Guidance

Commercial models

This section presents an overview of some of the commercial models available to local authorities when providing access to their assets.

Commercial models for granting access to public sector assets

When offering access to their assets, local authorities who wish to encourage deployment of digital infrastructure should avoid a commercial model which could restrict access by network providers or lead to the imposition of high access or rental fees. In considering fees for access, or use of sites, local authorities should refer to the separate guidance on access agreements .

There are a variety of alternative models available to local areas who choose to offer their assets for use by investors in digital infrastructure. Some examples are included below.

The open model

In this model, a local authority offers a simple agreement (such as a Framework Agreement for Site or Duct Access) offering access to one or more sites/locations on standard, non-discriminatory terms. If the request for access is from a Code operator, and is agreed by the site provider, this will likely be a Code agreement.

This is the model favoured by most network providers as it minimises complexity and therefore cost by enabling the network providers to contract directly with local authorities. Another advantage associated with this model is that it provides local authorities with control over the fees charged for site access or duct access.

A variation of this model is where a local authority leases its dark fibre assets to a third party who then offers managed services to third parties on an open access basis.

The cooperative asset sharing model

Cooperative asset sharing has been developed and tested over some years and is now being adopted by a number of local authorities and city regions.

The model has two main objectives:

  1. To enable public sector bodies to collaborate in building advanced digital infrastructure to meet their individual and collective needs; and
  2. To allow them to offer access to infrastructure at commercial rates with private sector investors, network providers and service providers in a non-discriminatory, non-exclusive way.

Individual public sector (and private sector) bodies can build infrastructure, such as duct for fibre optic cables, to meet their needs. A cooperative involving private and public sector members can then install fibre in the duct for shared use, creating a single fibre infrastructure.

The cooperative would pay the duct owners a rental fee, look after maintenance and charge commercial rates to its members to use the fibre. It may offer its members other ‘passive’ wholesale products such as rack-space and antenna space on lamp posts. The cooperative only trades with its members and any communications network provider can join.

This model has a number of advantages:

  1. It offers a simple way for public and private sector bodies to collaborate for mutual advantage. There are no complex shareholder agreements. Public sector bodies retain the assets they own.

  2. It offers a simple way to share access with the private sector, with consequent benefits for the local economy. There are no complex clawback or revenue share agreements: the cooperative pays a straightforward fee to public sector asset owners.

  3. The cooperative structure ensures that the infrastructure is neutral and access is non-discriminatory and non-exclusive. This promotes competition and innovation. It also promotes public sector cooperation.

The concession model

Concession models have been used by some local authorities in order to encourage investment in connectivity (such as Wi-Fi, mobile or fibre) by offering a period of exclusivity in return for an upfront fee and sometimes a share of ongoing revenues. An advantage to this model is that it allows local authorities to work with one, rather than multiple, entities, thus freeing up their own resources. However, the challenge faced by local authorities who choose the concession model is how to maintain competition in the provision of networks and prevent the concession acting as a barrier to wider investment.

The revenue achievable from the use of the assets has not always matched the expectations of local authorities or indeed the concessionaire, which can have the result of effectively sterilising the assets for the period of exclusivity.

Concessions are likely to be most effective at encouraging investment in connectivity when the concessionaire is in the business of providing infrastructure to network providers, rather than a network provider itself. They may also make sense where there are benefits to sharing infrastructure, for example in rural areas or dense urban areas.

If the concession model is to be used, local authorities and network providers are encouraged to ensure that agreements:

  • focus on unlocking investment in high-capacity digital infrastructure, including in hard-to-reach areas
  • mandate that the concessionaire offers open access to network providers on fair, reasonable and non-discriminatory terms
  • include ‘use it or lose it’ clauses, with exclusivity conditional upon specific network deployment targets
  • are not offered before consulting with industry

State Aid requirements do not necessarily mean local authorities can only grant access to their assets via a procurement exercise or concession model approach. Local authorities can ensure that access to, or use of sites is granted on an open and non discriminatory basis, which complies with the principles set out in the section on access agreements. There is nothing to prevent an open model approach being adopted where an individual network provider requests access to a site, as long as it does not exclude other network providers.

Accessing street furniture for network provision

Where the provision of street furniture is outsourced through public private partnerships, local authorities are encouraged to consider how to agree with contractors to ensure that network providers can have access to install and operate network equipment. This should include consideration of issues such as commercial arrangements for access including charging, and access to information about the location of street furniture and the availability of, for example, power supplies. The aim should be to facilitate network deployment through collaboration and cooperation with network providers and ensuring that the level of charges for access do not act as a disincentive to network deployment. Putting in place agreements with existing contractors can take time so local authorities are advised to plan ahead.

Government would like to include case studies on this page showing a variety of effective commercial models available to local areas who choose to offer their assets for use by investors in digital infrastructure. If you would like to submit a case study, please do so by emailing connectivityportal@culture.gov.uk.

Homepage: Digital Connectivity Portal

Published 20 December 2018