Analyst Warns of GBP1bn Shortfall for Lords UK Fibre Optic Broadband Proposal

Consultancy firm Analysys Mason has warned that yesterdays scathing House of Lords Select Committee report into the UK’s embattled superfast broadband strategy, which proposed to blanket the country with truly open-access fibre optic hubs, would require “substantially more public funding” (£1bn) than is currently available.

The lords report (full summary) warned that the current plan, which aims for 90% of people in the UK to be within reach of a superfast broadband (24Mbps+) service by 2015 (plus the last 10% get speeds of at least 2Mbps), had become too preoccupied with speed, wasn’t competitive enough (BT seems to dominate the current tenders) and only sought to deliver real improvements “for those with already good connections” (i.e. it practically ignored the last 10% of rural areas).

Instead the Select Committee proposed the creation of a “robust and resilient national network, bringing open access fibre-optic hubs within reach of every community” that would prioritise better connectivity to rural areas first. One radical part of this idea was that “the property owner becomes responsible for the construction and maintenance of their own final drop“, which could potentially burden home owners with a huge cost.

Sadly the report did not “undertake a detailed costing of the Committee’s proposal” and cheekily called upon the government to do the work. Now Analysys Mason has warned that it could cost approximately £1 Billion to cover just the “most rural” 10% of the UK. But are they right?

Analysys Mason Statement

If the Government were to start by building open-access hubs to serve the most rural 10% 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 300–400 premises (roughly the same number as an existing BT cabinet), then the total cost would be of the order of GBP1 billion. This figure does not include the cost of linking the hubs to each of the premises they are designed to serve.

The major challenge faced by the House of Lords proposals is that they appear to require substantially more public funding than is currently available. As the report notes, the amount of Government funding allocated to broadband schemes totals GBP750 million – less than our estimated cost for building hubs in the most rural 10% of the UK. If the hubs were expected to provide greater population coverage (perhaps as much as the final 33% of the UK population), then the shortfall would be even greater.

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. Furthermore, the 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.

As usual it’s important to take such estimates with a big pinch of salt, especially since Analysys Mason’s existing budget figure (GBP750m) isn’t completely accurate and those funds are at present focused more towards connecting the first 90% and less the last 10%.

The current Broadband Delivery UK (BDUK) plan has a budget of £530m. On top of that some £150m has been set aside for the Urban Broadband Fund (Analysys Mason only counts this as £50m) and then there’s the £150m Mobile Infrastructure Project and a few smaller rural schemes. None of these factors in money from the EU and variable match-funding by local authorities or the private sector.

In any case we still don’t know precisely how much the new proposal would cost, although the plan would almost certainly require more money. The big question though is whether or not the majority of rural home owners would be willing to shell out hundreds or possibly thousands of pounds to do a job that many may not see as being either affordable or even their responsibility.