Don’t Blame Europe for Poor Broadband in UK Urban Areas

Is it Europe’s fault that some urban areas in the United Kingdom still have to suffer poor broadband? At least one newspaper appears to think so and is blaming the issue entirely on restrictive EU state aid rules, albeit while completely ignoring the natural responsibility of private sector operators.

The Telegraph’s report actually makes two questionable statements, with the second being that the Government’s Broadband Delivery UK programme exists solely to help extend superfast broadband (24Mbps+) into “hard to reach rural areas“, which has long since become somewhat of a historically inaccurate statement.

BDUK is for Rural Areas?

The BDUK scheme will indeed help many rural areas to gain access to a faster connection and that’s a good thing, with its original aim being to make fixed line superfast broadband speeds available to 90% of UK premises by the end of 2015 and this was later pushed to 95% by 2017/18 (note: BDUK is now unofficially expected to complete with around 97% coverage by 2019).

But crucially the private sector (e.g. BT, Virgin Media, KC etc.) had already more or less hooked up around 70%+ of the UK before the subsidised programme took over, thus BDUK was effectively established to close the so-called “final third” 30% coverage gap that existed between the 70% mark and achieving true universal cover.

Related areas in the final third where considered by most operators to be too expensive to upgrade, although we suspect that some of them would have gone a little further even without state aid, but it would have been a much slower process and they were still unlikely to hit the top 90-95% coverage level without public help.

The thing is that most of what normal people would actually consider to be truly rural (green hills and countryside) exists in that final 5-10%, while the remaining bulk of the final third mostly appears to consist of sub-urban areas, larger towns and big villages. As such the choice to describe BDUK as a purely “rural” programme has always been more of a political one and indeed the Government quietly removed the word “rural” from its title in 2014 (here).

It’s Not All the Fault of EU State Aid Rules

The telegraph reports that of the 1 million or so homes in the final 5% of the UK, some 600,000 are in rural areas and 400,000 are in towns and cities. Ignoring the fact that final coverage will reach beyond 95%, the report puts the blame for a lack of good broadband in urban areas squarely at the feet of the EU’s state aid rules. Naturally some MPs are now using this as an example for why the UK should leave the EU. But as always, the truth is more complicated.

Andrew Bridgen MP, the anti-EU Conservative MP, said:

“Once again it shows that sensible plans by the UK Government are thwarted by EU regulations set in Brussels. It shows who is really running our country when our Government cannot support the roll out superfast broadband in urban areas. I hope those affected will take this into consideration when they vote in the EU referendum.”

The newspaper doesn’t fully reflect the fact that such rules exist precisely to prevent public money being used in areas where the private sector is deemed to be capable of doing the job itself, which is certainly true of dense urban locations where there should be no shortage of potential customers and all packed into a small area (easier to tackle and a better return on any investment). In this case the clear responsibility of BT, Virgin Media and others to deliver good connectivity for urban areas isn’t even mentioned.

Similarly allowing the use of state aid in such areas would also give rise to a greater risk of market distortion, with some fearing that state aid could be gobbled up by BT and thus further enshrine their existing infrastructure advantage (e.g. Hyperoptic and Cityfibre might have less incentive to deploy their FTTP networks in cities if BT could do more of the same via public funding). On the flip side BT and Virgin Media, after later seeing that the money was likely to be taken up by alternative networks, also developed similar concerns of their own (see below).

At this point it’s easily forgotten that the original BDUK programme did in fact set £150m aside to help roll-out 80-100Mbps+ capable “ultrafast” infrastructure in urban areas, but this was later watered down into a voucher scheme for businesses after BT and Virgin Media perhaps ironically raised over-building and competition concerns with the EU about the use of state aid in urban areas (here and here). It’s a funny old world.

The other problem with urban areas in the final 5% is that a good number of those left without superfast connectivity are being hobbled by the dreaded Exchange Only Lines (EOL), which are old pure copper phone / broadband lines that have been directly connected to a telephone exchange and thus do not go through one of the more traditional street cabinets (PCP). Resolving EOLs requires a significant network rearrangement, which is both expensive and can be very disruptive in busy urban areas.

On top of that local authorities and existing regulation does not exactly favour disruptive street works in urban areas, which adds to the bag of costs and problems that operators face when trying to deploy new infrastructure. Never the less the private sector has a clear responsibility to upgrade such areas and for the most part they are slowly delivering.

In the end EU state aid rules are at least partly to blame, but as we’ve shown above the wider picture is more historically complex and the big private sector operators still have the biggest responsibility. Going forwards there has been talk of softening EU state aid rules in order to allow more flexible investment in urban areas, but so far this has yet to materialise and as above it may prove hard to implement.