Cheap broadband for the masses - An unfulfillable dream or a reality-grounded aspiration?

Late last year, in the heat of an electioneering campaign, the Labour party promised to deliver full-fibre broadband access to every home and business. The plan, if implemented, was expected to cost the economy £20bn, and would have been funded partly by nationalizing British Telecom (BT), and partly by taxing tech giants like Google, Amazon and Facebook.  Fast forward to today (20th March 2020, to be more precise) and Of Com has already launched its own affordable broadband-for the-masses initiative.

 

 

So, is “broadband for everyone” on its way to becoming reality, or is it simply an aspiration that’s difficult to fulfil. We’ll let the facts guide us.

 

Promises by the numbers

 

According to a study published by SQW, a leading provider of independent research, analysis and advice on economic and social development in the UK., investing in more wide-spread access to faster broadband across the country will add roughly £17 billion to the UK’s annual Gross Value Added (GVA) by 2024. To put that in perspective, the forecast growth in GVA, under current government growth initiatives, is expected to amount to approximately £6.3 billion p.a. by 2024 – that’s a 0.03% real annual growth rate, compared to 0.07% promised by broadband expansion initiatives.

 

In addition to a net increase of 56,000 jobs by 2024, the study foresees other positive economic impacts from expanding high-speed internet access, including:

 

  • Increase in labour force participation across the broader economy
  • Improvement in teleworker productivity
  • Enhanced safety and security on broadband-based infrastructure (less risk of hacking and enhanced data privacy)
  • Increased levels of business and household savings - e.g. increased levels of telecommuting will reduce commuting costs, which will go towards household savings – to the tune of £270 million p.a.

Additional benefits to accrue, as a direct result of broadband uptake, relate to environmental impacts. By 2024, decreasing employment-related commuting, and reduction in business travel is expected to reduce the UKs carbon footprint by 1.6 million tonnes of carbon dioxide equivalent (CO2e) savings per annum – which is equivalent to 0.3% of the UKs current greenhouse gas (GhG) emissions.

 

Reality revealed

 

However, like any technological innovation, the true benefits (to the economy) will only come from wide-spread, low-cost broadband availability. And there lies the challenge! Earlier this year, Britain’s telecommunications service regulator, Ofcom, made a daring pronouncement that took effect on March 20, 2020:

 

“if you can’t get a download speed of 10 Mbit/s and an upload speed of 1 Mbit/s, you can request an upgraded connection.”

 

On the face of it, it all sounds rather promising.

 

Certainly, at first blush at least, this sounds like an announcement worth celebrating. But not so fast! As with all things “governmental”, the devil’s in the detail. The announcement gives service providers, who own and operate high-speed internet infrastructure across the UK, a wide berth to seemingly do their part in serving the greater public good – while at the same time profiting from their “public service”.

 

The ruling accepts that there could be a (significant?) cost associated with getting your broadband upgrade. The Ofcom announcement magnanimously offers to pick the tab for the initial £3,400 of the upgrade cost. Really? And what if the service provider decides that your upgrade will cost more than £3,400? Well…then you’re stuck with paying the difference!

 

More hype than reality

 

If you are in a COVID-jam, forced to work from home to earn your living, you may not have any choice but to apply for the promised broadband upgrade. There may even be a bright side to this offer: Once your broadband is up and running, you could (potentially) increase your productivity and, perhaps, take on additional side-gigs and quickly earn the cost of your upgrade. Right? Not so fast!

 

 

Firstly, while the Ofcom decision tree (see graphic above) promises that “your connection will be built as quickly as possible”, the fine print suggests otherwise. In fact, you could be waiting for up to 60-days to receive an upgrade quote, for a potential upgrade, from BT/KCOM. Well, you’ll just have to bite the bullet and forego any opportunity cost (potential of using your upgraded connection to boot your income) for 60 days then. And after that…things will start picking up. Correct?

Hmmm…right – but there’s more to this 60-day wait than meets the eye.

 

The “offer” comes with a sobriety check that, while most people will receive their upgraded connections within 12 months (that’s one year!), you should be prepared to wait for up to 24 months. And after that, you will still have to pay £553.20 (£46.10 per month) a year (based on current estimates) for your “affordable” service. Who knows what that £553.20 will balloon to by the time you plug in your laptop into your new broadband connection – in 2 years.

 

Reality check

 

While BT (and the powers that be) may have arbitrarily decided that paying £46.10 per month for broadband is a yardstick of “affordability”, reality for subscribers might be different. While some households can afford to pay that amount, others – that may be struggling with joblessness, poverty and lack of economic opportunity – might find £553.20 a year highly unaffordable.

 

This disparity in affordability comes down to the annual cost for broadband as a percentage of household income. And that disparity is what a study by PointTopic Ltd., a broadband market intelligence provider, highlighted across England and Wales. 

 

 

While  broadband deal aggregators and service provider-aligned websites offer “great deals” and super saving packages, the reality is that some subscribers can afford to snap up those “deals”, but many just can’t afford them!  For instance, the PointTopic analysis found that even within local service areas, there are families that paid as low as 0.5% of net annual household income on broadband, and some that spent as much as 2.35% of their annual income on the service.

So, until the underlying issue of price affordability is addressed, “affordable broadband for all” remains an aspirational slogan that’ll not come to fruition anytime soon.