UPDATE NAO Praise UK Broadband Prices in Infrastructure Investment Report

The National Audit Office (NAO) has published an interesting new report into the impact of infrastructure investment on consumer bills. The focus is centred on the hot-topic of energy and water prices but it also gives a brief mention to telecoms services.

Broadly speaking the report states that large-scale infrastructure spending by the private sector over the next 10 years or more will increase consumer utility bills and warns that “government and regulators do not know the overall impact” or even whether future bills will be affordable.

Amyas Morse, Head of the National Audit Office, said:

“Government and regulators do not know the overall impact of planned infrastructure on future consumer utility bills, or whether households, especially those on low incomes, will be able to afford to pay them. It seems critical to know ‘how much is too much’, based on reliable information.”

Apparently the treasury expects that over two-thirds of the £310 billion worth of the planned infrastructure it has identified will be privately financed, owned and operated but paid for by consumers through their utility bills. It also suggests that increases in both energy and water bills will continue to “outstrip inflation“, on average, up to the year 2030. This is obviously a problem because some bills have risen sharply while incomes remain fairly flat.

As part of the work to illustrate this the NAO showcases a table of prices that highlight the changes in the past decade. Naturally energy (gas, electric etc.) has experienced the highest rise but telecoms came out looking better, which is in no small part thanks to the existence of a now aggressively competitive market. It’s however noted that Ofcom itself does not project future telecoms bills because it is “challenging to anticipate how the market will evolve” and they won’t want to be accused of “setting prices indirectly” by doing so.

The report states that spending on telecoms fell 2% in real terms over 2002 to 2011, although there was “significant infrastructure investment during this period resulting in more connections and new services for consumers“. Indeed both BT and Virgin Media were at the time putting a lot of money into their respective platforms (e.g. 21CN, ADSL2+, FTTC etc.).

NAO Statement

The situation in telecoms is different. Households have more discretion over their level of spending on telecoms services than energy and water. Two per cent of households report that they do not have an internet connection because of high equipment or access costs: many more households, 9 per cent, reported they did not need to be online.d BT basic [line rental], a social tariff that BT is required to make available to those on certain state benefits, represents just 2 per cent of household income after housing costs, for low-income households.

It proceeds to note that the average cost per unit of mobile and fixed line calls “fell significantly” and so too did the average monthly cost per Megabit of fixed broadband connection, which is something that we’ve often highlighted through various different studies. The full report is worth a read, albeit less detailed on the telecoms front.

Infrastructure investment: the impact on consumer bills (PDF)
http://www.nao.org.uk/wp-content/uploads/2013/11/10286-001.Full-Report1.pdf

UPDATE 14th November 2013

In related news telecoms firms have been called in, alongside water and energy companies, by the government to discuss how rising bills can be kept under control. Admittedly broadband and phone services have suffered from some sharp price rises over the past few years but consumers do at least have better choices than they do for gas, electric and water.

On the other hand practically all of the measures likely to be discussed (e.g. improved migration, better mobile roaming) have already been put forward by Ofcom and the EU.