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Openreach Say Full Fibre Broadband Worth £59bn to UK Economy

Friday, October 11th, 2019 (12:01 am) - Score 5,549

A new Openreach commissioned report, created by the Centre for Economics & Business Research (CEBR), has estimated that connecting the whole of the UK to a Fibre-to-the-Premises (FTTP) broadband ISP network by the end of 2025 could result in a £59bn economic boost (equivalent to £1,700+ per worker) – rising to £70bn by 2038.

The CEBR study essentially modelled the potential productivity impacts of completing a nationwide full fibre deployment by 2025, 2028, 2030 and 2033. This offered a range of different potential impacts depending on when nationwide full fibre can be deployed.

For example, if deployment were completed in 2025 then, under the “conservative baseline assumption“, a Gross Value Added (GVA) uplift of £59bn is predicted, rising to over £70bn in 2038. Under the baseline model, a “slower rollout will ultimately have the same impact on labour productivity, but at a slower pace“. GVA impacts in Scotland, Wales, and Northern Ireland are £4.6bn, £2bn, and £1.3bn respectively.

The work suggests that deploying such infrastructure could result 500,000 people being put back into the workforce via enhanced connectivity, while 270,000 could work just as effectively from rural areas and 300 million commuting trips could be saved each year. A visual summary of the other headline figures can be found below.

NOTE: The National Infrastructure Commission (NIC) estimated that it could cost £33.4bn to build a nationwide full fibre network (mostly private investment).

openreach cebr full fibre economic uk impact fttp broadband

However Openreach warned that “red tape and punitive business rates on fibre infrastructure currently undermine the investment case and are slowing down the roll-out, meaning that the industry could struggle to reach the ambitious targets set by Government.” The Government last week committed £5bn to help upgrade those living in the final 20% of UK premises (rural and suburban areas) to a “gigabit-capable” service (here).

Naturally the national operator will be keen to get a slice of that £5bn and so today’s report could be seen as a part of that lobbying effort, although some of the changes they want (e.g. an extension of the business rates holiday on new fibre and easier wayleaves / access agreements) are also being demanded by their rivals.

Clive Selley, Openreach CEO, said:

“Full fibre is a vehicle to turbocharge our economy post-Brexit, with the power to renew towns and communities across the UK. We’re proud to be leading the way with over 1.8 million homes and businesses already having access to our full fibre network. We’re currently building full fibre to around 22,000 premises a week– which is one every 28 seconds. But we want to go even faster and further – to 15 million premises and beyond if we can get the right conditions to invest.

Through our Fibre First programme, Openreach is now building to 103 locations across the UK and we’re on track to build to four million premises by March 2021. With the right policies and regulation, we can build a better, more reliable broadband network faster than any other country in the world and unlock the benefits for the whole UK.

If that doesn’t happen, then many people will be locked out of a more connected future and the UK could lose its status as a global digital leader.”

A copy of this report and Openreach’s proposals for making the current market more attractive will be online shortly – https://www.openreach.co.uk/fullfibreimpact. It’s also worth reminding readers that the operator has so far committed to cover 4 million premises with FTTP by March 2021 and then 15 million by around 2025 (1.8 million have already been built); likely to cost around £5.25bn in total private investment.

The above predictions of how all this, including deployments by other operators (see our ‘Summary of Full Fibre Plans‘), will benefit the UK economy are of course very attractive. Nevertheless it’s also true to say that gauging the economic impact of deploying faster broadband connectivity is notoriously difficult, not least since most businesses and consumers won’t be starting from a point of zero existing connectivity.

Likewise there tends to be a strong element of diminishing returns to consider (see this report from Ofcom). For example, online banking and shopping at 2Mbps vs 1000Mbps isn’t currently a particularly different experience and those two areas contribute a lot in terms of our online economic activity. Likewise most existing remote working tends to be text and spreadsheet work, which doesn’t need a particularly speedy line.

On top of that we shouldn’t ignore the possible impact of ultrafast 5G based mobile broadband connectivity, which may end up competing for customers in some areas. However few could disagree that there does tend to be a strong positive relationship between broadband investment and growth, even if figures like those predicted above should probably be taken with a good pinch of salt.

