UK telcos may need more money for SRN says audit office

The independent parliamentary body has also questioned the government's business case with regard to the economic benefit of extending 4G mobile coverage to hard-to-reach areas and suggested that it may not meet separate targets on rolling out 5G networks.

The NAO's comments come alongside the publication of its new report into the progress of the SRN. Its concerns about operators failing to meet their targets will come as no surprise, with all but one of the UK's mobile network operators having recently expressed doubts of their own on that score. But the extent to which it is now questioning the efficacy of the project is noteworthy, albeit with the limited information it seems to have available to it.

Indeed, the NAO's announcement on Thursday makes liberal use of the word 'unclear' and derivatives thereof. No one seems to know whether the project will be delivered on time, how much it will cost, or whether ultimately it will even be worth the effort.

The SRN was conceived as a partnership between government and the mobile operators to extend 4G coverage to rural areas, sharing the cost burden. The telcos signed up in 2020, committing to 95% landmass coverage by December 2025. The project was costed at £1.03 billion, the mobile operators contributing £532 million and the government £501 million.

As of Autumn 2023, 92.7% of the UK landmass had 4G coverage, the NAO reported, which is not a huge increase from 91.4% when the programme launched in March 2020. The project was behind schedule.

Meanwhile, Ofcom also set an interim coverage target that requires the four operators to each reach 88% 4G landmass coverage by June this year.

Of the four, only EE is on track. The BT-owned operator announced in January that it had hit that June target six months early and subsequently Howard Watson, Chief Security and Networks Officer at the UK incumbent, had a dig at the other three – Vodafone, Virgin Media O2 and Three UK – for falling behind. UK press reports in October suggested that the three laggards had written to the government asking for an extension to that June deadline, something that has now been confirmed by the NAO.

As yet there has been nothing from the government about moving the goalposts, but the NAO's new report could prove a trigger on that front.

"It's not yet clear whether the programme will meet its 95% target on time," the office said. It did not provide any further information on where the operators are with regard to the 88% target, but the last we heard Three said it will likely miss the June deadline, while Virgin Media O2 said it may meet it, or would otherwise come close.

There are a number of reasons for the delays, the NAO said, while taking care not to point the finger in any particular direction. The government and the operators took longer than expected to finalise mast locations, agree site sharing and access, and procure services, it explained. The Covid-19 pandemic also hindered progress, as did opposition from local campaign groups, and local authorities' capacity to handle planning applications.

The telcos themselves detailed some of those reasons – particularly the pandemic impact – last autumn. EE would beg to differ on the true significance of those factors though.

To make matters worse, it's all costing more than the various parties expected.

"Estimated costs have risen significantly on the programme, due to high inflation and other factors, although government does not yet know by how much in total," the NAO said.

"As a result of cost pressures, MNOs may no longer be able to deliver the level of coverage required within the current [£1.03 billion] funding," it added. "Under the terms of their grant agreement with the government, MNOs bear any additional costs. However, if costs are excessive, MNOs may not be obliged to meet individual targets, further risking the overall ambition to achieve 95% mobile coverage across the UK landmass."

Although the NAO is hedging its bets by saying "may," it seems unlikely that we will suddenly discover that actually everyone does have enough money after all. Or that the mobile operators will willingly stump up millions more to plug the funding gap.

That suggests we will see targets scaled back, particularly given that there are now question marks over the real-world benefits of the SRN.

"DSIT's business case suggests the investment will deliver economic benefits of £1.352 billion through supporting tourism and business productivity in rural areas. However, the business case included limited evidence of the specific benefits of extending mobile coverage into remote or sparsely populated areas," the NAO said.

It also queried the government's aims for 5G, as outlined in the Department for Science, Innovation and Technology's (DSIT's) 2023 Wireless Infrastructure Strategy; it is shooting for standalone 5G in all populated areas by 2030.

"Achieving the 5G coverage ambition will be challenging. It will require significant investment from MNOs and DSIT will be reliant on accompanying action from other government departments and bodies that may have competing priorities for funding," the NAO said.

But despite all the NAO's questions, it wasn't particularly forthcoming with answers. It recommended "improved oversight" of the mobile operators with regard to the SRN and essentially told DSIT to get its finger out and set some target dates by which it will actually make some decisions on what it wants from 5G.

"It is unclear whether the Shared Rural Network programme will achieve its coverage target on time; costs are higher than anticipated; and government has not clearly articulated the benefits of aspects of the programme, including increased connectivity in sparsely populated areas," said Gareth Davies, Head of the NAO.

"As government develops its 5G strategy, it will need to more clearly define what it is aiming to achieve in different parts of the UK and economic sectors, so that limited resources can be targeted where they deliver most value," Davies said.

Ultimately, we can probably expect some revised SRN goals from the government at some point in the next few months – doubtless with a carefully-crafted justification for the lack of progress – and eventually something more concrete on 5G too.