Labour broadband plan: Industry reaction
November 15, 2019
By Colin Mann
Philip Jansen, the chief executive of BT, has warned that real cost of the Labour opposition’s General Election pledge to roll out a full-fibre network nationwide and provide free broadband for all could be as high as £100 billion and that shareholders in BT will be forced to sell at a “deep discount” under a Labour government committed to nationalising the country’s broadband network.
Speaking to the BBC Radio 4’s Today programme, Jansen noted that the telco’s share price had dropped sharply in recent years because of the broadband roll-out. “We were at £5 not long ago and now we are around £2 . . . shareholders are nursing a major loss if they bought two years ago, they recognise that we are going to invest very, very large amounts in a competitive market and there is a lot of risk in that environment,” he said.
Separately, a BT spokesperson said that it should be a “top political priority to super-charge the roll-out of full fibre broadband and 5G right across the UK in order to build the digital economy of the future. “Whatever the result of the election, we’d encourage the next Government to work with all parts of the industry to achieve that. It’s a national mission that’s bigger than any one company.”
Labour’s plans have led multiplay telco TalkTalk to postpone plans to sell its small full-fibre broadband infrastructure network being built in Yorkshire. Tristia Harrison, chief executive, told The Times: “As you can imagine, news overnight is obviously going to make all the industry pause, reconsider and digest,” adding that there needed to be competition in the sector. “It is true in any sector. I think there is a lot of interest in infrastructure.”
Julian David, CEO of trade body TechUK, said: “These proposals would be a disaster for the telecoms sector and the customers that it serves. Renationalisation would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT. Full Fibre and 5G are the underpinning technologies of our future digital economy and society. The majority of the estimated £30bn cost for Full Fibre is being borne by the private sector. Renationalisation would put this cost back onto the taxpayer, no doubt after years of legal wrangling, wasting precious time when we can least afford it. These proposals would be a huge setback for the UK’s digital economy which is a huge driver for growth.”
“The telecoms sector has delivered increased coverage, capacity and quality whilst household spend on telecoms services has remained flat. Put simply, it is delivering for consumers and UK PLC. Labour’s plans are fundamentally misguided and need to be dramatically altered if they are to deliver the infrastructure we all need.”
The Independent Networks Co-operative Association (INCA) – the UK trade association for next generation broadband services – has welcomed what it says is the commitment to broadband and digital infrastructure development shown by Labour’s announcement, but warned that the practical implications of nationalising parts of BT including Openreach could have a negative impact.
INCA CEO Malcolm Corbett said: “For the UK to become a world leader in full fibre and 5G, it needs to provide access for all, wherever people live or work and we are pleased to see the commitment Labour has shown to this through its latest pledge.”
“It is crucial, however, that how broadband is funded, rolled-out and provided is considered, along with the wider impact the plan could have. The UK’s broadband market is currently thriving as a result of infrastructure investors and local communities, alongside the public sector. £3.3 billion was committed by investors in alternative network providers (altnets) last year alone, in addition to investments by BT and Virgin Media. This has led to the deployment of Gold Standard world-class networks in cities and towns across the country, including in previously underserved rural areas, growing from a very low base of about one per cent of premises to around 10 per cent today. Accelerating the pace is important and all parts of the industry are working to do that.”
“While we welcome Labour’s focus, we are concerned that some parts of the policy, for example, nationalisation, will dampen the vibrant market for investment in new fibre networks in the short term, thus delaying fibre roll-out. Free broadband is an attractive consumer proposition but will be costly, could undermine innovation and consumer choice, as well as having a detrimental effect on the service provider sector.”
INCA has also signed a joint statement with TechUK, UK Competitive Telecommunications Association (UKCTA), and ISPA: “Labour have rightly identified the potential of widespread full fibre and the transformative benefits it will bring to the UK. However, as an industry we believe this proposal will halt the significant investment already flowing into the industry, slow the large scale builds currently underway, risk jobs now and in the future, and leave consumers with no choice. We stand ready to work with whatever Government is elected on best way to deliver fit for purpose broadband to the UK as soon as possible and will provided further comment on Labour’s plans in the coming days.”
“It’s great to have bold aspirations but we’ve seen how challenging they are to implement,” commented Paolo Pescatore, TMT Analyst at PP Foresight. “For sure, connectivity needs to improve and so does coverage. There are so many companies laying cables and installing masts. The best way is to forge partnerships which will help lower costs for all including consumers. Ultimately, who is going to invest when something is for free? That is not a viable business model. Individuals and businesses will have to fork out for it somehow.”
Evan Wienburg, CEO of rural full fibre UK ISP Truespeed, said that the UK’s “robust and competitive” telecoms industry was already working hard to deliver full fibre for all, using a mix of public and private money. “Rather than upset the apple cart, we urge whoever is in government to be careful about how they use public money to effect this change and to support the myriad of infrastructure providers that are working tirelessly up and down the country to deliver this game-changing infrastructure to every post code,” he added.