Now here’s the full list of changes that Openreach want to see, some of which are already being actioned (e.g. easier access to buildings).

Accelerating the build – Proposals

Removal of business rates that penalise fibre build and ambition.

Business rates are one of the biggest blockers to investment in full fibre so we’re asking for the sector to be exempt from business rates in order to stimulate more investment. Currently there’s a relief on business rates until 2022, but payback on digital networks takes decades, so investors need a clearer long-term commitment by the Government.

Accessing multiple dwelling units (blocks of flats) and Local Authority buildings.

Today we struggle to access 44% of the UK’s flats and local authority buildings, meaning increased costs and delayed installations. Other utility companies – water, electricity and gas – don’t suffer the same restrictions to property access, and we believe network builders would benefit from having similar rights. Local authorities can also significantly speed up the build by granting us permission to access their buildings and the land and premises where they have control.

Mandating fibre in new build developments.

More than 165,000 new homes are built each year. Every one of these new homes should have access to an open, wholesale full fibre network – bringing choice and competition to homeowners. Today we offer to build full fibre infrastructure for free to any development with more than 30 homes and we share the cost on smaller sites. But mandatory full fibre for new builds would ensure no new homeowner gets left behind. We could also expand the network faster if full fibre was mandated to be installed when buildings, like offices or blocks of flats, are refurbished.

More efficient streetworks and traffic management.

We know how annoying it is for people to be held up by roadworks when utility suppliers are upgrading and repairing their networks. That’s why we always try to exploit our existing network and work in tandem with other utility suppliers. When we do have to do some digging or close a road, the advantage of fibre over copper, is that once it’s laid, we won’t need to touch it again. It can carry increasing levels of data and it’s weatherproof. We believe priority should be given to building this new digital network – which would speed up the build and reduce costs.

Attracting and training the right talent.

We’ve hired 6,500 engineers over the last two years, and they’re being trained at our new schools dotted across the UK. They’re part of our 33,000 strong team, but achieving the government’s ambition requires a huge civil engineering programme which will need an even bigger skilled workforce across the whole industry. That’s why it’s vital that Openreach and our civil engineering suppliers can continue to get access to the right people – even if they’re from outside the UK.

Continued access to a helpful international trading environment.

We have a global supply chain which means that many of the components in our network are manufactured by international suppliers. We take the security and stability of our network very seriously and – like the rest of the industry work closely with the Government and security agencies to ensure this. A diversified supplier base improves the quality of our network, innovation and value of the services we offer. For that to continue, it’s critical that we can access a wide range of suppliers, wherever they’re based. It’s important that the Government considers this as it continues to review UK supply chains.

The last two points above could be considered a nod to both the issues surrounding a possible no-deal Brexit and the potential damage that could occur if the Government were to completely ban the use of software and hardware from Chinese firm Huawei.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
Leave a Comment
17 Responses
  1. Joe says:

    Not trying to pick holes but:

    ” For example, online banking and shopping at 2Mbps vs 1000Mbps isn’t currently a particularly different experience”

    Tell that to those who only access their banking etc via a VPN where you can easily see 50% speed loss.

    1. Mark Jackson says:

      So 1Mbps isn’t particularly different either where banking is concerned, they’re fairly basic level web services in terms of data demands. I’m also not sure why a VPN would suddenly take you back to such speeds, a good one should provide a fair bit of capacity and you’re only limited by your own choice on that front.

    2. Joe says:

      I think 1mb would drag for the world on most banking sites. (yes 2mb is bad also but 1mb is barely functional) As we all know VPNs can vary due to all sorts of factors. But the slower the connection the more any loss matters to the experience.

    3. Mark Jackson says:

      Give it a try yourself. You can simulate bandwidth speeds through QoS methods or app specific throttling via various tools. A web page that’s only say 1-3MB in size (seemingly many of the online bank pages I see) is really not a problem for 1Mbps.

    4. A_Builder says:

      Well I beg to differ.

      Banking on 2Mb ADSL is a nightmare.

      Try running a payroll on Barclays.net on that and see how far you get.

      The problem is more the latency that goes with cruddy ADSL connections.

      Been there done it got the T shirt – hated the experience.

      The difference in banking performance is noticeable between FTTP and FTTC again I assume latency.

      I’d grant you that using a banking app would be OK on 2Mb.

