Government Faces £1.1 Billion Broadband Funding Shortfall

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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Report states economic and social case for superfast broadband but says more funding is needed to meet targets

Britain is in danger of missing out on the economic and social benefits of superfast broadband due to a lack of government funding and e-skills, according to a new report.

Research by the London School of Economics (LSE) and Convergys claims a funding gap of £1.1 billion could cause the government to miss its target of having the “best superfast broadband network” in Europe by 2015.

Not enough

Optical fibres around earth © Anterovium - Fotolia.comThe report says that the government’s targets of bringing superfast broadband to 90 percent of the population by 2015 will use up all the government funding earmarked for its rollout as well as an equal amount from the private sector. It adds that the £50 million set aside in the 2012 Budget is nowhere near enough to cover the shortfall.

“The costs of broadband infrastructure run into billions but are modest compared to the costs of energy and transport infrastructure, which together are forecast to absorb over £200 billion of investment,” said the report. “Yet the funding for broadband from all public sources (not just the government) amounts to a total of £1.3 billion, which is likely to be less than, for example, the government revenue from the forthcoming digital dividend spectrum auction.”

The report also suggested that 100 percent penetration of superfast broadband may not occur until 2025, due to a lack of digital skills and the large proportion of old people who are not online. There are 8.7 million adults in the UK who have never used the Internet who may be excluded from the social benefits of the web.

“We also talk about getting older people online, disabled people. There’s a lot of issues, a lot of aspects of a digital divide that need to be addressed which go well beyond the technology,” Dr Paolo Dini, senior research fellow at the LSE, told TechWeekEurope.

Left behind

According to the report, superfast broadband is too new a technology for there to be much evidence of its impact on the economy and society as a whole, but based on that of basic and fast broadband, there appears to be a connection between broadband deployment and economic growth.

The immediate gains from superfast broadband will be visible to companies whose businesses revolve around the Internet, but economic activity will grow as the cost of connections decreases, the report said.

“The cost of not investing will ultimately be macroeconomic and very significant,” it warned. “The public sector funding, and implementation timescales, are unlikely to let all the government targets be reached by 2015.”

Internet economy

The government should be putting more money into it,” Morag Lucey of Convergys told TechWeekEurope. “There are other areas where they are investing a lot of money for limited return. And this is a massive return when you think of everything that can be gained from superfast broadband.”

“Everything that we do is reliant on access to be competitive,” she said, adding that the UK’s Internet economy was growing at a rate double to that of the US. “As a small country, we are far more internet dependent than many of the other countries who are way beyond what we are with broadband rollout.”

The government has pledged to invest £530 million in the UK’s broadband network, a figure that has been widely seen as too small, especially when compared to BT’s investment.

It was reported yesterday that Internet speeds in the UK had actually decreased in the last quarter of 2011, slowing from 5.1Mbps to 4.9Mbps.

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