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GBP0.89 Trillion Global Tax Revenue Lost Without Broadband Investment

Friday, June 22nd, 2012 (8:29 am) - Score 329

The CEO of Telecoms analyst firm Point Topic UK, Oliver Johnson, has claimed that political leaders, such as Ex-PM Tony Blair, who “are not brave” or knowledgeable enough to invest in a better broadband infrastructure, could be costing the world economy an estimated £0.89 Trillion (annually) in lost tax revenue.

Johnson, whom was speaking at the CommunicAsia event, singled out Tony Blair for his dislike of computers, which the analyst claims resulted in a “a lack of knowledge and understanding” that is apparently common among other world leaders.

This limited understanding allegedly makes it difficult to encourage broadband investment. Tony Blair eventually resigned from in June 2007, several years before the UK’s broadband policy finally started to take shape (Digital Britain was published in 2009).

Oliver Johnson, CEO of PointTopic, said (Total Telecom):

[There is] a $6.9 trillion per year increase in GDP that we’re not getting because we don’t have broadband everywhere [ED: this apparently equates to about $1.4 trillion in lost tax revenues for governments].”

Furthermore Johnson noted that such investment often takes years to reach its goal, which is longer than the average term in office for a democratic government and thus adds an additional political disincentive.

On top of that you usually have to spend a lot just to get started, with Johnson estimating that it could cost €200 billion to build fibre optic broadband networks around Europe. Waiting 10 years for a return on that investment could, to some political leaders, seem unattractive.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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4 Responses
  1. Avatar DTMark says:

    It’s quite easy to imagine, though.

    Just suppose all the roads in the country were sold off to just two private entities. The internet, or rather the infrastructure, being analogous to “roads”.

    One of them, the larger of the two, is then a private monopoly in about half of the country which is then subject to regulation, price and activity controls and has to share their assets so other people can “resell” them. Is it in their interests to improve the quality of those roads? To offer good quality, well-priced services?

    No, of course not, which is why we’re so backwards here. It’s in their interests, in fact more than that as a private company, it’s essential *in law* that they represent their shareholders, not their customers.

    The other one which did not inherit a nationwide infrastructure and who set about consolidating and extending a number of local deployments bankrupted itself and isn’t extending anywhere significant.

    So it’s like imagining that you could have all the roads controlled by just two private entities, regulate them heavily, and for some reason given that there isn’t a market as such in half the country, imagine that the monopoly will deliver improvements or that some other entrpreneur will come along and present themselves and deliver.

    While at the same time guaranteeing that they will not because of the way in which the funding has been targeted and because it is, or seems to be, money to “give to private companies to provide” rather than “money to use to create ducting to enable the providers to provide” thus creating that market.

    And it all suggests that the laying of ducting is what’s needed, and that’s certainly something the Government could do something about. Probably, only the Government could do something about.

    Until the government grasps this (and we still have this in this village – “why can’t the broadband still come down a phone line, do I have to have a new trench dug? – well, yes, you do, that’s a phone line, we’re deploying a broadband circuit, they are not related”) I fear money is going to wasted chasing solutions that don’t presently exist given the non-existent market and that the narrow focus excludes (or, does not seem to join up or encourage) the radical action needed.

    1. Avatar FibreFred says:

      Neither of your examples (BT and Virgin) inherited anything, they bought what they now own from another party. BT when it went private through the sale of shares and Virgin just a rebrand of the NTL+Telewest merger.

      To inherit indicates there were given this infrastructure for nothing obviously not true.

      The government of the time sold BT, nothing you can do about that. On one hand part of me thinks if the government still ran that Telco we’d still have a terrible phone service (getting dial was a lottery back then) and probably no broadband to speak of at all, on the other we are in this “situation” we are in now.

      The government could start a new “open duct” build across the UK costing billions or I guess they can stick with what we have now PIA.

      A new nationwide duct build would be great for competition and good for jobs but obviously a few downfalls.

      It would cost a fortune (the biggest engineer works of this and the last century) this government is already borrowing more than the previous and taxing everyone to death, they have no interest in broadband apart from nice soundbites
      Huge disruption
      Probably take decades to complete (i.e. too late)

      If you class the sale of BT as a mistake it was the governments mistake to make, although to be fair at the time no-one could have foreseen what is happening now , there was no concept of broadband or the Internet back then

    2. Avatar DTMark says:

      We largely agree.

      My use of the word “inherit” was not meant to imply “free of charge”.

      I don’t want the Government running any phone or broadband services. This isn’t Venezuala. My suggestions have always involved the Government doing what a government ought to do: facilitate. Not control and certainly not supply.

      That said I forsee widespread nationalisation of private resources over the next decade or so thanks the the fact that the monetary system (fiat currency) may be close to outright collapse in the West. Governments need cash, and the number of oligopolies and monopolies that have built up (telecoms, energy etc) are ripe for the taking. Popular with the voters and all that.

      Perhaps a digression into economics but relevant, my wider view is that the UK is basically bankrupt and I’m personally unconvinced that our economy will ever “recover” as such until it collapses completely and goes over the edge of the abyss. I really don’t think people have any idea what’s coming.

      We can’t have a Keynesian approach to the problem because we’re in too much debt and we didn’t put anything by for the proverbial “rainy day”, and that delightful Mr. Brown was keen to help market manipulators by selling gold reserves at rock bottom prices.

      But, since we’re going to basically keep on printing money ad infinitum until GDP is more or less worthless (whether through QE or some other scheme) we might as well target it towards something that might bring us economic benefits, like infrastructure.

      As far as “decades to complete” is concerned – remember the Japanese roads destroyed by the earthquake but rebuilt in full in days? No reason why it should take decades to complete, though I acknowledge your point that in the UK it’s a bit different. Let’s have another cup of tea and think about it.

      PIA is not a workable option and has already quite rightly been laughed at by most.

      Private companies controlling essential infrastructure is never a good idea. And your point that back then, nobody foresaw that the phone network might need to potentially be adapted into a broadband one is totally correct.

      Still, an horrendous mistake (goes for the trains, too – anywhere that a market could not or would not be created) and now, we’re going to have to build it over again. Or, take up some of my suggestions I’ve posted before.

    3. Avatar DTMark says:

      Oops – GDP = Sterling. Late night and all that!

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