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The Economic Impact of Alternative Wayleave Regimes on UK Broadband

Saturday, January 11th, 2014 (1:35 am) - Score 1,118
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The Department for Culture, Media & Sport has published a new report that highlights the potential economic and infrastructure benefits to the broadband market of adopting any one of three alternative wayleave regimes, which might make it easier, faster and cheaper for ISPs and mobile operators to install new telecoms infrastructure.

A wayleave typically refers to the special agreement between a landowner and communications provider (ISP) or utility firm, which allows the operator to install, access and maintain cables or other related equipment on private land (especially useful in wide open rural areas). Sadly such deals are notoriously complicated and costly to arrange, which has encouraged the government to consider a more streamlined approach.

The Government are currently mooting three alternatives, one from the Law Commission that would modify the Electronic Communications Code (ECC), another that’s based upon the existing system used by energy suppliers and a regime similar to that found in the water industry.

Overall the Nordicity report claims that the Law Commission’s proposal would result in a moderate decrease of 10% in wayleave costs, while adoption of the energy sector’s approach would decrease costs by a more significant 40% and the watery industry’s approach would slash them by 62% compared to those under the existing regime (estimated over a 15 year period).

However the impact on overall costs of broadband infrastructure were found to be much less, ranging from 0.4% to 5.3%.

wayleave uk broadband infrastructure costs proposal 2014

The report also considered that cheaper deployment costs could translate to cheaper prices for consumers, which in turn might improve the uptake of superfast broadband. But it also stated that the impact on broadband infrastructure deployment costs should “be deflated by a factor of five when assessing the overall impact on consumer pricing“.

Nordicity estimates that a 5% reduction in broadband infrastructure deployment costs would be equivalent to 1% of total turnover, and therefore “offers the potential for a maximum decrease of 1% in consumer pricing“. In other words you probably shouldn’t expect any of this to have a visible impact upon the price you pay for the service itself and likewise for service speeds (note: average broadband speeds saw no real benefit between the three approaches but then this is predominantly an examination of cost).

But as we’ve discussed before when writing about wayleave agreements, such arrangements can be tricky.

Nordicity Statement

The alternative wayleave regimes could also have a negative impact on the build-out of broadband infrastructure and superfast broadband services, and thereby put a drag on growth in subscriber numbers and average speeds.

Because landowners would be subject to lower rates under the alternative wayleave regimes, there is likely to be an increase in the number of disputes, or the necessity to reroute or redesign networks. Both situations would introduce delays as well as additional costs to the build-out of broadband infrastructure.

We also note that broadband plays an important role in research and development (R&D) and innovation. These endeavours tend not be price-sensitive and flourish in countries with advanced broadband networks and highly qualified researchers. Thus, any delays in the build-out of broadband infrastructure brought on by the uncertainty surrounding wayleave costs could potentially delay or even jeopardize R&D and innovation in the UK economy.”

In writing this article we had hoped to produce a simple summary of how each of the three alternative wayleave methods differ but we found this to be quite a complicated task, which was made more difficult by the lack of plain English explanations for each (i.e. it helps to be a lawyer when reading through this stuff).

In any case the Nordicity report appears to suggest that the water industry’s approach, when looking purely at the issue of cost savings, would appear to be the best option. But as we’ve always said there’s nothing simple about wayleaves and cost is just one of many considerations.

Modelling the Economic Impacts of Alternative Wayleave Regimes
https://www.gov.uk/../Wayleave_Economic_Analysis_2013_10_23.pdf

Leave a Comment
1 Response
  1. Avatar MikeW says:

    It is difficult to see the impact of the cost of wayleaves, so I took some numbers out of this report…

    It reckons that the rate agreed between farmers (the NFU) and Openreach amounts to £500 per km per annum for e-side cabling, and £360 per km per annum for D-side cables.

    I tried applying this to B4RN, and specifically to phase 1 of their plans. The figures there were for 275km of digging, to service around 1500 properties. Allowing half the distance for core routes at £500/km pa, and half the distance at £360/km pa, this makes for an Opex cost of £120,000 per annum for the wayleaves alone. That is equivalent to £75pa on the bill of every property.

    Given that the monthly cost for a B4RN connection is £30, the cost of wayleaves (if the landowners were being paid them) would add £6 to that bill, or roughly 20%.

    That’s a significant factor that this report doesn’t really reflect.

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