In the run up to the General Election, the Labour Party promised ‘free broadband for all’ as part of its election pledge. It would be achieved by a £20bn investment nationalising Openreach, the maintenance arm of BT and a tax on internet companies such as Google, Facebook and Amazon to cover the operational costs.
As providers of telecommunications solutions across a wide range of sectors such as education, hospitality, manufacturing, financial services and retail, we thought we’d look at how realistic the proposal is and how it could affect our customers and even our own business.
Starting at the beginning, what is full fibre broadband? Now, the standard fibre broadband that we have delivered to our homes and many of our businesses is FTTC or Fibre to the Cabinet. This is where the provider delivers a fibre connection to the nearest green street cabinet and the gets it from the cabinet to your location over traditional copper wires. Copper wires resist a signal being passed through them so speeds typically are not too great and seriously degrade over distance.
The big thing now is Full Fibre, or FTTP Fibre to the Premises. The big difference being that the link from the green cabinet to your location is delivered over resistance free fibre optic cable – delivering blisteringly fast speeds. The new Nirvana. The UK currently has an estimated 8% market availability of Full Fibre, which is pretty pants when you compare it to Spain for example who have 75%.
The problem is infrastructure, cost and investment. BT Openreach have not focused on this area in recent times which has left opportunity and, in its way, passed the baton to private enterprise. Companies like Virgin Media with their ‘Project Lightening’, Talk Talk with ‘FibreNation, City Fibre, KCOM, Gigaclear, Glide, Toob, Community Fibre and Truespeed have invested billions in delivering Full Fibre infrastructure and commenced roll outs.
So, Labour now proclaim that they will nationalise BT Openreach, rebranding it ‘British Broadband’ (at a cost to the tax payer of £20bn) and deliver free full fibre to every business and household in 10 years and 18 days, i.e. by 2030. What is the reality of this? So, let’s break this down into 4 parts.
Point One, Labour have priced up the project at £20bn, is this realistic? Well first it has been estimated that the country needs £100bn investment to get us to full fibre. The industry itself, it is believed currently invests an estimated £8.4bn back in for infrastructure roll out, which does not include monies already invested and of course the huge private equity investment already committed by banks and other institutions. What is more it is estimated that the industry currently delivers £4bn per annum to HMRC coffers, which will also be lost should Labour provide these services for free? The final nail in the £20bn per year estimated fiscal cost is the current market value of BT itself, which BT have recently chirped up as projecting a £100bn buy price. More conservative estimates for UK fixed asset balance sheets sit at around £90bn. Hey, and what about shareholders, pension funds etc. It is hard to not believe that adding all the variables up would not sum somewhere closer to greater than £200bn – or 10 times Labours current estimates.
Point Two, what about none BT businesses? Ok, so by providing a state-run monopoly to BT, rebranded ‘British Broadband’, it would mean an end to the broadband businesses that are Virgin Media, Talk Talk etc. It would also see massive losses in the reseller and distributor markets as most telecommunications companies in the UK be, they small or large provide broadband services to customers. It is estimated that as many as 200,000 jobs could be impacted. A move like this would see some if not all the largest companies taking the British Government to court in an attempt to stop the closing of their businesses and loss of tens of billions of investment overnight. Court cases would go on for years and without a doubt awards and damages would also run into tens of billions. Hey, let’s add this to our already >£200bn initial estimate for the cost of this project. Now it’s starting to get very emotive as well as eye wateringly expensive.
Point Three. Would a state monopoly be a good thing? Well, we have already seen that to really get Full Fibre Broadband moving we have had to see the introduction of competition as BT Openreach have not delivered the goods. You would have to question how by closing down all competitors and putting complete delivery with British Broadband would see a speedy and credible delivery? History has shown us that state monopolies rarely deliver. What is more, British Broadband wold need consistence and unerring funding from the Government, which could not come under any austerity were this £200bn + project to be fulfilled.
Finally, and Point Four, the European Union. The elephant in the room for the last 3 and half years has been the ‘B’ word. Labour propose a ‘remain’ or softer leave option on their referendum 2 ballot paper were they to be invited to form a Government on Friday 13th December 2019. It’s fair to assume that a Labour outright win or LibDem coalition would see the odds of a remain decision increase. However, by remaining in the EU Labour would not legally be allowed to create an anti-competitive state monopoly and as such could not offer Free broadband for all.
So, in order to deliver Full Fibre Broadband to the British Public and UK businesses Labour would have to: –
- Buy BT Openreach, including infrastructure, shareholders stock and pension funds at an estimated £100bn
- Wave goodbye to £4bn provided each year in tax and dividends.
- Lose an estimated industry-provided investment of £8bn+ in infrastructure which the Govt would have to then fund themselves
- Plus, themselves invest greater than £10bn per year, every year in new infrastructure, whilst paying to run this new giant new business,
- Whilst at the same time risking perhaps as many as another 200,000 UK jobs
- This would include the closure of industry giants like Virgins project Lightening, Talk Talks FibreNation, Vodafone’s Cable & Wireless business, CityFibre, Toob, Glide, parts of KCOM and thousands of small businesses with the litigation and reparations that would ensue.
- And finally – leave the European Union.
Given the above the real question must be, is this a genuine offer at all?
Evoke Call to Action
If you would like to understand more about the different types of Broadband and connectivity Evoke can provide for your business, please do not hesitate to get in touch. It won’t be free but we can promise extremely good value 😊 please don’t hesitate to call us on 01509 278278 or if you prefer, you can email the team at [email protected]