With news that if the Labour Party were to win power, they would nationalise BT’s fixed-line network, effectively delivering free high-speed broadband to all, Silicon assesses the practicality of the policy and asks industry experts if these plans, will finally provide the network access promised by successive governments.
The shadow chancellor John McDonnell announced a major move in the tech sector two weeks ago pledging to deliver broadband internet access to the whole of the UK by 2030. In a speech, Labour’s leader Jeremy Corbyn said: “It’s time to make the very fastest full-fibre broadband free to everybody, in every home in every corner of the country.”
Costing £20 billion over a decade, the plan would be paid for by a new tax on the tech giants and by nationalising a section of BT. Now that the industry has had time to digest these radical plans, what does the tech sector across the UK think of these proposals?
Called British Broadband, the new entity would effectively end the average bill of £30 households pay for their broadband access. The move could also ensure that rural areas of the UK would finally have acceptable broadband speeds for the first time. Indeed, according to the last Ofcom report, only 7% has access to fibre broadband.
Speaking to Radio 4’s Today program, Philip Jansen, BT’s Chief Executive said that he disputed the overall cost of the scheme the Labour Party has proposed. Indeed, the Conservative Party have calculated the Labour scheme would cost an estimated £83 billion.
Debates about the cost of the scheme notwithstanding, the timeframe for the initiative has been called into question, as Evan Dixon, Managing Director, Viasat Europe explained to Silicon: “Broadband strategy can’t exist in a vacuum but has to form part of a national industrial strategy aimed at making Britain a high-tech nation. And for that, time to deployment has to be taken into consideration.”
Dixon continued: “The UK cannot afford to wait ten years for its broadband rollout. Alternative ultrafast broadband technologies exist today that could connect all Britons. Not only is connectivity essential for a high-tech economy but, supporting the connectivity itself – including investment in faster fibre and satellite technologies – will boost the UK and provide capabilities that can be used across government.”
Free broadband promise
A recent YouGov poll found 79% of Labour voters back the proposal, as do 62% of Lib Dem voters. People who backed the Conservatives in 2017 are much more evenly split, with 45% pro and 41% against. However, when it comes to how Labour say they will deliver free broadband – by nationalising BT Openreach – Britons become much more unsure.
Speaking to Silicon, Dinesh Dhamija, Liberal Democrat MEP for the London Regions and Founder of eBookers, said: “Improving access to high-speed broadband is a good idea in theory, but Labour is missing the more significant developmental need facing our country, and that is 5G. That’s where money should be spent. Telecoms companies don’t have the money to implement fast 5G because it’s a totally new technology and you need different towers.
“Speed is what will give us a competitive edge from other countries. Countries which have invested in this infrastructure – like South Korea – will see considerable advantages in terms of advancing business and research. Labour is spending on something that the telecoms companies have already invested in, and which will be more freely available to us anyway in the next few years. All these plans do is short-change the smaller telecoms companies that have spent millions to compete with BT’s monopoly. More than 600 micro-internet service providers resell broadband over Openreach’s network – they will be wiped out.”
Also, the notion that a nationalised broadband service would be free has been called into question by many. “Let’s nationalise Openreach is a slogan that creates headlines, but it’s important to remember that Openreach doesn’t supply broadband directly to consumers,” said Paul Stobart, CEO, Zen Internet. “It builds and runs a network that is consumed by wholesale and retail Internet Service Providers. This means that to provide free broadband for all, Labour would also need to nationalise the end-user ISPs – something that would come at a massive public cost.”
Stobart also said: “To provide free broadband to all, Labour would also need to nationalise the end-user ISPs. This would not just be the big four (BT, TalkTalk, Sky, and Virgin) but ourselves Zen, and several hundred other smaller providers as well. This would decimate an industry that has built up over the last quarter of a century, since the birth of the internet, remove all consumer choice, and replace it with a state-owned monopoly. This raises big questions. Would we see continued investment in improving speed and reliability? What’s more, the real danger is that the new corporation would offer one service only, significantly reducing choice.”
Many have pointed to the lack of competition that is a crucial trait of nationalised industries. Would innovation continue in an environment where only one broadband supplier is active? And has Labour and indeed all the other political parties miss-understood how the internet has evolved and how consumers now access online services?
Ofcom’s research is telling in that in 2012, the UK made a total of 103 billion minutes of landline calls, but in 2017 that fell to just 54 billion. Over the same period, mobile call minutes have increased steadily from 132.1 billion to 148.6 billion, but the average person’s monthly mobile data use has soared from 0.2 gigabytes to 1.9 gigabytes.
The death of the landline has been a long time coming. The question of whether the investment in more broadband is misplaced is an interesting one, as 5G has just begun to roll out across the UK. The promise of 5G could deliver the data speeds that a fixed-line fibre network could but, would also be infinitely more flexible. Do we want to invest billions in a network infrastructure that has effectively been supplanted by 5G?
Alan Laing, UK and Ireland MD, IFS commented to Silicon: “5G will be a game-changer in the provision of telecommunications infrastructure. It’ll minimise the need for disruptive projects laying cabling in urban areas, replacing these with smaller 5G masts that can sit on lamp posts, rooftops and bus shelters. This shifts the activity from construction contractors to high tech manufacturers and presents a servitization opportunity for the equipment manufacturers supporting their network operator customers.
“However, this is all some way off yet. We’ve seen several UK operators launching 5G networks recently – but the connectivity is only available to a handful of subscribers in select areas. We shouldn’t forget that many businesses and consumers (especially those in the north and rural areas) still struggle to get reliable connectivity of any kind!”
