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

Wednesday, August 1st, 2012 (1:28 pm) - Score 555
fibre optic ultrafast broadband uk

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.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he is also the founder of ISPreview since 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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10 Responses
  1. dragoneast

    Time to question a few principles perhaps?

    When other utilities such as gas, electricity and water/sewerage do infrastructure replacement or renewal the consumer pays the full whack through increased charges. What makes the telephone rental sacrosanct? Decide what we want as a nation technically, and however much the national rental needs to rise, well so be it (same for Scotland and Wales who can do their own thing). Political suicide, so all the parties would have to agree so the great British public have no option. But if it’s as important to our future as they all say it is . . .

    Or go the other way: you want FTTC/P in a local community where it’s not commercial. Well perhaps public funds pay for an evaluation study triggered by a local petition, and everyone then gets a vote in a local referendum on the increase in the local line rental element to pay for it, perhaps with a need for a 50% of electors or 75% of those voting majority (net of any public subsidy which might be available), It’s called localism and democracy, the flavour of the moment.

    Discuss.

    • DTMark

      The government have already decided to socialise the cost of improving broadband, with the BDUK funding.

      So there’s a question as to who that money should target – a question the answer to which seems to have wandered since the original proposals, largely because the original proposals had no real strategy behind them. Final third? Urbans? Bit of everywhere? Where is the detailed plan by area; the “planned network” taking into account all those factors?

      Increasing telephone line rental – that idea of a 50p (or whatever) surcharge rather implies that broadband and telephone lines are necessarily somehow connected together, yet, we haven’t had a landline for over five years now, as we upgraded to 3G HSPA. So that’s neither a fair nor efficient way to collect a tax if the idea is that the users or proposed users are meant to be the ones paying.

      The local democracy option is an interesting one. Far too often this country seems to have the attitude “the council will do it”. But then, we all pay such exhorbitant taxes including council tax anyway that it’s hardly surprising; I don’t have the option to “opt out” of the part of the council tax that pays for our fortnightly bin collections and organise that myself, for example.

      We have a survey running on our community planning website and have just undertaken a wide-ranging survey aimed at finding out what the residents think the long term future of the area should encompass. Rurals seem quite good at doing this; no urban area I have lived in ever seemed to have this concept of community involvement, largely because it wasn’t what I’d call a “community”.

      The results of that survey (every householder) will be used to determine how funding will be used, one possible use of that funding being a FTTP or Wi-Fi network (or a mix thereof) to serve the village. Some may prefer, for instance, road humps, a pond, a fishing lake etc. so this is local democracy in action.

  2. SlowSomerset

    I always thought the BDUK money was for the final third in other words the places BT would not go ?.

    • Deduction02

      Nah that looks like it was just flannel BT, the government and BT fans choose to try to spread.

  3. SlowSomerset

    Oh so I suppose it will just go to the posh areas in the country then and the rest wasted by councils and surveys ha ha.

    • Deduction

      Listen to the BT supporters and the answer is no, mind you some of them cant decide if its available to 33% of 30 million which equates to 9.9 Million or if BTs 11 Million figure is true. I call it broken abacus syndrome.

  4. SlowSomerset

    Talking of the 50p was that not supposed to be used to Improve Broadband so wheres the Improvment ?.

  5. Neil McRae

    I think this analysis is fantastic but probably is still underestimating the cost of this. Also the Lords paper does nothing to address the fact that digging fibre to every home is not cheap, even more expensive going point to point (crazy more expensive).

    Australia’s national operator went for a PON based solution for the same reasons. Infact, more or less every country building fibre access is using PON as a solution, or Cable (which is not a point to point solution either!). I think the Lords need better advisors.

    Neil

  6. zemadeiran

    This discussion is mute…

    Our elected officials have just spunked up 8 Billion+ of our money on something that was meant to cost 2 billion for one month of games and better surroundings for the boys in the city.

    Like I have mentioned in one of my previous posts, 20 Billion is fuck all for a future proof fiber network to be proud of and I fully back the lords on their stance as opposed to the idiots in the commons.

    Anyone who says otherwise is a wasteman.

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