The Labour Party recently announced a plan to provide every home and business in the UK access to free full-fibre broadband should they be elected.
We’ll go over a few key questions related to the roll-out to see whether it is possible, how it would work, and what it would mean for consumers.
What’s Wrong with our Broadband?
The United Kingdom is far behind other countries when it comes to superfast broadband. For instance, in the UK only 7% of households are connected to full-fibre optic broadband - compare that to countries such as South Korea and Japan who have 97% and 99% full-fibre connectivity respectively. Even in the European Union, a country such as Spain has 71% connectivity.
Why Make It Free?
Labour argues that the internet in the 21st century is no longer a luxury service that people should have to pay for. In fact, in order to live and work in modern society you simply must have access to the internet. Whether it be school children accessing their homework online, or sending emails to colleagues, like it or not the internet is part of the fabric of our society. Therefore, they believe it should now be treated like a public infrastructure such as roads, libraries, or museums. As Corbyn says ‘What was once a luxury is now an essential utility.’
Has It Been Done Before?
Australia attempted to do this with its National Broadband Network, and it was branded as one of the worst infrastructure projects in history. The NBN is years late and massively overbudget. However there are key reasons why the Australia project is entirely different to this one. Specifically, in attempting to make the network pay for itself, the Australia system was bottlenecked and this led to providers skimping out on bandwidth for profit. In removing this need the Labour proposal should in theory be more effective.
But, Who Would Pay For it?
It will be funded, at least in part, by a tax on big technology companies. This means that organisations such as Facebook and Google will have to start paying their fair share. Other countries such as France are already experimenting with this idea and it is a very popular policy. Most of these technology companies pay 0% Tax in the UK and therefore many are calling for this to change. The rest would be paid through government issued bonds at an estimated total cost of £20 billion. It must be said that this number is disputed, with the head of BT claiming that the total cost would be more like £100 Billion.
Where Does This Number Come From?
A report from the independent group Frontier Economics for the Department of Digital Culture Media and Sport argued last year that the best way to roll out full-fibre broadband would be a national monopoly that could achieve 100% national coverage in 15 years for just £20.3 Billion. This report argued that if done by private companies it would cost £32.3 billion. Mainly due to the fact there would be duplications of the network by rival firms. This would also include 10% of coverage being held up and with a further 10% not even getting coverage because it would not be economic as they live in rural areas.
Will This Save Me Money?
In September Ofcom released a report that customers were paying 40% more than they needed to on internet deals that were too expensive. This is happening through people being moved onto expensive tariffs when their deal runs out, or being charged when they want to end their deals early. Last year EE and Virgin Media were fined £13.3 Million by Ofcom.
How Would it Work?
Essentially it would involve nationalising the parts of BT which are connected to broadband forming a new company which they would call ‘British Broadband’. This would mean taking over the separate broadband company within BT, Openreach. Openreach is currently worth upwards of £10 billion, and Labour have said that parliament will decide when and how much to compensate them for the takeover.
What Are the Conservatives Proposing?
The Conservative party have agreed that more needs to be done to make sure that the UK does not fall behind other countries on internet connectivity. They have pledged to spend £5 Billion in order to subsidise the full-fibre roll out by 2025. Labour have criticised this as nothing but a subsidy to existing operators.
What Would Happen to the Current Providers?
They key unanswered question that everyone is asking is what would happen to the current providers of internet connection. According to labour, shareholders in BT will be paid through government bonds in exchange for Openreach. However, there is no word yet on what would happen to investors in its competitors, such as Sky, TalkTalk, and Virgin Media.
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