Analysis of over 276 million broadband speed tests worldwide has revealed that the UK sits in 34th place, with an average speed of 22.37Mbps. The research was designed and compiled by Cable.co.uk, and the data gathered by M-Lab, an open-source project with contributors from civil society organisations, educational institutions, and private sector companies.
- 276 million broadband speed tests conducted across 207 countries reveal UK broadband speeds are behind 33 other – predominantly European – countries, gaining little to no ground in the 12 months since our last report. The UK ranks 34th overall, one spot behind Madagascar.
- At 22.37Mbps, the UK lags behind 24 other European countries, 18 of them in the EU (putting the UK in the bottom third of EU member states), but comes ahead of 173 other countries globally, including Italy, Austria and Russia.
- The Republic of Ireland has made substantial gains this year, surpassing the UK average for the first time since measurements began in 2016, coming in 29th place, up an impressive seven places from last year.
- Taiwan has eclipsed Singapore this year to rank as the world’s fastest country/territory, with average speeds of 85.02Mbps, with Yemen coming in last for the third year in a row at an average speed of just 0.38Mbps.
- Global broadband speed has risen from 9.14Mbps in the 12 months to 10 May 2018 to 11.03Mbps in the 12 months to 8 May 2019 – a year-on-year increase of 20.65%, compared to a year-on-year increase of 23.35% during the previous period (2016-2017).
Dan Howdle, a consumer telecoms analyst at Cable.co.uk, said: “It’s been very interesting looking at the data for a third year running. It’s our largest dataset ever, and the results are reassuringly consistent.
“The obvious correlation is that countries and territories with a heavier reliance on or ongoing investment in pure fibre (FTTP) networks or are upgrading to fibre or LTE from even more aged technologies, continue to see their averages rise. Those that are somewhat late to that particular party, however, have gone largely unchanged.
“Take the Republic of Ireland, for example. Its heavy investment in FTTP has seen its average speeds rise far faster than the average this year, lifting it a highly respectable seven spots up the table. The UK, meanwhile, remains in the ‘experimental’ stage of FTTP provision, (outside of Virgin Media) offering ultrafast in test locations while making noises about the national rollout in the coming years. As such, it has lifted only one spot, while (somewhat embarrassingly perhaps) remaining one place behind Madagascar, and in the bottom third of all EU nations.
“The UK has few excuses here. There is nothing especially challenging about UK geography when compared to that of our EU counterparts. The UK is simply arriving later to FTTP than many of those doing better in the global league. Ultimately, the UK must accelerate full-fibre rollout if it is to remain a competitive digital economy – especially so as Brexit looms.”
Clearly, the UK has to improve its data connectivity over the shortest period possible to remain competitive. How this is delivered remains debatable. Labour’s manifesto pledge to provide broadband to all is headline-grabbing, but the mechanics and economics of the plan have yet to be fully explained. Looking at how other countries have adopted mobile data technologies should be paid close attention to. There is an opportunity to invest in the future, which is undoubtedly high-speed mobile broadband.
Silicon in Focus
Tom Kingham, Director Solutions Engineering, CyrusOne.
What is your reaction to Labour’s plan to offer free high-speed broadband if elected?
It’s great to see that the larger parties have all pledged investment in providing improved connectivity to the nation. Whether it be Labour’s offer of free broadband to all or the Conservative’s £5 billion to connect the most difficult 20% or the Liberal Democrats’ £2 billion to ensure high-speed broadband across the country, they all recognise the importance of a connected nation for the growth of our economy and also recognise that the telecoms providers need incentives to bring connectivity parity to all.
Clearly, it is a much lower investment for a much greater return to connect all the houses in a street in London, Birmingham or Manchester versus connecting a hamlet in the Yorkshire Dales. As more of the country receives the improved connectivity, the more the dependence on data centres will increase, and we will start to see the development of smaller data centres around the country rather than being focused in the major cities.
This, in turn, will further improve the performance of the internet into people’s homes. Whether the broadband performance is improved by providing government subsidies to the network operators to build out their networks, or to entirely subsidise those operators, either option will boost our digital economy, and that can only be a good thing.
In a UK where high-speed broadband is free, who are the winners and losers?
To keep pushing the bounds of technology, investment is required in research and development and in upgrading infrastructure over time. Competition is normally very effective at encouraging innovation and technological advancement, so offering something for free would seem to reduce that competition, and maybe we would see stagnation once the initial performance gains have been realised. There are consumers, both personal and commercial, that are prepared to spend more to receive a better product, so why turn that potential additional investment away?
What are the challenges businesses face if they are suppliers in the broadband ecosystem if Labour’s plans did come to reality?
The investment that would be required to offer free broadband would be extremely high. When you consider the other parties are pledging £2 billion and £5 billion to tackle the hardest parts of the country to connect and even in those situations it would still be expected that the consumer would pay for their connection (at a subsidised installation cost).
It is very difficult to see how the country’s coffers could begin to cover this enormous expense. Beyond this, the competitive landscape that exists in the broadband ecosystem would be eroded due to the reduction in investment.
There are more than ten large fixed-line broadband providers in the UK and making broadband free will reduce this number and therefore will reduce the workforce in this industry significantly. This doesn’t feel like it was the aim of the Labour Party but is a potential consequence.
Could the expanding 5G network make Labour’s plans obsolete?
Expanding the 5G network is still dependent on fixed infrastructure, so we see this happening alongside the broadband rollout regardless. 5G requires more masts than previous iterations of mobile technology, so there remains the challenge of connecting these masts together with fixed infrastructure.
As more devices go wireless, it could be argued that 5G should receive greater investment than fixed-line broadband as the demand for wireless is greater. However, both still require the investment of installing fibre optics in the ground, so any investment in this area will help both 5G and fixed-line broadband in the long run.