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Budget 2021 Offers Nothing New for UK Gigabit Broadband Projects UPDATE

Wednesday, March 3rd, 2021 (2:10 pm) - Score 3,168
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The UK Chancellor, Rishi Sunak MP, has today published his Budget 2021 statement and sadly there were no new details for the £5bn UK Gigabit Broadband Programme. But we did get a few extra details on their recently confirmed plans for a new UK Infrastructure Bank, some of which had already been confirmed.

Just to recap. The Gigabit Programme – also known as the ‘Outside In Programme‘ due to its focus on tackling rural areas first – aims to help extend “gigabit-capable” (1000Mbps+) network coverage to at least 85% of the UK (up to 6 million premises) by the end of 2025, before getting “as close to 100% as possible.” The scheme will only help those living in the final 20% (F20) of predominantly rural premises.

NOTE: Gigabit-capable networks currently cover 37%+ of UK premises and rising (here), thanks largely to builds in urban areas (commercial deployments alone may eventually reach 70-80% of premises).

The programme will use a mix of demand side interventions (e.g. rural gigabit vouchers and support for providing fibre to public sector sites) and direct supply side interventions (e.g. gap funded contracts to deploy gigabit networks across rural areas of various different cluster sizes) to help solve all of this. In other words, it’s loosely similar to what we’ve seen before from the Building Digital UK team, albeit more centralised (at least in England), focused on gigabit upgrades for the final 20% and more accessible for alternative network ISPs.

However, the Government has initially only released £1.2bn of this funding for the next 4 years (more will follow if the “industry can demonstrate it has the capacity to deliver further and faster“), which they claim (here) should be enough to add an extra 5 percentage points of gigabit coverage to the UK by the end of 2025 (i.e. the 85% figure thus reflects that assumption of 80% being done commercially).

Budget 2021 Details – Broadband and Mobile

Suffice to say, we’ve already had the main announcements about the new Gigabit Programme, which means that the only thing left for the Government to do was to provide some final details on its various different parts, but surprisingly we didn’t even get that. In fact, the official Budget 2021 Document (PDF) contains not one use of the word “broadband” on any of its 106 pages.

In particular there was no mention of how much funding the new follow-on rural gigabit broadband voucher scheme is supposed to get when the old one ends later this month (an earlier leak suggested £250m+), as well as no mention of how the allocated funding for the gigabit programme will be apportioned for devolved governments (Scotland, Wales and Northern Ireland).

Likewise, there was no mention of the business rates policy for new fibre after 2022 (i.e. when the existing relief ends in England) or any confirmation of when the procurement phase for the gigabit programme will formally start (previously they’ve spoken of April/May, but there’s been no final confirmation).

The only thing we did get is confirmation that a new UK Infrastructure Bank will be setup to replace the fact that, post-Brexit, we can no longer make use of the European Investment Bank (here). The bank, which hopes to encourage a £40bn spending spree on infrastructure, will be supported by an initial £12bn in capital investment. Apparently, this one will be based in Leeds.

Gov Summary of the UK Infrastructure Bank

The new UK Infrastructure Bank will provide financing support to private sector and local authority infrastructure projects across the UK, to help meet government objectives on climate change and regional economic growth. The Bank will:

— be able to deploy £12 billion of equity and debt capital and be able to issue up to £10 billion of guarantees

— offer a range of financing tools including debt, hybrid products, equity and guarantees to support private infrastructure projects

— from the summer, offer loans to local authorities at a rate of gilts + 60 basis points for strategic infrastructure projects

— establish an advisory function to help with the development and delivery of projects

The institution will begin operating in an interim form later in spring 2021. The Bank will be headquartered in Leeds. Further details on the mandate and scope for the Bank are set out in the ‘UK Infrastructure Bank Policy Design’ document, published alongside the Budget.

The bank is to be owned by the government, but it will ultimately “operate as a separate institutional unit at arm’s length and with a high degree of operational independence.” We have assumed that it could be used to help attract private investment to gigabit broadband and 5G mobile deployments, although the policy design document makes no specific mention of either.

