholesale access to support them; -ensures full ‘open access’ where new passive infrastructure is built using State funds; and -Ensures all projects provide minimum levels of wholesale access (over and above those provided through regulation), with ‘points’ given for additional forms of network access. These design features were supported by the Commission ex ante in its NBS decision and are carried through to the Broadband Guidelines. The Commission is seeking evidence on the application ex post in order to validate their ongoing use; and to inform future policy development The use of ex-post evaluation forms part of broader initiative under State aid Modernisation.

Page 6 Ex-post evaluation of the NBS The key evaluation questions Part I – Compatibility evaluation (1) Have the conditions and assumptions which led to the State aid compatibility decision been realised? Part II - Impact evaluation (2) What has the overall effectiveness of the State aid measure been in light of the UK Governments pre-defined objectives (and how does this compare with different intervention models)? (3) What has the impact of BDUK’s NGA State aid intervention been on markets and competition and has the intervention been sufficiently targeted to ensure that there are no undue distortive effects arising from the State aid scheme that are contrary to the interests of the Union? 3. The Independent ex-post evaluation

Page 7 Ex-post evaluation of the NBS (contd.) Methodology o This is the first time that that an ex-post assessment of this sort has been undertaken and the Commission is looking to use the report as an exemplar. (The ITT has received input from DG Competition.) o The Commission has published key reference documents. The outputs must be consistent with these. BDUK role – supporting the evaluation o To provide relevant project documentation (e.g. NCC assessment of broadband projects). o To provide relevant available data (e.g. New Duct and Pole build). o To provide key supplier contacts (e.g. BT).

Page 8 Key deliverables These deliverables should be focussed on providing the UK with evidence-based answers to the questions set out in the Service sought section of this ITT. Specifically: Outline report setting out the contents, structure and the proposed approach to addressing the questions detailed in the Service sought section of the ITT. A draft report setting out preliminary answers to the questions detailed in the Service sought section of the ITT. The preliminary answers should address any feedback received from the Commission at outline stage. A final report that answers the questions detailed in the Services sought section of the ITT and addresses any matters that the Commission recommends the consultants consider following its review at preliminary report stage. The final report will be published by both BDUK and the Commission. Presentations In addition to the key outputs detailed above the appointed contractor will also be asked to present draft and final findings to BDUK. By exception, the appointed contractor may be asked to accompany BDUK DG Competition to present findings or answer questions on them. 4. Evaluation outputs

Page 9 5. Re-notification – Overall timeline and dependencies T Dates for contract award and project initition -Deadline for proposals - 5pm on 24 October -Project start - 3 November

Page ITT evaluation criteria - outline A: Understanding of the brief (10%) Provide and explanation of what is required to effectively address the ITT questions. Set out the key challenges and issues that will be faced in producing a robust evaluation and to address these. B: Suppliers proposed methodology and plan for the work (40%) Provide an explanation of the approach (including the application of economic analysis) that they intend to use to answer the questions. Confirm which qualitative and quantitative techniques would you use to answer the questions. Set out the relevant counterfactual that would help provide answers to the questions detailed. Provide a detailed project plan setting out the key activities, personnel assigned to those activities and work milestones. C: Experience, skills and people (30%) List relevant work/activities. Include specific references to: -knowledge and experience of applied EU/UK telecommunications competition policy, including the provision of expert advice to public and private sector clients; -evaluations that your organisation has undertaken, particularly related to public investments (including State aid); -quantitative analysis (economic and financial) that your organisation has provided in support of public policy/State aid decisions; and -relevant reports, submissions, or other contributions to State aid policy development (e.g. State aid modernisation). List the team with a brief description of their roles, prior experience, responsibilities and time allocations. Match prior experience to the requirements of this project. D: Cost (20%) Provide a table outlining the costs of the project, how these are calculated and matching the costs of resources to project plan activities.

Page Questions and answers Over to the audience for questions…. Supplementary questions Any questions not answered here should be submitted in writing to BDUK as clarification. Answers to clarification questions (CQs) will be published.