Study: Government ‘Should Axe Broadband Subsidies’

The government needs to dispense with its focus on boosting the UK’s broadband speeds and focus on developing the role of the Internet in people’s lives, according to a new study from think-tank Policy Exchange.

The study found that while the backing of successive Labour and Conserviative governments for the roll-out of high-speed broadband across the country has clear benefits, the government’s strategy needs to change once current targets for 2015 have been met.

Subsidies should end

After that point the government should end its broadband infrastructure subsidies and focus on getting more people online and boosting small business’ Internet usage, the report found.

“The government’s current spending plans will extend fast broadband to the vast majority of people,” stated Chris Yiu, head of Policy Exchange’s digital government unit and author of the report. “Any further public money should be spent on making sure we are putting this to good use.”

A survey of around 2,000 consumers and 500 small businesses found that price and reliability matter to users as much as speed, and that while 79 percent of small businesses have a web presence, only 34 percent take bookings online, with just 36 percent accepting payments online.

Government policy has focused on extending broadband coverage and boosting the UK’s broadband speeds. However, the report points out that while the UK is 18th in Akamai’s global rankings, measuring countries’ average downstream domestic Internet connection speeds, its ranking on measures relating the Internet to economic performance are more significant.

The Internet economy accounts for more than 8 percent of the UK’s GDP, a higher proportion than any other G20 country, according to figures from Boston Consulting Group cited in the study, with figures from McKinsey Global Institute indicating that the Internet accounts for around a quarter of the UK’s economic growth.

Speed is not the answer

“This observation alone makes it clear that speed should not be the primary lens for broadband policy,” Yiu wrote in the study, arguing that instead the government should be focused on achieving “the best economic and social outcomes”.

The report’s recommendations include a streamlined planning regime for local authorities looking to accelerate the rollout of fixed and mobile conectivity, a focus on attracting broader usage of government digital services and a stronger role for the minister responsible for broadband.

Recognising that radio spectrum will be a key constraint in the medium to long term, the study recommends the government make detailed plans now for future spectrum reform.

“A radical reform plan might include contingency planning to shift broadcast television to internet protocol television (IPTV) considerably sooner than 2030,” Yiu wrote.

Government plans

In his Autumn statement, chancellor of the Exchequer George Osborne revealed a list of 12 more cities that will get subsidised ultrafast broadband, but resisted calls to re-invest the $3.5 billion expected from the forthcoming 4G auction, and will instead use the money to reduce the UK’s deficit.

Building on an announcement from March that £50 million would go on the expansion of Britain’s ultrafast broadband project, Osborne confirmed the following will soon benefit from speeds of at least 80Mbps: Brighton and Hove, Cambridge, Coventry, Derby, Oxford, Portsmouth, Salford, York, Aberdeen, Perth, Newport and Derry/Londonderry in Northern Ireland. These twelve cities are added to a list of 10 cities, including London, Birmingham and Manchester, which were given the chance to share a £100 million pot to get similar speeds, back in the March Budget.

The government is investing £680m over the lifetime of this Parliament to “deliver the best broadband in Europe”, including £530 for the more intractable problem of getting fibre into rural areas, through the Broadband Development UK (BDUK) initiative, meaning the government has now used up that total fund.

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