Why Labour's telecoms proposals would damage the sector

Labour has pledged to give every home and business in the UK free Full Fibre broadband by 2030, if it wins the General Election. This would be done by part-nationalising the infrastructure (Openreach) and consumer (BT Consumer) arms of BT and imposing a tax on online service providers to cover the on-going operating costs of providing the service.  

While techUK has long made the case for national gigabit infrastructure – which will drive opportunity and productivity across the Country – these proposals risk making it harder to deliver the national broadband upgrade that we need. 

What is the state of UK broadband today? While no one would argue that UK broadband services are perfect, international benchmarking studies continue to highlight the UK’s strengths. The UK has achieved near universal availability of superfast broadband which is available to 97 per cent of the population at a price point that is amongst the most competitive in Western Europe. Indeed, consumers today pay the same for their broadband and mobiles services as they did a decade ago[1].

This progress has been achieved primarily through private investment with limited public funding to support deployment to the most remote areas. And, more investment is on the way with companies like Hyperoptic and CityFibre entering the market to compete directly with Openreach in deploying new fibre infrastructure.

So, at the very moment that the market is poised to invest, Labour’s proposals risk putting that new fibre build on hold. Here is why we believe nationalisation is the wrong approach:

  • There will be a huge cost to the public purse

The cost of building nationwide Full Fibre has been most accurately costed to £33bn[2]. The private sector can, and is already, bearing the vast majority of this cost, with nearly £15bn already committed to delivering Full Fibre. This investment that is already committed from industry will dry up under these proposals, leaving the public sector to pick up the full bill.  

Once this £33bn network is built, it will need to be operated and maintained. Labour has said that it would cost in the region of £250m per annum and be paid for by tax on multinational tech giants. Whilst it is less costly to operate a Full Fibre network than a copper network, both BT and independent telecoms analysts have said that this is a significant underestimate, with Openreach’s stated operating costs being £2.6bn[3]. As a comparison, £2.6bn is 70 per cent more than the entire annual resource budget of the Department for Digital, Culture, Media and Sport in 2019-20.

 

  • This will actually slow down fibre deployment

The private sector is gearing up to deliver Full Fibre broadband. Coverage has gone from a standing start to 10 per cent coverage in two years and deployment is poised to accelerate even further, with new businesses entering the market to compete with Openreach. These proposals would stop that momentum dead in its tracks.  

Companies building out new fibre infrastructure will stop investing as they face the prospect of having to complete with a state-backed monopoly and face the realistic threat that they themselves will be nationalised. The previous Government looked at a monopoly model for infrastructure provision and concluded that “There will be a delay of three to five years before the monopolist will start rolling out its fibre network”[4].  

So, we would move from a position where we can get to 50 per cent of premises with Full Fibre by 2025 to one where we are likely to be in the same position as we are today. Given the global tech race we are in, that would be a waste of precious time we do not have.  

 

  • There will be less innovation and choice for consumers

The nationalisation of parts of BT and providing broadband for free would have a ripple effect across the telecoms sector – which employs 177,000 people[5] and makes a significant direct contribution to the UK economy. Private companies providing broadband services would be unable to compete against a state-owned entity providing similar free services. The end consequence would either be further nationalisation of these companies or bankruptcies. That means when a business or consumer has a problem, they would be ringing a Government monopoly to ask them to fix it rather than a private provider, which they can choose to switch from if the service is not good enough.  

 

  • It solves the wrong problem 

Leaving aside the cost of nationalisation, where would Government be best placed spending the money to build a network and run it for free? Here’s a key point, providing broadband, no matter how good, for free will not solve the critical issue of people who are digitally excluded. In recent research only half of those who are offline cited cost, with those who did in focus groups often citing device rather than subscription costs[6]. This carries over to business with 1.8million SMEs and charities who lack Basic Digital Skills; mindset and skillset are again the major barriers rather than cost[7].  

  

We all want to see the UK deploy Full Fibre as fast and cost-effectively as possible. Labour’s proposals could actually set back fibre broadband deployment by several years.  Where similar nationalisation plans have been trialled, such as in Australia, all the evidence shows that consumers have ended up worse off, with network upgrades being delayed and service promises being watered down. techUK stands ready to work with a future government to implement a better plan. One that harnesses private investment, accelerates deployment, and ensures that the whole of the UK benefits from the fibre broadband revolution.

 


[2] “Analysis produced for the Commission estimates that, over a 30-year period, building and maintaining a full fibre network would cost £33.4 billion.”

https://www.nic.org.uk/wp-content/uploads/CCS001_CCS0618917350-001_NIC-NIA_Accessible.pdf

  • Matthew Evans

    Matthew Evans

    Director | Markets
    T 020 7331 2034

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