Low UK Uptake of Broadband Connection Vouchers Despite Tweaks

The Government’s Broadband Connection Vouchers scheme, which offers grants worth up to £3,000 to help SME businesses install a superfast broadband (30Mbps+) service in 22 cities across the United Kingdom, is continuing to suffer from low uptake with only around 4% (1,500 approved applications) of the £100m fund being drawn down.

The scheme was hastily setup last year after fears of network overbuilding triggered legal challenges by BT and Virgin Media (here). Europe also expressed competition concerns about putting state aid into urban areas, where the private sector normally has less trouble making a case for investment (here). Faced with the threat of a significant delay the Government decided to reallocate its general infrastructure funding to a less contentious voucher scheme.

At the same time the Government watered down their ambitions, with the original £150m Urban Broadband Fund (“Super-Connected Cities“) aiming to roll-out “ultra-fast” 80-100Mbps+ (Megabits per second) capable broadband infrastructure (note: around £100m was destined for infrastructure upgrades). By comparison the new scheme set the minimum speed at just 30Mbps.

The voucher scheme then officially went live at the very end of last year and an update in May 2014 revealed that hundreds of applications had been submitted, although some cities were clearly doing better than others (here). However it also took several months before the scheme was live in all of the cities (Dec – April 2014).

Since then the government has also made some changes, such as by reducing the minimum grant from £250 to £200 and simplifying the application process so that only one quote is now needed from a registered supplier instead of two. But according to the FT (paywall), the scheme, which is currently expected to run until March 2015, is still only seeing very limited uptake.

Apparently only 1,500 applications have been approved (although “thousands” more are in the pipeline) and these have an average value of £2,300, which means that the total cost to the scheme so far is likely to be around £3.5 million out of the £100 million budget. It’s understood that around 75% of the funds released have been used to improve fixed broadband connections, with the rest paying for wireless solutions, and the Government claims that average speeds for businesses that benefitted have gone from 11.2Mbps to 70.3Mbps.

Never the less the Government will have hoped to see a stronger uptake. It’s claimed that some of the reasons for this situation are because businesses have found the scheme to be complicated and others reported that the quotes they were given could sometimes exceed the voucher value (this is very plausible if you’re installing an expensive leased line where costs can run into five figures). Businesses can also team-up and aggregate their vouchers, much as yesterday’s news demonstrated (here), although that’s not always practical or possible.

Meanwhile the Government said the scheme was “breaking new ground in the telecoms sector” and they’re keeping it under regular review. The expectation is that the related website will shortly be simplified and re-launched, although at the current rate it’s still difficult to envisage all of the fund being gobbled up by spring next year.

In fairness the voucher system was setup so quickly that there was never really much time to consider its likely impact, especially with many urban areas already having access to good connectivity. At the same time it might be handy if the fund isn’t wiped out as this could then be repurposed back towards the Broadband Delivery UK (BDUK) programme and used to help connect the final 5% of rural areas, where it could assist both homes and businesses.

On the other hand the Government might do well to consider raising the upper voucher level and or making it available in more cities.