Media Release

‘Full-fibre broadband for all’ target at risk without major reform

A Government promise to deliver full fibre broadband to every home by 2025 is likely to be missed unless ministers make radical changes to telecoms policy, a new report warns today.

The Social Market Foundation think-tank made its warning about a year after the Government promised an extra £5 billion to broadband roll-out.

Full fibre broadband coverage stands at just 14% across the country as a whole, the SMF said, warning that the country has a “mountain to climb” to hit Boris Johnson’s target for universal coverage.

The SMF also called for a greater focus on consumers, warning that recent developments in the broadband market mean consumers risk being left with fewer choices and higher prices for a service that has become all the more important to many households because of the coronavirus pandemic.

Current Ofcom plans would see prices rising for consumers, business and public sector users. The SMF said that rising wholesale broadband prices could harm consumers and called on the regulator to do more to protect consumers.

In a report on “full-fibre to the premises” rollout, the SMF calculated that the UK is lagging far behind other economies on broadband penetration, including Spain, New Zealand and South Korea.

The Prime Minister promised during the 2019 General Election campaign to deliver “full fibre broadband to every home in the land” by 2025. The SMF said that target will only be hit if ministers adopt a range of changes to broadband policy, including reforms to reduce the telecoms industry’s risks of investing in new networks and to make sure that customers can afford to move onto new services.

New “demand management” measures should be used, where central and local government should commit to purchasing full fibre broadband services for public sector buildings such as hospitals and schools, as a means of providing some “certainty of demand” and encouraging industry investment.

The SMF said the new approach could also include the creation of new New Zealand-style “Local Fibre Companies”, jointly run by public sector bodies and private companies, to deliver the broadband in remote and costly areas.

Such joint companies might not be compatible with EU State Aid rules, meaning the next stage of the Brexit process could make the policy viable in the UK.

The report also raises concerns about Ofcom’s decision to allow Openreach – owner of most of Britain’s broadband infrastructure – to charge higher wholesale prices to retail broadband providers, highlighting fears that this could reduce competition in the sector and penalise low-income households, who will see prices for their current broadband services rise from April 2021.

The SMF report comes as ministers and regulators try to decide who should meet the significant costs of a new broadband network, which could be £30 billion. Private companies are investing in commercial areas, but Government subsidy is required to connect hard-to-reach households and businesses in remote and rural areas. Providing FTTP to the “final 10%” of UK households could cost about £4,000 per premises, compared to costs of £300-£400 for the first 50% of premises.

The SMF report was sponsored by Talk Talk. The SMF retained full editorial independence.

Scott Corfe, SMF Research Director, said:

“Delivering the rollout of full-fibre broadband fairly and quickly is hugely important for the UK economy, and all the more so because of pandemic restrictions that have left so many of us working and socialising online.

“The 2025 target is extremely ambitious and the UK still has a mountain to climb to reach it. Getting there will require some radical changes, especially in how the public sector uses its huge buying power to support demand for broadband and offer the industry some certainty that funding new networks will pay off.

“To keep the Prime Minister’s bold promise of connecting every household in the country by 2025, minsters should look to the example of New Zealand and ask whether Britain’s Brexit outcome could allow the creation of new local public-private companies to deliver the most expensive final miles of the new network.”

Tristia Harrison, CEO of TalkTalk Plc, said:

“The surge in internet usage that began in lockdown has been maintained right up until now. Driven by video, online shopping and continued home working, we don’t expect it to fall away. In fact, as we go into autumn and winter, we will need increasing amounts of data, that is faster, more reliable, and crucially, affordable.

“We welcome the Government’s ambition for gigabit connectivity for everyone by 2025, but this is in serious danger of being missed without swift action. Investment into Britain’s full fibre rollout is critical both to help the country to build back better and also to support the Government’s levelling up agenda. However, this must all be done with the customer in mind – people cannot be forced to pay higher prices just to increase the profits for builders.

“While some fixate on tax breaks for industry, far more critical for the country is that customers can afford the broadband as it is built, so TalkTalk is urging the Government and Ofcom to ensure that competition thrives and that prices are fair for hard-pressed Britons.”


Contact

  • For an embargoed copy of the report or media enquiries, please contact SMF Impact Officer, Linus Pardoe – linus@smf.co.uk– 07402 576995

Notes:

  • The SMF report, Funding Fibre, will be published at http://www.smf.co.uk/publications/funding-fibre at 07:00 on Wednesday 7 October.
  • The report was sponsored by Talk Talk Plc. The SMF retained full editorial independence and declares all its financial backers.

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