      But I’d also be thinking about having to unplug everything from the router to prevent contention and turning off Dropbox etc

    5. Simon Hayter says:

      A_Builder – ADSL can easily achieve 25-50ms latency, so has absolutely nothing to do with the technology other than the fact ADSL has a much lower upload rate than most VDSL2 packages seen today.

      Bandwidth has little to no impact on latency. It comes down to technology being used, and the route the packets of information take.

  2. AnotherTim says:

    “most existing remote working tends to be text and spreadsheet work” – is that because that is all you can manage to do with low speed connections? Would faster broadband enable a wider range of work to be performed remotely?
    I’m a home-based software engineer. Spreadsheets don’t figure highly in my work, but uploading and downloading lots (and lots) of data does. A faster connection would certainly boost productivity.

    1. Mark Jackson says:

      Absolutely but quantifying the economic benefit of that is notoriously tricky due to the many different variations of work types and impact of being able to send X file in X space of time vs say 24Mbps+ (available to 95%+ of the country – estimated).

    2. JmJohnson says:

      Remote working has advanced beyond just spreadsheets and documents.
      Yes a lot of work is still that but the methods to it have changed.
      We now utilise things like Files-On-Demand/OneDrive, DropBox etc which requires bandwidth for syncing etc.
      Video conferencing, VOIP etc… remote working is also collaborative.
      Also like Tim… GitHub/Azure DevOps is where the majority of my uploads go.
      The UK is a heavy IT services nation… it’s no longer a case of email and documents.

    3. GNewton says:

      “24Mbps+ (available to 95%+ of the country – estimated).”

      That’s only half the story. A suitable upload speed is only available for a much smaller portion of the country, yet it is very important for many home workers and offices, too.

  3. NGA for all says:

    IMHO Most of the challenges exist within BT itself. Overlaying fibre on an existing network has been relatively cheap. FTTC did not cost the £5bn predicted in 2009, but about £3bn capex for 100k cabs and fibre paths, where Gov has paid £1.5bn.

    The BDUK has been useful as it exposed just how affordable this is, while begining the task of FTTP in-fill in rural.

    So much of this is how much Selley can do while carrying the rest of BT Group.

    These economic upsides are like of a plea for headroom if not mercy and time to catch up with what BT Group was preventing.

    1. Gadget says:

      @NGA – there is more to a business case than capex… you don’t buy a car without having sight of the money to insure, tax and maintain it. So whilst cost will certainly have dropped since 2009 you cannot just pick out an element of the business case cost and ignore the rest – I assume you take into account similar considerations when you set your own consultancy charges?

    2. NGA for all says:

      Sure, but historically capitalisation of operational costs has served more of a PR function. As the Ofcom fair bet analysis showed, BT investment was only 49,000 cabinets (first pass) about £1.3bn not the £2.5bn. The Opex is over 11 years + and recovered from the ongoing revenues.

    3. Gadget says:

      If the cab was not economic for either commercial or earlier BDUK then revenues over the period are less than initial costs, if they were higher the cab would be viable

  4. Steve says:

    So many advantages yet so little is actually done. Yes it would be expensive to really knuckle in and get it deployed but it’s an investment that will pay us back for years and years to come.

  5. Brendan Richman says:

    Just put in OM4 fibre (specced for up to 100G) to every new home or every new connection from the cab etc and we’ll never have to do it ever again. Doing it now becomes a non-issue for pretty much the next 100+ years I’ll bet!

  6. Geoff Willis says:

    WE are classed as “rural”, the two node points are less than 1km away hence “rural”! Openreach have surveyed 12 times now (same engineer & 2-3 hours each time) and surprisingly the property and everything else was still in the same place on each visit! so lets waste some money then shall we?
    We got a quote to have FTTP – £30,000! they have to use a digger (not a trencher) and they have to have 4 manholes of at least 1000 x 600mm every 200 meters @ £4,000 each – why? – to house the 50mm fibre joint even though it’s in a grass verge.
    obviously based on 12 visits per household, £30,000 per kilometre then it is un-affordable for the UK to be competitive in the world.
    Or maybe it’s down to openreach themselves – a manoploy mentallity – we own it – you pay what we demand or we’ll do nothing!

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