One other thing worth mentioning is the new “super deduction” policy for businesses that invest in new plant and machinery assets, which is obviously something that fibre optic network builders could potentially stand to benefit from. Effectively this would allow FTTP builders to reduce their tax bill by 25p for every £1 invested.

Overall, this year’s budget was a little disappointing, at least from the perspective of broadband and mobile investment. We had hoped to at least get some solid details and dates for what had already been announced, but none were forthcoming. Last but by no means least, we’ll end on a brief recap of what the UK Government has already pledged for broadband infrastructure since 2010.

Summary of Previous UK Broadband Developments

* The £1.9bn+ Broadband Delivery UK programme is technically still running and seems have put fixed line “superfast broadband” (24Mbps+) networks within reach of around 97% of premises. Openreach (BT) hold most of the contracts but a few AltNets are also involved in the later stages (Gigaclear, Call Flow, Airband etc.). Recent contracts target a slightly faster speed of 30Mbps+ and use more FTTP.

* £200m was put toward a Rural Gigabit Connectivity (RGC) programme until March 2021, which aims to encourage an “outside-in” approach to building new ultrafast broadband ISP networks by focusing on helping to connect rural areas via gigabit vouchers and other schemes (here). Hundreds of rural schools are also being upgraded to full fibre through this.

* The Government is working to make it easier for “gigabit-capable” broadband ISPs and mobile network operators to access buildings – usually big apartment blocks (Multi-Dwelling Units) – where “rogue landlords” fail to respond (here). On top of that they’re also working to mandate Gigabit capable broadband connections for new build homes (here).

* The legally-binding and industry-funded Universal Service Obligation (USO) for broadband, which will offer a 10Mbps minimum download speed (1Mbps upload) to all – upon request – went live on 20th March 2020. Most of this is expected to be delivered via EE / BT’s 4G network, with only a little from fibre (FTTC/P), but there have been problems with high costs in very remote areas (here and here).

* £400m has been provided via the Digital Infrastructure Investment Fund (here), matched by private finance, to help invest in new “full fibre” (FTTP/B) networks until late 2021 (focused on helping to boost altnet providers). It’s hoped that this could foster FTTP capable connections for an extra 2 million premises by the end of 2020.

* £294m was set aside to support the Local Full Fibre Networks (LFFN) scheme (details, here, here and here), which is funding a programme of local projects to help accelerate market delivery of new “full fibre” broadband networks (e.g. connection vouchers for businesses (this has now ended), aggregated demand schemes, opening access to existing public sector infrastructure etc.).

* 100% business rates relief for new full-fibre infrastructure, backdated for a 5 year period from 1st April 2017, but this will end next year and there’s currently no replacement (in 2019 Scotland independently implemented a 10 year period of relief).

* £200m to support a programme of 5G mobile / wireless technology trials and spectrum (here).

* Various local voucher / subsidy schemes are still on-going to help those areas that suffer slow broadband speeds.

* Ofcom’s regulatory changes are attempting to boost competition by making Openreach more independent from BT and giving rivals greater access to the operator’s national network of fibre optic cables and cable ducts/poles. Not to mention improving the overall quality of service (here).

* The Government and Ofcom are also supporting various other broadband related measures, such as automatic compensation from ISPs for service faults, improved / cheaper access to build new infrastructure on private land and more enhancements for consumer switching (adding support for FTTP etc.) and phone number portability (making it easier to adopt VoIP etc.).

* £75m has been assigned to help improve broadband connectivity in hard to reach areas via the RDPE’s Rural Broadband Infrastructure Scheme (here).

* Part of the new £3.6bn Towns Fund is due to be used to help “improved broadband connectivity” cover selected towns (here). Exactly how much of this will go toward broadband remains unclear. Each town/city looks set to receive up to £25 million and most of that will probably be eaten up by improvements to local transport infrastructure.

* A small part of the £900m that has been committed via the Getting Building Fund (GBF) will also go toward broadband improvements (here).

UPDATE 2:20pm

We’ve had the first comment.

