Do Digital Britain broadband sums add up?

 

Gallery

By Matthew Sparkes

Posted on 17 Jun 2009 at 12:17

Yesterday's unveiling of the Digital Britain report gave us a long-awaited look at the Government's plans for funding a next-generation broadband network. But do Lord Carter's (pictured) sums add up?

We already lag behind many countries on broadband speed, and without massive investment we will continue to be left wanting. For businesses based in the UK this could prove disastrous.

"Many people now see broadband as being a utility as important as gas and electric and will be disappointed by the findings of the report," said Douglas Chalmers, Director of the Country Land and Business Association. "High-speed internet is essential right now and those who don't have it are already disadvantaged."

Unfortunately, the solution isn't cheap. According to the Broadband Stakeholder Group, even 80% fibre-to-the-home coverage comes with a price tag of £16 billion. Three quarters of this huge cost is consumed by the gargantuan task of burying new cables across the country.

Lord Carter's solution to this epic shortfall is a 50p levy on each and every phone line in the UK, lasting for seven years. Small businesses with several lines running into their premises could find themselves facing a bill of hundreds of pounds per year.

This measure is expected to bring in between £150m and £175m per year, collected by operators and being pooled by a new group tasked with bringing fibre to the UK, the Network Design and Procurement Group.

The money will be handed back to those operators looking to invest in infrastructure, on a reverse auction basis. The lowest bidder will get to reclaim the money it collected.

Shortfall

Therein lies the problem - over seven years this scheme will bring in somewhere between £1 and £1.2 billion, significantly short of the projected cost of a fully-fibred Digital Britain.

The figures simply don't add up, which is a worrying sign for those who are relying on new infrastructure to keep their businesses competitive. The CLA worries that no mention has been made of any other source of funding.

In a statement it said it was "highly doubtful" the figures raised would be enough to provide access for all.

It also found fault with the Universal Service Commitment, which aims to reach 100% of homes with 2Mbits/sec by 2012. This is not ambitious enough, says the CLA, calling for it to be upped to 5Mbits/sec.

Unfortunately, funding here is also sparse. An underspend from the Digital Switchover Help Scheme will add £200 million to the pot, but it is unclear if this will be enough to replace or repair the 11% of lines that Lord Carter admits are currently unable to deliver a 2Mbits/sec service.

Compromise

So, if the Broadband Tax is not sufficient to run fibre-to-the-home, then fibre-to-the-cabinet is the compromise solution - but this, too, looks to be too pricey.

Andrew Ferguson, editor of Thinkbroadband.com, explains that even this cheaper option looks to be beyond the reach of the 50p charge.

"In terms of next-generation services, eight years of £150 million amounts to about £1.2 billion, which considering BT has talked of £5bn to offer fibre-to-the-cabinet to the whole country does not look to be a large enough pot of money," he said.

The Internet Service Providers' Association points out that the levy has only been possible because the cost of telecoms in the UK has fallen so rapidly.

"In effect customers and the ISP industry are being penalised for successfully bringing prices down," said the group in a statement.