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

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.

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.