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£250m shortfall for new UK broadband plan

Posted By TelecomTV One , 01 August 2012 | 0 Comments | (0)
Tags: Broadband UK Wireless Fibre open access BT Ofcom Government Research Internet

Following yesterday’s release of a new UK broadband plan by the House of Lords, a study of the economics of the scheme reveals a funding shortfall. Not that the government is likely to act on it, mind you. Guy Daniels reports.

The House of Lords Select Committee on Communications published its report yesterday on its alternative broadband strategy for the UK. It urged the government to study its 50 separate recommendations and to cost it out – although why they didn’t do it themselves remains unclear. At the centre of its proposals was the need to focus on access and not just speed, and that the best way to do this would be to construct “open-access fibre-optic hubs”.


Every community in the UK should be within reach of one of these hubs, which would have sufficient fibre connectivity back to the local exchange to provide Internet connectivity to all. Third party service providers (whether established wireless operators or wired ISPs, or even community groups) would then have access to these hubs on fair, reasonable and non-discriminatory terms, from which they could then build their own local access networks using whichever technologies they choose.


Consultancy firm Analysys Mason has produced a first-pass analysis of the plan and come up with rough costings, based on the work it had conducted previously for the UK Broadband Stakeholder Group.


“If the Government were to start by building open-access hubs to serve the most rural 10 per cent of the UK – i.e. the part that is least likely to receive superfast broadband under existing broadband plans of local authorities – and if we assume that each hub serves around 300 to 400 premises (roughly the same number as an existing BT cabinet), then the total cost would be of the order of £1 billion.

This figure does not include the cost of linking the hubs to each of the premises they are designed to serve.”


The problem is, £1bn is far more than the £750 million of public funding already made available by the government to enable its planned broadband schemes. This total comprises £530 million allocated via Broadband Delivery UK (BDUK), £20 million allocated via the Rural Community Broadband Fund, £50 million allocated via the Urban Broadband Fund and £150 million allocated via the Mobile Infrastructure Project.


However, it’s TelecomTV’s understanding that BDUK’s budget could increase by a further £300m by 2017 “if deemed necessary”. This would put the total funds available to £1.05bn – pretty much in line with Analysys Mason’s costs.


But bear in mind that the firm’s £1bn estimate is only for 10 per cent coverage, if the hubs were expected to provide greater population coverage – perhaps as much as the final 33 per cent of the UK population – then the shortfall would be even greater. As Analysys Mason says:


“Some additional funding may be available at the European Union level, but it seems unlikely that the operators themselves would contribute to the construction of a new open-access dark fibre network, as they would risk damaging the value of their own existing networks.”


Open access to dark fibre is rather controversial in the UK, with neither Ofcom nor BT showing much interest. However, the EU is a fan, and this “difference of opinion” is already causing delays in releasing EU funds for UK broadband projects. The Independent Networks Cooperative Association (INCA) is also a dark fibre supporter. It commented:


“The Lords Report proposes that state funding should only go to operators that are prepared to provide open access down to the passive layer – i.e. dark fibre. This is strongly supported by INCA members, many of whom are keen to contribute towards building this new national infrastructure, but only on terms that don’t disadvantage them in competition with BT. The European Commission shares this perspective as demonstrated in the new European state aid guidelines published in June 2012.”


The Analysys Mason study also adds that the Lords’ proposals might delay the roll-out of commercially funded networks, as operators would be likely to wait to see in which areas their planned infrastructure could be duplicated.


BDUK aims to facilitate a high-speed broadband service (over 24Mbit/s) to 90 per cent of the UK population by 2015, with the remaining 10 per cent receiving access at speeds of at least 2Mbit/s. In addition to its government budget, additional funding will come from the private sector (which looks to be just BT at the moment), local government and the European Union.

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