Virgin Media Tells UK Government to Put City Broadband Cash Toward Skills

The CEO of cable operator Virgin Media, Neil Berkett, has written an open letter to the Chancellor of the UK government, George Osborne. The letter calls on Osborne to ensure that a minimum of 50% of the £150m destined for improving broadband connectivity in cities is instead used to boost business training and digital capability.

At present the Urban Broadband Fund (UBF) has been allocated to help over twenty cities around the United Kingdom (here and here) become “super-connected” by deploying “ultrafast” broadband ISP services (80-100Mbps+) and “high speed public wifi“, although some of the funding will also to be used to help promote service uptake.

The proposed state aid is intended to focus on areas that are “not served by the private sector” (e.g. where BT and Virgin Media have failed to upgrade) and this has already triggered a controversial legal challenge in Birmingham because the existing and new networks could overlap (here). Similarly BT and Virgin Media would arguably benefit by keeping public funding away from their rivals.

Virgin Media’s Letter to George Osborne

Dear Chancellor

As the Government prepares for the 2013 Budget, Virgin Media sees a huge opportunity for you to boost efforts to drive economic growth through the expansion of digital skills across UK businesses.

As you are acutely aware, driving growth amongst SMEs is critical to the future success of the UK economy, and increasing uptake of digital technologies amongst those businesses is central to that goal. The economic value to be derived from a more digitally mature UK small business sector is estimated at £18.8 billion [1] and 58,000 extra jobs by 2017[2], with the most digitally mature three times more likely to have seen growth than those who operate entirely offline.

Yet the potential benefits offered by digital technologies are not currently being realised by UK businesses. Only two-thirds have a website and a third sell goods and services online. Both the Government’s own ‘Digital Champion’ and e-skills delivery body identify the central barrier to small businesses realising those benefits as a lack of practical, digital skills and shortage of resources to undertake digital training.

Seizing this opportunity to drive the UK’s economic recovery will therefore require action from Government to support small businesses to better understand and utilise the benefits of digital. Specifically, this means:

– Ensuring a minimum of 50% of the £150m Urban Broadband Fund is allocated to Government efforts to boost the training and digital capability of SMEs, including through existing programmes such as Web-Fuelled Businesses.

– Enhancing the role of the Minister for Broadband by giving the post an explicit remit to promote economic growth, and oversee cross-departmental work on digital capability as recommended by Policy Exchange.

These are measures that will strengthen the UK’s economic capabilities and can be taken without further expenditure. As you prepare your Budget, we therefore urge you to seize the opportunity to provide a much needed boost to the UK economy and the growth prospects of SMEs across the nation.

Yours sincerely,

Neil Berkett, CEO, Virgin Media

[1] http://www.go-on-uk.org/files/7313/5227/8439/Final_Booz_Embargoed_Nov7.pdf Chapter 4

[1] http://www.cebr.com/wp-content/uploads/1733_Cebr_Value-of-Data-Equity_report.pdf – Executive Summary, page 4

It’s not the first time that Virgin Media has made such remarks (here) and we’re similarly unsurprised to find that today’s letter has surfaced just before the government’s Budget 2013 report, which is likely to include further information on the UBF and how the money is to be spent. The Government’s own Digital Champion, Martha Lane Fox, is also known to support Virgin Media’s position.

Meanwhile more than a few critics of the UBF would prefer such funding to be spent on improving internet access in neglected rural areas.