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UK broadband makes election bow

November 15, 2019

Who’d have predicted that broadband would take centre stage in the UK election in such spectacular fashion? But then, who would have predicted much at all about the shambles that is British politics just now.

The parties are united in recognising a market failure that has seen the UK languish at the bottom of developed nations when it comes to broadband infrastructure. The Conservatives – who have switched from austerity to drunken sailor spending spree – have kind-of promised £5 billion to make full fibre happen in all homes ‘in five years’. It’s a BJ promise and, therefore, contains vague commitments on spending on comms infrastructure, including 5G.

Five years is about eight years sooner than the previous Conservative government promised for the same level of investment. So, let’s get real.

Which is where the Labour plan comes in. Just kidding. But at least Labour’s ‘policy’ – which feels very much hot off a napkin at an over-excited planning lunch – does ‘put it out there’ that on the evidence it is clear the current market structure isn’t going to deliver a 21C fast infrastructure fit for a country about to try punch above its weight in world markets. The UK’s overall productivity looks about as good in league tables as its broadband performance. And the two are not unrelated.

However, is the answer to nationalise Openreach and rely on public sector management to build the network? And then give away the prized 1GB service to everyone? It is often argued that broadband is a utility as necessary as water or electricity – but I know which ones I’d be prepared to try and live without.

The problem is Labour’s proposition doesn’t work. Giving it away guarantees universal access but means the public purse sucking up the running costs. Labour says these will be paid for by taxes collected on ‘tech companies’ for which read Amazon and Facebook and a handful of others. Those companies can and should pay more based on their sales in-territory but, even if you can pull this off in the regulations, it won’t be anywhere near enough. Charging carriage fees might be a more realistic revenue raiser but, even then, any kind of ROI is unattainable.

‘Normal nationalisation’ – there may be such a thing soon enough – relies on swapping bonds for shares and paying a coupon from earnings via the assets nationalised. BT were quick to point out that Labour’s scheme would see shares swapped for low income government bonds unlinked to specific income – as there isn’t any. This means shareholders and pension funds that hold shares would lose out terribly. Quite possibly. But probably not as badly as they have through the halving of the BT share price in the last five years.

It is ironic (but not coincidental?) that this most surprising of election offers should be about BT, the most totemic of privatisations – the sell-off that marked the beginning of handing over utilities to the market. It is also ironic that on the day that it emerged, BT announced it had renewed its right to show Champions League in the UK for £400 million a year.

That commitment keeps it in the TV game and competing with the other providers of broadband in the UK. It is also a sum that could pay for quite a lot of fast broadband investment. If nothing else the (rare) common recognition by politicians that our national broadband effort has been embarrassing should at least mean that Openreach is completely split from BT and properly mandated and funded to begin to things right.

Categories: Blogs, Broadband, Broadcast, Business, Nick Snow, Policy, Regulation, Telco