Lloyd Felton, CEO of Rural ISP County Broadband, said:

“Whilst we welcome the announcement of a new UK Infrastructure Bank, we see this as more of a ‘fund’ rather than a transactional bank, operating in a similar way and, directly replacing, the European Infrastructure Bank that British businesses no longer have access to post Brexit. We suspect the majority of any funding available from this will be more focussed on non-digital infrastructure such as the power sector and will not impact the rollout of full-fibre in the UK. The digital infrastructure sector has already demonstrated its ability to raise private investment supported by significant existing government support from the Gigabit Voucher Scheme and Outside-In Programme recently launched.

The biggest hurdle we face is widespread confusion in the consumer market. Existing superfast broadband networks are promoted as ‘fibre’ despite their copper limitations, creating apathy towards real full-fibre which holds back progress. Why would consumers buy something they think they already have? If the government is serious in its commitment to deliver next generation connectivity by 2025, then we must implement stricter rules over how different broadband services are promoted.

Existing networks are reaching their limit and over the coming months and years the demand for data will soon outstrip capacity. Only new Hyperfast full-fibre networks can deliver the future-ready speeds and reliability we need. We must increase the rate at which we are building full-fibre Hyperfast networks now if we are to meet the government’s gigabit coverage targets of 2025. It we wait until the last minute it will already be too late. As the rest of the world races ahead, we don’t want to be left peddling a bicycle.”

UPDATE 4:12pm

Cityfibre has given their reaction.

Greg Mesch, CEO of CityFibre, said:

“We are pleased to see the Chancellor place digital infrastructure at the heart of his plan to Build Back Better. As we rollout Full Fibre to 8m premises across the UK, we couldn’t agree more about potential for these new networks to connect people with opportunity, support economic recovery, reduce our carbon footprint, and enable countless industries to compete on a world stage.

The rapid deployment of CityFibre’s up to £4bn Gigabit City Investment Programme will only be accelerated by the introduction of the measures announced in the Budget today to support apprenticeships, jobs and infrastructure investment, which build on the Government’s existing £5bn commitment to rural rollout, and underscore its commitment to a Full Fibre Future.”

UPDATE 4th March 2021 @ 8:49am

A couple more quotes.

Paul Stobart, CEO of Zen Internet, commented:

“The introduction of a UK Infrastructure Bank is a welcome development for the broadband industry and the wider population. The UK’s broadband infrastructure has been put under sustained pressure over the past 12 months and it’s clear that there are still some areas of the country suffering from poor connectivity, particularly in rural areas. A reliable and robust national network is not something that can be achieved without investment so we’re eagerly awaiting the details of how this new initiative will be rolled out and remain hopeful that it’s additional to the UK Gigabit Broadband Programme announced last year.”

A BT Group spokesperson said:

“Following today’s budget announcement, BT welcomes the Government’s support for new investment, specifically tax deductions on certain qualifying investments in plant and machinery. We are expecting to invest significant amounts of capex in plant and machinery over the next several years, and to the extent this proves to be eligible for the super-deduction it could result in a significant reduction in our corporation tax bill for our 2021/22 and 2022/23 financial years. This would be offset in later years by the subsequent increase in the corporation tax rate to 25% from April 2023.”

Steve Leighton, CEO of Rural ISP Voneus, said:

“This budget certainly demonstrates the resilience of the UK and gives us reason for optimism about the future. While we very much welcome the Government’s commitment to levelling up across the whole of the country to ensure no community is left behind, we are concerned the Chancellor has missed out on some key opportunities to recognise the integral part gigabit-capable broadband plays in the UK’s economic recovery. Fast broadband – particularly fibre-based connectivity – is a productivity enhancer and digital equaliser the country has never needed more so than now; at a time when we find ourselves reliant on it for work, education and social interactions.

Despite this, there is still a looming digital divide today between better-serviced urban areas and rural parts of the country, especially in the North East. In County Durham alone there are still over 30,000 premises where there are no providers or future plans to provide speeds or 30Mbps or above, the vast majority of them in rural areas. In rural Northumberland, median broadband speed is just 14.1Mbps – nowhere near national average. Levelling up should target these left-behind communities in the first place.

