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By: MarkJ - 20 October, 2010 (12:57 PM)
parliament logoGeorge Osborne, Chancellor of the coalition UK government, confirmed today that his Spending Review would ultimately use a total of £530m over the next four years (until 2015) to help bring faster broadband internet access to rural areas. A significant amount of that will also come from the BBC.

Chancellor, George Osborne, said:

"It will help encourage the growth of our creative industries as a key part of the new economy we are seeking to build."

Osborne confirmed last Sunday that £230m had already been set aside to help 2 Million UK homes in rural areas get access to faster broadband speeds by 2015 (here), which we believe did not include cash directly from the BBC.

The new figure, which adds an extra £300m to the original number above, is most likely to come from the BBC's TV Licence Fee, specifically its 3.5% Digital Switchover Budget. The switchover scheme is due to end in 2012 and be re-purposed for broadband. It's believed to be worth around £130m per year.

The cash is expected to be spent on both "super-fast" Next Generation Access (NGA) solutions and the weedy 2Mbps Universal Service Commitment (USC). Further details are expected to surface before Christmas. However £530m alone is simply not enough. The previous Labour government anticipated spending £2bn-£3bn by 2017 or 2020 on the project, which many viewed as being the smallest amount needed to do the job.

UPDATE 21st October 2010

Some ISP reactions.

David Williams, Chief Executive of Avanti Communications, said:

"Avanti welcomes the government's recognition that there is still a very large population in the UK without access to reasonable quality broadband. The £530m pencilled in potentially to finance new projects in the next five years obviously goes nowhere near the £30bn cost of fibring all UK homes, but with the imminent arrival of HYLAS and its 10Mb satellite broadband available to every home in the UK, there are now cost effective options available to the consumer."

Clodagh Murphy, Director of Eclipse Internet UK, said:

"Yesterday’s Government Spending Review is said to bring the UK into a new age of austerity. As a business, my biggest concern when faced with all these cuts is what this means to UK plc. It’s disappointing to see the Department for Business budget being cut but perhaps more worrying is the Train to Gain programme being axed. This has been an important initiative that has allowed companies and government to work together, to boost business by improving the skills of individual staff members, a key element of any business.

On the other hand, with such significant public sector cuts, it is possible that today’s review will present SMEs new opportunities to become more effective and competitive suppliers to the State. Another encouraging point, was that the next-generation broadband project has survived the cuts. Extending broadband services in rural areas is expected to benefit around two million businesses and homes, including those in remote locations who currently struggle on dial-up speeds, an important factor for regional SMEs.

Small businesses are a vital piece of the UK’s fragile economy, accounting for an estimated combined annual turnover of £3,000 billion (Department for Business Innovation & Skills, 09). With such a substantial contribution to UK GDP, it is essential the Government allows SMEs to prosper and flourish, it will be interesting to see how this develops."

UPDATE 22nd October 2010

Another comment, this time from Entanet UK.

Entanet's Head of Marketing, Darren Farnden, said:

"While we welcome the confirmation that the USC remains intact and on schedule for 2015 we also have concerns that the budget required has been grossly under estimated and that the target of 2Mbps will be irrelevant within an even shorter period of time than first expected.

We think the government should be aiming much higher if they plan to hit the additional European target of 30Mbps by 2020, just 5 years after the 2Mbps USC has been implemented. If the government truly believes Britain can become a ‘world leader in the provision of next generation broadband’ with a 2Mbps by 2015 USC they are fooling themselves.

Cisco’s report shows we have some serious catching up to do before we can make this a reality."

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