Last November, the Government watered down its promise to provide gigabit-capable speeds to everyone in the country by 2025. Now, with the Rural Gigabit Connectivity (RGC) programme coming to an end at the end of March, there is an urgent need for reassurance and continued support. We hope the Government can provide this and will back Britain’s rural communities and farming businesses to turbo-charge our economic recovery.”

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Mark Jackson
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
15 Responses
  1. Avatar Billy Nomates says:

    Corporation tax is up tho.

    I expect that will be passed on to the consumers

    1. Avatar FibreBubble says:

      How many fibre builders are paying UK Corporation Tax do you reckon?

    2. Avatar Billy Nomates says:

      Seriously?

      I mean they’re UK companies. They pay UK corporation tax. I dunno if that was a tax dodging question or not, but if they’re playing by the rules a UK company pays UK corporation tax. Unless they’re not making a profit ?

    3. Avatar Simon Heather says:

      Exactly most of them (apart from BT and VM) are in the investment phase and are borrowing hundreds of millions of pounds to lay fibre so no profits in the foreseeable future so no corporation tax.

  2. Avatar N says:

    Well at least we could afford to freeze fuel duty . Probably some real sense in raising that by a fraction of a percentage point to fund final 20% FTTX from a socio-economic perspective, let alone climate.

    1. Avatar JK says:

      I have to disagree. Raising fuel duty doesn’t make people drive less, it just penalises them for using their car. Can’t say I agree with the climate part either. Surely the hardest to reach people have to use a car to get a pint of milk?

      But hey, let’s get the motorist to pay even more.

    2. Avatar M says:

      I live in Dorset, the nearest train station is about 7 miles away, and we have a bus service of sorts. But it’s nothing like a city that’s for sure. The nearest Tesco’s is 12 miles or so away for instance which is also where our nearest Police station is after 9PM, although they have been moved to council offices whilst the civil service spend 4 million to REDUCE the stations size and get rid of its custody cells. Not very many amenities but the government has allowed thousands of extra homes to built, at present they want around 30,500 new homes to be built in just Dorset and have done nothing for additional infrastructure or services for them. So no new hospital beds, fire stations etc.
      So if someone said that’s the price you pay for living in a rural area, why is the government hell bent of ensuring thousand more mice to it? Whilst reducing the services in the area, let alone not invest in fibre broadband.

    3. Avatar Buggerlugz says:

      I’ve only managed 3000 miles this last year according my MOT the other day, also noted a CO of zero, yet I still have to pay car tax for some reason….

  3. Avatar M says:

    Didn’t expect it really. But they still have the money for HS2 and consultation etc into Boris’s Irish tunnel.
    And as said above the corporation tax will be passed onto the consumer, along with the freeze on pensions for 5 years. We will all be paying for a while yet.

  4. Avatar Anna says:

    Also he won’t be chasing Amazon, Google or Apple for tax – spineless tool he is

    1. Avatar Billy Nomates says:

      Problem is, tax avoidance is legal. Tax evasion is not.
      Ireland (Netherlands/Luxembourg/Monaco) all do it as well.
      Not a fan of the present government (not a fan of any of the others really, including Labour) would have to abide by the same rules. But … there’s no reason they can’t change that law.

      I seem to recall something about corporations having to pay taxes in the country they earned their profits on. Obviously, that didn’t happen.

    2. Avatar Buggerlugz says:

      Its not just google,amazon, facebook etc….its all the UK supermarkets and thousands of other high volume retailers too.

    3. Avatar Buggerlugz says:

      Billy, that’s because they have numerous subsidiary companies in the Cayman Islands, specifically to pay millions into for “consulting services” thus cutting their profits.

      In effect syphoning off your profits to other shell or phoenix companies. They’re ALL at it.

  5. Avatar Buggerlugz says:

    The Tories need incentives to do things like this so they can assure they’re Eaton mates can skim all the cream off the top of the milk of £1B projects….Like HS2 or Boris’s Willy Wonka tunnel…

  6. Avatar David Burns says:

    Super Deduction Tax Relief will help many such as BT. 130% tax relief on new plant and machinery!

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